Management & Development of Complex Projects

Course Code - 706

MS Project Management
Construction Industry of Pakistan
A Case Study
Lecture # 6
In previous Lecture, we have discussed about

The need of public sector projects
Approval process for public sector projects in Pakistan
Generic life cycle of project management in public sector of
Pakistan
Key stakeholders in Planning Commission of Pakistan
Composition of approving forums & their functions
Project Cycle Performa (5 number)


Summary of Previous Lecture
Construction
The way in which something is built or
put together.

Major Construction Types

Most people are generally interested in acquiring only a
specific type of constructed facility, however, the
construction industry is a collection of quite diverse
segments and products.
Some organizations and individuals may be in involved in
the construction of one type only once in a long while and
tend to look for short term advantages.
However, many organizations and individuals require
periodic acquisition of new construction of different types
of facilities and/or rehabilitation of existing facilities.
In planning for various types of construction, the methods
of procuring professional services, awarding construction
contracts, and financing the constructed facility can be
quite different.

Residential Housing Construction

Residential housing designs are
usually performed by architects
and engineers, and the
construction executed by
builders who hire subcontractors
for the structural, mechanical,
electrical and other specialty
work. An exception to this
pattern is for single-family
houses which may be designed
by the builders as well.

Residential housing construction includes single-family
houses, multi-family dwellings, and high-rise apartments.


Residential Housing Construction

The residential housing market is heavily affected by
general economic conditions, the monetary and fiscal
policies of the government & buying capacity of common
man.

Often, a slight increase in total demand will cause a
substantial investment in construction, since many
housing projects can be started at different locations by
different individuals and developers at the same time.

Because of the relative ease of entry, at least at the lower
end of the market, many new builders are attracted to the
residential housing construction. Hence, this market is
highly competitive, with potentially high risks as well as
high rewards.

Institutional & Commercial Building Construction

The owners of such buildings may or may not be familiar
with construction industry practices, but they usually are
able to select competent professional consultants and
arrange the financing of the constructed facilities
themselves.

Institutional and commercial
building construction encompasses
a great variety of project types and
sizes, such as schools and
universities, medical clinics and
hospitals, recreational facilities and
sports stadiums, retail chain stores
and large shopping centers,
warehouses and light
manufacturing plants, and
skyscrapers for offices and hotels.

Institutional & Commercial Building Construction

Specialty architects and
engineers are often engaged for
designing a specific type of
building, while the builders or
general contractors undertaking
such projects may also be
specialized in only that type of
building.

Because of the higher costs and
greater sophistication of
institutional and commercial
buildings in comparison with
residential housing, this market
segment is shared by fewer
competitors.

Specialized Industrial Construction

Specialized industrial
construction usually involves
very large scale projects with
a high degree of
technological complexity,
such as oil refineries, steel
mills, chemical processing
plants and coal-fired or
nuclear power plants.
The owners usually are deeply involved in the development of
a project, and prefer to work with designers-builders such that
the total time for the completion of the project can be
shortened. They also want to pick a team of designers and
builders with whom the owner has developed good working
relations over the years.

Infrastructure & Heavy Construction

Infrastructure and heavy construction includes projects such as
dams, highways, mass transit systems, tunnels, bridges,
pipelines, housing societies, drainage systems and sewage
treatment plants.

Most of these projects are publicly
owned and therefore financed
either through bonds or taxes. This
category of construction is
characterized by a high degree of
mechanization, which has gradually
replaced some labor intensive
operations.

The engineers and builders
engaged in infrastructure
construction are usually highly
specialized since each segment of
the market requires different types
of skills.

Structure of Construction Industry in Pakistan

The construction industry in Pakistan is
heterogeneous and enormously complex. There are
several major classifications of construction that
differ distinctly from one another: e.g.

Housing
Nonresidential / Commercial Building
Highways
Utilities
Industrial
Dams & Canals
Ports & Harbors etc.


