The Construction Management Method for Public Sector Building Projects - Research Paper Example

INDEX INTRODUCTION. 2. REASONS FOR THE DELAYS 3. REASONS FOR COST ESCALATIONS 4. ROLE PLAYED BY THE PROJECT MANAGEMENT 5. RECOMMENDATIONS 6. CONCLUSION INTRODUCTION In 1998, the Scottish Parliament Corporate Body required the new Scottish Parliament house to be build by mid-2001. However, it was not completed until 20 months after with the cost having doubled from 195 million in September 2000 to 431 million in February 2004. This could have been countered by better project management practices. The construction of the new Scottish Parliament House known as the Holyrood project was a very difficult and complex project. The Auditor-General of Scotland, Robert Black [2000], commented that, 'in the recent history of Scotland there has not been a public building project as complex and difficult to deliver as the Holyrood Project'. According to Robert Black, the project management consisted of the Clerk and Chief Executive of Parliament who was the Principal Accountable Officer, and the Project Team, which was led by the project director. The legal client was the Corporate body but it delegated the function of completing the Holyrood Building Project to the Clerk. He emphasized that project management was responsible for managing and delivering the project. This paper will feature a review of the reasons for the delays and cost increases of the project. The depth to which the project management was to be blamed for the setbacks will also be analysed. It will also give recommendations on what should have been done by the project management so as to avert the setbacks and finally the lessons that project management should learn that are relevant to management of public sector projects. REASONS FOR THE DELAYS Robert Black in his report of June 2004 listed the main cause of the delays to the project as the production of detailed design variations and the late supply of information during the construction. He however sighted other factors that contributed to the delays. One factor was the choice of construction management as a method of procuring the project. The Auditor-General commented that construction management is unsuited for most building projects in the public sector. He however sighted that construction management was not necessarily the wrong choice in the Holyrood case. It was only unfortunate that in the Holyrood case project management did not implement construction management fully in accordance with usual practice. The experience and expertise in construction management was not present in early stages of the Holyrood project and therefore the risks and challenges were not fully appreciated by the client and project management. Wanna [2004] described this program as a very tight and far too ambitious construction program. This is so because in construction management the design is incomplete and uncertain when construction starts, so the risk stays with the client. The different forms of contracting are intended to transfer risk to those best able to manage it. The client must manage design development and get a project team that has professionals who are experienced in this construction method. Another major factor was the challenge of construction. This was due to the difficulties associated with the construction of such a complex and unusual building on a densely developed site. It was also expected to be completed against very tight deadlines. It was extremely challenging both in engineering design and construction terms. Lord Fraser, in the Holyrood Inquiry, highlighted that there had been many references to the "complexity of the design" as a factor causing programme overruns. The third factor was the fact that there was no room for slippage in the original timetable, which was very compressed and very challenging to deliver. The original timetable was not adjustable or had no allowance for any delays hence was hard to work with. These factors hindered the architect and some trade contractors from delivering some critical elements of work on time. At the root of the project slippage however, according to Burgess [2003], was the production and release of design information later than at the time agreed in the construction manager's programme. Further delays were caused in some cases because there were design elements provided by trade contractors which had to be approved by the design team. As a consequence some work was out of sequence and not productive, and this added to the delays. In the face of repeated slippage, project management should have managed performance by measuring what was being achieved against contractual obligations and enforcing those obligations strictly. REASONS FOR COST ESCALATIONS Turning to the reasons for the cost increases of the Holyrood project the main cost escalations came after the project was handed over in 1998. Lord Fraser summarized the reasons for increases in cost estimates in the Holyrood inquiry. The inquiry highlighted that there had been many references to the "complexity of design" as a factor causing both cost and programme overruns. The first reason as summarised in the report was that the briefed grossed area on which the budget had originally been based had increased in the latest design proposals so as to accommodate large members of staff in the light of better knowledge of the way parliament would operate. Secondly, the design proposals had been unable to match the over optimistic gross/net proportions in the brief. Another reason was recognition of the need to incorporate an additional formal entrance to the building. This required more area on which to build the entrance and also additional designing was necessary. This therefore led to the need for additional space hence costs for acquisition and also design. According to Wanna, the Holyrood Project was faced with a very tight and far too ambitious construction program. The use of the 'construction management' method of procurement and contracting was identified as the main reason for significant cost increases. This is so because in construction management, the design is incomplete and uncertain when construction starts. It is therefore difficult to make estimates based on the information provided. In normal construction contracting however, most of the costs are determined when the contract is awarded. This ensures budgeting estimates are close to the real thing. Another reason was that even before the cost plan, according to Robert's report, the impact of inflation would consume the entire contingency fund and so it was increased from 11 million to 61 million but there was no detail on how the risks were eliminated. Another reason was that some of the increased costs came about due to the extended construction period. In any project, time slippage can mean additional costs. These costs can arise from prolongation, delay, and disruption. These are the extra costs of doing the same work over a longer period. Lord Fraser, in regard to the procurement method adopted, argued that there was an inadequate level of evaluation or understanding of the construction management route. ROLE PLAYED BY THE PROJECT MANAGEMENT In September 2000, the