By Joseph Brady
The construction industry is quite a unique one. It’s an industry that contributes to most of the country’s GDP, by providing a means to production, the addition or improvement to the infrastructure of the economy, social investments such as hospitals, as well as personal investments like houses and apartments. Unfortunately, this industry can be a highly competitive one, with low profit margins. The demands from construction businesses are determined differently for different types of projects, government policies and economic cycles.
The volatile nature of the industry might make it difficult to plan for projects and their requirements. Another challenge is the distribution of control over several people in the construction process. The involvement of several parties such as the owners, architects, contractors, subcontractors, materials and equipment suppliers, regulatory agencies etc. This means the construction business should be constantly prepared for any immediate changes, or last-minute requirements well ahead of time.
A construction business is characterized by the following:
- Workers/Human Resources: A growing shortage of skilled workers is faced due to a 4 ‘D’ industry perception – dull, dirty, demanding and dangerous, an aging workforce, a requirement to travel, and an absence of apparent technology.
- Safety: Construction accounted for 19.5% of all workplace fatalities in the United States (about 5% of the total US workforce)
- Quality Control: If you do not provide excellent quality, someone else will and put you out of business.
The projects of your construction business can be divided into the following categories:
- Industrial: These are dominated by very large engineering and construction firms. These projects can be the most technical of all construction projects. Only a few design firms and constructors can take these privately funded projects. Examples include automobile plants, petroleum refineries, petrochemical plants, steel plants, nuclear plants, etc.
- Heavy Engineering and Infrastructure: These activities are primarily the work of civil engineers, but other engineers can also take roles. The equipment used here is intensive, and uses fleets of large earth movers, heavy trucks etc. These projects involve working with massive quantities of basic materials and these projects are funded by the public and are of long duration. Examples of these projects include airports, bridges, dams, tunnels highways, urban transit systems etc.
- Commercial Building: These projects are labor and material intensive and require close interaction with several people. The design of these projects are coordinated by architects who work with engineering specialists and the private economy finances these structures. Examples of these projects include religious buildings, government buildings, hospitals, retail stores, malls, warehouses etc.
- Residential: Residential projects need continuous working capital, and can be labor intensive. They may result in a business failure if demand falls. These projects also have the maximum involvement of parties, with architects who design the property, large number of contractors and subcontractors involved and the owners who oversee the whole project. These projects are largely financed privately, and their examples include houses, apartments, residential villas and complexes, condominiums, town-houses etc.
Construction projects are largely divided as private and public projects. A private party can award a project to anyone they choose as well as create multiple contracts. A public party is limited by rules and regulations and generally awards projects through a competitive bid.
The Strategic Life Cycle and Stages of a Project
The costs of each phase of a project is based on several factors, but Stage 4 of production generally requires most of the resources and efforts. However, the details of the budget for the project should be committed even before Stage 1 of the project, though it is generally only planned later. Unfortunately, there is a constant pressure to start “real work” to meet deadlines without properly planning first. This can cause an allocation of resources in a hurry, which can bear high costs.
Stage 1: Conceptual Design
The conceptual design phase aims to understand the technical, financial and economic feasibility of a project and design a plan to accommodate the development of basic and detailed engineering.
Stages of the concept design phase include:
- Feasibility Studies
- Options Appraisals
- Project Brief Preparation
1) Feasibility Studies: Feasibility studies are carried out for large and complex projects.
Feasibility studies aim to:
- Establish the viability of a project
- Identify feasible options
- Assist in project development and documentation.
All assessments of studies should be carried out properly to provide the client with clarity on whether the project is feasible or not. This will require consultation with stakeholders and statutory authorities to reach a conclusive decision on the project. The feasibility studies should include the following:
- Planning Permissions
- The requirement of an Environmental Impact Assessment
- Legal and statutory laws and approvals
- Budget analysis
- Assessment of potential to re-use existing buildings
- Assessment of site information and site appraisals
- Assessment of operational and maintenance issues
- Procurement Options
- Appraisal of Servicing Strategies
2) Options Appraisals: This phase aims to appraise all other options before designing a plan based on the feasibility studies. Options appraisals can be diagrammatic and highlight the pros and cons of various options for the client’s understandings, to select the preferred option.
