United States
Environmental Protection
Agency
Office of Water
Piogram Operations (WH-547)
Washington DC 20460
430/9-83-006
July 1382
Water
Management
of Environmental Protection
Agency Project
by Local Grantee
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EPA-430/9-83-006
July 1982
Management of Environmental
Protection Agency Project
by Local Grantee
Final Report
Prepared by
Department of Civil Engineering
University of California
Berkeley, California 94720
For
Municipal Construction Division (WH-547)
Office of Water Programs Operations
U.S. Environmental Protection Agency
Washington, D.C. 20460
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Although the research described in this report has been funded wholly or
in part by the United States Environmental Protection Agency through
grant T-901266-01, to the University of California, it has not been
subjected to the Agency's required policy review and therfore does not
reflect the views of the Agency and no offical endorsement should be
inferred.
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AKNOWLEDGEMENTS
This report resulted from the cumulative efforts of a large number of
individuals and organizations. Many grantees, consultants, state
and federal personnel contributed time, data from projects,
ideas, and lessons learned through experience.
As we developed our tentative recommendations we received
extraordinarily valuable guidance and input from an informal
steering committee, consisting of Messrs. Harold Gold, Esq.,
Donald Barrie, Woodward Wilson, and Professors Robert Carr, John
Melin and Boyd Paulson. These gentlemen shaped this study in its
earliest, most critical stage by directing us away from
impractical or unrealistic alternatives, and by their astute
insights on good management practices.
The report was written by the Project Investigator, Associate
Professor Weston T. Hester, Department of Civil Engineering, with
the assistance of graduate students from the Department of Civil
Engineering, School of Law, and School of Business
Administration, University of California, Berkeley.
As a graduate student in the Schools of Law and Business
Administration, respectively, Mr. Jim Graves, Esq., developed
the questionnaire used for this study and also helped formulate
the conclusions cited in this report. Ms. Laurie Peterson, a
graduate student from the School of Law, researched many of the
topics considered here. Mr. Hal Chapel, a specialist in data
management and analysis, directed the gathering and analysis of
the large amounts of data referred to herein.
Mr. Harold Cahill, former Director of the Environmental
Protection Agency Construction Grants Program, encouraged and
guided us in the study of grantee management practices.
Mr. David Welch, Contract Officer, and Mr. Walter Brodtman,
Western Regional Manager for EPA, patiently answered our
inquiries about EPA policies and guided us to other persons who
could provide specialized help.
Finally, we owe a large measure of gratitude to the grantees and
consultants who anonymously contributed to this study through
their input of project data, ideas, and insights.
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EXECUTIVE SUMMARY
For many local government agencies the planning, design,
construction and operation of a wastewater treatment system
represents the most difficult public works program ever
attempted. Although some agencies have prior experience managing
complex and costly projects, many others lack the sophistication
needed to complete projects on time and within budget.
The purpose of this report is to identify contemporary grantee
Project Management techniques, critically analyze those
techniques which are weak or ineffective, identify techniques
which will improve grantee operations, and establish the basic
costs for grantee Project Management services.
The Construction Grants Program has undergone many changes
since its inception, and the program will continue to evolve in
response to the needs and available funding. But, every grantee,
consultant and grantor agency representative we contacted
believes there are specific reasons why the program is less
effective than it could be. We believe the following are some of
the most important:
1. Grantees receiving support from one or more state and
federal agencies are frequently ill-prepared to
coordinate the different parties involved and their
overlapping or contradictory requirements;
2. Many consultants aggressively pursue the opportunity to
plan, design and manage the construction of a project for
a grantee, but at the same time explicitly disavow any
responsibility to assist the grantee with cost or
schedule control.
Fearful of the liability associated with maintaining
cost and schedule controls, some consultants use the NSPE
Owner Designer Agreement [NSPE Document 1910-2] which
states in part that:
[The designer] shall not be responsible for the
means, methods techniques, sequences or procedures of
construction selected by the contractor(s) ... he
shall not be responsible for the failure of the
Contractors to perform the work in accordance with
the Contract Documents.
3. When grantees are negotiating for the provision of
certain management-control services, including cost and
schedule control, they frequently underrate their value,
and may reduce or eliminate them in order to cut costs.
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One of our highest priorities in this report was to help put
these problems into a helpful perspective and to present
specific, workable approaches to their resolution.
Regardless of the problems any one grantee is facing, and the
source of these problems, there are at least three basic facts
common to all grantees. First, the grantee bears full
responsibility for the proper use of grant funds and effective
functioning of the wastewater system. Secondly, EPA funding is
limited and if changes in the project are to be grant-eligibile
EPA must approve them as the project progresses. Finally, even
relatively small projects involve complex financial and
contractual arrangements between contractors, consultants,
sources of finance and the grantee.
Based on our site-visits to grantees, responses we have
received to a detailed questionnaire distributed to grantees, and
input from consultant, EPA and state personnel, we have
identified four "measures of grantee success" on a particular
project:
ON A SUCCESSFUL PROJECT ...
1. The design work was completed less than 30 days late;
2. The construction phase was completed within the original
schedule;
3. The actual cost of construction was less than 5% higher
than the contractor's original bid amount; and
4. There were no construction contractor claims or when the
claims were resolved the grantee received the bulk of the
award.
Many supporters and critics of the EPA Program argue that larger
grantees are more "successful" than the smaller grantees, and
that EPA should take a more active role in assisting grantees
with the management of grant funds. We agree that larger grantees
are more likely to be successful, but do NOT believe that it is
necessary for EPA to provide greater direct assistance to any
grantee group.
We believe that a small number of proven management techniques
can be used by grantees of any size to significantly improve
their current operation and to LOWER their current costs. These
techniques were deliberately selected to accomodate the de facto
realities confronting the grantee and to reduce project delays,
cost overruns and the likelihood of designer and contractor
disputes. Summarizing:
A SUCCESSFUL GRANTEE ...
I. Carefully considers the qualifications and background of
prospective designers.
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1.1. Prior to selecting a project designer, consider each
candidate's Errors and Ommissions insurance limits,
record of delays and cost overrruns on previous
projects, and any current claims or disputes with
clients or others.
II. Closely monitors the schedule and projected costs of the
work during design and construction.
II.2. Respond immediately to any problems which are
revealed during the 50? design review;
II.3. Possess a detailed schedule for all planning
and design activities;
II.4. Review the schedule for the project design monthly
or more frequently;
II.5. Require progress reports on the project's design
monthly or more frequently, AND reports on the estimated
cost of the project on a regular basis;
II.6. Enforce the design schedule by notice to the
designer, and threaten to or actually withhold payment
if the work does fall behind schedule;
II.7. Possess a detailed schedule ( e.g., bar chart, CPM,
etc.) for all construction activities;
II.8. Conduct a review of the construction schedule monthly
or more frequently;
II.9. Verify the progress of the work with respect to the
schedule monthly or more frequently;
11.10. Update the construction schedule with each review;
and
11.11. Enforce the construction schedule by notice to the
contractor, threatening or actually witholding payments
if the construction work falls behind schedule.
III. Resolves any difficulties which may arise during design
and construction as soon as possible.
III.12. During construction, immediately resolve all change
orders and disputes with the contractor
Relative to grantees using four or fewer of the recommended
techniques, those using any nine to twelve of them experience:
1. a 145 day reduction in construction delays;
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2. a 50% reduction in construction cost overruns;
3. an 85% reduction in successful construction contractor
claims against the grantee; and
4. a LOWER total cost for administering the work.
Despite the fact these recommendations appear to be a
classical prescription for good management, we find that
relatively few grantees actually implement them. The most widely
cited reason for not doing so is the apparent cost. Some grantees
argue that close control of project costs and particularly
schedules is expensive, frequently unnecessary and that professional
consultants cannot or will not perform these services. Many
grantees also argue that deferring resolution of some problems
may permit more fact finding, reduce project costs and increase
the likelihood of grant eligibility. We strongly disagree.
We have found that grantees that work with qualified staff or
consultant personnel to actively develop and maintain cost and
schedule controls, and to solve problems as soon as they arise,
have LOWER construction costs, costs for force account and
consultant services, and fewer claims than grantees that do not
perform them. Although these techniques are costly, by using them
the grantee's net costs are lowered through more efficient
project administration, fewer construction contractor claims, and
shorter construction times.
Relating these management techniques to the realities of limited
EPA funding and the need to manage complex contractual
arrangements, professional design and management consultants will
need to assume greater responsibility for the preparation,
receipt and evaluation of project cost estimates and schedules.
And, all of the participants in the project, including the
grantor and grantee, will need to develop a greater appreciation
for the importance of timely decisions.
We emphasize the fact that additional assistance from
EPA, the delegated State, or other grantor agencies will NOT
necessarily enable the grantee to more successfully manage its
projects. Rather, we recommend that small, medium and
large size grantees consider using contract clauses which have
been proven effective on previous projects, and adopt specific
management techniques that will enable them to complete their
projects in less time and for less money.
In conclusion, the grantee is fully responsible for the proper
use of all funds, must seek concurrence of EPA on major decisions
if grant-eligibility is to be assured, and needs to pay
particular attention to the formulation and administration of its
contracts with others. Fortunately, however, there are some
relatively straightforward management techniques the grantee can
use to effectively meet its needs. And, the implication of these
techniques is that there will be more work for consultants and
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better administered contracts for the contractor, but in turn
these groups will also need to assume greater responsibility for
cost and schedule control of their work and its effective
administration.
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TABLE OF CONTENTS
Introduction 1
Chapter 1 : Recommendations 4
1.0 Measures of Grantee Success 4
2.0 Recommended Management Techniques 5
2.1. Consider the Prospective Designer's
Previous Experience 5
2.2 Require Updated Schedules ..... 6
2.3 Immediate Resolution of Problems 8
3.0 Cost of Recommended Services 8
4.0 Conclusions 9
Chapter 2 : Contemporary Approaches to Project Management 10
1.0 Introduction 10
2.0 Alternate Approaches to Project Management .... 11
2.1 The Traditional Approach 11
2.2 Turnkey Project Management 13
2.3 Construction Management 14
2.4 Special Consultants 17
3.0 Summary 18
4.0 References ..... 20
Chapter 3 : Professional Liability 22
1 .0 Introduction 22
2.0 Establishing Liability 23
3.0 Liability According to the Contract 24
3.1 Immediate Resolution of Design Problems and Changes
or Disputes during Construction 24
3.2 Schedule Control During Design 25
3.3 Schedule Control During Construction 27
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4.0 Conclusion 30
Chapter 4 : The Contemporary Grantee ..... 31
1.0 Introduction 31
2.0 Grantee Characteristics: A Function of Population 32
2.1 Small Grantees 32
2.2 Mid-sized Grantees 33
2.3 Large Grantees 34
2.4 Generalizations Pertinent to all Grantees .... 34
3.0 Twelve Specific Techniques for Effective Management 35
3.1 Overall Effectiveness of the Techniques 36
3.2 Overall Effectiveness of Techniques Used During
Design and Construction 37
3.3 Use of Techniques and Construction Administration
Costs 38
3.4 Use of Techniques and Construction Administration
Costs by Project Cost 39
3.5 Use of Techniques and.Cost of Outside Construction
Management Services by Project Cost 40
3.6 Use of Techniques and Cost of Outside Construction
Management Services by Grantee Population .... 41
3.7 Use of Techniques and Total Construction Management
Costs by Grantee Population 41
3.8 Use of the Techniques and Cost of Grantee Force
Account Services for Construction Management
by Grantee Population 42
3.9 Use of Techniques and Cost of Grantee Force Account
Services for Construction Management by Project
Cost 43
3.10 Analysis of the Specific Tactics 44
3.11 Qualifications of Design Consultants 44
3.12 Development and Enforcement of a Master Schedule
for the Design Phase 44
3.13 Review of the Design Schedule on a Monthly or More
Frequent Basis 45
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3.14 Identification and Correction of Serious Problems at
the 50% Design Review 45
3.15 Development and Enforcement of a Master Schedule for
the Construction Phase 46
3.16 Review of the Construction Schedule on a Monthly or
More Frequent Basis 47
3.17 Updating of the Construction Schedule to Reflect the
Current Progress of the Work 47
3.18 Resolution of Contract Changes or Disputes With the
Contractor as soon as They Occur 48
4.0 Conclusion 48
Appendix 51
1. Development of the Questionnaire 51
2. Question Format and Structure 52
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LIST OF TABLES
Table no. Title Page
1 Delay in Completing the Design
Phase and the Number of Techniques
Used 37
2 Number of Techniques Used During
Design and the Likelihood of Claims
in the Design Phase 37
3 Number of Techniques and Delays in
Completing Construction 37
4 Number of Techniques Used and Con-
struction Cost Overruns as a Percentage
of the Original Contractor's Bid .... 37
5 Number of Techniques Used and the
Likelihood that the Grantee Will Lose
a Claim from the Construction Phase . 37
6 Number of Techniques Used and the Total
Cost of Administering Construction as
a Percentage of the Cost of Construction 38
7 Number of Techniques Used and the Total
Cost of Administering Construction as a
Percentage of the Cost of Construction 38
8 Number of Techniques Used and Cost of
Grantee Force Account Construction Manage-
ment Services as a Percentage of the
Cost of Construction 39
9 Number of Techniques Used and Total Cost
of Administering Construction as a Percentage
of the Cost of Construction 39
10 Number of Techniques Used and Cost of
Outside Firms Used to Manage Construction
as a Percentage of the Cost of
Construction 40
11 Number of Techniques Used and Cost
of Outside Construction Management
Services by Grantee Population .... 41
12 Number of Techniques Used and Total
Cost of Administering Construction
as a Percentage of the Cost of
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Construction
13 Number of Techniques Used and Cost
of Grantee Force Account Construction
Management Services as a Percentage
of the Cost of Construction ..... 43
14 Number of Techniques Used and Cost
of Grantee Force Account Construction
Management Services as a Percentage
of the Cost of Construction ..... 43
15 Number of Prequalification Criteria
Used and Cost Overruns as a Percentage
of the Contractor's Original Bid . . 44
16 Frequency of Design Schedule Review
and Delay in Completing Design Work . 45
17 Outcome of 50% Design Review and
Construction Cost Overruns as a
Percentage of Construction Cost ... 46
18 Use and Enforcement of a Master
Construction Schedule and Delay in
Completing Construction ...... 46
19 Frequency of Construction Schedule
Reviews and Delays in Completing
Construction ........... 47
20 Frequency of Construction Schedule
Reviews and Percentage of Projects
Completed on Time ......... 47
21 Updating of Construction Schedule
Versus Cost Overruns as a Percentage
of the Cost of Construction ..... 48
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INTRODUCTION
The Environmental Protection Agency assigns complete responsibility
for the planning, design, and construction of wastewater
facilities to the local grantee. The management of these
projects from plannning through construction, i.e., Project
Management, is an immense challenge for even the largest and most
sophisticated grantees. And, each grantee's relative success
depends on a number of factors, from political support for the
facility to the availability of qualified grantee and consultant
personnel.
The purpose of this report is to identify contemporary grantee
Project Management techniques, critically analyze those
techniques which are weak or ineffective, identify techniques
which will improve grantee operations, and establish the basic
costs for grantee Project Management services.
