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Construction Management

Course Objective:

• This course will enable the students to become potential industry

leaders capable of implementing the best engineering and
management practices and technologies in construction industry.

Course Outlines

• Economic Concepts and their application:

• The Economic Decision Analysis in Construction, Decision-Making
Process, The Principles of engineering economy, Cost Concepts, Time
Value of Money, Market and its type, Budgeting, Feasibility analysis,
Cost estimating, Bond Financing

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Course Outlines (Cont…)

• Principles of Project Management: Project management process. Project
delivery systems, Introduction to construction management, Construction
project players, Construction projects manpower, material, machine and
money management, Project Organization, Organizational breakdown
structure, selecting an organization structure, Formal and informal
structures,

• Project Planning: Project planning objectives, Components of a plan,

Project monitoring and control, Project evaluation, auditing and
termination, Productivity issues in construction, Factors affecting
productivity, Productivity management in the construction site and in the
construction company,

Course Outlines (Cont…)

• Project Scheduling: Network Diagrams, CPM Calculations, Critical
Path, Floats, Event Times, Critical Path Analysis, Bar Chart, Time-
scaled Diagrams, Multiple Resource Leveling, Sum of Resources
Square Method, Limited Resource Allocation, PERT, PERT Calculations,
Event Times and Network Compression in PERT

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Course Outlines (Cont…)

• Construction Contracts and their Management: Procurement methods for
construction projects, Award of contracts, the contract documents, Typical
construction contract clauses, Types of Construction Contracts, Contract
Disputes and Dispute Resolution, International Contracting, Tendering
arrangements,
• Health and safety in Construction Projects: Health and safety problems in the
construction site, Health and safety legislation, the cost of safety,
Organization and arrangements for safety offices and safety policies,
• Risk Management in Construction: Risk and opportunity identification and
analysis, Risk response, developing and implementing a successful risk and
opportunity management system.

Recommended Books
1. Fellows, R. F., Langford, D., Newcombe, R., &Urry, S. (2009). Construction management in practice. John Wiley &
Sons.
2. Levy, S. M. (2006). Project Management in Construction (McGraw-Hill Professional Engineering). McGraw-Hill
Professional.
3. PMI, A. (2008). Guide to the project management body of knowledge Project Management Institute. Newton Square,
PA.
4. Kerzner, H. (2013). Project management: a systems approach to planning, scheduling, and controlling. John Wiley &
Sons.
5. Mubarak, S. A. (2015). Construction project scheduling and control. John Wiley & Sons.
6. Newnan, D. G., Eschenbach, T., & Lavelle, J. P. (2004). Engineering economic analysis (Vol. 2). Oxford University
Press.
7. Standard, B. (2000). Management systems–Guidelines for the implementation of OHSAS 18001.
8. Hinze, J. (2000). Construction contracts. McGraw-Hill Science/Engineering/Math.
9. Uher, T. E., & Davenport, P. (2009). Fundamentals of building contract management. UNSW Press.

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INSATIABLE WANTS + FINITE RESOURCES =

THE NEED TO ECONOMISE

What is Economics?
• is a social science
• studies human behavior
• is the study of making choices
• is the study of the production,
distribution and consumption of
wealth in human society
• analyses WHAT, WHO, WHEN, HOW
and FOR WHOM society produces

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What is Economics?
• “It is the study of people in the ordinary business of life”.
(A. Marshall)

• “It is the study of how societies use scarce resources to

produce valuable commodities and distribute them among
different people”. (P. Samuelson)

• “Economics is the study of how individuals and groups

make decisions with limited resources as to best satisfy
their wants, needs, and desires”.

What is Economics?
Scarcity is not poverty!
• “Scarce means” does not mean “few”, doesn’t mean
uncommonness neither rarity (ex: oil).
• Scarcity arises from the assumption of very large (or
infinite) wants or desires, and the fact that resources to
obtain goods and services are limited.
• wants exceed resources necessary to obtain them
• therefore we must make choices
• every choice leads to a cost

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Engineering Economy
Two Definitions:
• Engineering Economy is a collection of mathematical
techniques that simplify economic comparisons.

• Engineering Economy involves formulating, estimating, and

evaluating the economic outcomes when alternatives to
accomplish a defined purpose are available.

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Problems

Simple Problems:
Simple
Intermediate
Complex

• Can generally be worked in one’s head without extensive analysis.

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Intermediate Problems

• Must be organized and analyzed

• Are sufficiently important to justify serious thought and action
• Have significant economic aspects
• Are primarily economic
• Are the principal subject of this course

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Complex Problems
• Such problems represent a mixture of 3 elements: economic,
political and humanistic.
• Complex problems are beyond the scope of this course from a
decision-making criteria point of view, but the economic
aspects of complex problems will be discussed.

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Role of Engineering Economic Analysis

• Assists in making decisions where:
• The decision is sufficiently important that serious thought and effort is
required.
• Careful analysis requires that the decision variables be carefully
organized and the consequences be understood.
• ECONOMIC ISSUES are a significant component of the analysis
leading to a decision.

