How To Win And Manage Construction Projects

I find there is a necessity for me to write a Book to share with others my long and mixed experience of over 40 years in the construction industry with Employer, Consulting, Contractor and Teaching environments. The book shall be of immense use for young Engineers who may wish or decide to have an interesting and rewarding career as Cost Engineer in the Construction Industry. This book can also be useful for Engineers who seek careers in Construction Auditing/Alternate Dispute Resolutions. These two branches of Construction industry have seen a great growth in the recent past. The book is mostly directed at Engineering professionals in the construction industry, while it will also be useful to have insight of the construction industry for small and medium size Contractors and individual clients who intend to build up their own villas. I also feel that it would be of immense help to young Engineers who seek careers in the construction industry, particularly in countries such as China, India, Middle East where Cost Engineering has not developed like say countries such as United Kingdom, Australia and Canada where many university offer degree Courses in Quantity Surveying and related fields. There is another professional issue in publishing this book. I have to make explanation/substantiations for my statements regarding the two issues given below. a) Once I made a presentation on the topic “Construction as an option to international Investors (the summarized version was published in Building Economics-AIQS Dec.2011) and I stated that in such cases the Quantity Surveyors can Work as advisors to them and earn in excess of US $ 100,000/= a week. Some Quantity Surveyors were sceptical or couldn’t comprehend and it became joke to them. My chapter on Tender Adjudication and Post- Tender negotiations answers this aspect. b) I made another point that if someone could do Technical Auditing of a big project that would be enough for his entire life and quoted a Lawyer in Sri Lanka in th 1960’s who did only one case in his whole career. He earned so much that he never sited the Courts in rest of his life. Again, some people were sceptical, couldn’t comprehend this. My case studies given under Construction Frauds shall give an indication regarding the possibilities of the amount of savings in Technical Auditing (if one is very smart enough) and going by the Industry standards (1/3 to Auditor & 2/3 to Client) shall clearly give an answer. 5. ADJUDICATION OF TENDER AND POST- TENDER NEGOTIATIONS The top management personal shall do the adjudication before the formal submission of tender. The topic of discussions can be summarized as follows: 1. Status of the order book. Are we in real need or desperate to get this job. This can be owing to the situation of the company or the familiarity of the project (similar ones were successfully done previously, thus have sufficient experience) 2. Do we have the resources & Technical knowhow in house to do the job. 3. What would be the additional cost (as a percentage) which we have to encounter in the event of outside hiring of labour and plant. 4. How is the Employer?. Good pay master, some what ok., or plainly bad 5. Type of Conditions of Contract –Familiar, completely new . 6. Risk factor. 7. Can we do the project with our regular suppliers giving the bulk of the materials or do we have to import or look for new suppliers. 8. Possibility of using materials already in our stores profitably 9. Proximity of the site. No need for labour accommodations. 10. Advance payment amount, Payment terms, the approximate financial charges based on initial Cash flow forecasts. 11. Major Plants. Has any reach Zero value if so the list of such plants in order to consider possible discounts on such plants. . After discussing the above points, the management can decide about the discounts if any or the adjustments to Overheads and Profit and make the submission of the tender The main point in staying successful is to understand the full extent of the scope; the complexities, the risks and price all to avoid any difficulties while execution. Page 14 Post- Tender Negotiations This is phenomena particularly with individual Employers as every body wants to cut corners and interested in the best possible value for money. The top management with sufficient authority to be in charge of such negotiations. In the post - tender negotiation, there is a possibility to know the near rivals tender amounts as tenders are already opened. The top management during such negotiations can contemplate substantial reductions/discounts in addition to what is already given in the tender value on items such as a) Overheads b) Profit c) Mark up on Provisional sums d) Mark up on Nominated sub- Contractors In the event the Conditions of Contract can be amended to: 1) Increase of Advance payment to say 15% of the Contract price rather than the 10% normal. 2) More favourable monthly payment terms –say to be paid within 30 days upon Engineer’s certification. 3) In projects where the bulk of the materials/equipment to be imported overseas, payment for materials at site to be considered when the same is in shipment in high seas rather than delivered to site. 4) Higher Invoice value for materials at site. Say 90% instead of the usual 80%. 5) Deduction of the Advance Payment to be based on the value of work done rather than the elapsed Contract duration. It is to be noted that the Employers may be willing to consider the above as they already have the budgeted amount. The bottom line is, Construction projects are carried out with financial outlay upfront by the Contractors in order to get a reasonable profit on their investment. If the project can be financed in full by the Employer’s money upfront then there is no investment from the Contractor and thereby his profit margin can be reduced as it amounts to net profit.