To develop an accurate picture of grantee management practices we
reviewed the available literature on grants programs and Project
Management techniques, conducted a survey of representative
grantees, and had numerous discussions with EPA consultant and
grantee representatives. Perhaps surprisingly, despite their
diversity, all of these sources yielded the same basic
conclusions. Summarizing, some of the most cost-effective and
efficient management techniques the grantee may exercise are
selection of qualified consultants, development and maintenance
of schedules for the design and construction work, and prompt
resolution of problems and disputes.
Despite the fact that careful selection of consultants, close
schedule control and a prompt response to problems appears like a
classical prescription for good management, relatively few of the
grantees we met actually perform these functions. In particular,
few grantees actively monitor project schedules or work to
resolve disputes as soon as they arise. The most widely cited
reason for not doing so is the apparent cost. Grantees argue
that close control of project schedules is costly, frequently
unnecessary and that deferring resolution of some problems may
permit more fact finding, reduce costs, and increase the
likelihood of grant eligibility. We have reached the opposite
conclusion.
We have found that grantees who work with qualified consultants
to actively develop and maintain comprehensive schedules during
design and construction, and who resolve disputes promptly, have
LOWER construction costs, costs for force account and consultant
services, and fewer claims than grantees who do not perform these
services. Although these techniques are costly, by using them
the grantee's net costs are lowered because of more efficient
project administration, fewer construction contractor claims, and
shorter construction schedules.
If the number of grantees involved in audit disputes, alleged
mismanagement and construction contractor claims continues to
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increase, we will probably witness a call from many public and
private organizations for greater EPA management assistance to
local grantees. No doubt, one argument which will become
fashionable is that since EPA provided a large amount of the
money originally spent by the grantee, EPA should share in the
burden of managing the project and disputes resulting from the
work. And, there will also be renewed calls for grantee use of
"advanced" management techniques such as turnkey construction,
construction management, etc.
In Chapter 2, Contemporary Approaches fco Project Management, we
show that any one of the approaches the grantee may use to manage
his project has specific limitations, but also that public and
private owners are increasingly recognizing that the overall
approach used, e.g., construction management versus greater EPA
involvement, is much less important than the management services
performed by the grantee.
A topic of growing concern to grantor and grantee agencies is the
legal obligation of the grantee's professional consultants to
compensate the grantee for damages. For example, when higher
costs, operations breakdowns and schedule delays occur on a
particular project, an increasing number of grantees are turning
to their professional consultants to share in the associated
costs. In large part because there are few precedent setting
cases where the consultant was held liable for mismanagement,
there are few specific guidelines for evaluating the Project
Management consultant's liability. But, referring to established
legal principles and those cases we do have, in Chapter 3,
Professional Liability, we show that consultants are increasingly
and deliberately disclaiming responsibility for management
functions. And, we also review those circumstances where
liability can be assigned to consultants.
To identify the management techniques which "successful" grantees
found most helpful, and those which were counterproductive, we
met personally with the senior officials of over twenty grantee
agencies and their consultants. We inquired about the overall
grantee organizational structure, grantee policies for selecting
and using consultants, particular management problems grantees
were experiencing and the administrative costs normally incurred.
Supplementing the personal visits, we also surveyed a number of
grantees to identify elements of their Project Management effort,
and we analyzed the data collected. In Chapter 4, The
Contemporary Grantee, we reviewed two composite pictures of the
Construction Grants Program grantees based upon this data.
First, a picture is developed of the grantees according to the
population served and, second, with respect to the management
techniques that they use.
As a "conclusion" to this report, we developed a series of
specific recommendations which grantees may implement to
improve the effectiveness of their grant management effort. In
developing our recommendations we emphasize specific techniques
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with established records of cost effectiveness, and which would
not require changes in the EPA regulations. In conclusion, we
believe that if grantees adopt the recommended management
practices, the costs and time associated with their projects will
be significantly decreased. Our recommendations are presented in
Chapter 1, Recommendations.
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CHAPTER 1
RECOMMENDATIONS
1. Measures of Grantee Success;
Two of our most important objectives in this work were to
identify specific Project Management methods which would
improve the efficiency of grant funded operations, i.e., make
the grantee more "successful," and to establish the costs of
both the contemporary and proposed management methods.
As we studied various management techniques and their
associated results, we adopted four measures of a "successful"
grant funded project:
1.1 The design work was. completed less than 30. davs
late.
Timely completion of the design may permit the grantee
to schedule construction bids for a time when lower
bids are more likely, allow the grantee to estimate
more accurately final costs and effective operations
dates for the completed facility.
The design work was completed less than 30 days late on
approximately three-fourths of the projects we
investigated.
1.2 Tke cons true tlpu phase Has. completed on schedule.
Completion of construction early or "on schedule," i.e.
within the time originally specified in the grantee-
contractor contract, permits grantees to minimize
consultant and force-account costs associated with the
construction phase, and allows the grantee to meet its
own commitments for system operation.
Approximately one-fourth of the projects we
investigated were completed within the time originally
agreed upon.
1.3 Ulg actual cost p£ construction was less than 51
higher than, the contractor1 s original bid.
Changes in the original construction contract to
accomodate changes in the original work or other
conditions are virtually inevitable during
construction. The most common "changes" are grantee
recognition of differing site conditions, but may
include clarification of the contract documents, small
additions to the work and approval of substitutes to
items specified.
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Most changes result in an increased cost of
construction, and a 5% increase in total costs is
considered typical. The actual cost of construction
was less than 5% higher than the contractor's original
bid for approximately three-fourths of the projects we
investigated.
1.4 Jhere were, no construction contractor claims for a
particular project pr claims ibli did pcfiur resulted
iD £h_e_ grantee reselling tfce bulk pjl th_e_ award.
Construction contractor claims, i.e., unresolved
disputes between the grantee and construction
contractor, are increasingly common and due not only to
grantee actions but also to increasingly competitive
bidding for projects, and a greater contractor "claims
consciousness."
However, there is much that the grantee can do to
minimize the likelihood of claims, their consequent
costs (as in item 1.3 above) and to increase the
probability of receiving the bulk of the award if the
dispute does go to arbitration or litigation.
For approximately 80% of the projects investigated
there were no claims or the grantee received the bulk
of the award.
2. Recommended Management Techniques
Based on our meetings with numerous grantees, a review
of the literature and data developed through a survey
of grantees, we have established three basic management
techniques which significantly increase a grantee's
likelihood of "success1" as defined by the above 4
criteria: (1) carefully consider the qualifications and
background of prospective project designers; (2)
closely monitor the schedule of the work during design
and construction; and (3) resolve any difficulties
which may arise during design and construction as soon
as possible.
2.1 Consider tfce. prospective designer's previous
experience.
In addition to evaluating a prospective designer's
technical ability and experience with a particular type of
project, we believe that the grantee should consider
the limits on his Errors and Omissions (E/0) insurance,
his prior record of delays and cost over-runs on
similar projects, and any current claims or disputes
that he may have with clients or contractors. We
consider that a grantee used this technique
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successfully if he considered any two of these
criteria.
Although we recommend that grantees consider a
prospective consultant's E/0 limits, prior "track
record" and relationships with others, we also
recognize that this information is generally not
released by consultants for fear of its being
misconstrued or abused by competitors. We also
recognize that the consultant's E/0 insurance coverage,
even though high, can be consumed by a small number of
prior disputes which will then leave the grantee
without compensation. But, these problems
notwithstanding, if the grantee can assure the
consultant that the data provided will remain
confidential and will not be considered seriously, we
believe most consultants will comply with the grantee's
request.
The professional consultant's response to inquiries
about his background in these areas is not necessarily
indicative of what the grantee will experience with the
same personnel on his project, but using this
information the grantee may be able to make more
informed selection between consultants. And, making an
informed selection is particularly important since
beyond his voluntary contribution it will be extremely
difficult for the grantee to compel the project
designer or construction manager to make a financial
contribution towards correcting an improperly operating
plant or resolving a construction contractor claim.
Contemporary procedures for holding the professional
legally liable are rigorous, and pursuing the recover
of cost through legal maneuvers is time consuming and
costly. Therefore, it is to the grantee's advantage to
select consultants with an established record of timely
completion and workable relationships with all of the
parties involved.
2.2 Schedules
There are at least four basic elements to the effective
use of project schedules: (a) possession of a Master
schedule depicting the major events, duration and
inter-relationships for the duration of the work; (b) a
periodic review and/or verification of the schedule
whereby the actual progress of the work is compared with
that projected; (c) the preparation of progress reports
and/or an updated schedule through which the grantee,
designer and/or contractor jointly agree on the work
done to date and the projected effect on subsequent
operations; and (d) the possession of appropriate
enforcement mechanisms.
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The possession and use of a meaningful schedule for the
planning, design and construction phases is valuable for
several reasons. First, the exercise of constructing a
meaningful schedule for the work disciplines the
persons preparing it to plan the work, and consider
those items which may disrupt it. Secondly, once
prepared and agreed upon by the grantee, the schedule
can serve as an excellent basis for discussing and
recording the effect of changes in the work, and
disruptive influences on the overall schedule.
For the purposes of our Recommendations we have
represented the schedule of the project's design and
construction work by nine separate management
techniques:
1. The grantee's possession of a detailed schedule
of the work for the design phase;
2. Design schedule reviews monthly or more often;
3. Design progress reports monthly or more often;
4. Enforcement of the design schedule by notice to
the designer, or threatened or actual withholding of
payments if work falls behind schedule;
5. The grantee's possession of a detailed
construction schedule;
6. Construction schedule reviews monthly or more
often;
7. Verification of the schedule and work-in-progress
monthly or more often;
8. Updating of the construction schedule with each
review;
9. Enforcement of the construction schedule by
notice to the contractor or the threatened or
actual with-holding of payment if construction
falls behind schedule.
There are numerous methods for representing project
schedules, and any one or combination may be used. The
critical value of this step is to be able to understand
and respond to developments in each phase or part of
the project, and schedules are particularly valuable
for this purpose.
We emphasize that adoption of advance schedule
techniques, such as CPM networks, is not in itself a
guarantee of good project schedule controls, but rather
the most important consideration to exercise when
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selecting and specifying scheduling techniques is that
the schedule as developed be accepted, understood and
used by all the persons associated with the project.
For example, design phase activities may be
meaningfully represented by bar charts, comparisons of
projected versus expended man-hours for particular
tasks, or other simple measures. Similarly, many
simple construction operations may be represented by
Gantt bar charts, line-of-balance diagrams, etc.
2.3 Immediate resolution of problems.
Many of the problems which arise during the design or
construction work are complex and require a cooperative
effort between the grantee, consultants and contractor
to reach an equitable solution. However, in part
because these problems are so complex and a workable
approach to them is not always apparent, many of the
grantees with which we have met defer the resolution of
problems until a more "convenient" time, usually at the
end of the respective design or construction phase.
Unfortunately, however, in many cases this deferral may
be accompanied by a loss of productivity, misplacement
or destruction of the pertinent records, further
deterioration of the grantee-consultant relationship,
or other problems. In conclusion, then, we recommend
that as a minimum the grantee identify and immediately
resolve serious problems revealed at the routine 50%
design review; work for immediate resolution of
contract changes or disputes with the contractor.
3. Cost of Recommended Services
In our discussions with grantees, consultants and EPA
personnel, virtually all associated increased force account
and consultant costs with the previously recommended
management techniques.
In fact, the grantee using force account or outside
consultants for the recommended techniques reported lower
administration costs than grantees who did not. For example,
working with our sample of grantees, those using up to four
techniques spent approximately 5% of the construction cost on
all administrative services, whereas those performing nine to
twelve services spent approximately 4.4? of the construction
cost on administrative services (more detailed summaries of
these statistics are presented later in this report).
Virtually all of the data we have compiled supports the
conclusion that use of the recommended services costs no more
than contemporary grantee management techniques, and will
probably result in lower administrative costs, regardless of
grantee or project size or type.
The fact that use of the recommend services may result in
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lower administrative costs for the grantee is also
intuitively clear. First, for example, the explicit purpose
of the scheduling procedures recommended is to facilitate
earlier completion of the work, with consequently lower
administrative costs. And, in fact, grantees using these
techniques do complete the work sooner with both lower
administrative and contractor costs.
Second, careful consideration of the designer's previous
experience and prompt resolution of all problems and disputes
before the design progresses or is completed may minimize
potential design-related problems, and facilitate maintenance
of workable relationships.
Summarizing some of the discussion presented later in this
report, the effect of using the recommended techniques on
project costs and delays may be summarized as follows:
Total Average
Administrative Average Cost of
Number of Costs as a Delay in Construction
Recommended Percentage of Completion Over Contractor's
Techniques Used Construction Costs (davs) Original 3J.d
0-4 5.0% 243 5.4%
5-8 4.6? 197 4.3?
9-12 4.4? 97 2.7?
4. Conclusion
We have considered recommending greater EPA assistance to
individual grantees, more (and less) grantee commitment of
grant funds for management services, and numerous other
techniques to enhance the ability of individual grantees to
manage properly their projects. But, based on all of the
information available to us the most effective management
techniques the grantee can use are those outlined above, and
are readily available through professional consultants for
those grantees who do not already have the capability to
provide them. And, futhermore, use of these recommended
services is not expected to result in higher administrative
cost, and requires little assistance from EPA or other
agencies to implement.
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Chapter 2
CONTEMPORARY APPROACHES 10 PROJECT MANAGEMENT
Introduction
For many grantees the planning, design and construction of a
wastewater system represents the most difficult work ever
attempted. Although some have prior experience with complex
and costly projects, many others lack the technical and
managerial sophistication to complete the project on time and
within budget.
If the number of grantees involved in audit disputes, alleged
mismanagement and construction contractor claims continues to
increase, we will probably witness a call from many public
and private organizations for greater EPA management
assistance to local grantees. One argument which may become
fashionable is that since EPA provided a large amount of the
money originally spent by the grantee, EPA should share in
the burden of disputes resulting from the work. And, there
will also be renewed calls for grantee use of "advanced"
management techniques such as turnkey construction,
construction management, etc.
As the authors of this report, we believe the number of
grantees involved in disputes will increase rapidly in the
next few years, but we also believe that additional EPA
involvement in the grantee's own project management effort,
or the adoption of a turnkey or construction management
approach will not necessarily result in better managed
projects with fewer disputes.
In this chapter, we explicitly show that any one of the
overall approaches the grantee may use to manage its project
has specific limitations, but also that public and private
owners are increasingly recognizing that the overall approach
used, e.g., construction management versus use of the
original project designer, is much less important than the
management services performed by the grantee.
Broadly, the technical services which must be performed to
complete a wastewater facility include evaluation of
alternate systems, facility planning and design, preparation
of contract documents and monitoring of the construction
work. Professional management services performed to direct
and monitor the work include development of long-term cost
and schedule goals, monitoring of the project-specific costs
and schedules, and assistance with resolution of disputes.
In conclusion, we encourage the grantee to emphasize
performance of these services and not necessarily adopt any
one of the standard management approaches.
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A number of terms have been used to describe the management
systems grantees use to plan, implement and control their
work. Program Management (1) refers to the grantee's
management of the entire wastewater system, Project
Management (2) refers to the management of all work related
to a specific facility, and Construction Management (3) to
management of the construction phase operations on one or
more projects. In this chapter we review the development of
the principle management approaches used in Project
Management and the respective advantages and limitations.