Structure of Construction Industry in Pakistan

Construction work is accomplished by contractors
who vary widely in size and specialty.
Some contractors choose to concentrate on a
particular task or aspect of the construction project
and are therefore referred to as specialty contractors.
Others assume broader responsibility for a
comprehensive work package and are referred to as
prime contractors.
Commonly, prime contractors will subcontract
specific aspects of a project to the specialty
contractors, forming a contractual web of prime
contractors and specialty contractors.

Structure of Construction Industry in Pakistan

Construction work is designed and supervised by
Consulting firms / individual consultant.

The Consultant may be (an) engineer (s) or (an)
architecture (s).

The PEC bylaws are considered binding legal
framework for the construction works whereas
international standards like ACI, ASTM, AASHTO etc.
are used for construction activities.

The construction work is carried out in the presence
of The Engineer who has good authority over all the
parties of the contract.

Structure of Construction Industry in Pakistan

Usually following are the prime stakeholders of the
construction project.

The Client (The Employer, Customer, Buyer etc.)
The Contractor
The Engineer
The Consultant (Designer etc.)
The Supervision Consultant
The Management Consultant (only on large
projects)
The Sub-Contractor
The Suppliers




National Economy and Construction in Pakistan

Construction accounts for more than 2.5 percent of the
gross domestic product (GDP) of Pakistan. (2011)

Construction has seen a growth of as high as 28.4 % in
financial year 2009-10 in Pakistan, averaging 6 % growth
in 2000s only.

Construction has produced 6.7 % (making about 3.68
Million ) of total Jobs (54.92 Million) in Financial Year
2009-10.

Construction had produced about 6.6 % of total jobs in
year 2008-09 showing a consistent trend.

National Economy and Construction in Pakistan

Source: Economic Survey of Pakistan
WORK HUNT
The construction industry is full of opportunities. The
construction organizations has to identify, analyze and exploit
these opportunities. The first step is to HUNT the work.
Following are few sources to be checked for construction work
opportunities.

Media (both print as well as electronic media)
Consultants
Peer Architects & Engineers
NGOs
Government Agencies and their information desks
Pakistan Procurement Regulator Authority (PPRA)
website
World wide web
Words of mouth
Contractors

REGISTRATIONS
The first step is to prepare organization profile and to get it
registered with authorities concerned. Some of these
registrations needed to be renewed every year.

Following may be the few authorities with which the
organization are needed to get registered for construction
works

Pakistan Engineering Council (PEC)
Federal Bureau of Revenue (FBR)
Line Departments (NHA, CDA, RDA etc)
Chamber of Commerce
Securities & Exchange Commission of Pakistan (SECP)
etc
CONSTRUCTION WORKS PROCUREMENT FLOW CHART
Prequalification of
Contractors as required

Invitation of Bids
(ITBs)
Review of Bidding
Documents
Submitting Bids
Bids Evaluation
Major evaluation criteria:
Cost
Contract Award
Contract Administration
Contract Close
DECISION TO BID
The Construction organization decides whether to go for bidding
or not basing on the following but limited to
The Project is aligned with the Mission, Objective and goals of the
Organization
The Organization has all the resources or has the ability to acquire the
needed resources
The Financials are available to carry out the job
The Organization has the construction processes assets to take up the
job
The site is accessible and the Client will ensure the access.
The Client is reputed and pays on time.
The workability and constructability analysis shows that the project may
be taken up.
The organization employees are ready to work at construction site
The location is provided with all the amenities for project team deployed
there
The Project is profitable or the project will add value to organization
The future dimension of business acquiring & retaining is there
The competition asks for it to get introduced to new investor in the market
SITE ANALYSIS
Even before the award of work, preliminary study of site is
very helpful in

Preparation of realistic Bid
Preparation of Budgets
Preparation of Schedule
Preparation of project risk plan
Preparation of stakeholder management plan
Understanding the need of extra ordinary resources
well before time on that specific project
Preparation of utilities need list well before the
execution



