Client Requirements

Discuss about the Project Execution Planning And Management.

The NSW Government, realizing that there has been a significant growth in traffic in the existing Sydney motor way system, including the M5, M5 East and the M4 motorways. After evaluating th situation and realizing the need to expand the existing M4 motorway, the NSW carefully selected contractors to undertake the expansion project. The complexity of the project means that no single contractor can competently undertake the project, and so the project was awarded to a joint venture firm, WestLINK, made up of JPM Co, KLG Solution, and TOP Construction.  WestLink has hired two consulting design firms to work with in house contractors as well as two consulting forms to offer management and technical expertise. Further, the project has 180 sub contractors for specialty works. The project challenges include keeping over 140000 vehicles moving at speeds of 80 KPH, controlling costs and maintaining a fast track schedule, creating a unified and cohesive team to deliver the project, and meeting the 2013 deadline to complete the project. After briefly evaluating the client needs, this paper proposes, based on a weighting criteria, with justification, suitable methods for project delivery and a financial contract based on client needs. The reasons are then discussed before conclusions are drawn.

The client requires a suitable project delivery method that will help overcome the stated challenges, as well as suitable financial contract type; the entire expansion of the M4 is budgeted to cost $ (AUD) 16.8 billion and the NSW government has so far only provided a concessional funding of $ 1.5 billion, leaving a balance of $ 15.3 billion.

This refers to the system used by the project owner to organize the financial design, operations, construction, and maintenance services for a facility/ structure by entering into a legal agreement with an entity/ entities (Touran, 2009). There are various project delivery methods: for this case, the design-bid-build, the [email protected], and design-build are considered. The design-bid-build (D-B-B) is the traditional design-tender project delivery method where contracts with separate entities are entered into by the owner/ agency to design and construct a project. The D-B_B has three distinct phases that include the design phase, the tender/ bidding phase, and the construction phase. The design phase entails having the owner nominating and retaining an architect to design and come up with bid documents that also include drawings and technical design specifications for the structure (‘Design Build Institute of America’, 2015). Various contractors then make a bid based on the drawings and design specifications and the early design is further developed in conjunction with other professionals, including mechanical, civil, and electrical contractors. This phase is followed by the bid phase in which an open tender is floated and  interested service providers bid for the project. After review, the qualified contractor is awarded the contract and construction starts and the architect acts as the representative of the owner (Bramble & Callahan, 2010).

Project Delivery Method

The [email protected] (Construction Manager at Risk) is a method of project delivery in which a CM (Construction Manager) makes a commitment to deliver a project within a GMP (Guaranteed Maximum Price) based on the given construction projects and specifications plus any reasonable terms that are inferred. The [email protected] acts as the owners’ consultant and also provides professional services: the [email protected] (or CMAR) can also engage in actual construction works for the project depending on expertise (Gransberg & Shane, 2010). The CMAR not only acts in the best interests of the owner, but is also responsible for managing and controlling the costs of construction so they do not exceed the GMP. This is because the CMAR is responsible for any extra costs that exceed the GMP and which are not change orders (Rodriguez, 2018).

The Design-build (D-B) project delivery method entails having a single entity contracted to undertake the design and construction services for a construction project. The single entity is the design builder. The D-B delivery method is based on a single point of responsibility in which the design and construction phases are overlapped. His helps minimize risks for the owner while also reducing the schedule for the project delivery. The D-B is responsible for all aspects of the project, regardless of the nature of any issues or faults that may arise. This process of contracting brings value engineering and can enhance innovation on the construction project (Dykstra, 2011).

Project financing and financial contracts are a crucial aspect of any construction project, especially one of the magnitude under discussion (the M4 motorway expansion). Cost is among the triple constraints in project management, the others being time and scope (Shen-fa & Xiao-ping, 2009). There are various methods of financial contracts for construction projects; this paper focuses on the Lump sum contract, GMP (Guaranteed Maximum Price) Contract and Cost Plus Fixed Fee Contract (Kayser, 2013).

Lump Sum Contract type is a traditional method for construction procurement that still remains commonly used (Kayser, 2013). This type of financial contract entails agreeing on a single lump sum amount (price) for all works in a construction project prior to starting the project. The price for the contract is fixed and contractors make a commitment to be responsible for the complete execution of the contract for a stated sum. Such financing is suitable where the project is well defined and there are no likely major changes to the scope of works (Hickson & Owen, 2015).

Financial Contracts

GMP is an open book, cost contract financial contracting method in which the contractor is given compensation for actual costs incurred plus a fixed contract fee, governed by a ceiling price. The responsibility for cost overruns, unless of course any increments are based on approved changes. In the event that there are cost under-runs where actual incurred is less than the budget, the excess is returned to the owner (Burger, 2018).