2.0 Alternate Approaches to Project Management
Until recently, many grantees implicitly assumed that with
their use of a standard Owner-Professional Consultant
contract agreement that the consultant would take charge of
the project from beginning to end; that is, he would act as a
Project Manager and perform all of the necessary technical
and management functions. (4, 5) However, a large number of
new priorities and requirements are reshaping this
traditional Owner-Consultant relationship, and many grantees
may need to revise their expectations.
Alternate approaches to Project Management began to develop
during the Second World War when owners became increasingly
concerned with achieving the lowest cost of construction in
the shortest period of time. In the late 1940's and early
1950's, Turnkey contracts, where a single contractor provides
design and construction services, was a popular approach. (6)
In principle, with the turnkey contract approach the
consultant provides all of the necessary planning, design and
construction services necessary to provide a facility with
the desired performance.
In the late 1960's and early 1970's, the use of a
Construction Management firm in lieu of the original designer
during construction became popular among owners in their
attempt to reduce costs and construction time by more
carefully controlling project schedules and cost. (1, 8)
And, more recently, as owners and contractors have become
disillusioned with the Construction Management approach, more
effort has been placed on hiring specialized consultants to
perform particular functions and to supplement the original
project designers. (9)
2.1 The Traditional Approach
The classic approach to grant funded work is for the grantee
to act as Program and Project Manager with substantial
assistance from private, professional consultants. Typically
the grantee will develop and maintain a master schedule and
budget for completing the entire system, but contract with
professional consultants for planning, design and certain
construction services. Thus, the grantee retains nominal
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control over the direction and progress of the work, but does
not commit its personnel resources to a short term project.
Historically, the professional architectural and engineering
societies representing consultants have encouraged owners to
rely on private consultants and to use this "traditional"
approach. For example, at one time the standard Owner-
Architect agreements defined the Architect's duties quite
broadly from preparation of preliminary studies to
supervision of the work. (4) And, according to the
commentary accompanying a National Society of Professional
Engineers (NSPE) Owner-Project Manager agreement, the Project
Manager "takes charge" of the project:
"... the Project Manager ... in effect, takes
charge of the Project from beginning to end in order to
provide special expertise and relieve the Owner of
duties and responsibilities which the Owner is neither
qualified to undertake nor for which he will have a
continuing need." (5)
Proponents of this traditional approach argue that use of a
single professional consulting firm representing the grantee
from planning through construction simplifies the grantee's
own management responsibilities and is cost-efficient. The
grantee can establish and interact with a single contact
throughout the project's life and thus need not take an
active part in the Project Management. Also, if the original
professional design consultant is involved during the
construction phase, questions about the work may be resolved
quickly and directly.
The advantages notwithstanding, use of this approach has been
declining recently. Some consultants, fearful of assuming
unwanted liability for activities beyond their control, are
explicitly disavowing any responsibility for cost or
schedules, and also limit their responsibility for inspection
of the work. (10) And, in a related development, since few
consultants have personnel familiar with advanced management
techniques such as cost and schedule control, they are
drawing a sharper distinction between the technical and
management services provided and are excluding those they are
not prepared to offer. The net result is that in order to
satisfy their own management needs grantees are either
expanding their own staff or contracting for specialized
management services from other consultants. (11)
In conclusion, for many years the traditional arrangement
between the grantee and consultant resulted in the consultant
providing the full range of planning, design and construction
oversight services necessary for Project Management. More
recently, however, professional consultants have narrowed the
range of services offered grantees and are explicitly
excluding responsibility for project costs, schedule, project
inspection and certain other functions. And, whereas in the
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past grantees had given only limited attention to development
and maintenance of detailed cost, schedule and inspection
records, they are now developing these in detail in order to
minimize audit related and construction contractor disputes.
2.2 Turnkey Project Management
During the Second World War and early post-war industrial
development, owners explored a number of different techniques
to speed planning, design and construction processes. Owners
were concerned with controlling costs and efficient use of
their own staff, but there was also an overriding emphasis on
completion of the facility as soon as possible. The Turnkey
approach, where the owner contracts with a single contractor
to provide a complete facility ready for operation, was
particularly popular during this period. (6) Variations and
other names applied to it include "single-source, design-
construct responsibility" and the "design-construct"
approach. (12) " *
The fact that the contractor may overlap planning, design and
construction operations and the responsibility for the
facility performance can be clearly focused are widely cited
as the principle advantages of this approach. It has been
considered for wastewater facilities, and its advocates argue
owners (i.e., grantees) will be able to save time, reduce
escalating costs and focus responsibility for operational
problems on one single firm. (12)
The apparent advantages notwithstanding, the complex dynamics
of simultaneous design and construction may result in
unexpected costs for the owner. Abnormal weather, site
conditions, unexpected problems with regulatory agencies and
other unforeseen events over the several year life of a
typical project can make it extremely difficult to plan and
forecast time and costs associated with the future work, and
the consultant will want to be reimbursed for these
unexpected problems. (7, 8)
For unsophisticated owners, or those expecting to use the
Turnkey approach to minimize their responsibilities, the
problems associated with the assumption of liability and
guarantees of performance by the consultant may pose the most
serious obstacles. In effect, the grantee may want an
explicit guarantee the facility will meet established
performance standards for water quality, cost of operation,
etc., and for the consultant to assume responsibility for
meeting these standards. In fact, however, consultants
cannot afford the open-ended costs such unilateral guarantees
impose, and insurance which may support performance
warrantees is usually quite costly and limited in coverage. (6)
In summary, the Turnkey method is appealing because it focuses
responsibility on a single contractor and the overall time
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required to complete a facility may be shortened because design
and construction can proceed simultaneously. But, in actual
practice this method will be used even less frequently in the
future due to the fact owners have not been able to adequately
control and predict costs, and Turnkey consultants are sharply
restricting their assumption of liability for the facility's
performance.
2.3 Construction Management
The 1950's and early 1960's was an exciting period for
owners, contractors and consultants associated with complex
capital projects. The magnitude and number of industrial,
commercial and defense related projects started after the
Second World War continued to grow rapidly, the impact of
private financing and inflated costs was considerably
greater than it had been earlier, and new tools for control
and management of these projects were being developed. (6)
As owners placed even greater emphasis on timely completion
of their projects, attention was also focused on scheduling
tools and techniques. Project personnel tracked estimated
and actual milestone dates and some developed elaborate Gantt
"bar charts" for use in project control and planning.
But, the most important advances in project scheduling could
be attributed to the development of the so-called Critical
Path Method "CPM" network scheduling techniques by Hayward
and Robinson at DuPont, and PERT for the Navy during the late
1950's. (13, 14) With the subsequent development and
application of these networking techniques, project personnel
were able to "track" thousands of separate activities and
evaluate the impact of different events on the overall
project schedule. During the 1960's, academic scholars and
practitioners in the field further developed and refined the
use of CPM, PERT and related techniques. And, a number of
consulting organizations were formed to offer scheduling
services, and computer-based "scheduling packages" were
developed for use by several government agencies. (14)
As the scope and magnitude of industrial public works
projects continued to expand, besides employing detailed
project schedules, owners also attempted to minimize the
problems associated with the use of the traditional, lump-sum
construction contracts. Some public owners began "packaging"
their construction contracts so as to start foundation
construction, for example, while the balance of design was
completed, and also adopted construction contract clauses
which would minimize disputes and ease the burden of project
administration during construction. (10)
Late in the 1960's, the federal General Services
Administration (GSA) recognized the potential advantages
associated with these advanced scheduling techniques and
multiple bid packages, and promoted their use with greater
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fanfare as "Construction Management." (15) Specifically,
GSA defined Construction Management (CM) as:
... a prime contractor (professional services) who will
work with PBS (federal Public Building Service) and the
architect to formulate the project budget, furnish the
architect with information on construction technology and
market conditions to insure their building design stays
within budget, manage the procurement effort, supervise
the construction of the building and provide, if desired,
a wide range of other services . . . (15)
In summary, with the GSA approach the CM provides cost and
schedule input to the project designer during the planning
and design phases, assists the owner with development and
award of multiple construction contracts to start
construction while the final design is completed, and then
assists the owner (e.g., GSA) with all management functions
during the construction phase. (15) Unfortunately, GSA was
not able to capitalize on CM as much as expected, apparently
due to the CM's limited authority to enforce schedule and
coordination requirements (7), and stopped using CM in 1980.
(16)
However, as GSA's use of CM was declining, some grantees and
delegated states became increasingly interested in a slightly
different approach. In 1977, the state of California issued
its Managing Construction of Claim Water Grant Projects (11)
recommendations on the use of CM and actively encouraged
grantees to employ a CM other than the original designer to
administer the work, exercise cost and schedule control and
perform other duties during the construction phase. In 1981,
the state of Washington Department of Ecology issued its own
guidelines. (17)
With the approach promoted by California, Washington and
others, (8) the CM assists the grantee with development of an
overall management plan, development and maintenance of a
comprehensive cost and schedule control system, and
administration of the work. (18) But, in contrast to GSA,
the CM does not help award "phased" of fast-track
construction contracts.
Although inconclusive, a small amount of data gathered by the
state of California since issuance of its 1977 guidelines
tentatively indicates that active use of a CM would result in
shorter completion times, fewer change orders reduced
increases in construction costs, but slightly higher
administrative costs. Similar conclusions, but without
supporting quantitative data, have been widely reported by
others for conventional commercial and public construction
projects. But, despite active encouragement, relatively few
grantees have used CMs and most have apparently chosen to
continue use of the original project designer in a limited
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role during construction.
No doubt, there are many reasons why the concept of CM has
not "caught on" despite its apparent advantages, but we
believe that the principal obstacles are the lack of
conclusive quantitative evidence that its use is cost-
effective, an apparent shortage of persons capable of and
willing to assume active responsibility for cost and schedule
control activities, and uncertainty about the liability of
the CM for its own and others actions. (6, 10, 19)
Most people (and even delegated state agencies disbursing
funds), and particularly cash-short grantees, are not
motivated to use a "new" service such as CM unless there are
known cost-effective benefits. Interestingly, despite the
widespread publicity and the use CM has enjoyed for over a
decade, extraordinarily little quantitative data capable of
winning the support of a skeptical agency Board of Directors
or delegated-state contract review staff has been developed.
In fact, all the grantees we have met and who are using CM
services strongly assert that it is cost-effective, but also
admit they lack objective data supporting their contentions.
Perhaps the most cost-effective CM service is active cost and
schedule control. By using detailed schedule and cost
projections when planning the work, and through maintenance
of comprehensive records as it takes place, the grantee will
be able to anticipate his financial needs and have a time-
record to use in discussion with the contractor and designer.
But, until relatively recently few consulting engineers (or
contractors) were familiar with advanced scheduling
techniques, including CPM networks, and thus placed little
emphasis on their development and maintenance. This limited
use notwithstanding, the number of persons using scheduling
techniques is growing rapidly and the use of an appropriate
scheduling technique by the contractor, professional
consultant, or both, will probably become commonplace within
the next few years. (14)
Advanced scheduling techniques are now included in
contemporary undergraduate civil engineering curricula,
contractors and consultants are finding them an invaluable
tool for presenting and resolving construction contract
claims, and many large civil engineering firms are developing
specialists trained in cost and schedule administration as an
essential element of their effort to manage large, multi-
billion dollar projects.
Finally, the whole issue of professional liability has had a
dramatic effect on the evolution of CM services. Since the
mid 1960's, consulting engineers have become increasingly
fearful of assuming responsibility for the construction
contractor's work and associated liability. So, for example,
many consultants actively monitoring the construction have
carefully avoided responsibility for safety-related programs
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and defects in the completed work (obvious sources of
potential liability), but also for tracking the contractor's
sequence and schedule of work activities. In effect, fearful
of the assessment of unwanted liability some consultants
offering construction monitoring or oversight services also
explicitly exclude certain services which would be
particularly valuable to the grantee. (20)
Because of the whole issue of CM liability it is still
undergoing a rapid evolution; it is impossible to predict
precisely what effect it will have on the CM services
offered. However, at least for the next few years if a
grantee wants certain allegedly "high-risk" services from a
consultant, including schedule control, then these should be
explicitly stated in the grantee-CM contract.
To summarize, the term Construction Manager or CM typically
represents the professional consultant providing specialized
services encompassing development of a management plan,
active cost and scheduling control, assistance with the
development of the contract documents and the negotiation of
changes during construction. And, most of these services are
performed during the construction phase. Although widely
publicized and recognized as "valuable", few public owners
are actively using CM, perhaps due to the uncertainty of
benefits. But, as the benefits associated with good cost and
schedule administration and other CM services become more
widely recognized, successful grantees document the "true-
cost" of these services and the people able to provide these
services increase in number, we foresee that grantee use of
CM or similar approaches will expand rapidly.
2.3 Special Consultants
Independently of any state or federal promotion of CM or
related services, in the late 1970's and early 1980's, many
grantees began to realize that strong cost and schedule
control and vigorous contract administration could result in
substantial benefits ranging from fewer contractor claims to
lower administrative costs. In fact, most of the grantees we
contacted began placing heavy emphasis on these services
after battling complex construction contractor claims and
seeking additional contract time from grantor agencies. In
both of these situations the grantees found excellent project
records and comprehensive cost and schedule projections were
essential for defense of their position. (21)
Also, the net result of the recent grantee interest in
advanced management techniques has not been the standard use
of CM, per se, but another type of special consultant.
Whereas with the CM approach as it was traditionally promoted
the CM would perform all of the construction inspection,
contract administration and scheduling functions and the
project designer's role would be limited to submittal review
and some interpretation of the contract documents, with the
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"special consultant" approach the original project designer
continues to assist the grantee with the development and
award of construction contract packages, inspection of the
work, submittal review and design interpretations; but, the
usually separate, independent special consultant's role is
limited to cost and schedule administration, negotiation of
change orders and maintenance of project records.
With this approach the grantee retains the original designer
as an active participant during the construction, but is also
able to supplement the designer's special expertise and
project familiarity with independent personnel specifically
contracted to provide cost and schedule control,
documentation services and change order administration.
Advantages of this approach include the grantee's ability to
employ a separate organization with particular strengths in
facility design and management, respectively. Conflicts of
interest which may occur if the original designer oversees
implementation of his own design during the construction
phase are minimized, and the special consultant is explicitly
agreeing to provide particular services which designers have
more recently explicitly excluded.
The principal disadvantages associated with the use of special
consultants are that they will increase the grantee's own
administrative effort due to the employment of additional
consultant personnel and costs for consultant services.
Also, unlike those providing traditional planning and design
services, consultants providing management services such as
cost and schedule control may not be able to obtain
professional liability insurance. These potential
disadvantages notwithstanding, we anticipate a rapidly
expanding acceptance of this approach to Project Management.
In summary, grantees are increasingly using special
consultants to fulfill their own limited need for specific
services during the construction phase. With this approach
the original designer continues to provide inspection,
submittal review and other design related services during
construction, but independently operating Special Consultants
provide basic management services including cost and schedule
control, contract administration and documentation.
