Case Study - IoT in Construction: Project Delivery, Financial Contracts, Procurement, and Risk Management

This case study examines the implementation of IoT and smart sensors in construction projects, covering project delivery methods, financial contract types, procurement methods, and risk management plans. The study focuses on the use of Design-Bid-Build as the project delivery method, Cost-Plus-Fixed-Fee as the financial contract type, and Best Value as the procurement method. It also discusses the importance of developing a risk management plan to mitigate potential risks.

Case study – IOT

Table of Contents
INTRODUCTION...........................................................................................................................2
Project at the target company......................................................................................................2
Background of the project...........................................................................................................2
Project delivery method...............................................................................................................2
Financial contract type.................................................................................................................4
Best Procurement method............................................................................................................5
Risk Management Plan................................................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
The project is based upon the case study of Rio Tinto which is not going to introduce
Internet of Things and Smart sensors for their project. It is so because in this modern era, every
company have to become digitalized so that it stay ahead in the competition. Further, report will
describe the project delivery method and financial contract type, also, report will present the best
procurement method and develop a risk management plan that help to deliver the project in
better manner.
Project at the target company
Rio Tinto is the top mining and construction firm in Australia such that it keep working
on providing best innovative tools to their company so that it will help to attract the customers
towards it. For this, the selected project for the company is to use both Internet of things and
Smart sensors for the construction sites with a purpose of worker- safety, cost reduction and
quality assessment. Not only this, this new advancement also help to forecasting the
environmental conditions and now this IoT also have an ability to connect with the machines
over an Internet so that it will help to determine the progress of the company project in better
manner.
Background of the project
Introducing new project which includes IoT and Smart sensors with the machines and
mobile will help to determine every key aspect that may cause opposite reaction within a firm.
Also, if the construction sites used this project, then they can be turned into a web of an
interconnected devices which are easily accessible from one office. The biggest advantage of
using this is that it is energy efficiency and helps to predict the environmental conditions as well.
Also, introducing this system will easily range from truck, bulldozers, haulers to wearable
technology such that Fitbits and safety googles to a person’s work boots as well. Therefore,
attaching this sensor within a machines will help to keep update about all the products and
work’s progress as well.

Project delivery method
Project delivery method is that system which is used by the companies for organizing and
construction for a structure and this must be complying with the legal agreements with one or
more entities (Different types of project delivery method, 2019). There are three main types of
project delivery method which are as mention below:
Design- bid- build method: It is the delivery method in which the owner contracts
separately with a design firm that also produce the construction documents (Feghaly, and et.al.,
2019). It is consider one of the traditional method and also based upon the sequential process of a
design, construction documents, bidding etc. Thus, this method involves owner as well as
different agency contracting entities and that is why, it is score as high as compared to other
project delivery method
Design- Build: It is another project delivery method which is actually involve owner and
agency contracting (single) entity for design and construction (Kamarah, Attalla and Hegazy,
2019). Further, this project delivery method is help to reduce the risk of the owner of property by
delegating all the responsibilities to one single entity. Further, using this method will help the
company to free from serious legal and managerial positions. But if the company uses this
method, then project manager must have the well contacts with vendors. That is why, it is ranked
or score at 2nd position because the design brief is the subject to different interpretation and
sometime leads to miscommunication as well.
Construction manager at risk: Another most effective delivery tool that is actually used
in order to deliver the project in better manner (Chen and et.al., 2016). This provides
professional services and also act as a consultant for the owner in the design development as well
as construction phases. Under this method, project manager first select and retain the design firm
which is also based upon the price, qualifications and some best criteria which are designed by
the owner. Therefore, it is ranked as 3 position, because it does not provide complete planning
and do require pre- construction stages as well, which is not possible.
[1= best, 2= Medium, 3= Low]
Types of delivery method Scoring Justification
Design- Bid- Build 1 Provides lots of option for