The steps for an options appraisal would include:
- Assessment of risks of options
- Consultation of local authorities and statutory authorities for assessing planning permissions and other statutory requirements
- Cost appraisals of options
Once an appropriate option has been selected by the client, a business brief can be prepared.
3) Project Brief Preparation: The project brief is the final phase in defining a client’s requirements. It can be made as a report with spreadsheets and databases wherever required. It is the key document upon which the concept design is placed.
Besides collecting information on the physical requirements of the project, the project briefing process should also:
- Verify the goals and focus of the project.
- Plan the time, space and budget factors to align with the client’s vision and requirements.
- Ensure project expectations are accomplishable.
- Provide clarity to the project structure
- Gather contextual and user information
- Establish a building’s life span, flexibility and maintenance requirements.
Stage 2: Advanced Development
The advanced development phase of the project consists of designing a plan based on the studies done from Stage 1 of the project plan. The plan, budget and schedule are all a part of this phase.
The advanced development phase can be divided into:
- The Design Concept
- A Planning Strategy
- The Cost Plan
- Buildability and Construction Logistics
1) The Design Concept: The building design process must accommodate several, and even somewhat contradictory requirements. These requirements are based on the factors that have been studied above, including the brief, budget, structure, regulations. When it comes to construction however, it can be challenging to define what the design process actually is, because several construction business owners say the design outline can be quite different from what they actually do. This said, not all design approaches are also the same.
They can be:
- Inside out or outside in
- Holistic or serialistic
- Collaborative or independent
- Lateral or logical
- Rule/principle based
- Theory based
- Style based
- Form based
- Spatial/zone based
- Pattern based
- Function based
2) A Planning Strategy: Creating a planning strategy includes the assessment of needs, collecting resources, setting goals, building strategies, and allocating tasks as well as monitoring progress. It can also just mean obtaining permissions to plan in the construction industry.
The plan can include:
- Business plan.
- Contingency plan
- Cost plan
- Environmental plan
- Environmental scanning
- Project execution plan
- Project implementation plan
- Project quality plan
- Site waste management plan
- Stakeholder management plan
- Travel plan
3) The Cost Plan: A cost plan is calculated by a cost consultant. The cost plan evolves throughout the life of the project, as quotes are provided by contractors, subcontractors and suppliers. The project cost plan includes the following elements:
- Initial cost appraisal
- Elemental cost plan
- Pre-tender estimate and tender pricing
- The contract sum and its analysis
- The final account
The client should make it clear what costs are to be calculated by the cost consultant and what costs will be handled by the clients themselves.
4) Buildability and Construction Logistics: Buildability and Construction Logistics are finally about pulling everything together; planning the deadlines for every phase of the project, ensuring it can be done within the estimated budget and at the best value for money. It takes into consideration the sequence of events that will occur at the site, the labors and workers required, accounting the delivery of raw materials required and the environment as well. It also factors all the heavy machinery required for the process and storage of extra material during the course of the project. Once all the logistics have been planned, the project can proceed to the next phase of the project.
Stage 3: Detailed Design
This phase indicates the beginning of the “all-hands-on-deck” part of the project. All the contractors, subcontractors and workers are involved, and it is the project manager’s responsibility to plan an organizational structure, a detailed plan, allocate tasks, introduce the team and kickoff the work. This consumes the most effort and resources second to the actual production phase of the project. In this phase, the following are done:
- Project deliverables are identified
- Team is acquired and developed
- Organizational structure of team is prepared
- Safety and preventive measures with guidelines and protocols
- Execute the project management plan
1) Identification of Project Deliverables: In this phase, the project deliverables are listed and an acceptance criterion is prepared for the list of deliverables. This acceptance criteria is decided with the client and sets a quality parameter above which is met, the project work will be accepted by the client. In this phase, the construction project funding is also planned according to the deliverables.
