Program Management Brings Added Skills, Benefits to Owners

Whether it’s a nationwide retail store expansion or a portfolio of new elementary schools, owners with multiple projects spread over time and space have special needs. They must not only assure the successful execution of each individual job, but they must link those jobs into a coherent whole—taking advantage of opportunities to save time and money while adhering to more complex schedules and other demands.

• Professional program management is an increasingly popular answer. But what is PM? Is it just construction management applied to a series of projects?
• Construction Management Association of America (CMAA) asked three industry leaders to explore this topic together.
• Chuck Thomsen, FAIA, FCMAA, is chairman of 3D/I and founded CM Inc., a construction management pioneer, in 1971.
• George Heery, FAIA, FCMAA, author of Time, Cost and Architecture, said by its publisher, The McGraw-Hill Cos. to have been “the first definitive work on construction management,” is now chairman of Brookwood Program Management.
• Tim McManus is national practice leader at DMJM+Harris, in Boston, and chair of CMAA’s program management committee.

What does the term program management mean to you? Are there misconceptions that should be addressed?

McManus: It’s not just a name. Program management is a distinct service offering, a distinct knowledge base and a distinct way of doing business.

Heery

Heery: Program management is short for construction program management, the idea being that a construction program consists of pre-design planning, design, construction and related procurements. When I was CEO of Heery International, we first started providing construction program management services in 1966. We decided to set up a subsidiary of our firm, named Heery Associates Inc., Construction Program Management.

One evening in 1981, several of us ran into each other at Atlanta Airport during a weather delay, and we were sitting around discussing business when someone said, “We’ve got to think of a shorter name.” So we all threw out some names, and finally came up with Heery Program Management. That was the first time I heard the term used in our industry.

Thomsen: Well, George Heery is one of the most creative minds in the construction industry, and he sure did invent “bridging” and a lot of other stuff. However, I think program management contracts were used in the petrochemical industry long before the ’60s.

George uses the term program management to cover all the services. I quibble with him on the subject and I think that if you look at the contract forms developed by CMAA, AIA, AGC etc, you will find a distinction between construction management, project management and program management.

A construction manager typically manages a single project, replacing the need for a general contractor but adding advice on construction cost and technology during design. A project manager typically manages design and construction of a single project as an owner’s agent and almost always takes responsibility for managing the AE. But a project manager does not replace the general contractor.

A program manager provides the services of a project manager for multiple projects—and may also provide CM services—either as agent or at risk (although the latter is problematical).

All three management cousins require us to understand the business structure of the construction industry. We need to know how building systems are assembled and the companies that put them together. We need to know how long it takes so we can build schedules and fit people and organizations together. We need to know what things cost and how to buy them effectively. We need to know what a contract should say and how to track, document and enforce it. And we need to know how to install proper controls for these activities.

How long as PM been recognized as a distinct discipline?

Heery: Construction management, with construction program management as a version of it, both began to be developed in the 1960s.

Thomsen: I believe that it originated with companies like Brown and Root, Fluor and Bechtel. But in the world of facilities, I first heard it from George.

How have the roles of the construction manager and program manager evolved in recent years?

McManus

McManus: The nature of program management has evolved significantly in the last five to 10 years. We’ve seen organizations within public agencies become very sophisticated in how they deliver capital programs. They’re looking for innovation from program managers, in areas like funding and financial strategies, risk management, permitting, environmental issues and planning for operational considerations.

Program management has reached a level now where it is dealing directly with some very major considerations in an owner’s capital program—elements like financing. Public agencies are turning to program managers and saying, “What else can you do for me?” They’re looking for help in figuring out new ways to fund things.

Heery: After World War II, there was a lot of catch-up construction of everything, additions to schools and hospitals, plant renovations, expansions, new houses, etc., and it seemed almost all of those large projects ran over budgets and completion schedules.