3.0 Summary
Originally, grantees and owners of private projects assumed
that their professional consultants performing planning and
designing services would also provide all of the necessary
management services to take charge of their project from
planning through construction. In turn, professional
consultants supported this assumption by suggesting standard
form contracts using phrases implying a broad range of
services, and the consultants offered many of the services
these owners anticipated needing. But, as public and private
owners became more concerned with shortening the time required
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to go from planning through to facility start-up, a number of
new approaches to Project Management were developed, including
Turnkey and Construction Management (CM). Also, as
professional consultants became increasingly concerned with the
liability accompanying management services, some deliberately
excluded these from their contracts with the grantees.
Shortly after the Second World War in a deliberate attempt to
shorten the overall planning, design and construction process
and to focus responsibility for plant performance, some owners
used the Turnkey approach to Project Management. In effect,
the single professional consultant assumed responsibility for
the planning, design and construction of the facility to meet
established performance standards. But, due to consultant
imposed limits on the amount of liability they would assume and
the fact that this approach allowed less owner-consultant
control over project costs and schedules, this approach has
been used much less frequently in recent years.
In the 1960's and early 1970's, CM and related services were
widely promoted for public and private projects. CMs were
employed to develop and award multiple contract packages for
phased, fast-track construction and to maintain comprehensive
cost and schedule records. But the CM concept, per se, was not
as widely adopted as its promoters hoped, and today few
grantees use the CM approach as it was originally defined.
In contemporary practice, a relatively new and promising
approach to Project Management is for the grantee to continue
to use the original designer for many of the design related
functions during construction, but to employ an independent
special consultant for specific management services, including
cost and schedule control during the planning, design and
construction phases.
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1. Wong, Alan K. , "Program Management: Intent, Tools, Practice,"
Engineering and Construction Projects, ASCE, New York, 1982.
2. Scarola, John A. and Clyde B. Tatum, "Definition of Project
Management, " Engineering and Construction Projects, ASCE,
New York, 1982.
3. Muller, Frank, "Definition of Construction Management,"
Engineer and Construction Projects, ASCE, New York, 1982.
4. American Institute of Architects, "Standard Form of Agreement
Between Owner and Architect," AIA Form A-102, Washington,
D.C., 1948.
5. National Society of Professional Engineers, "Standard Form of
Agreement Between Owner and Project Manager for Professional
Services," NSPE No. 1910-15, Washington, D.C., 1977.
6. Barrie, D.S., Directions in Managing Construction, John Wiley,
New York, 1981 .
7. , Use c-f New Construction Method on Federal Projects a_t
Three Agencies Can Be Improved, Report of the Comptroller
General of the United States, General Accounting Office,
October, 1977.
8. , Construction Management Problems Have Delayed Completion
OL the New Plutonium Facilities at Rocky Flats, Report of the
Comptroller General of the United States, General Accounting
Office, June, 1978.
9. Cushman, Robert F. , and William J. Palmer, Businessman' s Guide
Construction, Dow Jones Books, Princeton, N.J., 1980.
10. Sneed, William R. , "The Construction Manager's Liability,"
Construction Litigation, Practicing Law Institute, New York
City, 1981, pp. 317-380.
11. California State Water Resources Control Board, Managing
Construction of Clean Water Grant Pro.iects, Clean Water
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Grant Guidelines issued by the Division of Water Quality,
California SWRCB, November 19, 1977.
12. Godwin, Richard P., and William A. Sandberg, Study of Single :
Responsibility Concepts for Water Pollution Control
Projects, Bechtel, Inc., April, 1974.
13. Webster, Francis M., "Tools for Managing Projects," Project
Management Quarterly, Vol. XIII, No. 2, June, 1982,
pp. 46-58.
14. O'Brien, James J., "Evolution of Integrated Project Control
Systems," Engineering and Construction Projects, ASCE,
New York, 1982, pp. 183-197.
15. General Services Administration Public Building Service, The
GSA System for Construction Management, reprinted October,
1977.
16. PBS/GSA order No. ADM/P545039B, October 20, 1980.
17. Hester, Weston T., et al, Construction Management and
Construction Contractor Claims, State of Washington
Department of Ecology, 1981.
18. National Research Council, Management of Urban Construction
Programs, Committee on Management of Urban Construction
Progam, Building Research Advisory Board, Commission on
Sociotechnical Systems, Washington, D.C., 1980.
19. American Society of Civil Engineers, Construction Division,
Construction Risks and Liability Sharing, 1979.
20. Kornblut, Arthur T., and John L. Sullivan, "The Liability of
Architects and Engineers to Third Party for Economic Loss,"
Practicing Law Institute, New York City, 1981, pp. 235-260.
21. Cochrane, Luther, Construction Claims: Representing the
Construction Owner, Practicing Law Institute, New York,
1982.
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Chapter 3
Professional Liability
1. Introduction
Many grantees contract with professional consultants to provide
the technical and management services needed to plan and design
their projects, and monitor construction. In addition to the
necessary technical services, the facility designer may also
provide the basic Project Management services needed, or these
may be procured from separate consultants. The "professional
liability" of these consultants is in effect synonymous with
their responsibility to the grantee or others for damages
suffered due to their negligence or breach of contract.
According to common legal practice, to establish professional
liability the grantee must show that the professional has a
legal duty to the grantee; that by breach of contract or
negligence he failed to meet an established standard for its
performance; and that the grantee was harmed by, but was not
the cause of the loss.
If, for example, an error is found in the original design of a
machinery component, the grantee and designer typically
negotiate the distribution of liability based upon the terms of
the grantee-designer contract agreement. As a practical
matter, some minor errors and omissions in the original design
are considered inevitable, and designers frequently correct the
design, if not the work itself, at their own expense. And,
designers purchase errors and omissions insurance to protect
themselves from the infrequent large losses attributable to
design deficiencies.
Whereas the consultant's responsibility for facility design and
performance may be clearly outlined in the contract documents,
the same contracts are frequently vague about the consultant's
responsibilities for management functions. And, since errors
and omissions insurance is usually unavailable for management
functions, many consultants hesitate to even appear responsible
for them.
In this chapter the case-law precedents and contract provisions
relating to liability of the professional consultant for
management services are discussed in detail. In conclusion, it
is shown that although the grantee and professional consultant
may share an active relationship on a particular project, and
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the grantee may rely heavily on the professional's performance
of specific functions, most professionals incur relatively
little liability for the performance of management services.
2.0 Establishing Liability
Based upon the literature study and survey compiled as part of
this report, we have established that the grantee may
pratically reduce cost overruns, delays and risks of litigation
by exercising basic management services, including maintenance
of schedule controls during the design phase; schedule control
during construction; and immediate resolution of problems
during design and construction.
In principle, to establish liability of the consultant for
these management services the grantee must show that the
consultant had a duty to perform them, that they were not
performed according to the contract or were otherwise done
negligently, and that consequently the grantee suffered losses.
Unfortunately, in practice there is no industry consensus on
the identity and level of management services a "reasonable"
Project Manager would ordinarily perform, most grantee-
consultant contracts exclude many of these and other services,
and it is extremely difficult to isolate the specific harm
attributable to the consultant's actions versus those of the
grantee or contractor. And, consequently, there is
extraordinarily little case law to provide guidance for those
seeking to assess the liability of a consultant Project
Manager. There are only two separate instances in which the CM
has been held liable for his duties as caretaker of the project
schedule and/or negotiator of project change orders.
In Green Plumbing and Heating Co.^ Inc. v. Turner Construction
Co., 500 F. Supp 910 (E.D. Michigan 1980), the Mechanical
Contractor (Green) contracted with the owner to construct a
portion of a hospital, and Turner contracted with the owner to
act as construction manager (CM). Subsequently, the mechanical
subcontractor claimed the CM interfered with its contract with
the owner, and that the CM was negligent in performing its
scheduling and coordinating duties. The charge of the CM's
negligence was later blocked, and the mechanical subcontractor
was permitted to pursue the charge of tortius interference by
the CM. Unfortunately, only a limited discussion accompanied
this case and its outcome is not instructive.
The consolidated case of Edwin J. pobson^ Jr. Inc. v. Rutgers
State Univ.f 157 N.J. Super. 357, 384 A. 2d 1121 (1978), and
subsequent Broadway Maintenance Corp. v. Rutgers University,
447 A. 2d 906 (S. Ct. N.J. 1982) contains a more elaborate, but
direct statement on the CM's liability.
In this case the CM had agreed explicitly "... to enforce
the combined schedule ..." constructed by an outside CM
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consultant and jointly approved by the other prime contractors
on the job. Based on the CM's responsibility to enforce the
schedule and coordinate the multiple contracts, the court held
that it was responsible to the delayed contractors for their
damages.
One lesson which we may draw from the Dobson case is that if
the Construction or Project Manager explicitly agrees to
utilize the project schedule to coordinate the contractor's
work, then he may become liable for damages resulting from the
delay.
3.0 Liability According to the Contract
The owner-consultant agreement is a logical starting point when
evaluating the consultant's liability for management services.
As in the Dobson case previously cited, the Project Manager can
be held responsible for those services he explicitly agrees to
perform.
Many professional societies and contractor associations have
developed standard owner-consultant contract agreements, and
although seldom used in their entirety, they contain many
contract clauses which are widely adopted. Perhaps the most
widely known standard form agreements are those issued by the
American Institute of Architects (AIA) and the National Society
of Professional Engineers (NSPE). For the purposes of this
discussion we will focus on the following:
AIA Document B-141 (1977) , an owner-designer agreement;
AIA Document B-801 (1980) , an owner-construction manager
agreement;
AIA Document A-201 (1976) , an owner-contractor agreement;
NSPE Document 1910-2 (197*0 , an owner-designer agreement;
NSPE Document 2802 (1974) , an owner-designer and
contractor agreement.
Each of these agreements contains some reference to the
management services grantees need most, i.e., prompt resolution
of change orders and close schedule coordination, but these
references are seldom detailed. In the following discussion we
compare the treatment of these different management services in
the respective contract forms.
3.1 Immediate Resolution of Design Problems and Changes or Disputes
During Construction
One of the key management services a Project Manager can
provide is to help the grantee promptly review and resolve
change orders and disputes. Prompt resolution reduces the
uncertainty inherent in any unresolved matter, and enables the
grantee and contractor to plan their work more effectively.
None of the standard form contracts explicitly require the
consultant to seek immediate resolution of design problems,
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changes or disputes during construction, perhaps due to the
fact that many design or construction problems require
substantial investigation before they can be resolved. Unusual
delays or lack of diligence by the designer or construction
manager, however, may be handled according to doctrines of
professional liability.
3.2 Schedule Control During Design
In earlier sections of this report, it was established that
design schedule control is improved by the use of the following
four techniques:
1. the owner's possession of a detailed design schedule;
2. monthly or more frequent schedule reviews,
3. monthly or more frequent design progress reports, and
4. enforcement procedures permitting the owner to withhold
payment if design work is behind schedule.
The above contracts, however, do not include provisions for
effective use of these techniques.
AIA Document B-141, an owner-designer agreement, provides the
owner a design schedule only if he requests one. The provision
states that:
The Architect shall perform Basic and Additional
services as expeditiously as is consistent with
professional skill and care and the orderly progress
of the Work. Upon request of the Owner, the Architect
shall submit for the Owner's approval, a schedule for
the performance of the Architect's services which shall
be adjusted as required as the Project proceeds, and shall
include allowances for periods of time required for the
Owner's review and approval of submissions and for
approvals for authorities having jurisdiction over the
Project. This schedule, when approved by the Owner, shall
not, except for reasonable cause, be exceeded by the
Architect. (AIA Document B-414 s 1.8)
Recalling the four elements recommended for design schedule
control, this contract provides a schedule (if requested by the
owner), but no monthly reviews, progress reports or enforcement
procedures.
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"SPE Document 1910-2, an owner-designer agreement, provides
only a suggested date of completion:
(the designer) would expect to start our services
promptly after receipt of your acceptance of this
proposal and to complete our services within
months, (letter agreement incorporated by reference in
NSPE 1910-2)
This agreement specifies a suggested date of completion, but
provides no interim schedule control. It requires none of
the four elements recommended for effective design schedule
control.
NSPE Document 2802, an owner-designer and contractor
agreement, contains a scheduling provision to cover design
and construction. Its scheduling provision appears to
provide only the scheduled date of start and completion:
The work to be performed under this contract shall be
commenced as of the day following the execution
of this contract and shall be completed within such time
schedule as shall be mutually agreed to by the Owner and
Engineer-Contractor. (NSPE Document 2802, Article 4)
This design and construction scheduling provision provides no
interim schedule control. The specification of start and
completion dates is insufficient to permit adequate
assessment of the progress of the work. Like NSPE Document
1910-2, this agreement provides none of the four elements
needed for design schedule control.
AIA Document B-801, an owner-construction manager agreement,
contains one provision that could be interpreted as requiring
a design schedule. It states that the construction manager
shall maintain a project schedule that integrates and
coordinates the designer's services with construction
schedules. Under this agreement, which contains specific
construction scheduling provisions described in detail in
later sections, the construction manager is to:
Provide for the Architect's and Owner's review and
acceptance, and periodically update, a Project Schedule
that coordinates and integrates the Construction
Manager's services, the Architect's services and the
Owner's responsibilities with anticipated construction
schedules. (AIA Document B-801 1.13)
The provision states that the schedule shall coordinate the
parties' responsibilities with reference to "anticipated
construction schedules" (emphasis added). This wording may
imply that the construction manager is to schedule portions
of design work that are concurrent with construction that is
to begin shortly.
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If this clause were to be applied to the design phase, it
would provide a schedule for design services, apparently
including specification of some design milestones. However,
it provides no monthly review (although "periodic" updating
is required), no monthly progress reports, and no schedule
enforcement procedures.
3.3 Schedule Control During Construction
To control effectively the project schedule during
construction, we believe that the grantee should:
1. possess a project construction schedule;
2. conduct monthly or more frequent schedule reviews;
3. verify the schedule and work in progress monthly or
more often;
4. update the schedule with each review; and
5. have enforcement procedures permitting the
withholding of payment if work falls behind schedule.
The current versions of the owner-designer agreements
explicitly limit the designer's role in enforcing elements of
the owner-contractor agreement. The designer denies
responsibility for the construction contractor's failure to
perform in accordance with the contract documents, which
normally include the schedule agreed upon by the owner and
contractor.
The owner-designer agreements provided by the AIA and NSPE
have similar provisions limiting the designer's
responsibility for the acts or omissions of the contractor.
The AIA owner-designer agreement states:
The Architect shall not have control or charge of, and
shall not be responsible for construction means,
methods, techniques, sequences, or procedures, ... or
the acts or submissions of the Contractor,
subcontractors, or any other persons performing any of
the Work, or for the failure of any of them to carry out
the work in accordance with the contract documents.
(AIA Document B-141, s 1.5.5)
Under the AIA agreement, the owner may contract for
additional services during construction, which binds the
designer to:
. . . providing coordination of the work performed by
separate contractors and the Owner's own forces.
(AIA Document B-141, s 1.6.2)
The NSPE owner-designer agreement states:
(the designer) shall not be responsible for the means,
methods, techniques, sequences or procedures of
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construction selected by the Contractor(s) ... He
shall not be responsible for the failure of Contractors
to perform the construction work in accordance with the
Contract Documents.