Cost plus fixed fees is a  financial contract type that involves cost reimbursement where the contractor is paid a negotiated fee of a fixed amount during the contract inception. The fee doesn’t vary with costs, although it can be adjusted if there are changes to the scope of works in the construction works. Such contracts are suitable where the required level of effort is unknown. This contract type is however not suitable for major construction works especially where reasonably form performance schedules and objectives have been established by the owner (Kerzner, 2009).
Having had a brief overview of the different methods of project delivery methods and the financial contracting methods, the best method can now be chosen based on weighting the methods, based on the project challenges and the owner requirements. The weighted scores for the project delivery method are shown in the figure below;

In apportioning the criteria weights, the challenges faced in the construction project, as well as the overall project objectives are given consideration. For the project delivery method, the need to keep traffic moving is given a weight of 15%; this is because it is important to keep traffic moving while the construction works are going on (Sözüer & Spang, 2014). Maintaining a fast track schedule is given a weight of 22% because the project must not have delays when being executed; this is tied to the project deadline in which the works must be complete by 2023. the construction project is complex, involving 200 different entities and contractors and as such, a proper project organization with clear roles and responsibilities are necessary if the project objectives are to be met. As such, a unified cohesive team that will ensure the successful delivery of the project is highly desired, hence this aspect is given a weight of 20 percent. The deadline is a major project constraint, but is given a weight of 18% because some delays or early finishing of the project can be tolerated, as long as the scope of works and the cost constraints are not affected.

Discussion and Assumptions Made

The ability to minimize risks; risks to the owner, risks of scope and remain within the set budget are very important, and so is given the highest weight of 25%. In giving the scores, the merits and demerits of the various project delivery methods were considered, as well as the requirements of the client and the project challenges. For instance, for D-B-B, some of its demerits include failure of the design team being current with the costs of construction and any possible increments in costs. This model also has the tendency to seek the lowest cost especially when seeking subcontractors, a factor that may affect the final project adversely (Carpenter, 2014). The contractor is also brought in when the design has been done meaning they have little input into design even where improvements might be achieved. There may also be competing interests, and so the DBB gets a score of 70 out of a possible 100 on keeping traffic flowing, 63 for maintaining task schedule, 75 for cohesion, 65 in meeting deadline, and 70 on cost objective and ensuring the least risk to the owner; the D-B-B model takes care of the owners’ interests.

For the CMAR, keeping traffic mowing is given a score of 78 because this model takes advantage of available expertise and is usually used were joint ventures as for the M4 expansion project are used.  Because it entails a joint venture with many specialists that accord the project value engineering; further, because the GMP is set prior to undertaking the project with a greater consideration on delivery and meeting scope objectives, maintaining a fast track schedule and having a cohesive unified team are given scores of 80 and 83, respectively (Carpenter, 2014). Further, CMAR offers professional services and because of value engineering and having many specialists on board, with a defined organizational structure, it will reduce risks for the owner and ensure there are minimal cost overruns, as such a score of 85 is given for this, and 70 for meeting deadline since with many players, decision making may be affected. For D-B, maintaining a fast schedule, meeting deadlines, risk and maintaining low costs gets high scores, except for keeping traffic flowing because this model does not have the value engineering experience, say given by CMAR (Telliford, 2009).

For the financing model, greater criteria weight is given to speed of execution and suitability for the scope of the project (complexity), give it is a very complex project with 25 % each. Low risks and maintaining the budget is given a weight of 20%, while ability to keep low costs and incentives for contractors to keep costs low are each given weights of 15%. The GMP has the highest score for suitability for project size at 82, and ability to keep costs low. The fixed cost plus a fee financial contract gets a high score for ability to meet budget objectives and offer low risks as well as ability to keep costs low.  
After assigning weights and weighted scores to the criteria based on the project requirements and challenges, the results show that th best method for project delivery is the [email protected]; this is because the project has a huge and complex scope, involving several subcontractors. Further, the best financial contract model is the GMP; which greatly compliments the chosen project delivery method (Kayser, 2013). The chosen delivery method and financial contract model fit with the requirements for the project. The CMAR model limits risks to the owner, provides professional services including architectural, surveying and engineering, meaning the project organization is well defined and tasks can be undertaken quickly due to the added value of value engineering. Further, it is a suitable method for contracts involving joint ventures. The CMAR main task is managing the project; effective project management is essential for the successful delivery of the project. For the financing model, the GMP just beats the lump sum model as it greatly compliments the CMAR

Conclusion

The expansion of the M4 motorway is a complex project that is scheduled to be completed by 2013 at a total cost of $ 16.8 billion. Given its complexity, the project delivery method and financial contract must meet the delivery objectives as well as tackle the project challenges. In order to select the best model, a weighted scoring system was used to compare the D-B-B, D-B, and CMAR models, as well as the financing modes of lump sum, GMP, and fixed cost plus fee. The project challenges and owner requirements were the guising factors in the weighted scoring. After an evaluation, with rationale, the CMAR and the GMP are the most suitable project delivery and financial contract methods, respectively, for the successful delivery of the project

References

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