Fundamentals of Civil Engineering Construction - Abebe Dinku, Alfred Ngowi and Ninatubu Lema Final Version 20.1.2015

Abebe Dinku Ninatubu Lema Alfred Ngowi
2nd Edition, 2015

PREFACE
Our motivation for writing this book was to provide students with a holistic,
integrative view of the management of civil engineering construction. A holistic
view focuses on how the construction industry is organized, who are the key players
and the various processes involved in getting construction projects planned and
implemented. Integration includes the process of identifying the land on which a
facility shall be constructed, carrying out appropriate designs, identifying a
contractor and applying construction management principles to get the facility
constructed.
In the context of the globalization of the construction industry, management of the

construction process is receiving increasing attention. As workforces move from one
country with a particular cultural background to another with a different culture in
pursuit of construction opportunities, it has become evident that greater attention
needs to be paid to the way they are managed. Several books have been written on
the subject of construction management. However, construction education
particularly in African universities is still delivered as a component of engineering,
architecture or quantity surveying programmes. Even the course contents of the
stand-alone construction management programmes hardly cover the core skills that
are required in the management of the construction processes.
Efforts aimed at delivering construction management programmes that are based on

sound management theory need to be pursued vigorously given that the construction
environment has changed drastically as the result of globalisation and what worked
in the past few decades may not be relevant today.
The current textbook communicates the fundamentals of civil engineering

construction management as it is practiced today, with particular emphasis on
African practices, and it is summarised as follows:
Chapter One introduces the origins of construction engineering as it developed from
i
a combined expertise as practiced by the Master Builder. Over time stratification of
the combined expertise took place and resulted into various specializations of
engineering, architecture, quantity surveying, among others.
Chapter Two describes the parties involved in the construction industry and their
roles and professional relationships. The parties that include the client, designer and
constructor are described for different projects and their roles and interactions at
different stages of the projects are described. Chapter Three describes the stages of
civil engineering projects starting from the inception, preliminary design, detailed
design, construction, operation and maintenance. The importance of carrying out
adequate feasibility studies is emphasized.
Chapter Four describes project financial appraisal, depreciation and inflation. The
methods of financial project appraisal and the methods of dealing with multiple
alternatives are described. The causes of depreciation are explained and the methods
of dealing with depreciation are discussed. Chapter Five describes sources of project
finance. It defines development project and list global and regional sources of
finance as well as how such finances are secured, managed and repaid.
Chapter Six describes planning studies before, during and after construction focusing
particularly on the construction process. Pre-tender, pre-contract and contract
planning are described and how their importance to successful construction projects
is shown. Chapter Seven describes planning techniques. Strategic and operational
planning levels are explained; the planning techniques of bar-chart and linked bar-
chart; network analysis; line of balance; the programme evaluation and review
technique and space-time diagrams are explained. Chapter Eight describes the least
cost scheduling and resource levelling, variation of direct costs with time, schedule
compression, resource levelling is described and examples are given.
Chapter Nine describes human resource management. Basic principles of resource

management, human resource management and labour productivity are explained
and examples are presented. Chapter Ten describes equipment and materials
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management. Included in the chapter are: Basic principles of equipment
management, equipment productivity and cost control, estimation of equipment
productivity, and plant and equipment maintenance.
Chapter Eleven describes procurement and management of construction professional

services contracts. The principles of procurement of construction professional
services contracts are explained. Procedures for the selection of consultants as well
as for the procurement of construction professional services are explained. Criteria
for evaluation of proposals; negotiation and award of contract; management of
construction professional services contracts as well as performance evaluation is
explained.
Chapter Twelve describes the selection of contractors and management of works

contracts. Construction project management using the traditional approach is
explained. It focuses on construction contracts, contract documents and their
interpretation, and conditions of contract.
Chapter Thirteen describes insurance requirements in construction industry. The

historical background of exchange rates and rules of behavior as well as the
principles of insurance policy are explained. Insurance requirements in African
construction sector are also discussed.
Chapter Fourteen describes claims and dispute resolution in the construction