A number of people with large project owners and professionals began to put forward the idea of finding some way to build buildings without the adversarial relationship between owner and contractor. In time, the idea was born that a professional manager of construction, instead of a general contractor, could solve many of the problems.

However, as more and more professionals began to look deeper into better ways of controlling cost and time, a number of us, such as Chuck and myself, began to say that to deal with the problems that affected so many projects, one must deal with the pre-design planning and design process as well as with the construction itself.

By the late 1960s, the search for better time and cost control began to go in two somewhat different directions—the original idea of having a professional manager of the construction process, and the other the idea of dealing with the whole construction program.

Thomsen

Thomsen: For most of the 20th Century, most clients were one-time clients. A corporation that wanted a headquarters hired an architect and contractor and built their building. A hospital would add a wing every five or 10 years. Today, government institutions and business are growing, acquiring and consolidating. They have building programs. All of these organizations are different, so they have different programs, but many share a desire to improve the process.

The construction industry is burdened by tradition. Hundreds of organizations come together to build the simplest project. They don’t have time to brainstorm and conceive original arrangements that define new relationships for every new project. Often their positions are controlled by law, regulations, standard industry contracts, political influence, or just plain unthinking assumption.

Consequently, many of these builders and many of their program managers still treat their programs primarily as a series of individual projects, missing opportunities to improve. Very few truly grasp the opportunity that a program offers over a single project.

Heery: And I would add this observation: Within the architectural profession, and very much within the architectural press, one can look back and see a steady shift of more and more interest in the visual aspects of design, particularly in terms of image and form, with less and less emphasis on construction methods and technology.

Along with this change, fewer and fewer owners saw the architect, who in previous generations had often been the owner’s primary professional advisor, as the entity to be trusted by the owner to be concerned with and control cost, time and practical details of the construction.

McManus: The true program manager also has the opportunity to help clients act on a real sense of legacy to the community. When we work with a client on a major capital program, when we bring national-level talents into a community, we can reach out to the community colleges, universities, public schools and to other parts of the community and involve them all in the process.

Even when the capital program is complete, our work can have a lasting effect on entire communities. A lot of people can just do the work, but we can do a little more—add a little more value.

We also have a very important opportunity today for CMAA and the academic community. Even though students are coming out of school today with a very good basis in construction management, when it comes to program management it’s still very much on-the-job training.

Partnering with academia, we have a great opportunity to help create a strong new capability to teach new skill sets and convey knowledge that we’ll need in the future to help clients realize the benefits of program management.

CMAA’s national conference, which has been setting new attendance records every year, will take place on the edge of the Pacific Ocean in September and explore the theme “Creating Visionary Leadership.”

Some 700 people, including professional construction managers, program managers and construction owners from both public and private sectors, will gather for the conference Sept. 11-13 at the Hyatt Regency Huntington Beach Resort in Huntington Beach, CA.

Former Corps of Engineers Leader to Speak

One keynote speaker will be the former chief of engineers and commanding general of the U.S. Army Corps of Engineers, Lt. Gen. (Ret.) Robert B. Flowers.

Gen. Flowers is now CEO of HNTB Federal Services Corporation. Prior to assuming the leadership of the Corps of Engineers, he held a series of important engineering commands, and led the Corps’ Mississippi Valley Division. He was also responsible for several of the most vital and complex operations the Corps has ever undertaken, including major deployments in Kuwait, Iraq, Bosnia and Somalia.

Other Conference Highlights

Erik Wahl also will provide keynote remarks during the conference. He is a recognized speaker who inspires professionals to achieve greater levels of performance. His consulting firm, The Wahl Group, challenges organizations to implement breakthrough-thinking techniques to accomplish extraordinary results.

The conference will also feature 32 topical breakout sessions, chosen from more than 70 proposals received by CMAA and evaluated by a conference committee headed by Steve Margaroni of Psomas.

CMAA Executive Director Bruce D’Agostino says, “This is the largest response yet to a request for presentations, and reflects the fact that CMs who have attended previous conferences have been sufficiently impressed and excited to see significant value in being part of the program.”

