Project Execution Planning and Management: Methods and Financial Contracts

This paper proposes suitable methods for project delivery and financial contracts for the expansion of the M4 motorway. The best method for project delivery is the CM@R, and the best financial contract model is the GMP.

PROJECT EXECUTION PLANING AND MANAGEMENT 1
Project Execution Planing And Management
Name
Date

PROJECT EXECUTION PLANING AND MANAGEMENT 1
Introduction
The NSW Government, realizing that there has been a significant growth in traffic in the
existing Sydney motor way system, including the M5, M5 East and the M4 motorways. After
evaluating th situation and realizing the need to expand the existing M4 motorway, the NSW
carefully selected contractors to undertake the expansion project. The complexity of the project
means that no single contractor can competently undertake the project, and so the project was
awarded to a joint venture firm, WestLINK, made up of JPM Co, KLG Solution, and TOP
Construction. WestLink has hired two consulting design firms to work with in house contractors as
well as two consulting forms to offer management and technical expertise. Further, the project has
180 sub contractors for specialty works. The project challenges include keeping over 140000
vehicles moving at speeds of 80 KPH, controlling costs and maintaining a fast track schedule,
creating a unified and cohesive team to deliver the project, and meeting the 2013 deadline to
complete the project. After briefly evaluating the client needs, this paper proposes, based on a
weighting criteria, with justification, suitable methods for project delivery and a financial contract
based on client needs. The reasons are then discussed before conclusions are drawn.
Client Requirements
The client requires a suitable project delivery method that will help overcome the stated
challenges, as well as suitable financial contract type; the entire expansion of the M4 is budgeted to
cost $ (AUD) 16.8 billion and the NSW government has so far only provided a concessional
funding of $ 1.5 billion, leaving a balance of $ 15.3 billion.
Weighting
Project Delivery Method
This refers to the system used by the project owner to organize the financial design,
operations, construction, and maintenance services for a facility/ structure by entering into a legal
agreement with an entity/ entities (Touran, 2009). There are various project delivery methods: for
this case, the design-bid-build, the CM@Risk, and design-build are considered. The design-bid-
build (D-B-B) is the traditional design-tender project delivery method where contracts with separate
entities are entered into by the owner/ agency to design and construct a project. The D-B_B has
three distinct phases that include the design phase, the tender/ bidding phase, and the construction
phase. The design phase entails having the owner nominating and retaining an architect to design
and come up with bid documents that also include drawings and technical design specifications for
the structure ('Design Build Institute of America', 2015). Various contractors then make a bid based
on the drawings and design specifications and the early design is further developed in conjunction
with other professionals, including mechanical, civil, and electrical contractors. This phase is

PROJECT EXECUTION PLANING AND MANAGEMENT 1
followed by the bid phase in which an open tender is floated and interested service providers bid
for the project. After review, the qualified contractor is awarded the contract and construction starts
and the architect acts as the representative of the owner (Bramble & Callahan, 2010).
The CM@Risk (Construction Manager at Risk) is a method of project delivery in which a
CM (Construction Manager) makes a commitment to deliver a project within a GMP (Guaranteed
Maximum Price) based on the given construction projects and specifications plus any reasonable
terms that are inferred. The CM@Risk acts as the owners’ consultant and also provides professional
services: the CM@Risk (or CMAR) can also engage in actual construction works for the project
depending on expertise (Gransberg & Shane, 2010). The CMAR not only acts in the best interests
of the owner, but is also responsible for managing and controlling the costs of construction so they
do not exceed the GMP. This is because the CMAR is responsible for any extra costs that exceed
the GMP and which are not change orders (Rodriguez, 2018).
The Design-build (D-B) project delivery method entails having a single entity contracted to
undertake the design and construction services for a construction project. The single entity is the
design builder. The D-B delivery method is based on a single point of responsibility in which the
design and construction phases are overlapped. His helps minimize risks for the owner while also
reducing the schedule for the project delivery. The D-B is responsible for all aspects of the project,
regardless of the nature of any issues or faults that may arise. This process of contracting brings
value engineering and can enhance innovation on the construction project (Dykstra, 2011).
Financial Contracts
Project financing and financial contracts are a crucial aspect of any construction project,
especially one of the magnitude under discussion (the M4 motorway expansion). Cost is among the
triple constraints in project management, the others being time and scope (Shen-fa & Xiao-ping,
2009). There are various methods of financial contracts for construction projects; this paper focuses
on the Lump sum contract, GMP (Guaranteed Maximum Price) Contract and Cost Plus Fixed Fee
Contract (Kayser, 2013).
Lump Sum Contract type is a traditional method for construction procurement that still
remains commonly used (Kayser, 2013). This type of financial contract entails agreeing on a single
lump sum amount (price) for all works in a construction project prior to starting the project. The
price for the contract is fixed and contractors make a commitment to be responsible for the
complete execution of the contract for a stated sum. Such financing is suitable where the project is
well defined and there are no likely major changes to the scope of works (Hickson & Owen, 2015).
GMP is an open book, cost contract financial contracting method in which the contractor is
given compensation for actual costs incurred plus a fixed contract fee, governed by a ceiling price.

