Contracting as a PM
The purpose of this article is to analyse the methodology used by a main contractor in large construction projects. The main contractor is expected to oversee and involve subcontractors and suppliers, along with manage the overall project. Furthermore the purpose of this article is to introduce theories and methods that can be used by contractors in civil engineering projects. The hypothesis of this article is, that it is possible to use Supply Chain Management (SCM) tools in order to manage, involve and oversee suppliers in large construction projects. The article aims to draw parallels between SCM and contracting, finding similarities and differences.
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General
Flow of products, supplies, information, and resources is essential in order to successfully create a plan for a project. Logistics provides a solid framework for flow-based plans and enterprises, such as manufacturing and development facilities. Supply Chain Management (SCM) builds upon this framework, and seeks to manage upstream and downstream relationships with suppliers and the client, in order to achieve enhanced value in the final market with less cost to the supply chain as a whole [1]. The goal of supply chain management could be to reduce buffers, by sharing information and co-ordinating the suppliers. The focus of a supply chain is to establish co-operation and trust between suppliers and clients, in order to optimize the final output.
The term contracting often describes the act of entering a formal and/or legally binding agreement. In civil engineering, management contracting is the agreement that the work is carried out by several different work contractors, who are either contracted to the client or a management contractor (main contractor). The various different work contractors may include suppliers, manufacturers, retailers or workers, and it is the job of the main contractor to manage them all.
Management of a Network
The work of a management contractor can in many ways resemble the work of a supply chain manager, as both are responsible for overseeing a network of connected and interdependent organisations, suppliers, subcontractors and/or resources. This network must be managed in such a way, that the enteties work together to manage and improve the flow of materials and information.
As companies often aim to be succesful, they will seek to achieve a position on the market, where they can offer both a cost advantage and a value advantage. As seen on the logistics and competitive advantage matrix[1], it is suggested to have a cost and service leader, in order to achieve a competitive advantage on the market. This also applies to civil engineering companies, where a large project can either save a company from bankruptcy or put them in the grave. This article seeks to provide an SCM-like framework for management contractors, based on an analysis of supply chain management.
Contracting Methodology
A general contractor (main contractor, management contractor) is responsible for the coordination of a construction project, and will oversee the daily progress at the site. The contractor will manage and be responsible for turnkey -, main -, and individual trade contracts[2], and ensure communication between suppliers, traders and the client throughout the course of the project. The client employs the contractor after a bidding process; where an estimated price is presented. The price should cover cost of overhead, materials and equipment needed. The client should choose a contractor based price, quality and/or reputation, so it is important for the contractor to have either a value - or cost advantage. During the project, the main contract will transfer the project management from the client to the general contractor. The general contractor will then (depending on the contract) fully manage the suppliers of materials and equipment, as well as labour and services needed for the project. The general contractor may hire subcontractors to deliver turnkey projects, which are fully functional upon delivery. He/she will also be responsible for safety on the construction site, managing personnel, and applying for the necessary permits.
The client may choose to coordinate and manage the project themselves, by not hiring a general contractor, but by entering contracts with several individual trade contractors. The client could also choose to split the management of the project by making grouped contracts, which allow related trades to coordinate their work. By using grouped contracts, the client will have fewer contracts to manage contrary to the individual trade contracts.[2] This article will focus on the role of the general contractor.
Stakeholders
Suppliers
Supply chain
Bull whip-effect
Conclusion
Notes
21-09-15: Please note that this article will be renamed on the 23rd of September, 2015.
