Project Management and Contract Administration

Question: Discuss about the Project Management and Contract Administration. Answer: Introduction: Project management combined with contract administration emphasises on the application of skill, knowledge, tools and techniques in meeting the requirements of the project. Their role starts with projects feasibility study and continues till the completion and commissioning of the project, as per Barnes Doidge, (2010). A poor contract administration enhances the project costs and also hinders smooth management of the project. Project Schedule Scheduling the project and maintaining the schedule are two important aspects of construction cost control. An increased project duration increases the cost of materials as well as the indirect costs. Therefore it is essential to consider cost estimation for efficiency of a construction project, say Christensen Duncan, (2004). Contractor's Site Management (CSM) CSM is the second most essential factor which can improve cost management and help in the reduction of projects cost overruns. A better site management by the contractor shall significantly affect productivity and this also reflects in the projects progress, as per Christensen Duncan, (2004). Construction Site Conditions Site conditions are the major contributors towards increased construction costs. These include wetlands, poor soil conditions, contaminated materials, conflicting utilities, such as underground storage tanks, cables and pipe as well as overhead lines. An area with endangered species, habitat which is environmentally sensitivity, archaeological sites, poor ground water conditions, a river or stream crossing, heavy traffic and such other existing conditions can increase the cost of the project after the construction commences in case these factors have not been considered during initial estimation of the project. Design and Documentation Design marks the initial road map and acts as a systematic guide in leading to the completion of a project, while documentation, such as costing, tendering and scheduling play an equally important role in monitoring the projects progress. A poor design or an unplanned documentation can leads to poor performance of the project. Such issues can result because of lack of experience or skill of either the consultant or contractor if proper working drawings and specifications are not provided by the consultant or are not efficiently managed by the contractor on site, assert Marshall, Williams Morgan (ed), (2015). Information and Communication System (ICS) This is another factor that creates a major impact on cost overruns in case the groups involved in the construction project, which include Consultants, Contractors and Sub-contractors are not provided with an effective ICS. Lack of a fast mode of data sharing among the participants can hamper their ability to take quick decisions with regard to unexpected problems which may occur during the execution of the project. Slow flow of information is considered to be an important cause of construction cost overruns. A fast and accurate ICT helps in improved coordination among the personnel involved in the project and this can reduce discrepancies. Material, Machinery and Labour Related Factors Materials are the backbone of a construction project and on an average account for 70% of the total cost of a project. Hence, it is essential that the project management places an efficient material management system in place for achieving timely completion of the project and to avoid any cost overruns, say Marshall, Williams Morgan (ed), (2015). Inflation Factor A construction project will run for years before it achieves completion and commissioning. During the course of the construction period, cost of labour, materials, equipment and tools can increase. A well planned project takes into account such contingencies during the cost estimation process, as per Mena, (2011). Outline Proposl Cost Introduction While planning a hotel, especially a budget hotel as is being planned in this case study, it is essential to balance the various layout, functional and aesthetic issues which can meet the needs of the guests, the staff as well as the owner. A well planned design, which takes into account all the activities which are required to be conducted in the hotel, allocates requisite space for them and helps in establishing a seamless relationships between these spaces. Although the developer works with an architect designer for developing the outlay, it is the developer who is solely responsible for ensuring that the design of the building is competent to accomplish the goals set out for the hotel, says Marsden, (2011). Designing and Planning Developing an effective and efficient design of the guestroom areas is critical for the initial development and budgeting process of the hotel. A low-rise hotel having 4 levels, inclusive of the ground level, as planned in this case study, is built with a design having guestrooms on both sides of the corridor, commonly termed as the "double-loaded" slab design. The design of guestrooms in such Budget Hotels is based on the locale and target markets for which these are developed. Budget hotels are a mix of guestrooms, which comprise of rooms having a king or queen bed or having two double beds, so as to suite the varying demands of the guests. Hence, planning the guestrooms should be conducted with careful consideration of the activities of the guests who shall come to occupy these room, as per Emerald Gems (ed), (2015). While finalising the design, the architect is required to keep the developer's vision foremost in mind and add the most appropriate look and feel so as to portray the level of service quality to be offered by the hotel, keeping the demand of the locale and surroundings. It is normal for guestrooms of budget hotels in tropical locations to layout tile floors in all the room and covering them with mats or rugs so as to soften the feel and look of the living areas along with providing the much needed comfort. However, in an urban area, such an outlay would be highly inappropriate as the temperate climate makes it unsuitable. Here, the combination of carpet and wood is most suitable, with tile floors to be confined only for the bathroom, asserts Parker, (2012). Another important factor to be kept in view is that budget hotels for vacationers who stay for longer periods require larger closets as compared to the urban area budget hotels where the guests come for an average stay of one to t hree days. The lobby of a budget hotel should not only function as the hotel's "front office", it should also be planned as an important transition space. This is the place where the guest makes a transition from a hectic and arduous journey to the peace and serenity of the hotel. If the lobby is well planned and laid-out, the guests would not even notice the crowd and feel welcomed, as per Parker, (2012). The next best is the reception desk, which should have an inviting look. These two spaces make the guest at home and they circulate effortlessly within the hotel without