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

Construction is unique when compared to manufacturing, process, distribution, transportation, and other industries. Each construction project is different: most contracts are awarded based on a competitive bidding or selection process; projects usually must be planned and executed under tight schedules; the workforce is transient, heterogeneous, and involves many crafts; union contractors may be dealing with several unions; much of the work is subject to weather; a tremendous variety of materials and equipment must be handled and managed; and construction workers are continually working themselves out of a job. These unique attributes present an extreme management and planning challenge.

Fixed-price contracting for construction is a common contracting strategy for project owners. Occasionally construction contracts are negotiated, but more often competitively bid. For competitively bid projects, a number of contractors are provided identical sets of drawings, specifications and other contract requirements, and given a period of time to prepare pricing and other submittals. Eventually, the contract is awarded to the selected contractor followed by a notice-to-proceed. The time allowed to prepare the bid/proposal is often short, and the time between contract award and expected mobilization date can be equally short. Yet the contractor is expected to meet all bidding requirements and to have final control schedules, procedures, and other control documentation available for client review soon after contract award. Given these challenges, detailed planning is essential if the contractor’s and owner’s goals are to be successfully achieved.

Pre-mobilization planning by a contractor for competitively bid, fixed-price construction contracts is the subject of this publication. Detailed planning is required from the time a contractor receives a set of bidding documents or request for proposal until resources are mobilized to execute the work. The research introduces the planning process and discusses the characteristics of fixed-price construction including the duties and obligations of the contractor and owner. Key considerations, estimating principles, and planning techniques are discussed to illustrate the importance of managing the execution risks associated with fixed-price construction projects. The ultimate goal here is the definition of a planning structure which best:

1. Assures development of an accurate cost proposal and other bid submittals; and
2. Establishes the framework for rapid conversion of preliminary plans into achievable final plans after contract award.

Contractor Planning for Fixed-Price Construction is part of a set of research conducted by CII in the over-arching area of cost and schedule, and published between 1985 and 1990.