Construction Project Organization
The Constructing Project organization is the one which actually take up
the construction works. The project team under the leadership of project
manager carries out following taks
Estimate and prepare bid proposals Handle requisitioning, scheduling, and
expediting
Plan and schedule Document all work performed
Stay alert to future work prospects Prepare and check payment estimates
Maintain preconstruction liaison with
joint venture partners
Document costs and extra work
Review subcontract proposals Document subcontract performance and
payment estimates
Prepare budget control estimates Prepare reports of costs and construction
activities
Develop construction methods Issue progress reports: daily, weekly,
monthly
Maintain contract relations Draft contract modifications, change orders,
and claims
Lay out the work Provide assistance in contract settlements
ENGAGING SUPPLIER & SUB- CONTRACTOR
Before actually start of construction, placing of
orders for sub-contractors and suppliers and their
contracts are made.
Following few requirements are assessed for
scheduling

schedule of labor requirement
schedule of materials requirement
schedule of plant and equipment
sub-contractors and suppliers schedule
ESTABLISHEMENT OF SITE CAMP
After complete Planning at office, the project team
establishes the site camp which facilitates the

The Project Team & Project Manager
The Project Personnel
The Project Labor
The storage and handling of construction materials
The storage and operations of equipment and
machinery

Preliminary Site Survey
As the site office is being established, the
preliminary site survey is started to understand the
locality and construction site.

The importance of such surveys increase manifold
when it comes to road construction projects or
large infrastructure development projects.

It is necessary at times to calculate the work to be
done. E.g. the preliminary land survey in road
construction projects will set a baseline for
measurement of bulk of work in later stages




Problems of Construction Industry in Pakistan

following are the few problems of the construction
industry in Pakistan.

Executive support / political will for project
Improper & insufficient planning
Incomplete & copy-paste design
Poor design detailing for executioners
Delayed mobilization of Project Manager on
project
Non delegation of powers to PM office
Uncertainty due to regime change
Political involvement in procurement process
Problems in Land Acquisition

Problems of Construction Industry in Pakistan


Poor Estimation & management
Non observation of quality standards
Non adherence and ignorance of to prevailing
laws, rules and regulations
Absence of Law & order situations handling
mechanism
Non cooperating Governmental agencies
Influential locals
Lack in stakeholders management
Uncertainty in construction market prices
Scarcity of construction materials (bitumen, steel,
cement etc.)
Load shedding (affecting crushers, refineries,
rolling mills etc.)

Problems of Construction Industry in Pakistan

Unforeseeable increase in fuel costs n power
prices
Increase in import materials & equipment by
inflating FC
Munshi culture
Nearly non existent professionally trained project
management teams
Contractors on public sector projects getting
political favors instead of behaving professionally
Bribery in Construction field
Delayed payments to Contractors resulting slow
progress & increased costs in lieu of escalations
Absence of timely payments to employees, sub
contractors etc. resulting in demotivation and
encouraging them for going for wrong means
Ignorance of user in actual construction work and
only product oriented mind set
Lack of sense of ownership
Poor construction supervision
Poor Communication among stakeholders
Poor Record Keeping
Project management is thought as of only a
schedule
Poor requirement collection and poor
understanding of deliverables.





Problems of Construction Industry in Pakistan

Absence of proper risk management
No standard formulation mechanism
Mostly project people are JUST KILLING time on
site
Absence of lesson learned mechanism
AND





Problems of Construction Industry in Pakistan

In this Lecture, we have discussed about

Construction projects types
Structure of Construction Industry of Pakistan
National economy and construction
Work hunt in construction
Registrations, decision to bid, construction project
organization
Engaging supplier/ sub contractors, establishment of site
camp, site surveys
Issues in construction industry







Summary of This Lecture
End Note
The road to success is always under construction


THANK YOU!