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You can download our homework help app on iOS or Android to access solutions manuals on your mobile device. Asking a study question in a snap - just take a pic. Textbook Solutions. Construction Project Management 3rd Edition Edit edition. Top management support Detailed scheduling Project objectives clearly defined Monitoring and feedback Client acceptance Communications Technology and expertise Correct trained personnel Client consultation Troubleshoot ability to handle unexpected crises Figure 1.
Adapted from Pinto and Slevin . Report concludes that strategic issues are important throughout the whole life cycle with tactical issues only being equal in the later stages Identifies the major issues to address by the year to keep UK industry competitive worldwide. Introduces 5 drivers for success and the enhancement of client VFM. Targets set similar to Latham Calls for a pact to be made between the client and supply side designed to improve VFM and the profitability of the supply side Measures improvements over the intervening 4 years since , indicating that demonstration projects where Egan principles have been practised have reached the targets set and far exceeded industry averages Sets up a toolkit for the integration of the project team in the better delivery of a project in partnership.
The parameters that it sets are very wide, but it represents a methodology to integrate the client and the team in a continuous improvement culture in pursuance of Egan and Clients Forum Reports However Baker  has said that factors are different for different industries and also qualified that failure may be defined in different ways. Pinto and Mantel  say that there are fundamental causes across industries for failure such as poor planning, insufficient senior management support and getting the wrong project manager.
Project life cycle and success 21 Table 1. Adapted from Wateridge . Applying this to construction it is clear that the brief and its interpretation, effective scheduling and control, together with continued client involvement at the highest levels, are critical. Morris and Hough  cite the Thames Barrier project as a successful project even though it took twice the planned time and cost four times the budget, because it provided profit for most contractors.
Wateridge  in his research on measuring success compares the major criteria as seen from the viewpoint of the users and the project manager. It is interesting to note that budget and time are more important to users.
Perhaps quality has been defined in a different way by the users as it is not otherwise mentioned in the top five. Conclusion Project management has been around for a long time in construction, but has not always delivered the value that clients have been promised.
The unique nature of the product needs to be properly planned for success, understanding the client business and not ignoring the key role of external events. The move is for large clients seeking to enhance value and not to tolerate under-performance.
Integrating the events in the project life cycle more fully especially design and construction , makes it move away from traditional procurement methods so it is important to look at innovative ways of delivering projects. Clients need to be clear about the impact of the approvals and decisions they are making.
The later chapters connect 22 Project life cycle and success RM with VM and also look more closely at design management and supply chain and how procurement can be managed in a better way.
The professional roles in projects are changing, but there is a need to manage a fragmented process seamlessly and to this end there is a special chapter on the development of DBFO and PFI schemes. The development of a strategic plan is important for all areas of project management indicating the organisational structure, culture and leadership, the strategy for more sustainable building and the promotion of effective teams.
The credibility of a project manager depends not just on their technical ability, but on their ability to provide an ethically sensitive service to all the parties to the contract and to deliver client satisfaction and advice. The research carried out on project success has not been specifically picked up by the recent industry reports, but it is clear that success depends upon the degree of strategic planning, the ability to integrate and getting the right person to match the job, in order to achieve the process-focused improvements which are being recommended by the reports.
Jr, Shafer S. A Managerial Approach. Toronto, Canada. In Papers on the Science of Administration. University of Columbia. As quoted in L. Mullins Management and organisational Behaviour. Pitman Publishing, London.
Table 2. Conference on the Management of Technological Innovation. Washington, DC. November In International Journal of Project Management. Elsevier Science Ltd, Amsterdam.
Clients may be classified into public and private, profit and non-profit making. The term business case implies the need to justify a need. In this sense, all categories of client will have a business case and this will define the client objectives in the context of the project. Construction projects are complex and expensive and need to justify the expenditure and the need. The objectives of this chapter are: Project constraints and objectives as they constrain the project.
The principles of presenting a business case. To present the context of decision making, using stage gate reviews. The concept of benchmarking and building value in the business case.
Identifying the project stakeholders. These issues are supplemented with some case studies as a way of illustrating the theory and presenting the current practice in commissioning a building work.
