YIT construction Company and their construction projects

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1) The project is being delivered as a design-build contract for which YIT is responsible.

The client is worried that they will have little opportunity to change their minds during production phase. For this situation, from the perspective of the project manager describe both the advantageous and disadvantageous of procuring this project on a design-build arrangement.

Ans:

YIT construction Company constructs project for Dermosil in Russia, for this projects they offered design-build contract where YIT will be responsible for design, construction, and handover of project but Ericsson, installer of hi-tech communication system have separate contract with Dermosil because they obtain good deal from direct negotiating.

For this design- build project, YIT will be single point responsibility for whole project. YIT will appoint a local Russian architect and engineer company for architectural and engineering services and sign contract with subcontractor for specific work. Ericsson will work with YIT to understand client's current and future requirements for information and communication technology.

The PROJECT FOW CHART

CONTRACTUAL LINK :-

COMMUNICATION ROUTE :-

Design and build: - Design and build is a form of project delivery where contract with single unit (contractor) to provide both design and construction services.

Fundamental characteristics of design and build:-

1) The responsibility for design and construction lies with contractor.

2) Payment is generally by means of fixed price lump sum.

3) The project is design and constructs to fulfil clients need.

Advantages and disadvantages of this design build project as follows:-

Advantages:-

1) Single point responsibility:-

* The YIT (contractor) will responsible for quality, budget, schedule, and performance of the completed project.

* Single point responsibility of YIT (contractor) should ensure that improved communication and minimised misunderstandings with the Dermosil (client).

* The contractual and functional relationship between the Dermosil (client) and YIT (contractor) are simplified and Dermosil (client) will not require spend time and effort to co-ordinate between design and construction contracts.

* Design and build integrate the project team members, produce open communication and encourage effective communication.

2) Minimised project delivery time:-

* The overall project duration will be minimised due to the overlapping design and construction phases.

* The integration of design and construction should produce more effective planning.

3) Minimised Price Escalation:-

* There is gurranteed project cost in tender stage.

* This design and build project, initial project cost in tender and final project cost are lower than other procurement types.

* The intigration of design and construction elements tend to reduce project cost.

* Professional fees can also be lower under design and build contract, depending on the monitoring role.

4) Buildiability:-

* The construction efficiency may be improved becouse design efficiencies made according to entire construction process.

* The designer as a member of the design and build teams are participated in problem solving and resolving design related issues.

Disadvantages:-

1) Less quality control:-

* Dermosil has no direct quality control over the contractors performance.

* YIT's design experties may be limited.

* Dermosil has little say in choice of specialist sub-contractors.

* Hidden reduction in quality are possible when delivering project within time and within estimated budget.

2) Limited flexibility :-

· Design and build is inflexible system which will not allow Dermosil(client) to change or devoloping ideas and requirements during construction without heavy cost penalties.

· The owners do not sepratly choose designer and contractor.

· This is also not allow to the owners, if some reason, during construction, the owners are not happy with the work of designer doing, they do not have option of choosing another designer.

· Major conflict of interest with role as designer and contractor.

3) Inattention of Request of proposals & documentation:-

* Request for proposal and documents are not prepared properly.

* The request of proposal includes sketches of design, a list of material, schedule of construction, and contract proposals.

* The request of proposals works like a set of rules that the contractors need to folow.

4) Fewer Checks and ballances:-

* Once the contract in place, it is difficult to modify clients requirements and the project may take a direction that the owner doesn't really want.

2) What are the human resource issues that are likely to be encountered on site during production phase?

Answer:-

The foreign companies are started to invest their capital in construction sector of St Petersburg (Russia) with the help of local employee. The labour force in Russia is skilled in basic trades but many of the workers which came from countryside to find out work in urban areas are unskilled.

This project describes, YIT (Contractor) constructs production premises for Dermosil (client) in Gorelovo technical Park near Pulkovo, St Petersburg international airport in Russia. For the construction of this industrial project, YIT(contractor) will use Finnish construction manager and site manager, but they will use local (Russian) supervisors and unskilled labour which coming from rural areas of Russia.

