Cost/Schedule Controls - Construction Contractor Planning for Fixed-Price Construction (Archived)

RT-006b Topic Summary
RT 006b

Overview

This research covers the benefits of Pre-mobilization planning by a contractor for competitively bid, fixed-price construction. The ultimate goal of this topic is to define a planning structure which best a) assures development of an accurate cost proposal and other bid submittals, and b) establishes the framework for rabid conversion of preliminary plans into workable final plans after contract award.

Good planning starts with the establishment of a planning culture, and the complexity of construction projects should be reason enough to endorse the concept of detailed planning on every project. However, good planning is unfortunately often compromised by contractors in the interest of saving time and money. Given that planning is not a new or adverse idea, the key to success is implementing the plan and sticking to it.

Of all contract types, fixed-price is the most challenging and therefore it is of the utmost importance to execute a well-crafted plan for the success of the project and for organization leaders to see these successes and make planning a focus of the organization from the top down.

Construction Contractor Planning for Fixed-Price Construction is part of a group of research conducted by CII in the over-arching area of Cost/Schedule published in 1985-1990.

Key Findings and Implementation Tools

1 : 6-step Planning Process

Suggested planning process includes:

  • Establish set of goals
  • Formulate alternative plans
  • Establish criteria
  • Selecting alternative
  • Implement alternative
  • Develop feedback loop

Planning Guidance: Since limited time is available for planning and it would be very costly to plan each project from scratch, a company must maintain a family of data bases, policy documents, standard procedures, model plans and checklists to standardize and streamline the planning process. (SD20, p. 6)

Reference: (SD-20)

2 : Factors Contributing to Project Success

Fluor’s study indicates 2 influencers of project success: (SD20, p. 16)

  • Quality and depth of early planning by the PM Group
  • Execution by a strong PM group
Reference: (SD-20)

3 : Top Management Commitment

Initial commitment to planning must come from top management. If top executives do not put their influence behind the planning process and create the environment to bring order out of disorder from their level down, the tasks of lower level managers become more difficult and the planning process may be inefficient and meaningless. (SD20, p. 8)
 
Reference: (SD-20)

4 : The Contractor’s Fence

Outlines who bears the risks in a construction project for each party. (SD20, p. 17, Figure 1)
Reference: (SD-20)

5 : Causes of Overruns

The research conducted a survey of general and project managers to determine reasons for project overruns resulting on the chart shown below. Interestingly, project managers see themselves in a reactive management role having been handed the project, well planned or not. The senior managers understandably look at the proactive management role. 
(SD6, p. 19, Figure 2)
Reference: (SD-6)

6 : Construction Planning Logic Diagram

Provides a layout of the development of a construction plan from bid to Project start. First Priority item is development of WBS for the project as this defines the project structure for work planning and control. (SD20, p. 26, Figure 4)
Reference: (SD-20)

7 : Subcontracting

Subcontract success includes: (SD20, p. 37):

  1. Requesting quotations only from qualified, experienced, financially capable contractors
  2. Defining the scope of work in sufficient detail so that subcontractor rights and duties are clearly understood
  3. Requirements (specs, flow downs)
  4. Milestone dates for start and completion of work
  5. Deliverables, payment, definitions, insurance, guarantees, Sacs
Reference: (SD-20)

8 : Project Execution Plan

A major component of the planning process is the Project Execution Plan (PEP). The PEP has many parts, such as: (SD20, p. 47)

  • Project organizational structure
  • Work breakdown structure
  • Subcontract plan
  • Procurement plan
  • Site development plan
Reference: (SD-20)

9 : Implementation Tool #1

The research source document includes many useful tools and checklists including:

  • Pre-Bid Site Investigation Checklist (Appendix A)
  • Subcontractor/Vendor Checklist (Appendix B)
  • Materials Management Checklist (Appendix C)
  • Contractor Facilities and Services Checklist (Appendix D)
  • Project Controls Checklist (Appendix E)
  • Checklist for Evaluating Risk for Fixed-Price Contracts (Appendix F)
  • Quality Control Plan (Appendix G)
  • Loss Control Plan (Appendix H)
  • Project Responsibility Matrix (p. 43)
  • Project Execution Plan (p. 47)
Reference: (SD-20)

Key Performance Indicators

Improved cost, Improved schedule, Improved quality(reduced errors & omissions), Reduced/improved risk, Improved predictability

Research Publications

Construction Contractor Planning for Fixed-Price Construction - SD-20

Publication Date: 11/1986 Type: Source Document Pages: 82 Status: Archived Tool


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