(NSPE Document 1910-2 s 1.6.2)
The NSPE design contract lacks an analagous provision for
coordination of contractors and the owner, but does offer as
an additional service:
. . . services resulting from the involvement of more
than one prime contractor for construction of the
project. (NSPE Document 1910-2 s 2.1)
It is unclear what services are contemplated under this
clause. The current versions of the owner-contractor
agreements lack the elements necessary for adequate schedule
control during construction. In the following section, we
will inspect the construction scheduling provisions of AIA
Document A-201. As we have seen in the earlier discussion of
the NSPE owner-designer and contractor agreements, the NSPE
agreement provides only the start and completion dates for
the entire project.
The AIA owner-contractor agreement contains a scheduling
clause which requires a schedule for the construction work:
The Contractor, immediately after being awarded the
Contract, shall prepare and submit for the Owner's and
Architect's information an estimated progress schedule
for the Work. The progress schedule shall be related to
the entire project to the extent required by the
Contract Documents, and shall provide for the
expeditious and practical execution of the Work.
(AIA Document A-210 s 4.10)
The terms of this contract provide for an "estimated"
progress schedule, but little else. There is no requirement
of schedule reviews, updates, or for the verification of the
schedule and the work in progress. In addition, there is no
schedule enforcement procedure available to the owner if the
work falls behind schedule.
The construction scheduling provisions of the owner-
construction manager agreements are more complete than those
contained in the contracts we have already reviewed, but they
do not specify all the elements necessary for effective
schedule control.
The AIA owner-construction manager agreement contains
construction scheduling provisions that provide a
construction schedule, updating to reflect progress, and
recommendations for enforcing the owner's contracts with
other parties. The construction manager is to:
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Provide for the Architect's and Owner's review and
acceptance, and periodically update a Project Schedule
that coordinates and integrates the Construction
Manager's services, the Architect's services and the
Owner's responsibilities with anticipated construction
schedules.
(AIA Document B-801 s 1.1.3)
Develop a Project Construction Schedule providing for
all major elements such as phasing of construction and
times of commencement and completion required of each
separate Contractor. Provide the Project Construction
Schedule for each set of Bidding Documents.
(AIA Document B-801 s 1.1.5.3)
Consistent with the Project Construction Schedule issued
with the Bidding Documents, and utilizing the
Contractor's Construction Schedules provided by the separate
Contractors, update the Project Construction Schedule
incorporating the activities of Contractors on the
Project, including the activity sequences and durations,
allocation of labor and materials, processing of Shop
Drawings, Product Data and Samples, and delivery of
products requiring long lead time procurement. Include
the Owner's occupancy requirements showing portions of
the Project having occupancy priority. Update and
reissue the Project Construction Schedule to show
current conditions and revisions required by actual
experience.
(AIA Document B-801 s 1.2.2.2)
Schedule and conduct pre-construction, construction and
progress meetings to discuss such matters as procedures,
progress, problems and scheduling. Prepare and promptly
distribute minutes.
(AIA Document B-801 s 1.2.2.1)
Endeavor to achieve satisfactory performance from each of
the Contractors. Recommend courses of action to the
Owner when requirements of a Contract are not being
fulfilled and the non-performing party will not take
satisfactory corrective action.
(AIA Document B-801 s 1.2.2.3)
Under this construction management agreement, the owner is
provided a schedule for construction, including the phasing of
construction activities and the start and completion dates for
separate contractor's work. The owner also is provided
schedule reviews, although their frequency is not described.
There is no verification of the schedule and the work in
progress, but the contract does provide for scheduling
updating "as required". Finally, the construction manager is
to recommend courses of action to the owner when construction
contracts are not being fulfilled. These recommendations
would be forthcoming if the contractor was not performing
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according to the schedule due to causes for which he is
legally responsible.
In conclusion, the standard form contracts for design,
construction and construction management do not provide the
owner with the recommended procedures for schedule monitoring,
maintenance and enforcement. The principal deficiencies of
the contracts are lack of monthly schedule reviews and
updates, inadequate schedule enforcement procedures, and lack
of verification.
4. Conclusion
Grantees who employ Project Managers to provide management
services are naturally concerned with their ability to hold
the consultant liable for damages associated with his breach
of contract or negligent performance of specific management
services.
According to common legal practice, to establish professional
liability the grantee must show that the professional had a
legal duty to the grantee; that by breach of contract or
negligence he failed to meet an established standard for its
performance; and that the grantee was harmed, but was not also
the cause of the loss.
We have shown that there is almost no case-law precedent for
holding a Construction or Project Manager liable for
negligence in the performance of particular management
services. In one case where a detailed ruling was made,
however, the CM was held liable for those services he had
explicitly agreed to provide in his contract with the owner.
The fact notwithstanding that some consultants have been held
liable for management services, we do not expect a large
number of similar cases or decisions in the future. In a
systematic review of contemporary, standard-owner consultant
contracts forms we have shown here that most standard
contracts are written in a way that minimizes the consultant's
liability for particular management services. And, we note
that these standard contract forms, and similar contract
clauses, are widely used in contemporary practice.
Finally, we note that if the grantee wants to establish
Project Manager responsibility for particular management
services, and be able to hold the consultant liable for the
consequences of negligence or non-performance, the grantee
should explicitly specify the services to be provided in the
grantee-consultant contract.
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CHAPTER 4
THE CONTEMPORARY GRANTEE
1. Introduction
Federal and state agencies providing financial assistance to
local grantees are naturally concerned that grant funds are
managed properly and their original goals fulfilled.
Although supporting statistical evidence is seldom cited,
some observers of grant programs express concern that
midsized and smaller grantees are sometimes mismanaging grant
funds and receiving insufficient management assistance from
the grantor agencies.
Previously, many agencies constructing capital-intensive
grant funded projects were represented by experienced, if not
large, sophisticated organizations with a detailed
institutional knowledge of the workings and vagaries of
design and construction processes. The state highway
departments, for example, had developed large, comprehensive
design and construction organizations. With the EPA grant
program, a different type of grantee is becoming more common,
and specifically we observe that few have personnel
experienced with the design and construction processes, and
many have difficulty meeting their established objectives.
To help us establish those management characteristics which
"successful" grantees found most helpful, and those which
were less helpful or were counterproductive, we met
personally with the senior officials of over twenty grantee
agencies and many additional consultants to discuss their
experiences. We inquired about the overall grantee
organizational structures, grantee policies for selecting and
using consultants, particular management problems grantees
were experiencing and the administrative costs normally
incurred.
For grantees who were considered nominally successful by EPA,
neighboring agencies or their peers, the management
techniques cited as most important were the use of qualified
personnel to perform and to oversee the work, and maintenance
of close control over the design and construction work
through detailed periodic reports and a prompt response to
any problems which developed.
Conversely, virtually all of the grantees experiencing
problems reported that the difficulties they had encountered
could be attributed to insufficient preparation for the work,
weak or nonexistent cost and schedule controls for design and
construction, and the inability to act decisively on changes,
questions about the design, etc. And, these conclusions and
other observations made during these visits were corroborated
by the results of our subsequent survey.
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In this chapter we review two composite pictures of the
Construction Grants Program grantees; first, a picture is
developed of the grantees according to the populations served
and, second with respect to the management techniques they
used.
First, we categorized grantees according to populations
served, i.e., large, mid-sized and small, and then developed
a composite image of each grantee category based upon the
data developed through our field visits and survey. In
conclusion, we observed that smaller grantees are usually
managed with substantial assistance from outside consultants
and are frequently less successful in minimizing cost over-
runs and delays in project schedules. Conversely, larger
grantees usually managed their work with outside consultants
or by force account, and regardless of the personnel employed
(consultant versus force account), these grantees are usually
significantly more successful in minimizing overruns and
delays.
Second, based on input provided by grantees and their
consultants, published literature, and our survey, we have
identified 12 management techniques grantees can use to
reduce project delays, cost overruns and the likelihood of
claims from designers or construction contractors.
Summarizing, these techniques may be simplified to three
basic concepts: 1) maintain close schedule control over the
project throughout its life; 2) identify and respond to
potential difficulties in a timely manner both during design
and construction; and 3) carefully scrutinize the
qualifications of all prospective professional consultants.
In conclusion, the available evidence demonstrates that if
these management techniques are used, the cost overruns,
delays in project completion and construction contractor
claims are minimized, and the grantees will actually expend
fewer funds on force account and consulting services than
those grantees who do not.
Many of our initial conclusions about what constitutes good
and bad grantee Project Management practices were based upon
discussions with EPA, grantee and consultant personnel. But,
the consistency and responses from these persons
notwithstanding, we believe that the most persuasive evidence
supporting the merits of particular management practices is
contained in the survey data. The survey data corroborated
our observations from a large number of discussions, but most
importantly provided specific, quantifiable measures of the
value (or limitations) associated with particular management
services. Because of its particular value we will emphasize
the survey data in the attached discussion.
2. Grantee Characteristics; A Function of Population
2.1 Small grantees
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For the purposes of this study, small grantees are defined as
those serving populations less than 10,000 people.
Approximately one-half of the grantees considered for this
study are small.
Small grantees are typically cities, with approximately 1/4
constructing secondary facilities, while the others are
constructing primary, tertiary, conveyance systems,
sludge-handling systems, or pump systems.
Based both on our questionnaire and visits with numerous
small grantees, we observed that they usually employ the
original designers to manage the entire project from planning
through construction, and that few hire a special consultant
or manage their own projects.
The overwhelming majority of small grantees reported projects
valued at less than $5,000,000.00 and had construction cost
overruns due to change orders or claims of less than 5%, but
a few had cost overruns greater than 10?
The total project duration ranged from less than two years to
over six years; however, a majority of these projects had a
duration of four-to-six years. Half of the grantees reported
construction time overruns of less than six months; however,
one-fourth had time overruns greater than six months.
The small grantee typically administered fewer than 25 change
orders on the specified project, and spent less than 2% of
the project costs on administrative force account work.
2.2 Mid-sized grantees
Mid-sized grantees are defined as those agencies which serve
a population greater than 10,000 but less than 500,000.
Nearly half of the grantees interviewed were mid-sized
grantees, and are typically cities; however, some are county
or special districts. The most common type of projects are
up-grading of existing plants and conveyance systems, and
these grantees were the least involved in the construction
of tertiary plants.
About a third of the middle grantees managed their own
projects, a third hired special consultants as construction
managers, and the remaining third engaged the designer to do
the construction management.
Half the middle grantees' projects were valued in excess of
$5,000,000. A third of the grantees had construction over-
runs in excess of six months; however, the vast majority of
middle grantees had cost overruns of less than 5% of project
costs.
The middle grantee typically spent less than 2% of the
project cost on administrative force accounts; however, the
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percentage of project costs expended for administrative force
account increased noticeably, on the average, as the grantee
size increased.
As with small grantees, the mid-sized grantees reported
administering fewer than 25 change orders for their specified
projects.
Almost half of these grantees had project durations between
four and six years, while nearly a third lasted over six
years.
2.3 Large grantees
For the purposes of this study, large grantees are defined as
those agencies serving a population greater than 500,000
people. Seventeen of the large grantees responded to our
questionnaire.
The large grantees are typically a special district
emphasizing the construction of an up-graded treatment
facility or a new conveyance system. Fewer large grantees
construct either secondary or sludge-handling systems.
The large grantees typically managed the construction
themselves, while a few hired the designer to do the
construction management work. A vast majority of these
grantees managed a project valued in excess of $5 million.
Of the 17 responding large grantees, three had projects
valued in excess of $50 million.
A vast majority of large grantees reported construction cost
overruns less than 5%, while no large grantees reported
overruns in excess of 10% of the project costs. Half of
these large grantees reported time overruns of less than six
months, and a third reported overruns in excess of six
months.
The large grantees typically reported a higher percentage
costs expended on administrative force account than did small
or middle grantees. Seven of the seventeen grantees spent
over 6%, and the remaining were evenly divided between the
two-to-six percent bracket and the less-than-2J bracket.
Half of the grantees processed fewer than 25 change orders,
and most of those remaining administered between 25 and 50
change orders.
Large grantee projects typically lasted longer than small or
middle grantee projects. These projects usually last in
excess of six years.
2.4 Qeneralizations pertinent to all grantees
Comparatively, the larger the population served by the
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grantee agency, the larger the dollar value of the projects
and the percentage of administrative costs. Also, as the
number of people served increases, the type of agency shifts
from the city agency to county agencies to special district.
The grantee population also has an effect on the type of
facility involved. Smaller grantees constructed more
secondary systems and upgraded existing plants. As the
grantee population increases, cost overruns decrease;
however, time overruns lightly increase.
3.0 Twelve gpecific Techniques for Effective Management
As we discussed alternate approaches to Project Management
with different grantees and consultants, it became
increasingly clear that no single approach to the project's
organization or skillful use of consultants would result in a
well managed project for all grantees. For example, some
grantees were able to do extremely well with their own force
account staff, while with others the use of their own staff
was an apparent hindrance to effective Project Management.
Based on our discussions with participants in the
Construction Grants Program, our review of the literature on
Project Management and the results of our survey, we were able
to identify a series of specific management services which
grantees would find productive and efficient. We emphasize
that these services, or any combination of them, can be
utilized effectively for any size of grantee, project, or
organizational structure. Thus, even grantees with well
established programs may be able to readily adopt and
implement them.
In the following section we present the specific Management
techniques and document the relative costs and benefits
associated with their implementation.
With respect to the planning and design phase of the work,
the grantee should:
1) Consider the prospective designer's: a) Errors and
Omissions insurance; b) record of delays and cost
overruns on previous projects; and c) any current
claims or dispute with clients or others.
For the purposes of our work, we assume a grantee was
using this technique if he considered any two of the
above criteria;
2) Respond immediately to serious problems revealed during
the 50% design review;
3) Possess a detailed schedule for all planning and design
activities;
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4) Review a schedule of the project design monthly or more
frequently;
5) Require progress reports on the project design and
planning monthly or more frequently; and
6) Enforce the design schedule by notice to the designer,
and threaten or actually withhold payment if the work
does fall behind schedule.
During the construction phase, a similar set of management
techniques are used. In particular, the grantee should:
7) Immediately resolve all change orders or disputes with
the contractor;
8) Possess a detailed schedule of all construction
activities;
9) Conduct a review of the construction schedules monthly
or more frequently;
10) Verify the progress of the work with respect to the
schedule monthly or more frequently;
11) Update the construction schedule with each review; and
12) Enforce the construction schedule by notice to the
contractor, threatening or actually withholding payment
if the construction work falls behind schedule.
Through our investigations we have found that all grantees,
regardless of population served or type of facility planned
and constructed, can use these techniques to minimize
unexpected cost increases and delays in the projects
completion. Furthermore, we note that for grantees using
these techniques the actual force account and administrative
costs are equal to or lower than those for grantees not using
them.
We have analyzed the data developed through our questionnaire
and established specific conclusions with respect to these
management techniques previously mentioned, and these
conclusions are summarized in the following sections.
3.1 Overall Effectiveness g£ the Techniques
The tables presented in this section show the combined
effect of the techniques. Some tables present data
applicable to the design phase only, in which six techniques
could be used. Others present overall project results,
which combine the six techniques used during design with the
six applicable to construction.
The tables below show the effect of techniques used during
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the design phase. Use of the techniques was associated with
a time saving of about 50 days, and a possible reduction in
the likelihood of claims.