Human resource management:-

"Human resource management is responsible for how people are treated in organization, it is responsible for bringing people into the organisation, helping them perform their work, compensating them for their specific task and solving problems that arise."(Cherrington 1995 P.S.)

Human resource issues:-

Many of the Human Resource issues will be faced in this project as follows:-

* Manage and trained unskilled labours

* Construction manager, site manager and supervisor training.

* Language barrier.

* Cultural diversity.

* Manage the rescaling of workforce for new technology.

* Respond to increasing demand of health and safety.

* Work under harsh weather condition.

The above human resource issues can be converted into four challenges for this industrial project:-

1) Matching skilled labour demand.

2) Equal opportunities and Fairness.

3) Overcome on language barrier.

4) Manage health, safety and welfare.

1) Matching skilled labour demand:-

* In this project, increasing skill demand and training are casual factor of this challenge.

* The need of specific skill labours for specific task for example crane driver needs specific training for their task

YIT should overcome this challenge by providing following solutions:-

· Recruitment & selection:-

§ The performance of site is mainly governed by labours who can either positive or hamper the development so selection and recruitment of labour force is crucial activity.

§ YIT (contractor) need to recruit skilled, multi skilled and flexible workforce for this project.

§ YIT (contractor) should highlight on team working has meant that selection decisions are concerned more with behaviour and attitude than matching with individuals.

· Training:-

§ Training is the most effective way to maintain update and improve the intellectual capital of the workforce.

§ The YIT should arrange the necessary induction training and instructions for all labours.

§ YIT should give special training for unskilled labour to understand the task.

· Motivation:-

§ A number of indication point out high motivation value: improving productivity, lower incidence of absenteeism, Zero accidents.

§ YIT should motivate unskilled labours to understand of task and learn skill.

§ YIT should motivate people by distributing incentives when certain objectives are achieved.

2) Equal opportunities and Fairness:

* Equity theory suggests that people will be better motivated if they feel they are treated equally and demotivated if they are treated unequally. This has been referred to as the 'felt-fair' principle (Armstrong, 2002, p.61).

* Fairness is, of course, subjective. People doing the same work may have different notions of "felt-fairness" (Jaques, 1962). The effects of underpayment may be dissatisfaction - eg lateness, lack of co-operation, absence. Mostly employees derive their judgement of what feel fair from comparisons with other individuals and groups. This comparison at individual level may be related to the qualifications and experience of a colleague, or to the level of performance which the employee thinks the colleague delivers.

§ YIT should have policy on job evaluation and equal value.

§ TIT should look at benefits other than pay.

§ Steps to be taken for harmonising conditions, which includes removal of barriers such as separate car park, canteens and toilets.

§ Non financial recognition and the importance of involvement autonomy and responsibility.

3) Overcome on language barrier:-

· Translator:-

§ The Russian labour on the site cannot understand the instructions which are given by project manager due to language barrier present in between labours and project manager.

§ To serve the purpose YIT should appoint a Translator who will help the company to provide better communication between the labours and the project manager and smoothen the working at site.

4) Manage health safety and welfare:-

§ Health and safety is important challenge on this site.

§ The YIT (contractor) should require to follow high safety standards, safety issues driven by senior managers, effective systems, continuous training to alert attitudes and behaviours in workforce.

§ YIT (contractor) should use effective induction and communication strategies to ensure awareness of occupational health and safety challenge.

3) The client has heard that the accident record for accident on site in Russia is very poor whereas YIT has an extremely good safety record for its projects in Finland.

The client is prepared to pay a bonus for zero accidents. As the project manager how would you ensure that YIT has good safety for this project?

Answer:-

Construction is a very hazardous industry in Russia, therefore each year both the skilled and unskilled lose their lives and many more injured on construction sites.

However safety of workers has paramount importance for YIT Construction Company in Finland. YIT remains focussed on developing a positive and proactive health and safety culture not only for their people, but also for their suppliers and subcontractors. They are ensured continual improvement to reduce accidents in health and incidents.

YIT (Contractor) will in addition to his responsibilities for the construction of this work have responsibilities associated with design of project. He will therefore take on responsibility to ensure that the project is designed such that it can be build, operated and handover safely, without risk to health and the environment.