2) Team is Acquired and Developed: The project manager takes the appropriate steps to acquire a team for the project, with the help of human resources. A resource calendar is prepared and the team’s skills are developed to meet the requirements of the project.
3) Organizational Structure of team is prepared: The hierarchy and structure of the workers is prepared and each worker must learn to whom to report. The work is allocated based on experience and skills and teams are prepared for each part of the overall deliverable.
4) Safety and Preventive Measures with Guidelines and Protocols: All construction business will have a safety protocol, but this may need tuning based on the project specifics and its location. Run through all the safety and preventive guidelines with your workers, and the number of who to contact in case of emergencies. This can be crucial given the fatalities that happen in the construction industry, so give importance to this.
5) Execute the Project Management Plan: This is the kick-off! It’s time to get down to business according to the plan, and ensure all other contractors and subcontractors are in-line with the actionables and deadlines. This is the final phase before beginning the production phase of your project.
There are several construction business blogs and websites to help develop the best project strategies, creating a project management plan, and many to hire the good and specialized workers. You can use these to build your team, and work towards the project goal.
Stage 4: Production
This is the longest phase of the construction project, and the one that takes up the most effort and resources. This is the most critical phase to the project, and involves a constant interplay of the client, suppliers, contractors, subcontractors and workers throughout.
This phase consists of the following:
- Management of Construction Project
- Measurement of KPIs
- Project Control
- Update and Re-plan
- Problem Solving
1) Management of the Construction Project: This is the most important part of the project manager’s job. It’s their responsibility to make sure the project is running smoothly and as per plan. All aspects of time, quality, risk and cost management take center-place. It is monitoring the project through its various life cycles with a constant eye on all resources being used.
2) Measurement of KPIs: Measurement of a project based on whether it meets the deadlines of each phase, and the budget is being spent as per plan is the best Key Performance Indicator or KPI to monitor. Quality deliverables are also a KPI that can assess that the deliverable meets the acceptable criteria prepared in the previous phase and an overall project performance tracks all the issues that arise in the project and how quickly they’re addressed.
3) Project Control: The project manager must check that all aspects of the project are in control and every team is working up to mark. Safety issues are addressed immediately, and the project must run according to plan. If there are any changes in actions to be made, the project plan must be re-worked.
4) Update and Re-plan: Although it is ideal, the project seldom or never goes according to the plan. Based on certain project conditions and challenges, the project plan may require some updates and need to be reworked to meet the client’s requirements. This may create changes in the project. The project manager must note these changes and decide what can be compromised or worked around, and what cannot.
5) Problem Solving: Finally, the project manager must be ready to address any issues faced by the workers, contractors, and subcontractors right away. The project manager needs to prioritize the problems to be addressed based on the site requirements and deliverable due dates to respond to each problem that arises in a prompt and timely manner.
Stage 5: Termination
The final phase is project termination, or project closure. Although the ending of the project is near, the work is still far from over. The project manager will need to prepare a final report of the project and close the budget or cost plan that was set for it. The report must include all the punchpoints on the progress of the project- including factors like the work accomplished at every phase mentioned above. A “post-mortem” of the project must be done including failures of the project and how they can overcome from next time. They will also need to include what was planned to be done but wasn’t; and catch up on that leftover work. All the project documents and reports will need to be collected and stored at a single place. Most cloud-based software solutions and construction apps can help out with this. The workers and contractors specifically hired for this project (if any) will be terminated, and the best workers can be specially awarded or thanked for their contribution to the project.
A construction project requires the use of a lot of effort, resources, time and most of all, money. Most construction businesses are also not paid until a project is completed and without careful planning, can result in a shortage of funds. Construction businesses are one of the few industries where along the course of the project, there may be an unexpected or an immediate need for short-term business financing. There are several construction business financing options in the market, and the one that suits your requirements may depend on your type of project. Stay prepared and plan your project ahead with careful execution of each phase and it is bound to be a success!
Joseph Brady is the Sr. Director of Digital Marketing at Reliant Funding.