Table 1 Delay in Completing the Design Phase
and the Number of Techniques Used
Number of
Techniques Used
(only 6 techniques
apply to design work)
Average Delay in
Completion of
Design Work
02
34
56
techniques
11
70
50
17
days
it
Sample
Size
92 grantees
73 "
51 "
Table 2: Number of Techniques Used During Design and the
Likelihood of Claims in the Design Phase
(only 6_ techniques apply to design work)
Number of
Techniques Used
0-2
3-4
5-6
%of Grantees
Reporting Claims
8*
4%
6%
Sample Size
100 grantees
74 "
49 "
3.2 Overall Effectiveness of Techniques Used During Design and
Construction
The three tables below show that use of the twelve management
techniques was associated with:
a. a 145-day reduction in construction delays
b. a 50% reduction in construction cost overruns
c. an 85% reduction in successful construction claims
against the grantee.
Table 3: Number of Techniques and Delays in Completing
Construction (based on the originally scheduled
completion date)
Number of
Techniques Used
0-4
5-8
9-12
Average Delay in
Completing Construction
243 days
197 "
97
Sample Size
26 grantees
120 »
92 "
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Table 4: Number £f Techniques Used and Construction
Cost Overruns as a. Percentage of the Original
Contractor' s Bid
Number of Average Construction
Techniques Used Cost Overrun Sample Size
0-4 5.456 25 grantees
5-8 4.3% 118 "
9-12 2.7% 93 "
Table 5: Number of Techniques Used and the Likelihood
that the Grantee Will Lose a Claim from the
Construction Phase ______ _
Number of Likelihood that Grantee Will
Techniques Used Lose Construction Claim Sample Size
0-1 45% 22 grantees
5-8 20% 106 »
9-12 6% 90 "
3.3 Use. QL Techniques aM Construction Administration Costs
The three tables below show that the direct costs of
administering construction were not increased by the use of
these techniques. In general, the total cost of
administering construction, the cost outside construction
management services, and the grantee's own force account
services were lower when more of these techniques were used.
Table 6: Number of Techniques Used and the Total Cost
of Administering Construction as a. Percentage
£f the Cost of Construction
Administrative Costs
Number of As a Percentage of
Techniques Used Construction Costs Sample Size
0-4 5.0% 28 grantees
5-8 4.6% 109 »
9-12 4.4% 88 «
Table 7: Number of Techniques Used and the Total
Cost of Administering Construction aj> a.
Percentage of the Cost of Construction
Construction
Management Services as a
Number of Percentage of
Techniques Construction Cost Sample Size
0-4 5.8% 23 grantees
5-8 4.5% 93 »
9-12 4.8% 66 »
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Table 8: Number of Techniques Used and Cost Q£ Grantee
force Account Construction Management ftervices
as a. Percentage of the Cost oL Construction
Force Account Costs
Number of as a Percentage of
Techniques Used Construction Cost Sample Size
0-4 1.6$ 28 grantees
5-8 1.4$ 110 "
9-12 1.3$ 89 "
3.4 Use Q£_ Techniques and Construction Administration Costs,
by Project Cost
The following tables show the number of techniques used and
the total cost of administering construction. In general,
the use of these techniques did not increase total
administrative cost, regardless of project cost. The
results for larger projects should be interpreted with
caution due to the small sample size.
Table 9: Number of Techniques Used and Total Cost Q£_
Administering Construction as a. Percentage
of the Cost of Construction
1. Projects with Total Cost of Less than $5 Million
Number of
Techniques Administrative Cost Sample Size
0-4 5.3$ 20
5-8 4.6$ 74
9-12 4.6$ 52
2. Projects Costing from $5 Million to $15 Million
Number of
Techniques Administrative Cost Sample Size
0-4 5.2$* 6
5-8 5.0$ 18
9-12 5.3$ 20
•These figures should be interpreted with caution due to the
small sample size.
3. Projects Costing From $15 Million to $50 Million
Number of
Techniques Administrative Cost Sample Size
0-4 1.5$* 1
5-8 5.7$ 11
9-12 3.7$ 11
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4. Projects Costing $50 Million or More
Number of
Techniques Administrative Cost Sample Size
0-4 1.5%* 1
5-8 3.9* 5
9-12 4.5* 4
3.5 Use fl£ the Techniques and Cost ££ Outside Construction
Management Services, by Project Cost
The following tables show the number of techniques used and
the cost of outside firms used to manage construction.
The tables have been broken down according to the cost of
the project. In general, the increased use of these
techniques did not require the grantee to pay more for
outside construction management services, regardless of
project cost. Some of the figures should be interpreted
with caution due to the small sample size.
Table 10: Number of Techniques Used and Cost Q£ Outside
Firms Used to Manage Construction, as a.
Percentage cJl the Cost of Construction
1. For Projects Costing $5 Million or Less
Number of Cost of Outside Construction
Techniques Management Services Sample Size
0-4 5.9* 15
5-8 4.8* 64
9-12 4.7* 45
2. For Projects Costing $5 Million to $15 Million
Number of Cost of Outside Construction
Techniques Management Services Sample Size
0-4 6.0** 7
5-8 3.5* 24
9-12 5.2* 16
3. For Projects Costing $15 Million to $50 Million
Number of Cost of Outside Construction
Techniques Management Services Sample SIze
0-4 3.0** 1
5-8 4.5** 5
9-12 4.9** 5
*These figures should be interpreted with caution due to the
small sample size.
3.6 Use fi£ the Techniques and Cost of Outside Construction
Management Services, by Grantee Population
The following tables show the number of techniques used and
the cost of outside firms used to manage construction. The
tables have been broken down according to the grantee
40
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population. In general, the costs of outside construction
management firms were lower when more of these techniques
were used, regardless of grantee population. Some of the
figures should be interpreted with caution due to the small
sample size.
Table 11: Number of Techniques Used and Cost of Outside
Firms Used fro Manage Construction as a.
Percentage of the Cost of Construction
Grantee Population
1. Less than 10,000 People
Number of
Techniques
0-4
5-8
9-12
Cost of Outside Construction
Management Services
6.0%
4.5%
4.7%
Sample Size
12
45
33
2. 10,000 to 500,000 People
Number of
Techniques
0-4
5-8
9-12
Cost of Outside Construction
Management Services
6.1%
4.4%
5.2%
Sample
10
47
24
Size
3. 500,000 People or More
Number of
Techniques
0-4
5-8
9-12
Cost of Outside Construction
Management Services
2.1%*
2.8%*
Sample
0
5
8
Size
3.7 Use pf Techniques and Total Construction Management Costs.
by Grantee Population
The following tables show the number of techniques used and
the total cost of administering the construction phase. The
tables have been broken down according to the grantees'
population. In general, the grantees with populations of
less than 10,000 people reported lower total administrative
costs when more techniques were used. Grantees with
* This figure should be interpreted with caution due to the
small sample size.
populations of over 10,000 people reported slightly higher
total administrative costs when more techniques were used.
41
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Table 12: Number of Techniques Used and Total Cost
Administering Construction as a. Percentage
of the Cost of Construction
Grantee Population:
1. Less than 10,000 People
Number of
Techniques
0-4
5-8
9-12
Total
Administrative Costs
6.2%
4.7?
4.9?
Sample Size
15
50
38
2. 10,000 to 500,000 People
Number of
Techniques
0-4
5-8
9-12
Total
Administrative
3.7%
4.7?
4.6?
Sample
15
47
28
Size
3. 500,000 or More People
Number of
Techniques
0-4
5-8
9-12
Total
Administrative
3.0?*
4.5?
Sample Size
0
6
11
3.8 Use oL the Techniques and Cost of Grantee Force Account
Services for Construction Management, by Grantee Population
The following tables show the number of techniques used and
the cost of grantee force account services during
construction. The tables are broken down according to
grantee population. In general, these tables show that
grantee force account costs remain stable or decline with
the use of additional techniques, regardless of grantee
population. Some of these figures should be interpreted
with caution due to the small sample size.
*This figure should be interpreted with caution due to
small sample size.
the
42
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Table 13: Number of Techniques Used and Cost jp£ Grantee
Force Account Construction Management Service,
as a Percentage of the Cost of Construction
Grantee Population:
1. Less than 10,000 People
Number of
Techniq ues
0-4
5-8
9-12
Force Account Costs
.8%
1.1%
.9%
2. 10,000 to 500,000 People
Number of
Techniques
0-4
5-8
9-12
Force Account Co;
2.1%
1.4%
1.6%
3. 500,000 or More People
Number of
Techniques
0-4
5-8
9-12
Force Account Costs
1.9%*
1.8%
Sample Size
13
46
39
Sample Size
12
49
31
Sample Size
0
6
11
3.9 yse of Techniques and Cost of Grantee Force Account Services
for Construction Management^ bv Project Cost
The following tables show the number of techniques used and
the cost of grantee force account services during
construction. "Force account" services refer to those
provided by the grantees' own in-house personnel. These
tables are broken down according to the costs of the
project. In general, force account costs decreased when
additional techniques were used. Some of these figures
should be interpreted with caution due to the small sample
size.
*This figure should be interpreted with caution due to the
small sample size.
43
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Table 14: Number fif Techniques Used and Cost o£ Grantee
Force Account Construction Management Services,
a_s a. Percentage of the Cost of Construction
By Cost of Project:
1. Less than $5 Million
Number of
Techniques
0-4
5-8
9-12
Force Account Costs
1.7*
1.4?
1.1?
2. $5 Million to $15 Million
Number of
Techniques
0-4
5-8
9-12
Force Account Costs
2.0%*
1.0?
1.656
3. $15 Million to $50 Million
Number of
Techniques
0-4
5-8
9-12
Force Account Costs
.5%*
1.6?
1.3?
4. $50 Million or More
Number of
Techniques
0-4
5-8
9-12
Force
Account
.5?*
1.6?*
2.9?*
Costs
Sample Size
18
69
55
Sample
7
22
20
Size
Sample
1
11
10
Size
Sample Size
1
5
4
3.10 Analysis of the Specific Tactics
The individual effects of some of the techniques are shown
below. Many of the techniques required the concurrent use
of another technique (i.e., a schedule review cannot be
conducted if no schedule is used), thus there are fewer
individual analyses than techniques.
3.11 Qualifications of Design Consultants
The capabilities of the design consultant have a direct
effect on the grantee's costs and schedule for at least two
reasons. First, a lesser-qualified designer may require a
*This figure should be interpreted with caution due to
small sample size.
the
44
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longer time and higher costs to complete the design work
satisfactorily. Second, construction costs and time may be
increased by construction contractor difficulty with
incomplete or erroneous contract documents, inadequate
contract administration, or an ineffective grantee/designer
relationship.
The survey data indicate that the grantee should consider
the previous record of prospective designers, including:
a. cost or time overruns on previous projects
b. errors and omissions insurance availability
c. pending litigation or other disputes with other
owners who have hired the designer.
Table 15: Dumber of. Prequalification Criteria Used and
Cost Overruns as a Percentage fi£ the
Contractor's Original Bid
Number of Criteria Considered Average Cost Overrun
0-1 4.0?
2 3.3$
3 2.5?
3.12 Development and Enforcement of a. Master Schedule for the
Design Phase
The development of a master schedule for the design phase
allows the designer to plan more effectively his
activities. In addition, the formal development of the
schedule may alert the designer and other parties to
potential difficulties.
As the design work progresses, the designer and grantee can
use the schedule to remind them of activities scheduled for
the near future. If work is progressing slower than
anticipated, the owner will be in a much better position to
alter his own time-table to reflect the probable completion
date.
The survey data did not reveal that the use of a design
schedule had any effect on the completion of the design
phase. However, grantees that did not have a design
schedule or did not enforce it incurred an average delay
during construction of 80 days longer thah grantees that
had a design schedule and enforced it. Enforcement
consisted of notifying the designer that work was behind
schedule, and if necessary, threatening to withhold payment
or actually withholding payment.
3.13 Review of the Design Schedule on a. Monthly or More Frequent
Basis
Schedule review allows the grantee and designer to assess
the progress of the design work, and to take timely action
45
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to correct or minimize delays. The schedule review is an
important aspect of effective management because delays and
unexpected difficulties are frequently encountered on
construction projects. If they are not noted by the
grantee, their effects may be costly.
Grantees that reviewed schedules and work in progress during
the design phase monthly or more often reported that design
work was at least 6 months late on 9? of the projects.
Grantees that did not use this technique reported that the
design work was at least 6 months late on 20% of the
projects.
Table 16: Frequency of Design Schedule Review and
Delay In Completing Design Work
Frequency of Design Percent of Grantees Reporting
Schedule Review at least & months Delay
Monthly or more often 9?
Quarterly or not at all 20%
3 • 14 Identification ajid Correction of Serious Problems at the
50% Design Review
The 50? design review is an analysis of progress at the
midpoint of the design phase. During this review, the
grantee and designer consider the implications of the
design as it takes shape. This review may consider the
operations and maintenance costs,the availability of
equipment or materials specified, and the results of
geotechnical investigations of the proposed site. Although
few grantees reported that serious problems were revealed
by the 50% review, but not subsequently corrected, 11?
reported that problems were not revealed by the review, but
later became apparent.
Table 17: Outcome o£ 50? Design Review and Construction
Cost Overruns as Percentage of Construction
Cost
Average
Outcome of 50? Design Review Cost Overrun
No serious problems were re-
revealed, or if revealed were
corrected immediately 3.9?
Serious problems were not
revealed, or if revealed
were not corrected 4.1?
3.15 Development and Enforcement of a Master Schedule for the
Construction Phase
The use of a master schedule in construction allows the
grantee, designer, and contractor to communicate and to
46
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plan their respective activities. In contrast to the
design phase, in which the grantee and the designer may be
the only active parties, construction adds the contractor
and subcontractors. Delays are costly due to the
amount of equipment and labor at the site, which must be
paid for whether working or not, and the grantees' indirect
costs due to inability to use the structure.
Construction delays are a fertile source of disputes and
claims. The use of a construction schedule can reduce
delay by coordinating the work of the parties and, if
claims are filed, may be used as evidence to support or
defend against them.
The construction schedule should include the timing and
duration of major work activities. It should also describe
the procurement and delivery dates of long lead time items,
and the inspection dates of major equipment and systems.
If there are subcontractors, it should show the interfaces
between their work and the work of the prime or other
contractors.
Grantees that reported that they used and enforced a master
schedule during construction completed projects an average
of 79 days earlier than those that did not. The enforcement
procedures consisted of giving notice to the contractor
that work was behind schedule, or the threatened or actual
withholding of payment.
Table 18: Use and Enforcement g£ a. Master Construction
Schedule and Delay in Completing Construction
Grantee's Use of Construction Average Delay
Schedule in Completion
Did not use and enforce schedule 219 days
Used and enforced schedule 140 days
-------
3.16 Review of the Construction Schedule
-------
The amount by which the cost of construction exceeded the
contractor's original bid was strongly correlated with the
extent of delay in finishing the project. On an average,
grantees incurred an additional 1% rise in construction
costs per 150 days' delay.
3.18 Resolution o_£ Contract Changes fir. Disputes With The
Contractor As. Soon As They Occur
Most significant construction projects require minor
changes in the work originally planned. These may be the
result of slight design changes, the grantee's request to
add or delete features, or ambiguous or incorrect design
documents. Changes may also be required if the site
conditions differ materially from those represented in the
construction contract, or if unusually bad weather or other
occurrence delays the work. These changes in the scope,
time, or cost of the work are formally recognized by change
orders which amend the original construction contract.