There is also a need to view business planning as an open system that is heavily affected by project and environmental constraints. The business case is a starting point or a benchmark for the level of performance required. It is very easy to erode the value of the business case, but the integrated approach allows for working together with the project team to preserve and improve that value. Maylor  reminds us that it is easy to measure the wrong things and that real improvements are made by long-term measurements across projects so that the supplier behaviour changes are permanent and not just reactive.
The process of feasibility and funding appraisal is dealt with, in Chapter 3. Project constraints and client objectives Table 2. The job of the project manager is to understand the client objectives and to ascertain the priorities. It is also to provide a professional service which not only develops the business case by applying the right tests to the assumptions made, but can also advise on the specific project constraints.
These project constraints come in the form of external circumstances which constrain the design and construction process. Project constraints can be classified as: Market prices for the tendering of construction work vary significantly according to supply and demand. Positively, local authorities may recognise employment opportunities and provide tax breaks for certain locations. Ethical and environmental choice.
Resource availability. Time constraints. Planning constraints which exist to the type of developments noted, making some locations easier than others to gain permission or apply Table 2. Building client business case 25 conditions. For example, building height restrictions on certain sites.
Local councils, through the planning system, may seek to impose section agreements planning gain on developers. These are designed to contribute towards community and transport issues created by new development, in return for the benefit gained to the client business.
Highway authorities may require planning gain to provide additional road widening, improvement of junctions or the provision of traffic signalling. Physical site constraints. Site access might cause expense, restrictions or limitations on the positioning of the building. Ground conditions determine foundations.
Neighbour concerns. Health and safety issues. Legal requirements such as durability, contamination and sustainability covered by the Building Regulations and various Environmental Acts. Client objectives Company goals are a framework and provide some guidance for the direction of the business, for example, the type and the location of markets to be in, the investment needs and the growth rates of the business. Strategic planning does not define the building project, but should give some justification for a project.
The client needs to be sure of testing key assumptions, giving clear requirements, having a good management commitment, sufficient skilled resources and flexibility of contractual arrangements to cope with change. Figure 2.
Project objectives Goals Company strategic planning Client objectives Strategy Outline project brief and outline planning Design brief and outline design options Figure 2. Scheme design Feasibility Planning approval Project brief defined 26 Building client business case Client objectives for a new building project define the business case for it and lead to the development of a project brief.
Specific they need to identify the outcomes clearly e. Measurable so it is feasible to monitor attainment, for example, a budget or a functional space e. Ownership of the objective also helps commitment to it. Realistic to the available resources of funding, time scale, materials, labour etc.
Time bound with a programme for delivery of the objectives. This will be a high-level programme indicating key dates for attainment of the objectives, such as decanting or occupation. They should be in the context of the business need.
Client objectives are the starting point for defining the project, but may need to be clarified by the project team. Client objectives recognise the external constraints and will inform the commissioning of a specific project. For example, Dyson have an objective to expand their business and to do so they have decided to move away from the current site in Wiltshire to Malaysia, because they recognise that production is cheaper there and because the conditions for planning permission in expanding on their current site are considered more onerous.
Building in Malaysia is cheaper and they have calculated that even with export costs, they can undercut their competitors in European markets. Different types of clients have different types of objectives. The main client types are private, public and developer. Below are a few simplistic examples of generic objectives for specific client types: They will be a secondary client as the building is a means to an end.
A developer needs a cheap, quick and attractive building. This will be a primary use as the building is being used as a commodity in itself.
This is again a secondary use of the building. Masterman and Gameson  have classified clients on a two dimensional grid as experienced or inexperienced and primary wanting buildings because buildings themselves are their business and secondary those who use buildings to house their business. The experience of the client will determine the degree of involvement that can be expected from the client in developing objectives.
It will also determine their understanding of the project constraints. A small manufacturer is unlikely to have built very often and so, is inexperienced.
British Airports Authority BAA on the other hand is experienced and has strong influence on the procurement of its built assets. This is quite simplistic and Green  believes that the consumer led market has led to a more organic iterative approach to arriving at the brief. Project objectives These objectives are associated with the efficiency and effectiveness of the project process.