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Rational Decision-Making Process

1. Recognize a decision problem
2. Define the goals or objectives
3. Collect all the relevant information
4. Identify a set of feasible decision
alternatives
5. Select the decision criterion to use
6. Select the best alternative

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Engineering Economic Decisions

Construction Profit

Planning Investment

Marketing
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Decision making process

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1. Recognize the Problem

• A problem exists when:
• A standard or expectation is not being met.
• A new standard or expectation is established and needs to be
achieved. (An opportunity.)

2. Define the Goal or Objective

• A goal or objective is the standard or expectation we wish to
meet.
• A goal is a general statement about what we expect.
• Pay all our bills on time.
• An objective is narrow and specific.
• Pay the auto loan on Tuesday morning at the bank.

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3. Assemble Relevant Data

• Information may be published or individual knowledge.
• Deciding which data is relevant may be a complex process.
• In engineering decision making two important sources of data are the
organization’s accounting and purchasing departments.

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4. Identify Feasible Alternatives

• The best alternative should be implemented. Occasionally this is to
maintain the existing situation.
• Alternatives considered should include both conventional and
innovative approaches.
• Only feasible alternatives should be retained for further analysis.

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5. Select the Criterion to Determine the Best

Alternative
• A criterion, or a set of criteria, is used to evaluate the alternatives to
determine which is best.
• The “best” alternative is relative.
• Selecting criteria to use is not easy because different groups often
support different criteria.
• The criterion most often used in economic decision-making is to “use
money in the most efficient manner.”

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Economic Decision-Making Problems Fall Into Three

Categories
1.For fixed input situations, maximize the benefits or other
outputs.
2.For fixed output situations, minimize the costs or other inputs.
3.Where inputs and outputs vary, maximize (benefits – costs).

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6. Construct the Model

• Requires merging the various elements: objective, relevant
data, feasible alternatives and selection criteria.
• In economic decision making the models are usually
mathematical.
• A model is a representation of reality.
• A model must represent the important parts of the system at hand.
• Be adequate to solve the problem.

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7. Predicting the Outcomes for Each

Alternative
• To avoid complications, we assume that a decision is based on
a single criterion. If necessary, multiple criteria are combined
into a single criterion.
• Usually the consequences or alternatives are stated in the
form of money, i.e., costs/benefits.
• Costs and benefits may occur over a short or long time period.

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8. Choosing the Best Alternative

• When choosing the best alternative both economic and non-economic
criteria must be considered.
• During the prior steps in the decision making process, only dominant
alternatives may be included based on either economic or non-
economic criteria.
• The elimination of feasible alternatives may predetermine the
outcome of the decision making process.

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9. Audit the Results

• Compare the results of changes to the predictions to assure
that the chosen alternative was implement as planned and the
results are as expected.
• Fix deviations from planned changes.
• Make sure prediction errors are not repeated.
• Identify added opportunities.
• Audits promote realistic economic analysis and
implementation.

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SOME FUNDAMENTAL ECONOMIC CONCEPTS

VALUE & UTILITY
• In economics, value designates the worth importance that a
person attaches to an object or a service.
• The value of an object is not inherent in the object itself, but is
inherent in the regard that a person or people have for it.
• Value should not be confused with the cost or price of an
object.
• In engg. economics studies, there may be little or no relation
between the value a person assigns to an article and the cost
for providing it or the price that is demanded for it.

SOME FUNDAMENTAL ECONOMIC CONCEPTS

VALUE & UTILITY

• The possibility for exchange exists, when each of two persons have utilities desired by the
others.
• Utilities of objects can be created by changing physical environment e.g. in the area of producer
utility, the machining a bar of steel to produce a shaft for a rolling mill has changed the utility of
that steel bar by manipulation of the physical environment.
• The purposes of engg. efforts is to determine how physical environment can be altered to
create the most utility for the least cost.

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SOME FUNDAMENTAL ECONOMIC CONCEPTS

Consumer and Producer Goods

• Two classes of goods are recognized by the economists as

Consumer goods and Producer goods.
• Consumer goods are products and services that directly satisfy
human wants.
• Producer goods also satisfy human wants but do so indirectly
as a part of production of construction process. Thus, in the
long run, they are used as means to an end.
• Examples of Producer goods are crushers, vibrators, bulldozers,
ships, etc.

Law of Supply and Demand

• Note: Supply is from suppliers (producers) whereas demand is for

consumers

• A supply and demand diagram, illustrating

the effects of an increase in supply and decrease in demand with
increase in price.

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SOME FUNDAMENTAL ECONOMIC CONCEPTS

Economy of Exchange

• Economy of exchange occurs when utilities are exchanged by two or more

people. Here utility means anything that a person may receive in an exchange
that has any value whatsoever to him.
• A buyer will purchase an article when he has money available and when he
believes that the article has equal or greater utility for him than the amount
required to purchase it.
• A seller will sell an article when he believes that the amount of money to be
received for the article has greater utility than article has for him.
• An exchange will not be affected unless at the time of exchange both parties feel
that they will get benefit; or in other words the exchange results in mutual
benefits.

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