The sessions will be presented in four tracks: Legal/Professionalism, Risk Management, Project/Program Management and Scheduling.

CMAA’s Exhibit Hall will also be back, and is shaping up as one of the best ever. As of press time, 21 companies had reserved booth space.

Complete information is posted on the CMAA Web site at www.cmaanet.org.

The traditional design-bid-build method of executing construction projects increasingly shares the market today with a number of alternatives, many sharing the goals of accelerating projects while maintaining quality control.

One thing all of these delivery methods, old and new, have in common is a key role for professional construction and program management.

Agency construction management (ACM), or construction management-for-fee, encompasses a range of services provided by a CM on behalf of an owner. It is a common misconception that CM-for-fee represents a distinct project delivery system. In fact, agency construction management consists of a distinct set of services that are applicable to any project delivery system.

CMAA suggests that any evaluation of prospective delivery methods should start with an understanding of the owner’s priorities and needs. How much expertise does the owner have on staff? How much time of key personnel can be devoted to the project? How involved does the owner want to be, day to day? How will project risk be allocated?

Professional construction management can begin paying off for owners in the pre-design phase, during which basic decisions are made on project location, property acquisition, project scope, budget and selection of a design team.

In the design-bid-build environment, the CM will aid in preparation of bid documents to assure completeness and clarity; the CM will help establish the budget and schedule, and conduct a constructability review, as well as help to pre-qualify potential contractors and coordinate the entire process of bid submission and evaluation.

The design-build option, which has become increasingly popular in recent years, seeks to accelerate projects by linking design and construction responsibilities in a single provider. One promise of this approach is that portions of a project can go forward without the entire design having to be completed first.

This approach yields its best results when a professional CM is involved from an early stage. The original project scope, budget and bid documents must be very complete and specific, and owners must realize they are ceding extensive control to their D-B contractor.

It may be difficult for the owner to maintain the proper balance of design expertise, financial capability, construction experience and experience in D-B team roles. In fact, leading this sort of collaborative team, and getting the best from every player for the owner’s benefit, is just the kind of job a professional CM does best.

CMAA President Joseph Seibold of PinnacleOne points out, “Project success results from proactive owner engagement, not from its absence. No project delivery system, including design-build, guarantees success. But an engaged owner, supported by a responsive professional CM protecting the owner’s interest and dedicated to the project—that combination can indeed guarantee success.”

Kabul-Kandahar road repaving, Afghanistan

They’re guiding development of drinking water infrastructure in Gaza and huge new wastewater treatment facilities in the U.K., helping to build subways in Toronto and hundreds of kilometers of new roadway in Afghanistan.

CMAA members are finding more and more opportunities to provide high level construction and program management to clients all over the world. “There is tremendous opportunity for U.S. PM/CM firms overseas,” says David Richter of Hill International, a director of CMAA. “When foreign clients consider hiring a PM/CM, they are primarily considering U.S. firms because the U.S. has been the worldwide leader in developing, promoting and using PM/CM practices.”
Richter cites his own firm as an example, noting that Hill International’s overseas business has grown from 5% of its revenue 10 years ago to 40% today.

Every year, CMAA recognizes an international project with one of its Project Achievement Awards, and recently the award winners have reflected the great scope and diversity of the work association members have supported. These honored projects have included:

• Hull Wastewater Treatment Works, U.K., with CM by Construction Dynamics Group, the largest civil engineering project of its kind in Europe during its construction and is considered one of Europe’s most important water projects for the new millennium.
• West Bank Water Resources Program, CM by Morganti Group Inc. This $68-million program was intended to provide greater access to and more effective use of scarce water resources for the Palestinian people.
• Sheppard Subway Project in Toronto, Ontario, Canada, owned by the Toronto Transit Commission with construction management by Delcan-Hatch Joint Venture.
• Kabul-Kandahar Road Repaving, Afghanistan. CM was delivered by The Louis Berger Group Inc. for this project that cut the travel time between Afghanistan’s two largest population and commercial centers from two days to four hours. This critical infrastructure project was completed ahead of schedule in response to a pledge by President Bush that the road would be open for use by the end of 2003.