The project manager has particular responsibility to meet these as well as to help the client to meet their own business objectives. They are traditionally to do with project budget, quality and programme time , but there are also other aspects of project objectives which are important to the success of the project and these will be considered later. The time—cost—quality triangle in Figures 2.
Time Cost Quality Figure 2. It becomes much more difficult to manage if a triple priority is given. The first two do not imply that the third factor is unimportant. Time, cost and quality are all important to a client, but one may be more important than another.
For example, a local authority is almost always tied to the lowest price. So once the budget is set for a school it is embarrassing for the budget to be exceeded, because it means going back to the central government, providing less school places or capturing money from another scheme. Alternatively an Olympic stadium must be ready in time for the event and the quality is important to the ambassadorial role that is so important to a government electing to hold the Olympics.
This means that a budget will be secondary to the quality and the programme as shown in Figure 2. Project objectives also include managing people and creating synergy from the team so that there is greater productivity. This approach may occur between the contractor and the client or between the design and the construction teams. In both cases the effect is unproductive use of time. For example, a failure to look at ways of getting over problems to mutual advantage and time spent trying to apportion blame and making claims leads to one or both parties out of pocket.
This can be avoided by an open attitude on both sides and a commitment to collaboration. The project manager may also agree to some task orientated objectives such as zero defects, planning to substantially improve health and safety risks and shared bonuses for reducing costs below budget. This particular agenda would relate to the improvements which are being recommended by the Egan Reports and 1 and others.
Building client business case 29 Best practice The Construction Client Forum CCF 2 recommend seven steps for the client to take when considering a construction investment and these are: Providing and setting clearly defined, and where possible, quantifiable objectives and realistic targets for achieving these. Fostering trust throughout the supply chain by treating suppliers fairly and ensuring a fair payment regime.
Promoting a team-based, non-adversarial approach amongst clients, advisors and the supply chain. Adopting a partnering approach wherever possible. Identifying risk and how best to manage it. Collecting and interpreting data on the performance in use of their construction solutions, for purposes of feedback. Presenting a business case A business case is presented at the inception stage of a construction project and will confirm the expected need for a new construction works to take place.
In addition it will contain constraints such as budget limits, date when required and some performance requirements. Business budget constraints are different from project constraints and refer to at least making a profit margin which covers the risks of the investment and a return to the shareholders, if it is a profit making venture.
Public ventures need to objectively value benefits against the costs, if they are to make the justification. Non-profit ventures do not have to cover shareholder expectations, but still need to cover the risk of not breaking even and costs of new investment. Time constraints are often indirectly connected with returns. A new supermarket can afford greater capital costs if it is able to start trading earlier to a ready market.
Every day saved will give a profit bonus. Quality constraints are based on balancing the durability of higher cost materials and best quality workmanship with the reduced maintenance costs. Cheaper materials may be used where less durability is required or there is a shorter term interest in the asset or where capital funds are scarce. The additional benefits of quality are that it projects an attractive image to the customer.
Case study 2. One problem the University has, is the unavailability of borrowed capital credits and so it has to generate capital by selling assets or it has to commission the provision on the basis of a revenue charge, for example, leasing or PFI.
It also has to consider that because UK students contribute fully to their accommodation and to some amount of their fees that accommodation has to be attractive to draw students to the University. The University has investigated the alternative routes which are open to them without capital finance and compared them with the cost of doing nothing. The option to proceed with a leaseback arrangement with a housing association was eventually adopted. The objectives of the University are to provide student places in a safe, secure and reliable environment under the overall control of the University.
It proposes single or grouped en suite rooms with the provision for catering services to widen the use out of term time for conferences and the provision of laundry and common rooms for communal purposes. The issues which are covered in the business case are: Management of the flats by others, but not on matters of discipline, pastoral care and leadership will involve the University.
Risks judged to be significant were the construction cost, the timing overruns and the subsequent defects in construction, the funding and ownership of assets, the standard of management of the service, the long-term maintenance and equipment replacement, the levels of student occupation and the out of term use and the bad debts from unpaid rents.