feeling lost or disoriented. Construction Costs The aim of budget planning is to apprise the developers about the total cost of the project. The cost of a hotel project is either calculated on per sq mtr area basis or on the basis of total number of rooms to be built. However, for budget hotel planning, the economical way of calculating the project cost is to calculate the construction costs adopting per sq mtr area costing process and the number of room basis for fit-outs. In this case study, there are two options given for evaluating the project cost. From the given diagrams, the calculations on the basis of sq mtr area of both the sites show that the plot of Scheme-A is 1130 sq mtr and for Scheme-B plot is also of 1130 sq mtr area, says Spoehr (ed), (2009). SCHEME A Description Area in Sq Mtrs Rate per Rate in $ Total Amount in $ Multi-storey 3 Star hotel with restaurant and with air-conditioning but excluding fit-outs 1,130 x 4 = 4,520 Sq Mtr 3,300 14,916,000 Cost of fit-outs 80 rooms Per room 42,000 3,360,000 Underground Parking (30% of construction cost) 2,712,000 TOTAL COST 20,988,000 SCHEME B Description Area in Sq Mtrs Rate per Rate in $ Total Amount in $ Multi-storey 3 Star hotel with restaurant but without air-conditioning and excluding fit-outs 1,130 x 4 = 4,520 Sq Mtr 2,000 9,040,000 Cost of fit-outs 80 rooms Per room 30,000 2,400,000 Underground Parking (30% of construction cost) 2,712,000 TOTAL COST 14,152,000 Construction Cost Escalation The escalation allowance, usually a percentage, is the contingency which is added to the construction estimates for future inflation in costs of materials and labour from the date of preparing estimates to the date of awarding the contract. This budget was prepared using the 2014 Guide and it was observed there was a zero escalation in all areas, assert Gruis Nieboer (ed), (2013). Conclusion You will find that planning and programming are important, but difficult, parts of the hotel development process. Programming a hotel involves defining the activities to be conducted within and in the surroundings of the hotel property, establishing relationships among the activity areas and allocating appropriate amount of space for each activity. It is the developer who is responsible for preparing a program which is consistent with the hotel's vision and positioning, as per Gruis Nieboer (ed), (2013). Ten Internal Factors Apart from the costs shown above, the other construction costs known as Soft Costs associated with the budget hotel project include the following development costs, assert Christensen Duncan, (2004). 1. Advertising and Marketing 2. Appraisals 3. Architectural and Engineering Fees 4. Contract Contingencies 5. Equipment and Furnishings 6. Insurance Premiums 7. Interest Charges and Lenders Fee 8. Legal Fee 9. Management Costs 10. Permits and Development Charges The value of these services depends on the type of the building, amenities provided and the design adopted. Another important requirement, though optional, is the cost of providing underground parking and this is usually 30% of the construction cost, as per Marshall, Williams Morgan (ed), (2015). Finally, after the developer has completed the project, the designers involvement shifts from designing the building to testing the strategic options proposed in the design. At this juncture of the project, the focus of both the developer and the designer shifts to the following activities: Identifying the needs of the guests. Here, the value management techniques become useful for both, the developer and the designer while identifying the important needs of the arriving guests. Matching the identified needs with the available resources that the developer and the designer have made available to the visiting guests. At this stage, even the architects, engineers and quantity surveyors are invited to get involved in surveys as well as reviews of the building stock. Identifying different options for meeting the requirements. For a successful and long run of the hotel, these options should be substantially different, as per Marshall, Williams Morgan (ed), (2015). Room Size The size of the rooms affects the overall construction cost per sq. m. hence, if the hotel is planned with more rooms of smaller size, the construction cost will become high. Furnishings, Fittings and Environment (FFE) FFE is concerned with providing a sense of comfort, invitation and a relaxing environments along with the services provided. Furnishings and fittings should be strong and durable yet comfortable. Budget hotels are required to add function spaces which provide comfort and are designed to enhance the hotel's services, assert Emerald Gems (ed), (2015). Foods and Beverages (FB) Budget hotels know that the hotels FB have to compete with excellent services of the domestic rivals, hence many select-service budget hotels have only a single, multipurpose area which serves as a combined breakfast area, coffee shop and fast food serving lounge in the morning and is transformed into a bar with a limited-menu dining room during the evenings. This is because the standard cost of the restaurant area in a budget hotel depends on the theme and supporting design and this could be in the range between $2,500 and $7,000+ per sq. m. Similarly, the cost of the kitchen area would be about $2,800 to $3,200+ per sq. m, says Marsden, (2011). IT Provision In budget hotels this is kept simple by providing a wireless access point in the guestroom or by extending the wireless internet within the hotel. The cost of providing IT is about 2% to 5% of MEP cost and depends on the extent of services provided. Federal Provincial Sales Tax The above noted service costs are exclusive of Goods Services Tax (GST) and the Harmonized Sales Tax (HST), but are inclusive of the Provincial Sales Tax, as per Gruis Nieboer (ed), (2013). List of References Barnes, R. and Doidge, G. 2010, Managing Your Investment Property: The Essential Guide to Property Management in Australia and New Zealand. John Wiley Sons, Milton, QLD. Christensen, S. and Duncan, W.D. 2004, Professional Liability and Property Transactions. Federation Press, Annandale, NSW. Emerald Gems (ed). 2015, Built Environment and Property Management: A Focus on Australia. Emerald Group Publishing Limited, Bingley. Gruis, V. and Nieboer, N. (ed). 2013, Asset Management in the Social Rented Sector: Policy and Practice in Europe and Australia. Springer Science Business Media, Berlin. Marsden, S. 2011, Business, Charity and Sentiment: The South Australian Housing Trust. Wakefield Press, Kent Town, SA. Marshall, A., Williams, N. and Morgan, J. (ed). 2015, Land of Sweeping Plains: Managing and Restoring the Native Grasslands of South-eastern Australia. Csiro Publishing, Clayton South, VIC. Mena, A. 2011, Your Inner Journey to Wealth: A Guide to Developing a Millionaire Mindset. Xlibris Corporation, New York. Parker, D. 2012, Global Real Estate Investment Trusts: People, Process and Management. John Wiley Sons, Milton, QLD. Spoehr, J. (ed). 2009, State of South Australia: From Crisis to Prosperity? Wakefield Press, Kent Town.