International business can mean different things. For example, a U.S. firm may take on an overseas project for its U.S.-based client, as well as finding clients based elsewhere. “Obviously, it is easier to grow globally if your domestic clients take you with them when they build overseas,” Richter says. But he believes U.S. firms can also compete robustly for business from foreign clients.

Richter

“The size of the firm is much less of an issue overseas,” Richter observes, “primarily because potential clients are looking at your local resources. In any given market, your office could very quickly be just as large as some multi-billion-dollar construction giants.”

Local knowledge of people, places, language, culture is vital. “Clients all over the world are demanding that their PM/CMs have local experience and local resources. These take time and money to build,” Richter says.

He suggests the best way to develop this knowledge is to hire local staff. “They speak the local language, understand the local social and business customs, and will have relationships that it would take your expatriate staff decades to build.”

Richter has some cautions for prospective international CMs, as well. “Many firms go overseas expecting the profit margins will make up for the investment and risk,” he says, “but our experience has been that the profit margins are actually lower overseas. What makes up for that is generally less competition for work, combined with tremendous growth opportunities.
“Besides,” he concludes, “with PM/CM services in demand worldwide, why would you want to limit your firm’s opportunities to only the domestic market?”

A conversation with Joseph Seibold, P.E., PinnacleOne, President, Construction Management Association of America

Seibold

Q. CMAA has been in a long-term pattern of growth. What are some of the concrete ways in which this growth is paying off?

A. The most obvious benefit of our growth has been the involvement of unprecedented numbers of smart, committed people in developing our programs and in sharing their ideas. For this year’s national conference, for example, we had 32 breakout session slots to fill and had to choose among more than 70 proposals. Those proposals, moreover, were uniformly very strong. This was not an easy choice.

Q. How do you make those decisions?

A. Mainly, the conference committee tries to construct thematic tracks whose sessions fit together well to provide thorough coverage of a critical topic. This process in itself is another example of the benefit of greater participation. Although we provide some general guidance as to appropriate topics, in general we rely on our members to tell us, through their proposals, what issues are most on their minds. Often we will see multiple proposals dealing with aspects of the same topic, a clear indication that that topic is getting a lot of high-level thought among our members. We end up with a remarkably timely and relevant slate of sessions.

Even the proposals we must turn down, though, often find new life as topics for “webinars,” Professional Practice Corner articles in our bi-monthly publication, CM Advisor, or in other forms.

Q. What are some of the most exciting new things CMAA has been doing lately?

A. We’re very excited about several additions to our professional development program. This year we launched a new in-depth seminar on scheduling, entitled “Construction Scheduling Revealed” and designed to give both CMs and owners a better grasp of what makes a real, executable schedule. This session sold out in its first offering and is scheduled to be offered twice more this year.

We’ve introduced a new certification exam for the Certified Construction Manager credential. This new exam has been updated based on a significant volume of new knowledge we gleaned from our major study last fall exploring exactly what the job of a CM or PM included on a day-to-day basis.

We’re also increasingly active and productive in our government affairs activities. CMAA has been a strong advocate of such critical legislation as the Transportation Equity Act and the Water Resources Development Act, which between them will free many billions of dollars of funding for highway, water and related projects. We’re also working continuously with state governments and regulatory agencies to improve their grasp of CM and what CM contributes to the public procurement and construction process.

Q. Are there still some persistent challenges?

A. Of course. We work in a very dynamic and rapidly changing industry, and we will always have challenges to face. One of the most important in recent years has been clarifying the critical role of CM and PM in delivering successful projects regardless of the project delivery method chosen by the owner.