Transfer and retention of risk — to transfer construction problems, the level of availability and the standards of service and the out of term use fully to the provider by delegating FM services as well as property ownership in return for a fixed service charge. To retain risk for student discipline, pastoral care, rent collection and provision of wardens.
To provide affordable rents for the students. In order to keep the service charge down, they also considered the permanent transfer of obsolete land to be used for independent development by the provider. Analysis If we compare this case study with the criteria for a sound business case indicated by the CIOB Project Management Code of Practice then we can make some favourable comparisons with the points made: The desire for renewing stock alone is not a sufficient driver to attract students, who also have changing needs.
Conference use does give some flexibility.
Sound information: Rational processes: A tendering process, which is competitive or negotiated from a strong position is also important. In this case, there was some concern that only one housing association was prepared to bid. Awareness of associated risk: Scope and best value of resources: The release of land to a developer kept rents down, but was it a shortterm view and did they get a VFM for it?
Previous experience: It would be fair to say that there is on balance, a sound business case. The University has a strong sense of its requirements and responsibilities. Developing value in construction: It is used here as a generic model to underline the key client decision points. There are six decision points called gateways as shown in Figure 2. Gateway 1 assesses the high level business case and budget and makes way for expenditure on the outside consultants.
Gateway 2 assesses the feasibility study and the proposed procurement strategy and gives the critical go ahead to proceed with the contract documentation for the implementation of the project. A proper PEP should be in place to proceed. Gateway 3 assesses the contractor tender bids report and provides the go ahead for design detail and construction. In this integrated model it is assumed that the scheme design is done by the contractor, but a separate design contract could be procured prior to tender competitions by the contractor.
There are two additional decision points at the completion of planning application and the detail design stages. Gateway 4 is the acceptance of the finished project either for a separate client fit out contract or for occupation. Gateway 5 is after occupation when a benefits evaluation takes place.
Based on OGC . Client approval to proceed Identify business needs and stake holders Gateway 0 Strategic assessment Client approval to proceed Tender on whole life costs Contract documents Gateway 3 Investment decision Client approval to proceed Final account Handover Construction Detail design Outline design Gateway 4 Readiness for service O c c u p y 34 Building client business case These gateways are the basis for getting approval to proceed to the next phase of the project cycle and making sure that there is adequate information available for client decision making for the viability of the project.
This system has several points to assess value, but note the early and later VM opportunity for gateways 1 and 3. This system has been set up for the client, but the project manager is appointed after gateway 1 and at this stage a feasibility study is commissioned with an outline design and a risk assessment and here a more general VM opportunity with the project team appointed.
A PEP is prepared which covers the strategy for the job and considers the programme, cash flow, procurement strategy, project organisation, health and safety plan, environmental impact, design management etc.
The plan establishes how the project is going to be carried out whilst the feasibility establishes how the project can be delivered viably and within budget time and quality constraints. These more complex forms of procurement are not necessarily the cheapest options and this is another aspect of matching the procurement type to the specific project imperatives. The true consideration depends on reliable figures being available and the value of WLC to the client will vary according to their post contract interest in the building.
OPEX costs are also recognised as needing to be sustainable in a climate where scarce resources are being increasingly recognised. The process of VM and life cycle costing are further discussed in Chapter 8. Project stakeholders Project stakeholders are those who have an interest in the project process or the outcome.
The obvious parties to the contract have an interest in the outcome of the project. Those interested in the process might be community based and the employees of the organisation. The community want a minimal disruption for neighbours, courteousness by project workers and employees want an interesting project. Newcombe  suggests that there are different requirements for the management of stakeholders depending on their degree of influence power and significance.
There is a need often to deal with the conflicting requirements of the stakeholders — so who do you satisfy and who do you disappoint? A good example is the Planning Authority who can hold up or stop the project and also any legally enforceable action such as compliance to fire regulations. These people may not have excessive interaction, but may have significant adverse impacts. Significance issues from the effect on working relationships and the amount of interaction that there is between the stakeholder and the project team.