PROJECT EXECUTION PLANING AND MANAGEMENT 1
The responsibility for cost overruns, unless of course any increments are based on approved
changes. In the event that there are cost under-runs where actual incurred is less than the budget, the
excess is returned to the owner (Burger, 2018).
Cost plus fixed fees is a financial contract type that involves cost reimbursement where the
contractor is paid a negotiated fee of a fixed amount during the contract inception. The fee doesn't
vary with costs, although it can be adjusted if there are changes to the scope of works in the
construction works. Such contracts are suitable where the required level of effort is unknown. This
contract type is however not suitable for major construction works especially where reasonably
form performance schedules and objectives have been established by the owner (Kerzner, 2009).
Having had a brief overview of the different methods of project delivery methods and the financial
contracting methods, the best method can now be chosen based on weighting the methods, based on
the project challenges and the owner requirements. The weighted scores for the project delivery
method are shown in the figure below;

PROJECT EXECUTION PLANING AND MANAGEMENT 1
Key: CW- Criteria Weight
WS- Weighted Score
Discussion and Assumptions Made
In apportioning the criteria weights, the challenges faced in the construction project, as well
as the overall project objectives are given consideration. For the project delivery method, the need
to keep traffic moving is given a weight of 15%; this is because it is important to keep traffic
moving while the construction works are going on (Sözüer & Spang, 2014). Maintaining a fast track
schedule is given a weight of 22% because the project must not have delays when being executed;
this is tied to the project deadline in which the works must be complete by 2023. the construction
project is complex, involving 200 different entities and contractors and as such, a proper project
organization with clear roles and responsibilities are necessary if the project objectives are to be
met. As such, a unified cohesive team that will ensure the successful delivery of the project is
highly desired, hence this aspect is given a weight of 20 percent. The deadline is a major project
constraint, but is given a weight of 18% because some delays or early finishing of the project can be
tolerated, as long as the scope of works and the cost constraints are not affected.
The ability to minimize risks; risks to the owner, risks of scope and remain within the set
budget are very important, and so is given the highest weight of 25%. In giving the scores, the
merits and demerits of the various project delivery methods were considered, as well as the
requirements of the client and the project challenges. For instance, for D-B-B, some of its demerits
include failure of the design team being current with the costs of construction and any possible
increments in costs. This model also has the tendency to seek the lowest cost especially when
seeking subcontractors, a factor that may affect the final project adversely (Carpenter, 2014). The
contractor is also brought in when the design has been done meaning they have little input into
design even where improvements might be achieved. There may also be competing interests, and so
the DBB gets a score of 70 out of a possible 100 on keeping traffic flowing, 63 for maintaining task
schedule, 75 for cohesion, 65 in meeting deadline, and 70 on cost objective and ensuring the least
risk to the owner; the D-B-B model takes care of the owners’ interests.
For the CMAR, keeping traffic mowing is given a score of 78 because this model takes
advantage of available expertise and is usually used were joint ventures as for the M4 expansion
project are used. Because it entails a joint venture with many specialists that accord the project