YIT Zero accident techniques can be ensured for this industrial project which is as follows:-

Site safety layout:-

* Site safety layout planning for this project is an important construction activity involves identifying the site facilities such as site office, material storage, etc. needed to support construction operations, determining their size & shape, defining the relationship among these facilities and positioning them within site area.

* The proper site safety layout will be ensured preventing or minimising site accidents. For example site safety layout to help selecting and position of crane on this site. So preventing crane accidents from site safety layout.

* Several causes of this site accidents and health hazards such as falls, falling object can be controlled through creating proper site safety layout.

* A good site safety layout is likely to be safe site with high confidence, few disputes and healthy environment.

Recruitment, induction and Training -

* The YIT should arrange the necessary induction training and instructions for all new employees.

* Site personal such as crane driving, scaffolding, etc. must be properly trained their competency regularly monitored.

* The YIT is responsible for ensuring the arrangements are in place for accessing the level of safety training for special jobs.

* Site induction should include site specific explanation such as outline of project, arrangement of first aid, arrangement of reporting accidents, individual responsibilities for health and safety.

* Proper Induction and training will be ensured employees that they are free from site accidents.

Personal protective equipment:-

* The YIT must establish adequate management systems for the provision of and use of Personal protective equipment.

* Personal protective equipment need to be identified include, procedures for identifying personal protective equipment requirements for the project, employee instruction for use, storage and maintenance. Recording issues and use of equipments.

* Plants and equipments which is fit for the purpose of reducing risk from identified hazards

Project method statements:-

* This method statements for a work schedule should be in sufficient detail to provide the correct sequence of work activities and description of work activities

* This project method statement help supervisor and site manager to co-ordinate or manage the work on safety way.

Site safety rules and procedures:-

* The control of construction activities related to managing safety plan for all sub-contractors, suppliers on the site including

§ Site rules and regulations.

§ Arrangement for monitoring and reviewing health & safety compliance.

Safety meetings:-

* The YIT should arranged and inform site safety meetings with the project team (project manager, site manager, supervisor, subcontractors, etc.) on weekly basis.

* A suitable meeting agenda should be developed and circulated prior to these meetings.

* YIT Safety meetings will help to ensure safety status on site and future requirement for safety of specific work on site.

Health arrangement:-

* The provision of first aid facilities.

* Arrangements for ensuring all site personnel are medically fit for work.

Safety motivation and incentives:-

* YIT should prepare to pay bonus to subcontractors for zero accidents.

* YIT should motivate their employee, subcontractor, supplier for apply safety instructions and safety standard for Zero accident on this site.

4) YIT is well respected large Finnish company that would like to expand further in Russia.

To date, their local company has struggled to obtain work. They see this project as a marketing opportunity, what strategy could be followed to ensure this happen?

Answer:-

YIT has nearly five decades of experience operating in the Russian Market. The past few years have seen expansion to several of Russia's largest cities and their vicinities in accordance with their strategy (YIT annual report 2008).

YIT constructs developer contracted residential buildings, office, retail and logistic premises in Russia. But in late 2007, residential construction market was affected by economical crises, so company has faced problems such as negative cash flow, decreased profitability and increased capital investment. So YIT has set their four focus areas as follows

1) Positive cash flow.

2) Profitability.

3) Growth.

4) Capital efficiency.

To focus above said areas, company has take to in consideration those projects that give early return in investments, improve capital efficiency, and advance payment for services. So YIT develops the business idea in cooperation with the users and carries out the entire implementation. Typically, the premises are sold to property investor and leased to users (YIT annual report 2008).

Marketing strategy: - Marketing plan which combines product development, promotion, distribution and pricing approach identifies the firms marketing goals and explains how they will be achieved within stated time frame. Marketing strategy determines the choice of target market segment, positioning market mix and allocation of resources (definition from BuisnessDictionary.com)

Marketing Objective: - Diversify construction services as a contractor in building construction services in Russia

An analysis of marketing strategy as follows:-

1) Market research:-

· Present and future growth of Russian construction market: -

In present, the construction industry has been hit by global crises. The majority of construction projects have been suspended and virtually no new residential or commercial property projects have been started.