These can have a slowing down and souring effect which affects the productivity of the project. An example of this type of stakeholder would be a key specialist contractor who provides less than full resource requirements. The community is also a stakeholder and may be able to have considerable effect where a group is able to obstruct progress.
A client may feel this pressure and make instructions for change as a powerful stakeholder. A project team will be affected by delays. Managing these phenomenon is important and consists of a mixture of selling the project objectives, satisfying the customer and compensating the stakeholders who have become dissatisfied. Making the logic of the project clear selling is a longer-term solution as it attempts to draw stakeholders behind the project and saves abortive resources by being preventative rather than reactive.
Compensating stakeholders may be expensive, but may bring a better project solution if other benefits are given for lost amenity. This law distinguishes between what the stakeholder sees as a product outcome or a level of service with what they were expecting from the project.
In achieving stakeholder satisfaction, it is not enough to perform satisfactorily as this will simply neutralise expectation and provide zero satisfaction. Stakeholder management is about making the sum positive by exceeding expectations. In practice, this means advertising the core objectives that will be the main outcomes and what must be achieved and setting about achieving some extras.
It is also clear from the second Egan Report 4 that the exceeding expectations principle is clearly enshrined in their vision statement so that customer value is optimised. Continuing service improvement is also important in keeping the stakeholders satisfied.
The customers are not affected as most business is done remotely, the business becomes more efficient and so produces better returns to shareholders, but the existing employees are mainly disappointed because many of them have to travel further and do not have access to the benefits of city centre shopping and amenities in their lunch breaks and after hours.
The local community is residential and is extremely worried that a large new facility in the vicinity will cause even worse traffic congestion and parking problems and loss of visual amenity and green fields. What does the company do? This will both partly satisfy the local community and satisfy the Local Planning Authority, who have qualified the planning permission to meet local objections in the planning appeal.
The shareholders have suffered no long-term loss to their returns and the solution is integrated to partly alleviate loss to the other stakeholders. In this case the stakeholders are the council tax paying public, neighbours and the LA. When they open the swimming pool in the summer of they decide that they will compensate by fitting out a new gym suite for fitness training to offset the disappointment of being late.
This came out of earlier local consultation during the planning stages which was not promised in the final scheme. Stakeholder satisfaction has been achieved by exceeding outcomes and offering people more ownership by consulting them. A basic 25 m swimming pool in autumn might have got them re-elected. A basic pool in would have caused frustration and possibly dissatisfaction because people would have made plans and have had to alter them.
The LA budget is a major constraint to the project. They wanted to include the fitness gym suite, preferably within the same budget. Budget savings may be made by considering one or more of the following: The first two now becomes a specific project design issue and must be levered into the brief development stage.
In terms of managing stakeholders, the client needs to be directed to make these decisions early. Conclusion The business planning process begins before the inception stage of the project and informs the client about the feasibility of the project in outline terms.
The briefing and ongoing development of the brief takes place in the next phase of feasibility testing when a solution is engineered by clearly communicating the project objectives and reconciling them with the project constraints. This stage optimises the value and reviews the effect on the stakeholders to mitigate the conflicts which may arise.
The integrated project team is seen as the maintenance of supply chains from project to project so that the team is not always learning on the job. This depends a lot on the greater involvement of the client in choosing limited partners for repeat work and naming suppliers and a lot of work needs to be done to convince one-off clients to be more involved. It also means making a strategic move away from the single stage competitive tendering with selection of the lowest price.
This system ignores other aspects which bring value to the business case such as earlier finish, guaranteed fixed prices, flexibility, sustainability and lesser life cycle costs. More strategic long-term relationships are possible by adopting forms of the contract that allow more direct contact between the contractors and the client such as prime contracting, construction management, design and build and PFI, where appropriate.
Public clients are specifying these forms more and taking up the challenge to be best practice clients by giving training to their procurers. The industry as a whole is being encouraged to participate through what is currently known as the Constructing Excellence Building client business case 39 programme which is building up a growing body of best practice material for client and project team and encouraging self improvement clusters of likeminded construction industry players.