completing the project
Design- bid 2 Project manager require lots
of contacts to make project
better.
CM@risk 3 Lack of management leads
to change the results and
drive up cost
Among all, quoted firm chooses Design- Bid- build as a project delivery method because
it utilizes the competition so that it will helps to secure the best price for the subcontractors as
well. On the other side, this method only provide range of options to the owner in order to
choose the best bid among all. While on the other side, it is not possible in the case of another
two options of delivery and that is why, it helps to deliver the project in better manner as well.
Financial contract type
Financial contract type is that project which is actually helps the project manager to make
sure that the contracts is right or not. There are three types of project contracts which are as
mention below:
Lump sum contract: It is the traditional method which is more suitable for those works
which contractors have a prior construction experience. Under this method, the contractor offer
to do the whole work for a sum of money and biggest advantage of using this method is such that
owner is aware with the cost of project (Noorzai, 2020). Project’s scope and limits are also
define prior to start of a project. That is why, it is ranked or score in 2nd position.
Guaranteed Maximum Price Contract: It is another contract method in which contractor
is agree to perform the work within a price ceiling and it is the maximum guaranteed price. In
this type some of the circumstances are mention such that if the work is accomplished under the
ceiling then owner has to pay no more than the actual cost and as a result, the profit s shared
between contractor and owner (Wang, Cui and Zhang, 2019). That is why, it is ranked under 3rd
position and most of the company do not use the same.

Cost- plus fixed fee contract: Under this method, all the cost for the work as per the
specification is reimbursed by an owner. While on the other side, the contractor is paid a fixed
sum which determine the profits. It is usually fixed as a sum and the final cost is quite lower than
the normal contract and that is why, it is ranked as a 1st position because contractor has a less
incentives in order to control the project cost while other do not perform the same,
[1= best, 2= Medium, 3= Low]
Methods Score rate
Guaranteed maximum Contract 3
Cost plus Fixed fee contract 1
Lump sum Contract 2
Among all, Rio Tinto also uses Cost ;plus Fixed Fee contract because its score is high
and it is one of the more flexible method as compared to others and contractor does not need to
pay fixed expenses.
Best Procurement method
It refers to the purchasing of goods and services as per measuring the quality and prices.
In the same way, in order to introduce the project in market, Rio Tinto also uses the best method
of procurement which are as mention below:
Competitive: It is also known as a sole source and single source method which refers to
opening the process to bids and tenders in order to obtain best value (Jobidon, Lemieux and
Beauregard, 2019). The basic idea that run under this method is such that it leads to reasonable
price as well as good quality. That is why it is ranked under 2nd position because it is depend
upon the urgency of need and actually used to meet the demand of the customer only.
Negotiated: it refers to the selecting a contractor without any formal advertisement and
pricing competition. This type actually involved analysis, investigation, exploration and
bargaining with regards to price and performance (Mosley and Bubshait, 2019). That is why, it
is consider under 3rd position because it is not easy to make the changes as per the requirement
and without any invitations.

Best value: Another most important procurement method which is used different factors
that must be consider while dealing anything. These factors are price, quality and expertise.
Further, the best value method is the value of a procured goods which is simply describe as a
comparison of a cost as well as benefits too. So, it is analyzed that project manger mostly
chooses this method and that is why, it is ranked as a 1st position because it consider many factor
while make decision.
[1= best, 2= Medium, 3= Low]
Methods Score rate
Competitive 2
Negotiated 3
Best value 1
Among all, Rio Tinto is also used Best value as a procurement method which actually
helps to minimize as well as eliminate the risk when allocating the information in effective
manner with an appropriate choice as well. Further, using this method, project manager also
consider only some principle such that qualitative, technical and sustainable aspect. In the same
way, by using both Internet of Things and Smart sensor also used to construction sites in order to
manage the work and also assist to meet the define aim and objectives of the company as well.
Risk Management Plan
In order to deliver the project, it is essential for the company to develop the risk register
that helps to manage the work and minimize the risk as well. Further, it is also analyzed that
developing the risk register will help to mitigate the risk and deliver the project in better manner
as well.
Type of risk Impact Likelihood Risk Quadrant
analysis
Mitigation
strategy
Technological error, which
means that when new smart
High High This type of risk
fall under
In order to
mitigate the