Changes are a significant cause of cost overruns, delay,
and claims.
Successful resolution of changes or disputes requires the
agreement of the grantee and contractor on the scope, cost
and time extension (if any) for the change.
Grantees that resolved change orders or disputes with the
contractor immediately reported contractor claims on 8% of
the projects. Grantees that deferred their resolution
until the end of the project, or resolved them
periodically reported contractor claims on 48/& of the projects,
In addition, immediate resolution of changes or disputes
with the contractor was associated with lower change order
costs. Grantees that resolved them immediately had change
order costs averaging 2.6% of the cost of construction.
Owners that deferred resolution incurred change order costs
averaging 4.1/5 of the cost of construction.
%
The survey data indicate that prompt resolution of changes
or disputes with the contractor reduced the likelihood of
claims and the extent of cost overruns resulting from
construction.
4. Conclusion
We have considered recommending greater EPA assistance to
individual grantees, more (and less) grantee commitment of
grant funds for management services, and numerous other
techniques to enhance the ability of the individual
grantees to manage properly their projects. But, based on
all of the information available to us the most effective
management techniques the grantee can use are those
outlined above, and are readily available through
professional consultants for those grantees who do not
already have the capability to provide them. And,
49
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furthermore, use of these recommended services is not
expected to result in higher administrative cost, and
requires little assistance from EPA or other agencies to
implement.
50
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APPENDIX
1. Development of Opestionnaire
One of the most effective means of establishing major patterns
and trends in grantee management practices is to survey a random-
ly selected sample of contemporary grantees. Surveys conducted
with written questions can be directed to a much larger sample of
grantees than it would be feasible to visit personally, and the
data gathered can be analyzed statistically to isolate particular
developments.
Working with a number of grantees, consultants and California and
federal EPA officials between December 1980 and April 1981, we
developed and trial tested a 105 question questionnaire.
Representatives from the University of California Survey Research
Center provided some technical guidance to us in the development
of the questionnaire format and the questions themselves.
In developing the questionnaire, we focused on seven topical
areas, including:
a. objective project results, including the number and types
of claims encountered during design and construction, and
increased construction costs;
b. characteristics of the grantee agency (e.g., special
districts, county, city, etc.,);
c. characteristics of the specified project, including costs
and type;
d. description of the role of other agencies involved in the
project, including the federal EPA, delegated state
authorities and the Army Corps of Engineers on behalf of
the federal EPA;
e. the roles of the project designers, construction managers
and other consultants during design and construction;
f. management techniques utilized by the grantee, including
considerations used when selecting consultants, project
managers, the cost of the administrative techniques used,
scheduling practices and change-order management;
and
g. costs associated with the cost of the project.
Prior to adoption of the final questionnaire and format, rough
drafts were submitted to grantees, consultants and
representative EPA officials.
2. Question Format
To facilitate development of meaningful responses from the
51
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grantees, we developed three basic types of questions: (1)
multiple choice; (2) a format permitting the grantee to check
all options which apply; and (3) a fill-in-the-blank format.
Multiple choice questions were used where all appropriate
responses were mutually exclusive. Where multiple responses to
the same question may have been appropriate, and no answer
precluded any other response, the grantee was encouraged to check
each answer that applied. Finally, to provide the grantee with
adequate flexibility in responding, in a limited number of cases
the grantee was asked to specify particular costs or percentages
associated with his work.
3. Sampling Techniques
EPA provided us with a computer-tape listing of approximately
17,000 active grants in the construction phase (Step 3) in the
United States and its territorial possessions. For the purposes
of our survey, we limited our sample to approximately 1,000
grantees who had been shown at least 80? complete with the
construction phase (Step ). No grantee received more than one
questionnaire, although some grantees had multiple grants.
Each grantee was asked to respond to the questionnaire with
respect to a specific grant pro.iect. In the cover letter
accompanying the questionnaire, the grantee was asked to respond
to the questionnaire using the best of the available information,
and assured that all responses would be kept confidential.
254 out of the 971 grantees actually contacted responded by
completing and returning the questionnaire in an enclosed, self-
addressed, stamped envelope addressed to the principal
investigator at the University of California. Approximately 20
surveys were returned incomplete or were otherwise unusable.
52
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Questions about the project a_s a. whole 1 apd about Step
1. A. Please indicate below the total estimated cost of all Step 1,
2 and 3 work — including any costs that are grant eligible.
Less than $5,000,000 ....... 65.2%
$5,000,000 - $14,999,999 ..... 21.6
$15,000,000 - $49,999,999 .... 9.2
$50,000,000 or more ....... 4.0
B. What is the estimated cost of construction, i.e., contractor
bid price plus anticipated contingencies?
*
2. Which of the following best describes the grantee agency?
City ............... 68.3?
County or unincorporated area . . . 9.6
Sanitation district ....... 21.3
3. What is the approximate population served by this grantee? If
grantee was a county or unincorporated area, your answer should be
for the total population of the county.
Less than 5,000 people ...... 36.1%
5,000 - 9,999 .......... 13.7
10,000 - 24,999 ......... 27.0
100,000 - 499,999 ........ 14.6
500,000 or more ......... 7.3
4. Who conducted the Plan of Study required by the EPA?
The grantee ........... 7.4%
An engineer hired by the grantee . 92.1
5. How many firms or persons submitted proposals that were seriously
considered before someone (either the grantee or someone else)
was selected to do the facility plan?
One firm or person ........ 59.5%
2 firms or persons ........ 8.0
3 firms or persons ........ 14.3
4 or more firms or persons .... 16,9
6. How many proposals were, considered for the Step 2 negotiations?
1 to 3 .............. 91.5 %
4 to 6 .............. 7.2
7 to 10 ............. —
' More than 10 ............ 4
Questions 7 and 8 assume that there may be several Step 3 grants,
including the specified one, originating from previous Step 1 and 2
grants.
53
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7. Please estimate the respective grant amounts and actual costs for
the specified project.
Grant Actual cost
Amount to grantee
Construction contract $ $ *
Administration $ $ *
A & E $ $ *
Inspection $ $ *
Contingency $ $ *
All "force account" $ $ *
(i.e., provided by the
grantee) work included
in the above
8. As a percentage of the construction cost ( contractor bid price
plus contingencies), please estimate the costs for Step 1 and 2
assignable to the specified project.
Step 1 : % *
Step 2: % *
9. As a percentage of the construction cost, please estimate the
cost of administering the Step 3 phase. Please include
inspection costs, schedule maintenance, grant administration and
cost accounting, but exclude engineering design or technical
review services.
Less than 3% of construction cost . . . .33.6?
3 to 5.9% 31 .0
6 to 8.9% 21.7
9 % of construction cost or more . . . .12.8
10. Which of the following issues were discussed at the pre-grant
conferenceCs) with EPA or any other funding agency? (Please
check all that apply.)
Scheduling and timetables for work in progress 40.9%
Timetables for required EPA or other agency reviews
and approvals 40.2
There was no pre-grant conference 44.9
Below are some issues on which EPA, the delegated state, or the Army
Corps of Engineers may or may not have provided guidance.
For each issue, please check one box depending upon how much guidance
was needed and how much was received. These questions pertain to Step
1,2 and 3 work.
54
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11. How would you rate EPA (or other agency, such as delegated state
or Army Corps of Engineers) guidance when planning the schedule
dates for major design and construction activities?
No guidance was received and none was needed 34.3$
No guidance was received, but some was needed 10.7
Some guidance was received, but more was needed 18.2
Some guidance was received and that was sufficient. . . . 35.5
12. How would you rate EPA (or other) guidance on developing contract
packages (i.e., the scope"of work" for each contract) based on
the type of work to be performed, the dollar magnitude of the
contract package, or the number of contract packages to be
awarded at or near the same time?
No guidance was received and none was needed 42.3%
No guidance was received, but some was needed 12.6
Some guidance was received, but more was needed .... 15.0
Some guidance was received and that was sufficient . . . 29-3
13. How would you rate EPA (or other) guidance on cost accounting
systems and project control systems?
No guidance was received and none was needed 28.3%
No guidance was received, but some was needed 23.5
Some guidance was received, but more was needed .... 22.7
Some guidance was received and that was sufficient . . . 25.5
14. How would you rate EPA (or other) guidance on the type of
facility — the appropriateness of the system design, its
capacity, and the operation and maintenance costs?
No guidance was received and none was needed 33.3%
No guidance was received but some was needed ...... 14.3
Some guidance was received, but more was needed 15.0
Some guidance was received and that was sufficient . . . 37.4
15. How would you rate EPA (or other) guidance on methods to
minimize disputes with contractors?
No guidance was received, and none was needed 46.3%
No guidance was received, .but some was needed 26.6
Some guidance was received, but more was needed 9.8
Some guidance was received and that was sufficient. . . . 16.4
16. Which grantor agency was the grantee's principal contact during
each step of the project? Please check one box for each Step.
Step 1 Step 2_
EPA 37.6% 35.8%
The delegated state . . . 62.0 63.3
Army Corps of Engineers . — .9
55
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17. What type of facility was recommended by the Plan of Study?
(please check all that apply.)
Upgrading or expansion of an existing facility 39.4%
Secondary wastewater treatment 39.4
Tertiary wastewater treatment 19.7
Conveyance systems 42.1
Sludge handling 25.2
Pump systems 31.5
18. How long was the grantee in Step 1?
Less than 6 months 9.3%
At least 6 months, less than a year 18.9
At least a year, less than 2 years 30.8
At least 2 years 39.2
In Questions 19-21, please estimate any costs of delay (not
additional requirements) caused by funding agencies (other than the
grantee). Please indicate the cost of any delay as a percentage of
the cost of that Step.
1 9. Cost p_£ Step 1 delays:
There were no delays due to funding agencies 32.6?
There were delays, but they cost less than 1? of Step 1 .19.9
1% to 9.9% of Step 1 costs 16.3
10% to 24.9% 17.2
25% to 49.9% 6.3
50% or more 5.9
20. Cost of Step 2 delays:
There were no delays due to funding agencies 34.2%
There were delays, but they cost less than 1%
of the cost of Step 2 18.7
1% to 9.9% of Step 2 costs 20.9
10% to 24.9% 18.7
25% to 49.9% 3.6
50% or more 4.0
21 . Cost of Step 3. delays:
There were no delays due to funding agencies ...... 41 .7%
There were delays, but they cost less than 1%
of the cost of Step 3 17.0
1% to 9.9% of Step 3 costs 21.7
10% to 24.9% 11-7
25% to 49.9% 4-3
50% or more 3.5
56
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22. How many grantee personnel were assigned at more than half-time
(20 hours per week) for management and administration of the
project in Step 1?
0 to 3 95.7?
4 to 7 3.9%
8 to 12
13 to 24
25 to 49
50 or more
23. How many grantee personnel were assigned at more than half-time
for management and administration in Step 2?
0 to 3 94.8%
4 to 7 4-3
8 to — 4
24. How many grantee personnel were assigned at more than half-time
for management and administration in Step 3?
0 to 3 85.5%
4 to 7 12.0
8 to 12 4
13 to 24 4
25 to 49 .8
50 or more
25. Did a change in the grantee's personnel or policies during
Step 1 cause any problems with the project?
There was no change in the grantee's personnel
or policies 76.7%
There was a change in the grantee's personnel
or policies, but it caused no problems with Step 1 . . 14.7
There was a change in the grantee's personnel or
policies, and it did cause problems with Step 1 ... 8.2
26. Did the Step 1 proposals suggest any innovative or
alternative technology?
Yes 25.6%
No 73.9
Questions About Step 2.
57
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27. How long was the interim period between the funding agencies'
acceptance of the Facilities Plan and the grantee's filing of
grant application for Step 2?
No interim period; Step 2 grant application was filed
before Step 1 was completed 43.8?
Less than 30 days 15.4
30 to 89 days 11.1
90 to 179 days 8.2
At least 6 months, less than a year 7.7
At least 1 year 13.0
28. Who supervised the project designer in Step 2?
(Please check all boxes that apply.)
Local government officials directly 63.8?
Another consultant 3.5
The project designer himself 56.7
Another government agency 15.7
29. Who reviewed the project designer's progress? (Please
check all boxes that apply.)
Local government officials directly 76.4%
Engineer or designer himself 53.9
Another government agency 21.3
30. Who reviewed or approved the design (either interim or final)
before submittal to a regulatory agency?
Local government officials directly 78.3%
Another consultant 3.5
Engineer or designer himself 53.9
Another government agency 19.7
31. Who (other than funding agencies) reviewed the design for
operability and maintenance expenses and techniques?
(Please check all that apply.)
Local government officials directly 67.7%
Another consultant 4.7
Engineer or designer himself 59.4
Another government agency 21.3
32. Which of the following issues did the grantee initiate and
seriously consider during final review of the Step 2 design
proposal? (Please check all that apply.)
Use of innovative or alternative technology 18.5%
Long-term maintenance costs 58.3
Long-term operation and personnel costs for
the finished project 64.6
Ability of the grantee to operate the facility
with available personnel 63.0
58
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33 What type of cash flow problems did the grantee experience during
Step 2? (Please check all that apply.)
There were no cash flow problems during Step 2 .... 53.1?
Difficulty in getting EPA approval of amendments to
the Step 2 design contract caused shortages .... 9.1
EPA delays in releasing funds to the grantee
caused shortages • • • • 2f'°
Other problems caused shortages (Please specify.) . . . 4.7
Cash flow problems were anticipated and action taken
in time to avert them 16.1
34. Was the same or a different engineer or designer used
on Step 1 and Step 2?
Different designers were used on Steps 1 and 2 9.7%
The Step 1 designer did part but not all of the
Step 2 design o^'4
Step 1 designer did all of the Step 2 design 85.7
35. Which, if any, of the following prequalification criteria
were considered in selecting a project designer (in addition
to the required (40 CFR 35-937.3) prequalification procedures)?
(Please check all that apply.)
Cost or time overruns on previous projects 21.3%
Errors and omissions insurance availability 11.0
Pending litigation or other contract disputes with
other grantees or owners 10.2
None of the above criteria was considered 67.7
36. How did the person or organization verify the project
designer's progress in Step 2?
Verification of the project designer's work was done at
Step 2 closeout only 13-5%
The project designer certified the progress 47.6
Inspection of the project designer's documents 38.4
37. During Step 2, how often did the project designer
submit progress reports?
Every week 6.5%
Every other week 3-9
Monthly 58.7
Quarterly 8.3
Other (please specify) 10.9
There were no progress reports submitted
by the project designer in Step 2 . 11.7
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38. Which of the following best describes what happened in the
10% design review?
Serious problems were revealed and corrected 4.7?
Serious problems were revealed at this stage, but
not corrected at this stage 1.9
Serious problems which later became apparent were not
revealed at this stage 11.3
No serious problems were revealed at this stage,
nor did they appear later 82.2
39. Which of the following best describes what happened in the
50% design review?
Serious problems were revealed and corrected 6.5%
Serious problems were revealed at this stage, but
were not corrected at this stage 1.4
Serious problems which later became apparent were not
revealed at this stage 12.6
No serious problems were revealed at this stage, nor
did they appear later 79.5
40. Were any consultants employed in Step 2 to do value engineering?
Yes, but they did not improve design or reduce construction
costs significantly ( i.e., at least 10?) 3.4?