Consider the confusion over the design-build project delivery method. Some voices in the marketplace have asserted, in perhaps simplified terms, that by unifying design and execution responsibilities, design-build has made a separate professional CM superfluous.
Design-build may simplify the contracting process but it does not eliminate the need for the owner’s interest to be represented and protected. In fact, in some respects the need for an independent CM is even greater.

No project delivery system, including design-build, guarantees success. But an engaged owner, supported by a responsive professional CM, who protects the owner’s interest and is dedicated to the project—that combination can indeed guarantee success.

Q. What does the immediate future look like for CM and CMAA?

A. We may be embarking on a period of remarkable opportunity. Construction spending, in general, seems likely to remain strong, and we see critical infrastructure projects being launched all over the country. Schools are being built, often with funds from bond issues. As I mentioned, federal legislation may soon open up significant new funding for highway and water projects. Transportation work of all kinds is strong.

There is likely to be a lot of work available, much of it exactly the kind of complex, multi-project programs in which our members can make their greatest contributions.

On the association front, we see membership continuing to rise, participation in conferences and programs at an all-time high, and record numbers of professionals pursuing and earning the Certified Construction Manager (CCM) credential. We have plenty of grounds on which to be very optimistic about the future.

A CMAA study has shed light on exactly what the core functions of a construction manager are—the tasks and responsibilities that most realistically define the job as it is actually practiced in the marketplace.

CMAA surveyed its own individual, corporate and owner members, along with holders of the CCM credential and CCM candidates. More than 500 professional CMs responded to the survey.

Survey respondents were asked to rank 120 common project responsibilities according to both their importance in a CM’s work and the frequency with which they actually engaged in these activities.

The project management planning arena was ranked as the most important of all project-specific functional areas by CMs responding to the survey.

Among project management functions, respondents gave the highest importance to defining the responsibilities and management structure of the project management team.

Ranking second in importance was “organizing and leading the project team by implementing project controls, defining roles and responsibilities and developing communication protocols.”

Survey respondents reported that their most frequent jobs—functions they performed on a daily or near-daily basis—included pre-qualifying designers, developing and managing a selection process, creating project procedures manuals and developing trade contractors’ scope of work definitions for contract agreements.

The next most important general area was time management, in which CMs reported their most important function is to develop a construction schedule, followed by developing and managing a critical path schedule for the job and reviewing detailed short-term schedules with contractors.

Respondents to the CMAA survey also identified a number of quality management functions as central to their jobs. Chief among these, in terms of the frequency with which CMs perform specific tasks, is to “manage conformance of work to contract documents during the construction phase.”

“This survey clearly demonstrates that both CMs and project owners see a large number of important, specific jobs that must be performed by the CM at every stage of a project,” said CMAA Executive Director Bruce D’Agostino. “The most important functions identified by respondents, as well as those they report performing most often, are equally distributed across design, construction and project-delivery stages.”

For more details on the study, visit www.cmaanet.org/job_analysis.php.

The beginning and end are the phases that most need improvement in the typical construction project, according to the most recent survey of project owners by the CMAA and FMI Corp. Inc.
The annual survey collects information and opinions from more than 100 owners in both private and public sectors.

A large majority of project owners agreed that “architects need to be held more responsible for completing a quality design that can be built without numerous change orders or requests for information.”

In response to a separate question, owners said the most significant causes of cost overruns on their projects were incomplete drawings and poor pre-planning. Particularly during the pre-design phase, the survey found owners feel a pressing need to control the scope of their projects.

Nearly 80% agreed that “the quality of design documents has declined to the point where subcontractors such as electrical and mechanical are actually completing the design through shop drawings.”

However, they also reported in large numbers that they believe they have insufficient time and funding in a typical project to give the pre-design stage the attention it requires.

Construction managers could help remedy this problem, but they often don’t become involved in time. Discussing the survey findings at the CMAA Conference, Bob Silver, P.E., of the U.S. Naval Facilities Engineering Command, noted that “most owners are not engaging their CM or operations and maintenance team early in the process, and are missing a significant opportunity.”