industry. International projects and constructs as well as their administration are
explained. Claims and their classification are described. Dispute resolution
mechanisms as well as the impact of claims are explained, and finally claim cases in
selected road projects in Ethiopia are discussed briefly summarized.
Chapter Fifteen describes occupational health and safety in the construction industry.
The principles of safety management systems in the construction industry, safety
legislation, site practices, as well as current developments in management of
construction safety are explained.
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It is the intention of the authors that future titles in the subject will shift towards the
emerging trend of theory-based construction management programmes. It is planned
that a follow-up book will communicate the current delivery of construction
management programmes at an advanced level, before a book that communicates the
paradigm shift to theory-based construction management programmes is authored.
Abebe Dinku
Ninatubu Lema
Alfred Ngowi
iv
ACKNOWLEDGMENTS
We want to sincerely acknowledge with special thanks and appreciation the financial
support of African Network of Scientific and Technological Institutions (ANSTI)
under the auspices of UNESCO that enabled the accomplishment of this textbook.
Special thanks deserve Prof. J. G. M. Massaquoi, ANSTI Director, for bringing us
together and his encouragement in the preparation of the textbook. In addition we
would like to thank Ms Shaza Yahia, Program Assistant for Science and Technology,
UNESCO Addis Ababa cluster office, for coordinating the efforts of the co-authors
who are located at geographically distant places.
We would also like to thank colleagues in the Faculty of Technology, Addis Ababa
University; Faculty of Civil Engineering and the Built Environment, University of
Dar es Salaam; and Faculty of Engineering and Technology, University of Botswana
for their formal and informal contributions in the various chapters of the book as well
as for checking the accuracy of the manuscript.
It is also important to note that the textbook includes contributions from numerous
students of the three universities as well as construction managers in the three
countries as gleaned from professional conversations. We want them to know that
we sincerely appreciate their comments and suggestions. Next, it is important to note
that the works of numerous authors were cited in the body of the text book.
Particularly chapter seven includes techniques such as line of balance that were
developed by other authors. In this case we acknowledge the work of Frank Harris
and Ronald Macaffer.
Finally, we wish to extend our thanks to the three Universities for availing the
opportunity to work on the preparation of the text book.
Abebe Dinku
Ninatubu Lema
Alfred Ngowi
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TABLE OF CONTENTS
Preface ............................................................................................................................i
Acknowledgements .......................................................................................................v
Chapter 1
Civil Engineering Construction..................................................................................1
1.1 Introduction .......................................................................................................1
1.2 Engineering as a Profession...............................................................................4
1.3 The Role of Education.......................................................................................5
1.4 Engineering Professional Organizations ...........................................................7
1.5 The Construction Discipline..............................................................................8
1.6 Developing an Academic Theory ....................................................................11
1.7 Cost Implications.............................................................................................12
Chapter 2
The Members of The Construction Team ...............................................................14
2.1 The Promoter ...................................................................................................14
2.1.1 The private sector ................................................................................14
2.1.2 The public sector .................................................................................15
2.2 The Construction Process ................................................................................16
2.3 The Construction Team ...................................................................................18
2.3.1 The consulting engineer (the Engineer)...............................................18
2.3.2 The private quantity surveyor..............................................................20
2.3.3 The structural engineer ........................................................................22
2.3.4 The service engineer ............................................................................23
2.3.5 The resident engineer (RE)..................................................................24
2.3.6 The supplier .........................................................................................26
2.3.7 The subcontractor ................................................................................27
2.3.8 The plant hirer .....................................................................................28
2.3.9 Planning control officer .......................................................................29
2.3.10 Factory inspector .................................................................................29
2.3.11 The contractor......................................................................................29
2.3.12 The construction project manager .......................................................30
2.4 The Contractor’s Head Office Structure..........................................................31
2.4.1 The contractor’s quantity surveyor......................................................33
2.4.2 The planning engineer .........................................................................34
2.4.3 The work study engineer .....................................................................35
2.4.4 The bonus surveyor .............................................................................36
2.4.5 The estimator .......................................................................................37
2.4.6 The buyer.............................................................................................38
2.4.7 The personnel officer...........................................................................39
2.4.8 The industrial relations officer ............................................................40
2.4.9 The safety officer.................................................................................41
2.4.10 The plant manager ...............................................................................42
2.4.11 The contracts manager.........................................................................42
2.4.12 The wages and accounts manager .......................................................42
2.4.13 The typing supervisor ..........................................................................43
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2.5 The Contractor’s Site Organization Structure .................................................44
2.5.1 The contracts manager .........................................................................46
2.5.2 The site manager..................................................................................47
2.5.3 The general foreman ............................................................................48
2.5.4 The trade’s foreman .............................................................................48
2.5.5 The ganger ...........................................................................................49
2.5.6 The charge hand...................................................................................49
