An Najah National University

Faculty of Engineering

CONSTRUCTION ECONOMICS &

MANAGEMENT

Dr. Mohammed ABUNEMEH

 Course Outline
 Introduction
 Life cycle of construction project
 Foundation of engineering economy
 How time and interest affect money
 Examples on combined factors
 Present worth analysis
 Construction scheduling technique and usage of bar chart.
 Critical Path Method (CPM); precedence diagramming method
 Resource planning and cash flow analysis
 Type of construction contracts
 Course Outline
 Quantity surveying & Estimating construction cost
 Bid documents
 Grading System
 Grading policy for this course will be based on the following:
 First Exam 25%
 Second Exam 25%
 Final Exam 50%
 Text Book & References
 Text Book:
 Estimating Construction Cost, Robert R. Peurifoy
 Edward Fisk and Wayne Reynolds, "Construction Project
Administration", 9th edition
 Hinze, Jimmie, “Construction Planning and Scheduling”, 3rd Ed.,
2008
 Blank, L. & Tarquin, A., (2012), Engineering Economy 7th
Edition, New York: McGraw-Hill.
 Introduction
 Definition of Terms:
 Construction Management
 Construction Contracting
 One-to-One Concept (in organization)
 Construction Management
 Construction:
The process by which material, equipment,
machineries are assembled into a permanent facility.
 Management
The planning, directing, and controlling of resources
(Material, Manpower, Machines, Money) to achieve
the desired goal (Time, Cost, Quality)
 Construction Management
 Covers the following area:
 Planning and Scheduling
 Business and communication system
 Material control
 Payment procedure
 Changes to the work
 Inspection and acceptance
 Construction Contracting
 Contracting:
The legal and business activities needed for initiating,
executing, and terminating a construction contract.
 One-to-One Concept
 Previous Administration functions involve different
parties (Owner, contractors, Engineers)
 To minimize confusion, conflicts, claims, use:
One to One concept
 Each party has a single representative who
communicates important project information and
orders.
Classification of Construction Projects:
 By Size: Small, Medium, Large, Mega.
 By Ownership: Private, Public, Military.
 By Usage: Residential, Commercial, Industrial,
Utility. (Usage can be expanded to subcategories).
 By Scope (preferred):
 Building (Residential, non residential), emphasis
on aesthetics.
 Engineering (Highway, Heavy, Utility) emphasis
on function
 Industrial: emphasis on production
 The Construction Participants
 Three key players in the game:

 The client (or Owner or stakeholder)

 The A/E or consultant
 The contractor (or Constructor or Builder)
 Relationship Among Parties

contract General
Owner
build
Contractor
own
contract Project
contract
build
Design

A/E Subs
 The Owner
The owner is responsible for:
Funding and paying bills for the construction of project.
Determining what the project will include (also called the
scope of the project), when the project can begin and must
end (the schedule),
Receive the ultimate benefits of the finished project.
 The Owner
 Owner organizations can be broken into two major categories,
public and private.

 A public agency exists for the ultimate benefit of the

citizens, the general public. Examples of public projects:,
an highway, or an Universities, schools.

 A private organization can be described as any individual,

partnership, corporation, or institution that builds a project
for its own use or for resale.

 The owner enters into separate contract with Architect and

contractor.
 The Design Professional
The consultant is a party of the contractual relationship has
professional skills in engineering whether civil, structure,
architectural, mechanical. Etc.
Who acts in behalf of the client.
 The Design Professional
The major role of the design professional:

Is to interpret or assist the owner in developing the project's scope,

budget, and schedule and to prepare construction documents that
will be used by the construction contractor to build the project.

The architect typically sub-contracts portions of work to other

design professionals such as structural engineers, landscape
architects, electrical & mechanical engineers

In almost all cases the design professional is a licensed, registered

professional who is responsible for the physical integrity of the
project.
 The Contractor
 A contractor is an individual or an entity that enters into a
contract with the owner to carry out the construction work.

 If only one contractor is appointed he may be known as the

main/prime contractor.

The Contractor is responsible for the interpretation of the

contract documents into physical facility. Transform idea to
reality
 The Contractor
In most cases the prime contractor divides the work among
many specialty contractors called subcontractors. On a large
project these subcontractors may also divide up the work into
even smaller work packages
 The Subcontractors
 A contractor assigned and work under the supervision of the
main contractor and who has special skills, experiences and
equipment to deal with specialized aspects of the work.

 Nominated subcontractor
 Non-nominated subcontractors
 Project Life Cycle
The major phases in the project cycle that are common to
most design and construction projects are:

Project Planning
Design
Schematic Design
Design Development
Contract Documents
Construction Procurement (Bidding Phase)
Construction
Occupancy
 Project Planning Phase
 During this phase of the project the owner makes decision that
set the tone for the project. All projects begin with an idea or a
need
 The most critical decision that is made during this project
phase is to make a decision as to whether or not to proceed
with the project (called a go/no go decision).
 Project Planning Phase
Phase activities:

Feasibility studies
Budgeting & Financing
Scheduling
Site selection/acquisition
Site investigation
 Design Phase
Design process involves:
Schematic Design
Talk to owner, rough sketches
Design Development
Major Systems & component selected
Contract Documents
Preliminary Cost estimate
Develop Preliminary working drawings
Develop working drawings with Specifications
 Schematic Design
The A/E reviews and evaluates the owner’s program and budget
requirements and discusses with the owner alternative approaches to
the design and construction
During schematic design, the A/E prepares conceptual design
documents. These may include: preliminary sketches ,small scale
schematic plans, elevations, sections, diagrams, and other graphic
and written documents, General written description of project.
The completion of the schematic design phase represents
approximately 30 percent design completion for the project
 Design Development
The design development phase takes the project from about 30
percent to approximately 60 percent design.
It is the time when the design team will be evaluating and selecting
all the major systems and components of the project.
During this phase of the project the design team is involved in the
evaluation and finalization of all the architectural components and
project systems.
Contract Documents
 Construction Procurement:
Solicitation
Proposal preparation
Bid/proposal opening
Bid/proposal evaluation
Award of contract
Final negotiation
 Construction
Mobilization
Subcontracting
Purchasing
Permits
Site preparation
Foundations
Interior finishes and equipment
 Occupancy/ Post Construction:
Start-up and testing
Leasing
Operation
Correction
Repairs/maintenance
Building evaluation
 Level of Influence on cost

Project Cost
Influence

Time