IN future, While residential and non residential construction activity will relatively construction activity will relatively subdued at least for the next year due to ongoing difficulties in securing finance, most construction will be relatively related to infrastructure development projects such as road and railway construction, as well as airport expansion.( Report, construction sector in Russia 2009- development forecast for "2009-2012")

· Key clients: - Government, foreign industrial companies, local industrial company.

· Identify "nich" markets:-As market research, YIT will focus on development of Industrial projects in Russia.

· Competitors: - Hochtief and N.C.C, both foreign construction companies are running their construction service business in Russia (assumption).YIT are facing strong competition with them.

2) SWOT analysis of YIT in Russian market:-

· Strengths: Experienced and reputed company in Russia.

Long term customer relations.

Recognised brand in the construction industry.

Major share in Residential development in Russia.

* Weakness:-Negative cash flow,

Low profitability,

Heavy capital investment.

Order backlog declined slightly.

* Opportunities: - to expand as contractor in industrial sector.

Russia opens to foreign companies.

Experience in Infrastructure and sports projects.

· Threats: - Economic downturn.

Big foreign construction companies in Russian market.

Residential sector affected in downturn

As per SWOT analysis of the company with respect to its work and position in Russia, YIT should focus on diversification and development projects in Russia.

It can be said that the company is looking for a differentiated and development marketing strategy, Where McCarthy's 4P's as follows:-

Product: - Building and industrial services, Residential services, Infrastructure development.

Prize: - competitive

Promotion: - the company can enhance promotion as per market & clients need.

Place: - Russia & Baltic countries

Above analysis support the Marketing strategy of YIT Construction Company.

YIT Construction Company promote Dermosil project as a sample project in Gorelovo industrial park for the development of Gorelovo industrial park and to display capability of YIT in construction sector.

The key feature of Dermosil project as follows:

1) Design and build: - modern procurement method.

2) Precast concrete: - advanced material.

3) Building Information Modelling: - advanced technology.

4) Zero accidents: - extremely followed health and safety rules.

Hence Dermosil project used as a sample project, as a brand project and promotional project for marketing strategy. .

5) The cad system used for the design is a standard software package used widely around the world.

The designers have no experience of working with Building Information Modelling (BIM).how should they set about finding out about how to incorporate BIM on this project?

Answer:-

YIT (contractor) constructs project for Dermosil (client), in Gorelovo industrial park, Pulkovo, near St Petersburg's international airport. For this project, Dermosil (Client) wants to be linked BIM system and Autodesk Revit system integrates AutoCAD and BIM.

However Russian Architect and Engineer Zorky & co. have worked on AutoCAD software application for 2D and 3D design and drafting. They are unknown about BIM application system. So incorporate of BIM system in this project is bigger challenge for Zorky and co.

Building Information Modelling and Building Information Model defined as:-

Building information modelling is the development and uses of multi-faceted computer software data model to not only document a building design, but to simulate the construction and operation of a new capital facility or a recapitalized (modernized) facility. The resulting building information model is a dada-rich, object based, intelligent and parametric digital representation of the facility, from which views appropriate to various users need can be extracted and analyzed to generate feedback and improvement of the facility design( GSA BIM guide).

Why Dermosil (client) want to incorporate BIM in this project:-

Because:-

1) 3D laser scanning technologies allow for better documentation of as build drawings and existing conditions.

2) 4D models technologies allow for visualise and optimise project phasing and construction sequencing.

3) Dermosil (client) wants to transfer the technology and its associate system to their future projects in Spain and Thailand.

Barriers will need to encounter while planning:-

1) Initially Fears: - fear of change, fear of unknown etc.

2) Software learning curve.

3) Lack of support from operational staff.

4) Initial investment cost.

Incorporation of BIM for this Project:-

Russian architect and engineer, Zorky and co. are using AutoCAD software. As per Dermosil (client) requirement, this company see an opportunity to move from AutoCAD (2D, 3D module) to BIM technology. Revit architecture as the best fit for this project.