Yes, and they did improve design or reduce construction
costs significantly 2.1
No, none employed for this purpose 94.1
41. During Step 2, what tasks were performed by consultants
under contract to the grantee (other than the original project
designers)? (Please check all that apply.)
No consultants were used in Step 2 except the
original designer's staff 57.5?
Value engineering 5.5
Grant administration to assist in meeting EPA
and other agency requirements 18.5
Scheduling or cost control 9.8
Geotechnical services 26.4
Special construction services including management
plans and constructability 7.1
Surveying services 29-1
42. Did the project designer submit a detailed master schedule
for Step 2 work?
Yes 45.7?
No 54.3
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43. Which of the following sis the master schedule for Step 2
include? (Please check all that apply.)
The project designer did not maintain a schedule
for Step 2 22.8%
Detailed estimated cost for each activity 27.2
Detailed presentation of timetables 36.6
Application dates for permits necessary
for construction 29.9
Outside agency approvals 29.9
None of the above 17-3
44. How often was Step 2 work formally reviewed to insure that
it followed the schedule?
Every week 6.7%
Every other week 4.9
Monthly 38.8
Quarterly 6.7
The Step schedule was not formally
reviewed 42.4
45. How was compliance with the schedule enforced?
(Please check all that apply.)
The Step 2 work never fell behind schedule 40.2?
Notification to the project designer of his failure
to comply with the schedule was needed to insure
compliance 6.3
A threat to withhold payment was made and was
sufficient to insure compliance 6.3
Payment was withheld to force compliance 3.1
The grantee had to change or terminate the project
designer 3.5
The grantee had to change or terminate the
project designer 1.6
There was no systematic enforcement of the
Step 2 schedule 42.9
46. How close to the schedule time was Step 2 completed?
Step 2 was completed on time 64.8%
Completed less than 30 days late 8.2
Completed 30 to 89 days late 10.0
Completed 90 to 179 days late 4.1
Completed at least 6 months but less than 1 year late 5.5
Completed at least 1 year late 5.9
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47. Who paid the additional design cost associated with
any delay in completing Step 2?
Step 2 was completed on time 64.8?
The project designer bore the entire additional cost . 17.8
The grantee bore the entire additional cost 7.5
Both shared the costs 3.3
EPA or other funding agency reimbursed the grantee
for the additional costs 5.6
48. Were there any disputes arising from Step 2 that led to
litigation or arbitration?
Yes, there was litigation or arbitration 1.7%
There was a Step 2 dispute, but it was settled prior
to litigation or arbitration 6.4
There was no dispute that threatened arbitration
or litigation 91.5
49. How much did the award or final settlement cost the grantee
or other funding agency?
There was no litigation or settlement entered arising
from Step 2 work 93.2%
Less than 2% of the cost of Step 2 work 3.2
2 to 4.9/5 of the cost of Step 2 .5
5 to 9.9% of Step 2 5
10% or more of the cost of Step 2 1.8
Questions About Step 3.
In the following questions, the term "Construction Manager" represents
the private, professional firm with primary: responsibilities for grant
and construction contract administration.
50. What role has the Step 2 designer's organization had
in Step 3? (Please check all that apply.)
The Step 2 designer was not involved in Step 3 .... 3.1%
The Step 2 designer is acting as the Construction
Manager 52.4
The Step 2 designer provided technical review (i.e.,
review of contractor's submittals, shop drawings,
etc. ) in Step 3 73.6
The Step 2 designer provided construction engineering
(e.g., resident engineer, field inspection, quality
assurance) .71.7
The Step 2 designer provided contract administration
(e.g., change orders, time extensions, compliance
with specifications, resolution of claims, schedule
updating, progress payment computation) 75.6
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51 Assuming that persons outside the grantee organization were
employed, estimate how much the firm or person supervising
or managing the Step 3 work will be paid as a percentage
of the total construction cost.
Less than 1% of the total construction cost 15.2?
1 to 1.9% ,j?'£
2 to 3.9% Jj'9
4 to 5.9% |5'°
6 to 8.9% ]|'°
9% or more 13-5
The grantee supervised or managed construction
with no outside help 13.5
52. What are the grantee's estimated costs for force account
services used for managing construction in Step 3 (in-
cluding scheduling, cost accounting, and grant administration)
as a percentage of the cost of Step 3?
Less than 1% of the cost of Step 3 66.1%
1 to 1.9% 1->-°
2 to 3.9% 1°'°
4 to 5.9% J-°
6 to 8.9% I'l
9% or more *^
53. How long after the Step 3 approval to award was the Notice to
Proceed given?
Less than 3 months after the Step 3 approval to award. 75.0%
At least 3 but less than 6 months later 15.0
At least 6 months but less than a year later 5.0
At least a year but less than 18 months later 3.3
At least 18 months later 1.2
54. Who prepared the bid documents for Step 3? (Please
check all that apply.)
Grantee 14.6%
Designer 94.5
Another consultant ... 1.6
55. Who reviewed the bid documents? (Check all that apply.)
EPA 77.6%
Grantee 85.8
State agency 83.1
Another consultant,other
than the Construction
Manager or designer . . 2.0
Construction Manager . . 28.3
There was no review of
the bid documents ... .8
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56. Was any special scrutiny given to conspicuously low bidders in
Step 3?
Yes 34.5?
No 65.5
57. Was there a bid protest in Step 3?
Yes 14.9%
No 84.6
58. What did the Step 3 bid protest in Step 3 involve? (Please check
all that apply.)
There was no bid protest in Step 3 70.5%
Restrictive specifications . . 3.9
Irregularities in bid forms submitted 8.3
Minority business enterprise (MBE) requirements. . .8
59. Was the Step 3 contract awarded to the bidder with the lowest
original price?
Yes 92.2?
No (i.e., the lowest bidder was judged nonresponsive
or not responsible) 7.4
60. How many bids were received for Step 3?
1 bid 2.5?
2 bids 3.8
3 or 4 bids 23.7
5 or more bids 69.5
61. How did the engineer's estimated construction cost compare
to the accepted bid?
The estimate was less than 85% of the accepted bid . . . 12.8%
The estimate was 85 - 89,9% of the accepted bid 12.8
The estimate was 90 - 99.9% of the accepted bid 29.8
The estimate was 100 - 109.9% of the accepted bid .... 22.1
The estimate was 110 - 114.9% of the accepted bid .... 10.2
The estimate was a t least 11% of the accepted bid . . . 11.9
62. Which of the following did the "master schedule" prepared
by the construction contractor (i.e., times and sequences for the
principal construction activities) include? (Please check all
that apply.)
The "critical path," even if not represented by a CPM
network 21 .3%
Project total cost for completion of each major activity. 44.1
Timetables for EPA and other agency reviews and approvals 20.1
Estimated schedules and durations for the major
activities .74.0
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63 Who reviewed the contractor's schedule when first submitted to
ensure that it was realistic and workable? (Please check all
that apply.)
There was no review of the contractor's schedule
for this purpose 4.7%
Construction Manager 50.8
Local government officials or grantee employee 44.5
Resident engineer 51.6
The Step 3 contractor did not submit a schedule 3.1
64. What do the grantee specifications require the contractor
to provide on the schedule for Step 3? (Please check all that
apply.)
Major work activities 69-7$
Durations of major activities 63.4
Estimated costs for each activity 47.2
Critical completion dates 39.4
Bar charts 41 .7
"Critical Path" networks 12.2
Line-of-balance schedule charts 4.3
65. How willing is the construction contractor to submit schedules?
Very willing 32.6%
Moderately willing (i.e., needed to be requested) .... 54.7
Unwilling, but did submit a schedule 10.2
Completely unwilling and did not submit a schedule ... 1.7
66. How frequently are schedule reviews during Step 3?
Weekly or more often 14.2?
Every other week 5.4
Monthly 56.8
Quarterly 7.1
There are no formal schedule reviews for Step 3 15.9
67. Is the schedule updated with each review to reflect the current
progress of Step 3 work?
Yes 62. U
No 37.1
68. How frequently does the grantee verify construction progress?
Weekly or more often 29.8$
Every other week 3.3
Monthly 58.3
Quarterly 4.1
At completion of the project 3-7
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69. Who verifies the schedule and work in progress during Step 3?
(Please check all that apply.)
Grantee employees or other government officials .... 63.0?
Another consultant independent of contractor 17.3
Construction Manager independent of contractor 55.5
70. Who reviews the schedule and work in progress-during Step 3?
(Please check all that apply.)
Grantee employees or other government officials 68.9%
Another consultant independent of contractor 16.5
Construction Manager independent of contract 53.5
71. What happens when construction work falls behind schedule
during Step 3?
There are no occasions when construction falls behind
schedule 20.7?
Notifying the construction contractor that the work
is behind schedule is sufficient to insure
compliance 37.9
A threat to withhold payment or resort to liquidated
damages provision is needed to insure compliance
with schedule . 20.7
Payment is withheld to insure compliance 10.3
The schedule for Step 3 is not enforced 3.9
Existing EPA regulations for retention do not permit
adequate grantee schedule enforcement 5.6
72. How many change orders are estimated for Step 3?
Less than 25 86.7?
25 to 49 6.7
50 to 99 5.0
100 to 199 1.2
200 to 499 4
500 or more
73. What is the total estimated value of all change orders as a
percentage of the cost of Step 3?
Less than 2? of the Step 3 cost 44.3?
2 to 4.9? 30.8
5 to 9.9? 13.9
10 to 14.9? 3.4
15? or more 4.2
Change orders resulted in a net reduction of Step 3 cost. 3.0
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74 What are the principal causes of change orders during Step 3?
(Please check all that apply.)
Clarification of contract documents 24.4%
Changed condition TV*S
Substantial design changes or additional work 41.7
Substitutions on'i
Changes required as a result of shop drawing review ... 20.1
75. Please estimate the proportion of all change orders during Step 3
that are initiated by the project designer, by the construction
contractor and by the construction manager. (Check one box for
each column.)
Project Construction Construction
Designer Contractor Manager
Initiated at least 50%
of the change orders 42.2% 33-5% 44.1%
Initiated 25-49.9% of
the change orders 15.5 18.2 17.1
Initiated 10-24.9% of
change orders 9-7 16.7 o.2
Initiated less than 10%
of the change orders 19.4 16.7 12.4
Did not initiate any
change orders 12.6 14.8 17-6
76. How many outside firms, if any, were seriously considered
for Construction Management in Step 3?
None; the grantee provided the necessary services .... 28.6%
None; the project designer acted as Construction Manager. 62.2
One firm was considered 4.1
2 or 3 firms were considered 3-7
4 or more firms were considered 1.2
77. In hiring a Construction Manager for Step 3 construction,
what particular skills possessed by the firm were considered most
valuable to the grantee? (Please check all that apply.)
No Construction Manager was hired for Step 3 48.8%
Scheduling experiences 15.4
Project design expertise 36.2
Geotechnical services 4.7
Grant administration skills 28.3
Ability to resolve or prevent disputes between grantee
and contractors 23.2
Inspection and technical review of contractor submittals. 30.7
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78. Who was most active in managing and monitoring the activities for
Step 3?
The grantee 24.1?
Construction Manager 32.8
The project designer from Step 2 42.7
Some other consultant (neither the project designer no
construction manager 4
79. Which of the following issues did the grantee and EPA discuss
in the pre-construction conference? (Please check all that
apply.)
There was no pre-construction conference between EPA
and the grantee 39.0%
Cost control and scheduling techniques 31.1
Change order policies 41.3
Eligibility or allowability of costs 34.6
Grantee's inspection responsibility 38.6
Management types or techniques 12.2
The grantee's responsibility fro grant management .... 39.8
80. Compared to the contractor's original schedule, what is the
actual or estimated construction time?
Construction is expected to be, or has been, completed
on schedule (or earlier than schedule) 25.6%
Construction is expected to be, or has been, completed
within 90 days after the original completion date . . .25.2
Construction is expected to take, or has taken, 90 to
179 days longer than scheduled 19-3
180 to 269 days longer than scheduled 11.3
270 to 364 days longer than scheduled 5.5
At least a year, but less than 2 years, longer than
scheduled 6.7
At least 2 years longer than scheduled 6.3
81. How did the actual construction costs compare with the original
construction contractor's bid?
Actual construction costs were lower than the original
bid 20.8%
Actual construction costs were less than 3% higher than
the original bid 41.1
3 to 4.9% higher 14.4 ,
5 to 9-9% higher 16.1
10 to 14.9% higher 3.4
15 to 24.9% higher 2.1
25% or higher 2.1
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82 Thinking first only of those Step 3 cost increases that were
ruled grant--ineligible, please indicate what percentage were paid
by the A&E firm, by the construction manager, grantee, and
by the construction contractor. (Please check one box for each
column.)
Of those Step 3 cost
increases ruled grant-
^.nelieible:
Paid more than 50%
of them
Paid 25 - 49-9%
Paid less than 25%
Paid none of them
A&E
Firm
1.1%
1.7
10.9
86.3
Construction
Manager
.7%
1.3
4.0
94.0
Grantee
78.2%
2.8
3.3
15.6
Constructio
Contractor
1.8%
1.8
13.9
82.4
83.
And now thinkng only of those Step 3 increases that were ruled
grant-eligible, please indicate what percentage were paid by the
person or organization indicated. Again, please check one box
for each column.
Construction
Manager
Of those Step 3 cost-
increases ruled grant-
eligible :
Paid more than 50% of them .7%
Paid 25-49.9%
Paid less than 25% 93.4
Grantee
EPA
or Other
Funding Agency
22.9%
31 .8
11.9
84.5%
4.2
8.5
84. Thinking of all claims between the construction contractor and
the grantee resulting from construction disputes, who received
(or will receive) the bulk of the award?
There were no claims as a result of construction 75.2%
The contractor received the bulk of the award 16.2
The grantee received the bulk of the award 7.7
85. Were performance bonds used to complete construction in Step 3?
Yes 33.2%
No 66.4
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86. Who reviewed the project during Steps 2 and 3 to insure easy
operation of the finished facility? (Please check all that
apply.)
Treatment process expert 12.2%
Architect or project designer 74.0
Grantee or local government officials 70.1
There was no review for this purpose 5.9
87. Did the State or any other governmental agency under the
Intergovernmental Personnel Act (IPA) lend any personnel to
assist in any step of the project? (Please check all that
apply.)
No, no personnel were lent to us 88.2?
Yes, during Step 1 2.8
Yes, during Step 2 4.3
Yes, during Step 3 5.5
88. Who contributed to funds (not counting loans) for the project?
(Please give percentages which each contributed.)
EPA * %
State *
Grantee *
Industrial Contribution ... *
Other *
Total = 100?
89. How much time was required (or is now forecasted) for the entire
project to go from the start of Step 1 until the end of Step 3?
* months
90. How long was the grantee on the priority list before receiving
the Step 1 grant?
Less than 6 months 26.7%
At least 6 months, less than a year .... 18.8
At least 1 year, less than 3 years . . . .37.6
At least 3 years 16.8
91. Is the project now in full operation?
Yes 82.0%
No 17.6
*No statistical analysis has yet been conducted,
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oe
or by the delegated state, but later disapproved? (If so, please
indicate the cost.)
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