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CEE 498 Dr. A.S. Hanna Fall 2007
Assignment #1Conflict of Interest
Due: September 13, 2007University of Wisconsin - Madison
Department of Civil and Environmental Engineering
The article entitled "Construction Management Performance Under
Dual ServiceAgreements," appeared in the December, 1987 issue of
the Journal of ConstructionEngineering and Management of the
American Society of Civil Engineers. Read thearticle and answer the
following questions:
1. What is meant by a "Dual Service Agreement?"
A dual service agreement is an arrangementoccurring in places
such as projectmanagement systems - where one entity serves two
roles, such as contract
manager and constructor. This is necessary in the pure
construction managementapproach to projects.
2. Explain with example how the article agrees and/or disagrees
with your
understanding of the "Pure Professional Construction
Management
Approach which is presented in the lecture.
The pure construction management approach, as I understand it,
has three separateunits operating over the subcontractors: the
owner, a design professional (DP),and a construction manager (CM).
The CM takes over the traditional role thegeneral contractor.
This system also operates using the fast track method,
condensing/overlappingthe design and construction phases. The
construction manager primarily serves inan advisory role (oversight
of cost, design planning). The owner coordinates withboth the CM
and DP, and vice versa. In the pure model, there is a
largeaccountability issue. The CM carries none of the project risk
nor is he operatingon a fixed budget or guaranteed maximum price.
With nothing at stake, there islittle intrinsic motivation for the
CM to perform.
The article discussed the agency form of CMwhich we defined as
pureconstruction management. It developed a number of issues we
discussed
concerning pure CM, such as the potential conflict of interest,
time involvement,quality control, responsibilities, and checks and
balances. The checks andbalances found in other project systems are
obscured in pure CM, which allowsthe potential for conflicts of
interest.
If the CM lacks proper business ethics, he can put his interests
above that of theowner/customer, since he has input into the design
phase and controls the logisticsand contracting for the project.
For example, if the owner isnt knowledgeable of
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all the possible variations in design, the CM can easily
overlook a more cost orquality effective design in favor of using
his friends contracting firm
I also noticed two aspects of PCM we talked about in lecture
that werent definedin the article. It did not mention who was
responsible for the project risk, or how
difficult it was to budget this system without a guaranteed
maximum price.
3. Indicate how the information contained in the article would
guide you in the
development of the "Contract Administration Procedure and
Policies" for
the hospital project, if you were a "PCM Expert" who is serving
as a
consultant for the State of Wisconsin.
I am not well versed in the current hospital project or its
scope, but if I wereserving as a PCM expert I would first ensure
the ultimate decision making entity(owner) fully comprehends the
organizational structure, job description/keyresponsibilities, and
the decision making flow (chain of command). Hopefully
thedecision-maker has prior experience with PCM. It is critical
that the owner/CMrelationship is well defined and understood by
both sides. I would also explainthe inherent problems associated
with PCM, such as the potential for conflicts ofinterest and the
project risk is still on the owner.
Secondly, the decision making body should ensure proper checks
and balances areemplaced in the project system or operating
procedures. I would recommendcreating separate contracts for the
various required services needed to build theproject, which will
preserve checks and balances necessary for quality control.This
means drawing up separate contracts for the designer and
constructionmanager.
Since this is a large project, a well defined team organization
will be needed. Theowner, design professional and construction
manager must have representatives atall levels of
managementincluding the executive, operational, and field
leadersfor each entity.
Since the function of a hospital is critical for modern
communities, there is muchimportance on the duration of the
project. Therefore, it is vital that timelydecisions are made. To
ensure this happens, all organizational units involvedmust maintain
clear lines of communication.
In addition, if we do decide on a PCM style project approach, we
must carefully
choose the CM based on his reputation and track record, since
the owner will behanding over large responsibilities with little
accountability.