This suggests that the better partnership of clients with the supply chain is sustainable where there is a win—win situation. This is a progress update on the Egan targets set in This report is one in a series of UK construction client reports proposing major change in traditional procurement and tendering procedures in order to promote a pact between the client and their supply team and promote better VFM by reducing process and product waste.
Developed as guidance to clients for the steps of gaining leadership and optimising built asset value. DTI, London. A document which reviews and updates the progress since the Construction Taskforce Egan Report Rethinking Construction. Strategic Forum for Construction, UK. Pearson Education, Edinburgh.
Procurement Systems. Walker ed. Blackwell Science, Oxford. Journal of Construction Procurement, 5 2. The Integrated Process, UK. Cape Town University, Melbourne, Australia. Free Press, New York. The initial brief at inception is developed in the feasibility and strategy stages. The concept of project definition is discussed in the context of project management, as a managed stage trying to reach an agreed design scheme and methodology. The main objectives of the chapter are: Mapping the construction process.
Assessing project feasibility and affordability. Managing the project scope. Dealing with external factors. Balancing risk and value and allocating risk. Project evaluation techniques. Determining the elements of project definition Project definition is carried out in the period from receiving the performance specification during the inception stages up until the receipt of full planning permission.
These stages are A: However, these are strongly related to the traditional forms of contract and procurement and assume a two-way relationship between the client and their designers. In Figure 3. It considers a probable procurement route. B C D Strategic briefing preparation by or on behalf of the client. It also identifies organisational structure and the range of consultants which might be appointed. Outline proposals, taking account of any feasibility studies which have been produced.
Estimate of cost. Review of the procurement route. Detailed proposals and completion of the detail brief. Application for full development control approval. The RIBA work stages provide a managed process with a greater emphasis on the design process. Traditionally the architect has led the management of the project definition stage, which may differ from other different procurement systems. It is important also to consider the cross over of the strategy stage with feasibility and to understand that the programme, the client funding cash flow, the risk and value assessments and the organisation of the project may have important impacts on the design and feasibility.
The normal way to proceed with the development is to include option appraisal or an iterative process to develop the design based on the client and the site constraints considered. A fuller picture The CIOB Code of Practice  therefore talks about an outline brief moving towards a full definition and this can include an extensive development on complex or controversial construction projects as shown in Figure 3. The detailed brief provides the resource requirements, a scheme design and a feasibility and strategy appraisal.
This stage is iterative and requires the involvement of the client with the designer and ideally, if procurement method allows the involvement of the construction manager. At the end of the project definition stage the detailed project brief should have determined scope as fully as possible, because beyond this stage changes to scope become much more expensive.
A system of cost checking is vital for control as it informs the designer of the impact of design change. The crossover between strategy and feasibility provides an axis for checking between the process and the product. It means that: Project organisation and communications are properly considered. The impact of design on construction method and construction time can be assessed. A master plan for the key time constraint of programme and cash flow is in place.
Risk is identified and allocated. Best value is managed. This is also recognised as a separate skill by the RIBA. The following are managed in relation to Project definition 43 the external environment: Feasibility and affordability.
Scope management, change and contingency. Risk assessment of external factors. Funding and location. Design management. Stakeholder management. Organisation and culture.
Some of these will be considered in the pages that follow. The design brief Gray  talks about three distinct types of knowledge controlling design. The first two types of knowledge are particularly relevant to project definition, but by no means exclude the third type.
Hellard  sees that there are four possibly conflicting elements to the brief Function Aesthetic Cost Time Technical and physical requirements to meet the business case. Satisfaction of human subjective aspects. Both capital and running costs.
The logistic requirements for commercial completion and occupation. The client may wish to determine some or all of these elements in the outline brief, depending on the degree of innovation and flexibility the client wishes to give to the team. This is the right stage for a VM workshop. Only then can a working brief be established. Process mapping Process mapping is used to model and test the system that is intended. In projects it is used to make sure that all operations carried out in the project 44 Project definition life cycle are planned and covered.
Formally this can be drawn as a flow chart indicating the activities in rectangles and key decision points in diamonds. It is often connected with a series of different pro forma documents. Electronically these are accessed as links across the intranet or the project extranet, making it a good communication tool and a knowledge base across all members of the project team.
