Reasons for Construction Failure

1. UNBALANCED ORGANIZATION DUE TO LACK OF PLANNING AND SCHEDULING - A LACK OF

PROPER PLANNING AND SCHEDULING LEADS TO AN UNBALANCED ORGANIZATION, CAUSING
INEFFICIENCIES, DELAYS, AND MISMANAGEMENT IN CONSTRUCTION PROJECTS.
2. LACK OF FINANCIAL PLANNING - POOR FINANCIAL PLANNING CAN LED TO BUDGET
OVERRUNS, CASH SHORTAGES, AND PROJECT DELAYS, JEOPARDIZING OVERALL SUCCESS.
3. POOR COST CONTROL - INEFFECTIVE COST CONTROL LEADS TO BUDGET OVERRUNS,
FINANCIAL INSTABILITY, AND PROJECT INEFFICIENCIES.

BASICS OF CONSTRUCTION CONTRACTS

•SCOPE OF WORK -Defines the exact nature and extent of the construction work to be performed.
•PAYMENT TERMS -Specifies how and when payments will be made, including milestone payments and retainage.
•PROJECT TIMELINE -Outlines the start and completion dates, including allowances for potential delays and
extensions.
•ROLES AND RESPONSIBILITIES -Clearly states the duties and expectations of each party involved, including
contractors, subcontractors, and project owners.
•DISPUTE RESOLUTION MECHANISMS -Establishes procedures for resolving disagreements, such as
mediation or arbitration.
•CHANGE ORDERS -Defines how modifications to the contract will be handled, including adjustments in cost and
schedule.

Scheduling Process (Steps)

1: Define the Project Scope and Objectives

• The Project Scope: These are very clear outlined project goals, deliverables, and client stations.
• Objectives: Must identify key milestones and deadlines in detail to achieve project completion.

2: Develop (WBS) Work Breakdown Structure

• Task Identification: Break down the project into manageable tasks and subtasks.
• Hierarchical Structure: Organize the tasks based on dependencies and in a logical order or sequence.

3: Estimate Task Time Length and Dependencies

• Task Time Estimation: Predict an estimated time that will be required for each task considering resources, expertise,
and conditions. Refer to available historical information when it comes to estimation.

4: Sequence Tasks and Create Schedule

• Task Sequencing: Arrange and sequence all tasks in an order based on their priority and possibility to start and finish.
When it comes to activity sequence, there are two logic types:

5: Allocate Resources
• Resource Requirements: This is where labor, equipment, and material needs for each task must be assessed.

6: Account for Contingencies and Constraints

• Contingency Planning: This is where any potential risks are identified, and contingency plans to mitigate impacts
are developed.
• Constraint Management: The Consideration of external factors (weather, regulatory approvals, possible setbacks)
and incorporate them into the schedule.

7: Review and Finalize Schedule

• Validation: Conduct a thorough review of everything with the project team and stakeholders for accuracy and a
feasible plan.
• Approval: Get a consensus and approval on the final schedule to ensure there is an alignment with the project goals.

IMPORTANT CONTRACTUAL CONDITIONS

• PENALTIES - Fines for delays, poor quality, or breach of contract

• ARBITRATION - Resolving disputes through legal means outside of court
• PRICE ESCALATION - Adjusting contract prices due to inflation or material cost changes
• TERMINATION OF CONTRACT - Owner's right to cancel under certain conditions

TYPES OF COST / CONSTRUCTION ESTIMATES

• DETAILED ESTIMATE
Includes determination of the qualities & cost of everything required to compute the project which includes material,
labor, equipment, insurance, subcontract work, overhead profit etc.
- A comprehensive calculation of all costs based on project drawings and specifications.
• PRELIMINARY COST ESTIMATION
A preliminary estimate, also called an abstract cost estimate, approximate cost, or budget estimate, is used in the early
phases of a project, usually before design documents have been completed. The detailed estimate is based on
completed design documents and how much labor will cost the contractor to provide. It is often the basis of the
contractor's initial Building construction budget.
- A rough cost approximation used in the early planning stages.
• QUANTITY COST ESTIMATE
A quantity estimate is based on the actual number of units or amount of work that needs to be provided. The project
is broken down into quantifiable pieces and all costs for each piece are added up to get the overall project estimate. A
quantity estimate is based on the count or measure of the amount of work and materials needed to complete the project.
It is assumed that there is a standard cost for each unit of work and for the materials purchased. This is all typically
quantified in a takeoff.
- Quantity Takeoff Estimate - A detailed measurement of materials required for a project.
• BID COST ESTIMATE
A bid estimate is the cost estimate that is submitted to a potential client in hopes of winning the job. It will include all
the contractor's costs for the project, plus allocated overhead costs and profit margin. The bid estimate is based on the
contractor's breakout of the building costs, plus markups for profit, overhead expenses and contingencies. Digita l
takeoff software typically allows for adding line items for markups and other expenses.
- Bid Estimate - A contractor’s final cost proposal for a project, considering labor, materials, and profit margin.
• CONTROL COST ESTIMATE
A control estimate is used for monitoring the project during construction and is comprised of three separate estimates:
the budget estimate for financing, the budgeted cost after contracting but prior to construction, and the estimated cost
to complete during the project. These budgets are revised on a regular basis to reflect approved customer change orders
and actual costs incurred.