Auditor General for Scotland undertook an examination of the project under the Public Finance and Accountability (Scotland) Act 2000. This report identified a number of project management and governance issues. For example, whilst recognising the unique and complex nature of the project, the report identified some shortfalls especially in the procurement strategy. Other areas identified as shortfalls were project cost reporting and in accounting for risk. The Audit Committee published a report on the new Scottish Parliament Building in December 2000 concentrating on project management. According to the report, one issue was that the reporting systems in place were unsystematic and there should have been a greater level of transparency in the cost reporting arrangement of the project. Secondly, it was unnecessary and wrong not to disclose the full costs of the project when they were known as required. Withholding the information on costs was a shortfall as the information was not acted upon as would have been required. Thirdly, there was no independent review of the project in June 1999 when the responsibility for the project changed from the First minister to the Scottish Parliamentary Corporate Body after which the construction costs escalated from 62 million to 108 million. In June 2004, Black wrote another report sighting issues relating to project management. He advocated that for any project there should be an approved budget limit. Any chance of the budget being exceeded should be countered by the project management by taking action to reduce the costs or to obtain extra funding. The absence of an approved budget contributed to weaknesses in cost reporting and financial control. Some contracts were awarded with uncertain scope and design and project management was not well placed to resist extra-time-related costs from contractors. RECOMMENDATIONS There are various operational projects management actions that could have been taken to control the project better and increase its chance for successful delivery against time and cost targets. First, an orderly, consistent and transparent selection of a designer from start to finish of the project is one of the recommendations. There should have been one designer allocated from commencing the project to the end as there could have been no major variations. Secondly, a full and rigorous evaluation should have been undertaken to confirm a compatibility of working cultures and practices. Thirdly, a full analysis should have been undertaken to evaluate all the risks. Construction management as a public procurement route should be used as a last resort. Fourthly, governance of public sector projects needed to be in line with those of the private sector and also the person leading the project should have had an understanding and appreciation of the procurement rules. Another recommendation is that full contracts, guarantees and bonds should have been secured at the outset to prevent risks when an architect, a consultant or other contractor was employed. Also the client and project management should have considered and addressed the performance of the contractors. Consequently, the reporting systems in place were unsystematic and there should have been a greater level of transparency in the cost of reporting arrangements for the project. It was also necessary to disclose the estimated full costs of the project when they were known. The letting of contracts before the design had been fully developed was a risk because true competitiveness could not be achieved. If the scope and design of the work had remained unchanged it would have been easier to ensure contractors complied with their programme obligations. The changes meant contractors were reluctant to accept responsibility for delay. Finally, an independent review of the project was also in order as it would have identified the weaknesses. The management should have invested more time in the early briefing stages of design to clearly define the project's scope and complexity. This is because there was a very high level of design development in this project. There was however not a full appreciation of the complexity of the design early enough in the project. The project management therefore did not control the process of design development effectively. CONCLUSION The Holyrood project identified a weakness in the system and there are various lessons that the project management can learn that are relevant for managing big public sector projects. One of the lessons is that the form of contracting should be chosen with care and with a sound understanding of where the risks lie and how they will be managed. This can help avert serious setbacks that can arise and hinder delivery of the project. Secondly, it should be noted that the construction management method is unsuited for most public sector building projects. This is so because in construction management the design is incomplete and uncertain when construction starts hence it is difficult to make assumptions and estimates of cost. The third lesson to the management is that the gateway review process should be followed. This is because it allows for scrutiny of a project at different stages hence weaknesses are sighted early. Another lesson is availing performance payment incentives for contractors. This is to encourage them to deliver in time and not compromise quality. Leadership and control is another issue to be addressed. There should be a single point of leadership and control and not dividing the two as this, as seen as in the Holyrood project, proves difficult to work with. Performance should be measured as the project unrolls. This is a lesson that should be taken very seriously as it ensures delivery. There also should be adequate time for planning for the project before commencing. This ensures that all shortcomings that are likely to occur will have been thought over and hence countered before commencing the project. The management of public sector projects should also learn that complete project information leads to more accurate capital cost budget estimates. One of the most serious problems when a budget is being estimated is that little information is often available. A budget estimated on such little information is likely to be misleading. This lesson goes hand in hand with the requirement of investing more time before commencing the project. Finally, project management should learn that change may be classified as the greatest risk. This is because no matter how much design information is produced for estimating, this can be counter balanced by any design changes that are subsequently made. The client's needs stayed the same but many changes were introduced to improve the design in terms of buildability, performance and aesthetics, According to Fairs (2001), it should be noted however that change is not just a threat. If managed effectively, it can be an opportunity to make saving or provide greater value for money. In conclusion, whilst the industry is often criticized for being inefficient, the clients must also review their driving contribution to the process of effective project management. REFERENCES Auditor General Report (2004). Viewed on 23rd February, 2008 Read More