Problems which arise are related to the compatibility of systems and the shortfalls which arise in the degree of information accessible.
Sophisticated systems may access comprehensive external sources through knowledge portals. More integrated internal systems may be linked to a knowledge management intranet, which identifies a wide range of experience and resources within the organisation.
The advantages of the formal system are that it works well in quality assurance, the disadvantage is that the system may become inflexible and discourage innovation and improvement, though it is possible to build in review and improvement stages. Case study 3. The amount of work may vary each year and the fee adjusted on a pro rata basis. Their work is broken down into maintenance and projects. There are approximately eight managers and technical officers employed to supervise projects.
There are 33 documents, which are used to progress the project from inception to completion and also statutory forms to cover building regulations and Construction Design and Management Regulations CDM procedures.
Contract information has been grouped together in a process map which covers the areas of quality assurance, health and safety, programmed work, planned maintenance, emergency callout, non-programmed work, financial management, works management stores and resource management.
The system is linked directly then to each of the relevant forms in order to ensure complete use of the system.
Looking specifically at the projects the process map could be constructed as follows. There are four key players and two audit agencies.
The process is mapped in Figure 3. This map could also be linked to the specific contract pro formas that are relevant at each of these stages so that relevant checklists are processed and approvals signed up. There should also be an opportunity for a review of this process. For example, when the job is logged there is a checklist of 11 items for the extent of the design services covering such items as: Does programme need amplification with the client?
Is contact with the utilities required? Is a policy on hazardous material required? Has a planning supervisor been appointed? There is also a sign off for the procurement manager to consider before the subcontractor starts work. This is called the initial quality check, which covers, for example, safety checks, statutory requirements and use and protection of existing services.
This indicates a need to have good communications with prompt responses for the project to proceed efficiently.
It is a useful system to have where there are repeat projects and there is a single designer and some regular subcontractors, as in the case study.
Where there is a broader range, then a more flexible system may become necessary to cater to different reporting and approvals in delivering the final project brief.
The case study mapping has benefits for ensuring that a system is adhered to, but decisions should be made when adopting a quality assurance system, so that bottom-up improvements may be built into the system otherwise frustration will set in. This system has two feedbacks.
One is from the customer in the form of a customer satisfaction annual survey, inviting the client to provide a scoring of 1—10 against different characteristics of the service given. The attractiveness of the form is that it invites staff to propose a solution as well as identifying a problem or query. To promote use, responses should be made to the initiator. Feasibility and viability Looking at it proactively, feasibility seeks a solution that is possible within the applicable constraints, whilst meeting the client objectives.
Investigations are carried out that will give an overall picture of the costs and constraints of the project and whether it is viable. There are two different types of feasibility.
At the outline business case stage the client, before inception, considers the viability of the project — whether they need the project and whether there is a suitable return to make an investment in bricks and mortar.
This will often take the form of a development appraisal where the estimated costs of the development are weighed against the income and benefit of the investment and over what period they will break even and make a return to the business.
Profits must justify the risk and the additional effort of investment. At project feasibility stage, the information originates from the outline project brief and the business case. Essentially it is a second stage of Project definition 47 feasibility and looks to either optimise value within the parameters which have been set or it will provide an option appraisal of different designs, locations, funding and methods.
Viable alternatives can now be assessed against client values. Client value is an important concept in feasibility and refers to the underlying beliefs of the organisation and also may be emphasised in the individual beliefs of senior managers responsible for the project. Client values determine the priorities and the underlying rationale for the decisions taken. Other issues are the degree of weight that is afforded to environmental issues and sustainability.
Political and stakeholder values will also have an influence on the design and choice. Public view — cost—benefit analysis Cost—benefit analysis is a way of taking into account factors other than income, that are included in the wider term of benefits. Non-financial costs should also be recognised such as, loss of environmental facility and homes blighted by additional noise. A cost—benefit analysis is more relevant in the investment appraisal of a public project, that offers social facilities.