Implementation of any technology, there were three main element required for successful execution:-

1) People:-

Zorky and co. had been using AutoCAD for all projects so their staffs are AutoCAD literate. The transformation of technology from AutoCAD to Revit architecture is challenging to the implementation of BIM. Employees of Zorky and co. is not known about this technology. So they need in house training course this implementation of BIM. In this Industrial project, this is challenging task because it is design and build with fast track delivery time where YIT (contractor) is responsible for design and construction. For the successful implementation of BIM, Zorky & co. should open Revit discussion room for resolve employee's problems.

2) Process:-

The Dermosil industrial project has already started establishing data production and exchange workforce around AutoCAD, the implementation of BIM is decided after preliminary planning (tender stage). The project team carefully evaluate the cad production workflow and establish the BIM workflow to produce same output this is very challenging for the team to try and match the output coming from Revit to the earlier project delivery. But after some practice, they will perform better and more efficient at producing output.

3) Technology:-

Zorky and co. are moving from AutoCAD to Revit architecture. The hardware which is used for AutoCAD software is not able to cope with the requirement of Revit architecture so they need to upgrade hardware as per the need of Revit architecture and need to purchase Revit architecture software.

HOW Revit architecture will use on this project?

· The project AutoCAD deliverables were produced using AutoCAD until the planning stage (tender stage).

· Each building create separate Revit project file and they are all link on Master model.

· AutoCAD plans imported into Revit and the model built off them.

* The biggest advantage of Revit is the bidirectional associatively of plans, elevations, sections and schedules.

6) Ericsson is installing the IT systems for the client, yet they are not in direct contract with YIT the contractor.

What challenges are likely to ensue as a result of this during the production phase?

Answer:-

YIT (contractor) is the biggest construction company from Finland, whoentered into contract with Dermosil (client). The contract is Design Build contract TheEricsson who is installing IT system is entered into agreement with Dermosil( client)directly, thus there in no contractual relation between YIT( contractor) and Ericsson( IT system installer) .therefore Many challenges will facing during construction.

* It can hamper the baseline schedule (Initial Schedule) of the project prepared by YIT schedulers.

* Since there is no coordination between YIT and Ericsson, the schedule is not discussed with the Ericsson, which should have been done in the initial phases, otherwise, there are possibilities of several change orders, which can delay the project schedule and also increase the project cost, which in turn will be taken care by using time contingency (If there is any in schedule) and cost by contingency decided as per contract.

Interface Management:-

* In the given context, the interface management will also be a challenge faced by YIT and Ericsson.

* Interface Management is the systematic control of communication within a given project.

* The communication can be internal communication and external communication.

* The internal communication is the communication of project manager with the construction companies, subs and suppliers i.e. parties involved in the process.

* Whereas external communication is one with the neighbouring community (if required).

* For this industrial project, it is very important to have an open communication with and from every member involved in the project, regarding construction activities, schedule and phases.

* The importance is given to human involvement, and it is important that the communication should be managed / controlled to avoid any misunderstandings or ego clashes.

7) Identify the factors that need to be considered for a waste management plan Suitable for this project from the perspective of YIT.

Answer:-

Dermosil (client) has keen interest in considering environmental issues and has decide to go for sustainable building which has mention in the agreement, since YIT( contractor ) is bound to such contractual requirement it has incorporated in the requirement in project course.

Although waste minimization is defined as one of the key factors for achieving sustainability, the relative significance of construction west resource and a comprehensive assessment system have yet to be developed. Implementing any successful waste minimization strategy during project execution requires the assignment of waste. Waste minimization has to be embedded as a one of the project objectives for that lead to sustainability.

Waste Management plan:-

* Site waste management plan is important tool for YIT (contractor) and Dermosil (client) to improve their environmental performance, meet regulatory controls and reduce energy rising costs of developing of waste.

* The main objectives of site waste management plan are improving material resources efficiency, increase the amount of construction waste that is recovered, reused and recycled.

Necessity of Waste management plan on site:-

· A tool to help YIT (contractor) deals with any quarries from, for example the environmental regulators regarding waste arising from this site.

* A mechanism to demonstrate Dermosil (client) how YIT (contractor) manage waste and minimise cost.

* A system to help Dermosil and their subcontractor, suppliers, make cost savings by better managing YIT material storage, and handling the better.