sensor do not get proper
network and as a result it will
cause negative impact upon
project
strategic because
of complex
specification and
supply sources
issue, project
manager have to
test all the tools
and also use
alternative
substitute as well
(Mosley Jr and
Bubshait, 2017).
Low management Low High It falls under
bottleneck that
includes few
qualified sources
of supply
In order to
mitigate the
issue, it is
essential for the
project manager
to delegate the
roles and
responsibility as
per the
capabilities and
also make sure
that they analyze
the progress of
project.
Not meet the specified time or
deadlines
High Medium This risk fall
under the routine
which means that
it must be
reviews regularly
In order to
manage the issue,
project manager
make sure that
set KPI which
must be review
every week or
daily. This will
help to determine

the loopholes ad
then further
actions can be
taken
Lack of human resource which
means one of the IT specialist
got ill and that is why, project
got delayed
High High It fall under
Leverage
quadrant analysis
because
alternative
products and
services are used.
In order to
manage the issue,
project manager
make sure that
have alternatives
of every human
resource so that it
will not cause
any negative
impact upon the
project
(Montalbán-
Domingo and
et.al., 2019).
Further, in order
to deliver the
project, project
manager must
have skilled IT
specialist so that
it will not cause
any negative
impact.

CONCLUSION
By summing up above report it has been concluded that project manager have skill in
order to choose the best option so that they will deliver the project in best manner. Further, report
also concluded that in order to introduce IoT and smart sensors, it is essential to use Design- bid-
build method that helps to deliver the project in better manner. Also, report concluded that cost
plus fixed fee contract is another best financial contract method which helps to make the project
in better manner and this type is far beneficial as compared to others. Lastly, report concluded
best value as a procurement method is also opted in order to deliver the project better and also,
risk management plan is make that assist to mitigate all probability of risk.

REFERENCES
Books and Journals
Chen, Q. and et.al., 2016. Time and cost performance of design–build projects. Journal of
Construction Engineering and Management.142(2). p.04015074.
Feghaly, J., and et.al., 2019. Selecting project delivery methods for water treatment
plants. Engineering, Construction and Architectural Management.
Jobidon, G., Lemieux, P. and Beauregard, R., 2019. Comparison of Quebec’s project delivery
methods: relational contract law and differences in contractual language. Laws. 8(2). p.9.
Kamarah, E., Attalla, M. and Hegazy, T., 2019. COMPARISON AMONG PROJECT
DELIVERY METHODS FOR SCATTERED REHABILITATION
PROJECTS. Constraints. 5(S7). p.S3.
Montalbán-Domingo, L. and et.al., 2019. Social sustainability in delivery and procurement of
public construction contracts. Journal of management in engineering. 35(2). p.04018065.
Mosley Jr, J .C. and Bubshait, A. A., 2017. Project procurement systems for mechanical,
electrical and piping projects in Saudi Arabia. Engineering, Construction and Architectural
Management.
Mosley, J. C. and Bubshait, A. A., 2019. Investigative study of project procurement methods and
project performance indicators in Saudi Arabia. International Journal of Construction
Management, pp.1-13.
Noorzai, E., 2020. Performance Analysis of Alternative Contracting Methods for Highway
Construction Projects: Case Study for Iran. Journal of Infrastructure Systems. 26(2).
p.04020003.
Wang, B., Cui, Q. and Zhang, S., 2019. Evaluation of the contract reliability for alternative
infrastructure project delivery: a contract engineering method. Frontiers of Engineering
Management. 6(2). pp.239-248.
Online
Different types of project delivery method. 2019. [Online]. Available through: <
https://perilloconstruction.com/design-build-vs-design-bid-build-differences/>.