OTHER TYPES OF COST ESTIMATES

• HISTORICAL
A historical estimate is based on costs from a project budget done in the past of similar size and scope. Often the cost
is adjusted for inflation or other pricing factors.
• PARAMETRIC
A parametric estimate uses simple calculations to provide a cost estimate. It is often based on standard rates from a
third party or a contractor's historical data.

• PLINTH AREA
The plinth area of a building is the area covered by the external dimensions of a building.

The plinth area is multiplied by a standard rate for construction in that area to arrive at an estimated cost for the project.

• BOTTOM-UP
In a bottom-up estimate each activity is priced individually, then rolled up to the overall project cost. This is the most
accurate way to estimate a project.

• THREE-POINT ESTIMATE
A three-point estimate is based on the average of expected costs in three scenarios: optimistic or best case, most likely
or expected, and pessimistic or worst case. The three values are added up and divided by 3 to get the average.
• EQUIPMENT FACTORED ESTIMATE
An equipment factored estimate is used for projects that involve the furnishing and installation of equipment. The cost
of the equipment is multiplied by an installation factor to arrive at the total cost.

1. Approval of the construction schedule ensures alignment with project goals and stakeholder expectations. - True
2. Resource allocation in construction scheduling involves assigning labor, equipment, and materials to tasks. - True
3. Work not in the Work Breakdown Structure (WBS) is considered as outside the scope of the project. - True
4. Duration is the time a task can be delayed without affecting the project’s overall timeline. – False
5. Derivation tool, planning tool, and communication tool are some examples of the uses and effectiveness of Work
Breakdown Structure (WBS). - False
6. Program Evaluation and Review Technique (PERT) is using One-time estimates in calculating the duration each
task of a project. - False

1. A construction contract is not legally binding. – FALSE

2. Specifications describe the materials, quality, and standards required in a project. – TRUE
3. In a Lump-Sum Contract, the contractor can ask for additional payments if the costs increase. – FALSE
4. A Guaranteed Maximum Price (GMP) Contract protects the client from unexpected cost increases. – TRUE
5. A Turnkey Contract means the owner is responsible for completing the final stages of the project. – FALSE
6. The Scope of Work (SOW) describes the specific tasks and responsibilities of a construction project. – TRUE

IDENTIFICATION
ARBITRATION - Resolving disputes through legal means outside of court
CPM CRITICAL PATH METHOD

● 1956 - J.E. Kelly of the Ramington Rand Corp and M.R. Walker of Du Pont developed "CPM" an advanced
scheduling and cost control method
● A tool for planning, scheduling, and control of construction work
● Derives the earliest and latest times for their start and finish
● is a statistical algorithm which has a certain start and end time for a project.

PERT PROJECT EVALUATION & REVIEW TECHNIQUE

● 1958 - 1ST used of "PERT" by the U.S government to speed up the Polaris Missile project
● To provide the management a periodic reporting of current status and an outlook for the future on meeting
approved plans and schedules.
● is a popular project management technique that is applicable when the time required to finish a project is not
certain.

● scheduling technique used to plan, organize, and coordinate tasks within a project.
● It was developed by the United States Navy in the 1950s to manage the Polaris submarine missile project.
● Used for large scale projects.
● Probabilistic Approach

ITB (ALAWS) -
WORK BREAKDOWN STRUCTURE (WBS)

A Work Breakdown Structure (WBS) is a deliverable- oriented grouping of project components that defines and
organizes the total scope of the project.

SOW -
CONTROLLING refers to analyzing and evaluating the actual progress against the plan. Reallocation of resources,
crashing and review of projects with periodical reports are carried out.

PLANNING involves setting the objectives of the project. Identifying various activities to be performed and
determining the requirement of resources such as men, materials, machines, etc.
CRITICAL PATH:
- The critical path is the longest path through the network diagram and determines the minimum project duration.
SCHEDULING: Based on the time estimates, the start and finish times for each activity are worked out by applying
forward and backward pass techniques, critical path is identified, along with the slack and float for the non -critical
paths.

TURNKEY - The contractor is responsible for both the design and construction of a facility. The contractor shall
provide the works ready for use at the agreed price and by a fixed date.
The contractor delivers a fully completed project, ready for use. The owner just "turns the key" and starts using it.
LUMPSUM - In this type of contract, the contractor offers to do the whole work as shown in drawings and described
by specifications, for a total stipulated sum of money. There are no individual rates quoted, thus it becomes difficult
to make adjustments in the contract value if any changes are to be made in the work later on. The schedule of 3
different items of work is not provided and the contractor has to complete the work as per drawings and specifications
for the agreed lump sum amount.
PRESCRIPTIVE SPECIFICATION - Exact materials & methods required
PERFORMANCE SPECIFICATION - End result criteria without defining methods
FLOAT - is the time a task can be delayed without affecting the project’s overall timeline. Understanding float
allows flexibility in scheduling and helps manage unexpected delays.

CHANGE ORDERS - Defines how modifications to the contract will be handled, including adjustments in cost
and schedule.
PAYMENT TERM - Specifies how and when payments will be made, including milestone payments and retainage.
PROJECT TIMELINE - Outlines the start and completion dates, including allowances for potential delays and
extensions.