PROJECT EXECUTION PLANING AND MANAGEMENT 1
value engineering; further, because the GMP is set prior to undertaking the project with a greater
consideration on delivery and meeting scope objectives, maintaining a fast track schedule and
having a cohesive unified team are given scores of 80 and 83, respectively (Carpenter, 2014).
Further, CMAR offers professional services and because of value engineering and having many
specialists on board, with a defined organizational structure, it will reduce risks for the owner and
ensure there are minimal cost overruns, as such a score of 85 is given for this, and 70 for meeting
deadline since with many players, decision making may be affected. For D-B, maintaining a fast
schedule, meeting deadlines, risk and maintaining low costs gets high scores, except for keeping
traffic flowing because this model does not have the value engineering experience, say given by
CMAR (Telliford, 2009).
For the financing model, greater criteria weight is given to speed of execution and suitability
for the scope of the project (complexity), give it is a very complex project with 25 % each. Low
risks and maintaining the budget is given a weight of 20%, while ability to keep low costs and
incentives for contractors to keep costs low are each given weights of 15%. The GMP has the
highest score for suitability for project size at 82, and ability to keep costs low. The fixed cost plus a
fee financial contract gets a high score for ability to meet budget objectives and offer low risks as
well as ability to keep costs low.
After assigning weights and weighted scores to the criteria based on the project requirements
and challenges, the results show that th best method for project delivery is the CM@R; this is
because the project has a huge and complex scope, involving several subcontractors. Further, the
best financial contract model is the GMP; which greatly compliments the chosen project delivery
method (Kayser, 2013). The chosen delivery method and financial contract model fit with the
requirements for the project. The CMAR model limits risks to the owner, provides professional
services including architectural, surveying and engineering, meaning the project organization is
well defined and tasks can be undertaken quickly due to the added value of value engineering.
Further, it is a suitable method for contracts involving joint ventures. The CMAR main task is
managing the project; effective project management is essential for the successful delivery of the
project. For the financing model, the GMP just beats the lump sum model as it greatly compliments
the CMAR
Conclusion
The expansion of the M4 motorway is a complex project that is scheduled to be completed
by 2013 at a total cost of $ 16.8 billion. Given its complexity, the project delivery method and
financial contract must meet the delivery objectives as well as tackle the project challenges. In order
to select the best model, a weighted scoring system was used to compare the D-B-B, D-B, and

PROJECT EXECUTION PLANING AND MANAGEMENT 1
CMAR models, as well as the financing modes of lump sum, GMP, and fixed cost plus fee. The
project challenges and owner requirements were the guising factors in the weighted scoring. After
an evaluation, with rationale, the CMAR and the GMP are the most suitable project delivery and
financial contract methods, respectively, for the successful delivery of the project

PROJECT EXECUTION PLANING AND MANAGEMENT 1
References
Bramble, B., & Callahan, M. (2010). Construction delay claims, Second edition (2nd ed., pp. 17,
28). New York: Wiley.
Burger, R. (2018). Here is What to Know About Guaranteed Maximum Price (GMP) Contracts. The
Balance. Retrieved 31 March 2018, from https://www.thebalance.com/guaranteed-
maximum-price-contracts-845345
Carpenter, N. (2014). Comparison of the Design-bid-Build and Construction Manager at Risk
Projet Delivery methods used for Construction of Public Schools (PhD). Clemson university.
'Design Build Institute of America'. (2015). Choosing a Project Delivery Method (p. 2).
Washington: Design Build Institute of America. Retrieved from
https://www.dbia.org/about/Documents/db_primer_choosing_delivery_method.pdf
Dykstra, A. (2011). Construction project management (p. 77). San Francisco: Kirshner Pub.
Gransberg, D., & Shane, J. (2010). Construction manager-at-risk project delivery for highway
programs (p. 23). Washington, D.C: Transportation Research Board.
Hickson, R., & Owen, T. (2015). Project Management for Mining [electronic resource] : Handbook
for Delivering Project Success (1st ed., p. 343). Englewwod, Co: SME.
Kayser, D. (2013). Recent Research in Project Finance – A Commented Bibliography. Procedia
Computer Science, 17, 729-736. http://dx.doi.org/10.1016/j.procs.2013.05.094
Kerzner, H. (2009). Project management workbook to accompany Project management - a systems
approach to planning, scheduling and controlling, eighth edition (10th ed., pp. 852-853).
New York: Wiley.
Rodriguez, J. (2018). Understanding What is a CM at Risk, Role and Responsibilities.. The
Balance. Retrieved 31 March 2018, from https://www.thebalance.com/advantages-of-cm-at-
risk-844536
Shen-fa, W., & Xiao-ping, W. (2009). The rule and method of risk allocation in project finance.
Procedia Earth And Planetary Science, 1(1), 1757-1763.
http://dx.doi.org/10.1016/j.proeps.2009.09.269
Sözüer, M., & Spang, K. (2014). The Importance of Project Management in the Planning Process of
Transport Infrastructure Projects in Germany. Procedia - Social And Behavioral Sciences,
119, 601-610. http://dx.doi.org/10.1016/j.sbspro.2014.03.067
Telliford, G. (2009). Public-private transportation partnerships around the world (1st ed., p. 16).
New York: Nova Science Publishers.
Touran, A. (2009). A guidebook for selecting airport capital project delivery methods. Washington,
D.C.: Transportation Research Board.