Construction waste at site:-

* The level of waste at construction site is considerable, but some materials are recycled so YIT (contractor) need to setup research technology for processing waste material to reuse.

* The following site materials from this construction site can be recycled as follows:-

§ Steel: - electric arc furnaces produce reinforcing mesh and sections from100% steel scrap.

§ Aluminium: - 100% recyclable.

§ Concrete: - unset concrete can be washed out at the plant to remove cement. Sand and stone can be reused. Set concrete can be crushed and recycled as aggregate for new concrete.

§ Bricks: - can be reused where appropriate or crushed on site onsite for backfill, aggregate and gravel with portable crushing plant.

§ Cardboard: - materials will be separated on the jobsite and stored within dedicated onsite dumpster and delivered loose to processor. Processer will able to materials and delivers end market users.

Elements of prevent site waste:-

Many factors contribute to prevent construction waste on site. In this project, YIT is responsible for design, construction, and handover. So YIT (design builder) need to address following factors that help to prevent site waste:-

· Design:-

§ Consider building form and shape to reduce the use of building materials.

§ Sizing of buildings and shapes to eliminate unnecessary elements (i.e. clean and simplistic design).

§ Selection of good quality of projects.

§ Give more attention to standard sizes available on the market.

· Specification:-

§ Long term approach to a proposed facility i.e. flexibility in design for future building expansions and alterations.

§ Flexibility in design for dismantling.

· Procurement and project planning:-

§ Avoid over specifications and composite material specifications.

§ Minimise variations in compounds and joints.

§ Compatibility between design and material supply.

§ Valuating reuse and recycling opportunities for the specified materials before specifying in the design.

Question8:- if the advance payment is made to YIT as a Mobilization fee, what action should be taken to ensure the money is guaranteed and if YIT went into liquidation how the money could be recovered?

Answer:-

The YIT (contractor) is there in Russian market since last forty years, so it's not reasonable enough to ask for advance payment security from YIT (contractor) because they have their prior commitment to a lot of projects existing in Russia.

Guarantee of clients advance payment:-

Advance Payment Bond:-

If YIT (contractor) is issue this bond to Dermosil (client) on condition:-

* If contractor is unable to complete the project then legally the contractor company is liable to repay advance amount.

* If contractor is unable to start the project then also company has to repay advance payment paid by client.

* Main drawback of advance payment bond, it does not apply, if a company goes in liquidation.

If YIT goes into liquidation following are the ways Dermosil (client) can ensure his advance payment.

Parent company guarantee:-

If Russian subsidiary of YIT goes into liquidation then the parent YIT Finland company will be liable to repay the advanced payment amount , this sort of an agreement which is been agreed upon the Dermosil (client) and YIT parent company.

Collateral Security:-

YIT (contractor) can give security against any of its asset (building, land) to the Dermosil (client) which equals to mobilization amount paid by him.

If the option like parent company guarantee or collateral security option it is not advisable for Dermosil(client)to go for options like business insurance where he has to pay premium which he will not get back after finish the project.

REFERANCES:-

Boddy, D. (2008). Management : an introduction. Harlow, FT/Prentice Hall.

Brandon, P. S. and M. Betts (1995). Integrated construction information. London, Taylor & Francis.

Hackett, M., I. Robinson, et al. (2007). The Aqua Group guide to procurement, tendering, & contract administration. Oxford, Blackwell Pub.

Han, S. H., D. Y. Kim, et al. "Strategies for contractors to sustain growth in the global construction market." Habitat International 34(1): 1-10.

Ling, F. Y. Y. and B. H. M. Poh (2008). "Problems encountered by owners of design-build projects in Singapore." International Journal of Project Management 26(2): 164-173.

Loosemore, M., A. Dainty, et al. (2003). Human resource management in construction projects : strategic and operational approaches. London, Spon Press.

Morledge, R., A. Smith, et al. (2006). Building procurement. Oxford, Blackwell Pub.

Naoum, S. G. (2001). People and organizational management in construction. London, T. Telford.

Storey, J. and C. Brewster (2007). Human resource management : a critical text. London, Thomson Learning.

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