At inception stage the main consideration is that there is an acceptable business case. Cost—benefit analysis is typically viewed as a soft management approach to the issue of feasibility, but in public projects, which are not driven by commercial concerns, then the benefits have to be justified. If comparable projects are to be assessed, then it is important that factors included are formally validated as the same for all projects and these benefits have a standard valuation in comparable projects.
Different benefits may cross over and care is needed not to double count. The system is categorised and valued as in Figure 3. Currently, agricultural land gets a very low weighting. There are also some measurable social benefits, which may be relevant to certain schemes in order to make sure that urban schemes are not the only schemes that get the go ahead on the basis of a priority list and scarce resources. Third, party costs are those that the Environmental Agency incur in dealing with floods.
The example in Table 3. Direct costs and benefits are those which are incurred from the building and direct revenue for the service. Indirect benefits are those accrued to third parties such as the benefits for owners now being able to insure or to sell their properties. In practice, a lot of weight is put upon well-populated areas with less urgency and therefore benefit is put on scattered populations.
Cost—benefit analysis and value At feasibility stage a public body may carry out a cost—benefit where there is a shortfall between the cost and the income. This should be a rigorous and realistic assessment of the financial worth of the benefit and the cost of intangibles. The Millennium Dome is an example where a grossly over optimistic assessment of the visitor figures was made and there was a justified sharp criticism of the justification made. On the other hand, the Sydney Opera House went badly over budget to a factor of 10 and has paid for itself over and over again as a perennial visitor attraction and an income earner.
The difference between the public and the private developer is the worth of the benefit which is used to weigh the balance. In the case of a sports centre for a private developer the income from fees will offset the building costs, fees and land.
A private developer will pay substantial premiums for residential land near water. Here, there is a direct benefit from the saleable price. An indirect benefit is the regeneration of contaminated land around old docks and recreational access without public cost. A public body can Project definition 49 price the benefit of providing the community with a social amenity which meets the council objectives and reduces crime amongst young people.
In both cases, the project is designed at minimum cost which will allow the appropriate level of performance and levels of safety and meet the objectives which are different.
In the case of social cost this is often transferred to the private developer by the legal system. Under the planning system, a new housing estate may have to provide a proportion of affordable housing, contributions towards a new school, a better road junction or open grassed areas.
Under environmental law, a new owner is responsible for clearing up site contamination and may have to provide acoustic barriers, holding ponds and flood defences and actually improve visual amenity. In many cases it makes sense to set up a public private partnership PPP for developments which are more socially beneficial.
Here a developer is offered incentives such as tax breaks for development in unemployment black spots. Or public money is provided for infrastructure improvements that make the area newly accessible and clears up major contamination.
The public contribution is based on the final value to the private party — a host of regeneration monies are available for former industrial and contaminated areas. Funding and investment appraisal A balance between value and development cost should be achieved to make a project viable.
This may either be carried out by measuring cost and assessing the value, or alternatively by calculating the end value and working out a budget to suit it.
In either case the value must exceed the cost to justify the project. The method and source of funding is important in order to assess cost. There are several tools that may be used to assess this on construction projects. Payback method This is a measure for assessing project incomes against project capital cost and possibly running cost.
The payback period is the point at which future incomes equalise the capital costs expended. In tabular form the cumulative income looks alike as given in Table 3. This method shows how long it takes to payback year 4 , but fails to indicate unless incomes are progressively predicted, what final profit is made. It also does not indicate the declining value of a sum of money which is paid later. This means that unless values are discounted then there is an 50 Project definition Table 3.
This applies just as much to the use of company reserves as it does to borrowed capital. This is usually expressed on a yearly basis as a percentage. Again this method takes no account of the declining value of whether a sum of money received in the future and even worse does not take account of how many years it takes to get a profit.
Discount cash flow DCF method Discount cash flow method is similar to accountancy rate of return, but it operates a discount value equal to the cost of capital. Project definition 51 Table 3. This rate is set by companies with reference to the cost of borrowing for them, even if the interest rates change.
Column four shows the undiscounted net cash flow. When the discounted income and the costs for all years are added up cumulatively we have what is called net present value NPV. This is summarised in column five. This rate reflects the rates of interest and when inflation rises proportionately with interest rates, it is a reliable indicator for comparison purposes.