As it has been for the past two decades, construction project delivery is in a state of nonstop evolution. Construction management (CM) came into its own in the late 1980s, when large corporate project management and engineering departments that ran massive building programs began to break up as owners started to focus more on core missions and shifted responsibility to outsiders. Design-build took off in the mid-1990s as private clients felt new pressure to get product to market quickly and cheaply. Soon after, federal, state and local governments began to extricate procurement from its highly regulated environment and recognize the value of alternate project delivery.
Now, as owners face new pressures and dilemmas, they are turning to yet another iteration in construction management. What happens when rapid shifts in markets, political realities or social climates dictate an entire construction program, not just one new facility?
The blossoming of program management as a construction industry discipline provides the answer. The approach has been around for a long time, but is overlooked by many potential users. Contractors have long been tasked by individual owners to do everything from building a series of gas stations to managing environmental cleanups at all plant sites.
But the concept of program management now is becoming more widespread and worthy of tracking as a discipline. As such, ENR this year is for the first time ranking the Top 20 Program Management Firms and will do so annually.
Contenders were ranked based on fees derived from program management services where more than one project was contemplated, planned or executed. Excluded was construction revenue outside of actual management fees from the projects. In the past, most firms had reported these fees in CM-for-fee totals.
"Program management has always been around for the really massive jobs like the Big Dig' in Boston," says Mansour Aliabadi, CEO of Vanir Construction Management. "But only now are you seeing it on smaller, more local construction programs."
There are many considerations for using PM in public works. "The public sector does not have the expertise" to manage massive programs, says Larry Hazzard, senior vice president of Carter & Burgess. "And money is now an issue. There are not many programs out there that can simply spend until a project is done."
In addition, many public agencies don't always have the will to fire contractors or designers on troubled projects, according to Hazzard. Program managers provide a measure of professional management as well as political cover to agencies when hard decisions have to be made, he adds.
Carter & Burgess has been working as PM on some major new transportation programs, including the T-REX project in Denver, Southeast Corridor in California and the Orange County, Calif., extension of the CenterLine Light Rail. Hazzard says that program management is growing among state DOTs as well.
The growing use of public bonds to fund large public construction programs is one PM catalyst. A school district or city agency may find itself benefitting from results of a successful public bond referendum. Suddenly, the district may find itself in possession of several hundred million new construction dollars to spend, but with tight deadlines and little staff to plan or oversee the program.
"Many big PM jobs are bond-funded, which lend themselves to a bundling approach, requiring a program manager," says Aliabadi. His firm, Vanir Construction Management Inc., is PM on several such programs, including the upgrade of police facilities in Los Angeles.
"There's a tremendous amount of bond-funded educational programs on the K-12 and community college levels in California," says Jeff Flores, chief operating officer of Seville Group. "Local school districts are not as sophisticated as the U.S. General Services Administration. They pass bond programs and then say Now what?' They need firms like us to help plan and manage their construction programs."
The growth of some bonding programs also is more daunting to local agencies. "We used to see a $100-million bond issue pass and celebrate," says Flores. "Now we are seeing $400 to $500- million programs pass regularly." PM work for the Los Angeles Unified School District and the city community college system, as well as school districts in Oakland and San Jose, has helped Seville to double in size in just over a year, he says.
PMs are not just called in after the bonds pass. "We are doing more pre-bond work," says Chuck Dahill, CEO of PinnacleOne. He notes that agencies and school districts want to be able to present a full plan to the public so voters know what they're going to get. "This used to be a free service with an eye toward a larger contract after the bond issue passed," he says. "But the level of planning is now more complex, and agencies don't want to lock themselves into a service provider. So we are now being hired specifically to do prebond work."
PinnacleOne is managing such activities for the Simi Valley, Calif., school district, as well as even larger programs for the Poway, Calif., school district and the city of Gilbert, Ariz. "The Gilbert program is $320 to $350 million in infrastructure upgrades," Dahill says.
Private-sector PM work is happening, but less frequently. "One reason is that a company can put up a fence and build," says Chris Reseigh, president of Parsons Brinckerhoff Construction Services. "In the public sector, there are a broad variety of stakeholders, including the public, the funding sources and end users who must be accommodated."
However, PB has been working with General Motors Corp. as PM to help organize the automaker's various corporate departments on the $1-billion renovation of its 37-building Technical Center in Warren, Mich., Reseigh notes.
PM work also allows its practitioners to get a heads-up on new opportunities, often before anyone else. "We are getting requests for feasibility studies and program planning now," says Chris Taylor, co-chief operating officer of Hanscomb Faithful & Gould. The recently merged firm has major construction management and program management practices in the oil and gas, food and beverage and pharmaceutical industries. "This year might be a nightmare, but we look forward to a turnaround in 2004," he says.
The boom in program management has led to rapid growth in some firms. McKissack and McKissack is one. "We started out as an architectural firm in 1990," says CEO Deryl McKissack. But she says the firm's big break came when it was named program manager for reconstruction of the damaged portions of the U.S. Treasury Building in Washington, D.C., after a 1996 fire.
McKissack says the firm was able to parlay its experience on that job into a series of complex, high-profile PM jobs on the Washington, D.C., convention center, security and historical restoration on national monuments there for the National Park Service and a $750-million security upgrade for the West Wing of the White House.
McKissack and McKissack also is expanding to Chicago. "We are owner's rep for construction programs for the Chicago Housing Authority and are working on the next renovation and expansion of McCormick Place," McKissack says.
Airport work is another major market for PM. "An airport upgrade or expansion is a complex job, with a lot of moving parts," says David Richter, president of the project management group at Hill International. "You have to be able to coordinate multiple projects while keeping the airport running smoothly. You need a PM for that." Hill International recently won a PM contract on an expansion of Philadelphia International Airport, he notes.
Another element of program management is program management oversight (PMO). PM firms have seen a rapid increase in PMO assignments in recent years to perform financial or construction audits on projects. "We've always had PMO, but there is more of it in the past couple of years," says Aliabadi. "It could be the nature of the times as financial institutions worry about the status of their investment in a project."
PMO may be a growing trend, but some firms prefer providing full management practices. "We are brought in to do PMO work mainly on troubled projects," Says Dahill of PinnacleOne. But he sees PMO as simply a small part of a larger array of services. "We do it, but on a $200-million program, PMO work will pay you only about one-eighth of what your fee would be if you were the PM on the job," says Dahill of PinnacleOne.
While some industry observers look at PM as the "flavor of the month," that was the same view of agency CM, CM-at-risk and design build in the past. As PM grows in popularity, clients may grow more comfortable knowing that, no matter how big the program and how small the in-house staff, there is help available.