What Is Construction Project Management?

Construction project management refers to the process of overseeing a residential, commercial, or industrial construction project from start to finish, and it is critical to the overall success of a project. Smart project management is required for completing multi-phase plans on time, within budget, and without legal hassles.

In this article, we’ll highlight why effective projective management makes life better for owners across all construction-dependent markets, starting with a project manager’s role in a construction project.

The Responsibilities of a Construction Project Manager

Construction managers with blueprints standing on construction site

The various responsibilities of a project manager include planning, overseeing, managing, and administrating the project from beginning to end and ensuring all goals are met.

Experienced project managers benefit contractors and clients by enhancing efficiency, ensuring quality, managing risks, and increasing overall profitability.

In general, construction project managers are responsible for:

Managing all Work Orders
Planning the Project Budget
Negotiating With Individual Contractors
Overseeing Multi-Trade Scheduling
Regularly Communicating the Project Status to Relevant Parties
Handling Construction Contracts

Types of Construction Management Contracts

There are various types of construction management contracts, each uniquely designed and worded to address the specifics of different industrial construction projects. All contracts serve to define a project’s budget, production timeline, communication protocols, dispute resolution methods, and quality standards. Let’s look closer at each type.

Cost-Plus Contracts

When the costs of an industrial construction project aren’t definable, a cost-plus contract might be a good choice. This type of contract ensures that contractors are fairly compensated and reduces conflict.

The “costs” of a cost-plus contract include:

Contractor Expenses: These would include materials, labor, equipment, and professional consultations.
Allocatable Overhead Costs: Examples include insurance, office rent, supplies, and travel expenses.
Other Project-Relevant Costs: Any other costs incurred during the contract’s performance would also be included.

The “plus” of a cost-plus contract refers to profit, which is typically a fixed percentage based on the total cost of the contract, as agreed to by all relevant parties. Some cost-plus contracts provide bonus incentives to contractors for early project completion or achieving other performance metrics.

Unit Price Contracts

Unit price contracts benefit the contractor and the owner. This type of contract ensures optimal transparency and highly accurate reporting about all work performed, eliminating confusion and inaccuracies in monthly progress billing.

Unit price contracts are perfect for projects where the precise scope of work cannot be calculated until work is already underway. All rates and expenses are predetermined, allowing work to commence before the design is complete. Additionally, this sort of contract enhances take-off quality and labor scheduling.

Design-Build Contracts

Most construction projects involve owners receiving completed design plans as part of the bidding and planning processes.

However, with design-build contracts, construction and design occur simultaneously and are typically managed with a single contract instead of multiple contracts common to other traditional bidding methods.

Benefits for all parties include:

Integrated Project Recommendations & Approvals
Collective, Cooperative Problem Solving
Single Point of Accountability
Eliminates Blame Shifting
Saves Time & Money

This type of contract promotes more efficient communication between the contractor, subcontractors, and the design team, which speeds up the entire bidding and construction process.

Design-build contracts benefit owners by absolving them from disputes between the contractor and architect. It also helps to negate any possible friction between the designer and contractor because they work in unison throughout the project.

Time & Materials Contracts

Like cost-plus contracts, time and materials (T&M) contracts are useful in situations where the precise scope of the build isn’t fully understood. The primary benefit is protecting owners from overpaying contractors and ensuring that builders are paid their fair rates for time spent.

With this agreement, the owner pays a predefined hourly rate for the total labor hours worked, plus the costs of all materials used. The contractor is also paid for sourcing and delivering materials, typically on a per-hour basis.

And similar to a cost-plus contract, a T&M contract can include stipulations for maximum and minimum total fees. This is a good type of agreement for smaller construction projects due to the associated high level of cost supervision. Close monitoring and reporting ensure accuracy and owner protection.

Guaranteed Maximum Price Contract

Lastly, a guaranteed maximum price contract stipulates that the contractor is to be paid for incurred expenses, plus a fee, both not to exceed a price ceiling. If the price ceiling is exceeded, the contractor is financially responsible. If the total costs are lower than the guaranteed maximum price, the leftover monies are returned to the owner.

This contract type limits how much the customer will be responsible for paying, in total, for all contractor/subcontractor fees, regardless of the actual costs incurred.

Customers enjoy the protection they receive with this type of contract, as it shifts most of the risk to those doing the work. Plus, all pricing is itemized, clean, and simple to understand.

Stages of Construction Project Management

Now, let’s review the main stages of project management, which include:

Initiation
Planning
Execution
Monitoring

Each stage is imperative for the successful completion of every project. Let’s look closer.

Stage 1. Research & Proposal

Is the project a worthy undertaking? Before any project is launched, construction project management professionals must evaluate the feasibility of the business case at hand. Shareholders are encouraged to perform their due diligence to ascertain its feasibility.

When all relevant parties agree to proceed with a strategy, the project manager will draw up a Project Initiation Document (PID), which clearly states the business case.

During this stage, project goals are scrutinized, costs are estimated, potential issues are addressed, and an initial timeline is developed. The proposed production schedule is measured against time and budget constraints to ensure the project’s viability.

Stage 2. Planning

Once feasibility is demonstrated and approved, the project manager crafts a Project Management Plan (PMP), which is a legal, mutually-approved document that details the project’s:

Scope
Benefits
Objectives
Deliverables
Business Needs
Tools & Methods
Primary Milestones
Communication Plan

The construction project manager will also create a risk management plan to identify risks, including cost estimates or time considerations that may have been skipped over. It will also plan for unanticipated material shortages, possible budget cuts, and potential labor deficiencies.

The planning stage also involves organizing the best teams for specific project phases and beginning to assemble them ahead of schedule. The goal is to get all team members on the same page concerning all project details to ensure the most fluent, safe, and economical completion.

Stage 3. Project Implementation

After the planning stage, the day comes to officially launch the project.Many teams attend kick-off meetings (parties), and the actual work ensues soon after. This stage includes:

Fulfilling Project Management Plans
Planning & Placing Tracking Systems
Performing & Completing Specific Tasks
Making Real-Time Updates to the Production Schedule

During this phase, the project manager is consistently occupied with multi-channel communications with owners, stakeholders, contractors, subcontractors, and customers.

Monitoring and reporting are key functions for every effective project management expert. Of course, the goal is to accomplish production milestones safely, on time, and on or under budget.

Stage 4. Cost, Time, & Quality Control

Real-time, accurate monitoring and reporting are integral for understanding a project’s progress, reducing time and costs, and ensuring optimal-quality results in every stage of production.

Project managers constantly watch key performance indicators (KPIs) to control costs, track time, and manage quality to ensure project success. The best project management professionals are flexible and can quickly accommodate changing scenarios without sacrificing quality.

Once projects are completed, project managers often hold post-production meetings (parties) to allow all participants to express any final thoughts. The manager then performs a final project accounting and issues an official end-of-project report to owners, stakeholders, and/or customers.

Ensure Success With a Construction Project Manager

A successful construction project starts by hiring the right project manager. With over 60 years of experience, you count on IICC to help complete your next project on time, within budget, and without errors. As an industry-leading construction project management company, clients in many industries rely on us for our expert planning and precise scheduling and monitoring.