2.5.7 The operative .......................................................................................49
2.5.8 The site engineer..................................................................................50
2.5.9 The site clerk/materials controller .......................................................51
Chapter 3
Stages of Civil Engineering Projects ........................................................................52
3.1 Introduction......................................................................................................52
3.2 Feasibility Study (Investigation and reports)...................................................53
3.2.1 The nature of the feasibility study .......................................................56
3.2.2 Importance and extent of investigation................................................56
3.3 The Engineer’s Terms of Reference ................................................................57
3.3.1 Scope of work statement......................................................................57
3.3.2 Flexibility and consideration of alternatives........................................57
3.3.3 Types of investigation or study............................................................58
3.4 Nature of Investigations...................................................................................59
3.4.1 Technical investigations ......................................................................59
3.4.2 Economic and social investigations .....................................................59
3.4.3 Use of existing information and plans .................................................59
3.4.4 Site exploration ....................................................................................60
3.4.5 Physical data ........................................................................................60
3.4.6 Models .................................................................................................60
3.4.7 Public participation ..............................................................................61
3.4.8 Outline programme ..............................................................................61
3.4.9 Cost estimates ......................................................................................61
3.5 The Engineer’s Report .....................................................................................62
3.5.1 Objective..............................................................................................62
3.5.2 Presentation..........................................................................................62
3.5.3 Form of report......................................................................................63
3.6 Proceeding With The Project...........................................................................63
3.6.1 The next stage ......................................................................................63
3.6.2 Public inquiries ....................................................................................64
3.7 Design and Preparation for Contract Documents ............................................64
3.7.1 Design proper.......................................................................................64
3.7.2 Preparation of contract documents ......................................................66
3.7.3 Overall approach to design and possible alternatives ..........................67
Chapter 4
Financial Project Appraisal,Depreciation and Inflation........................................70
4.1 Introduction............................................................................................................70
4.2 Methods of Financial Project Appraisal ..........................................................71
4.2.1 Straight cost method ............................................................................72
4.2.2 Payback method...................................................................................73
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4.2.3 Rate of return method ..........................................................................77
4.2.4 Present value (cost) method.................................................................79
4.2.5 Internal rate of return method..............................................................84
4.3 Dealing With Multiple Alternatives ................................................................88
4.3.1 Mutually exclusive projects.................................................................88
4.3.2 Incremental analysis ............................................................................88
4.4 Postponing an Investment................................................................................90
4.5 Depreciation.....................................................................................................90
4.5.1 Methods of depreciation calculations ..................................................91
4.6 Inflation ...........................................................................................................99
4.6.1 Interest and inflation............................................................................99
4.6.2 Working in real terms ........................................................................100
4.6.3 Working in monetary terms (or numbers of $'s)...............................100
Chapter 5
Sources of Large Development Project Finance ...................................................104
5.1 Introduction ...................................................................................................104
5.2 Sources of Finance.........................................................................................104
5.3 Development Banks.......................................................................................106
5.3.1 African Development Bank group (AfDB group) .............................107
5.3.2 Asian Development Bank (AsDB) ....................................................109
5.3.3 Inter-American development bank (IDB)..........................................110
5.3.4 The World Bank group ......................................................................111
5.4 The World Bank Approach to The Project Cycle..........................................114
5.4.1 Project identification..........................................................................116
5.4.2 Project preparation.............................................................................119
5.4.3 Project appraisal ................................................................................122
5.4.4 Negotiations.......................................................................................123
5.4.5 Project implementation......................................................................124
5.4.6. Project evaluation ..............................................................................128
5.5 Other Approaches to the Project Cycle .........................................................130
5.6 Summary........................................................................................................135
Chapter 6
Planning Before, During andAfter Construction .................................................136
6.1 Introduction ...................................................................................................136
6.2 Pre-tender Planning .......................................................................................137
6.2.1 Decision to tender ..............................................................................138
6.2.2 Pre-tender arrangements ....................................................................140
6.2.3 Site report ..........................................................................................141
6.2.4 Enquiries to subcontractors and suppliers .........................................142
6.2.5 Method and resource statement .........................................................142
6.2.6 Site organization structure .................................................................146
6.2.7 Schedule of preliminary items and site overheads ............................146
6.2.8 Pre-tender programme .......................................................................147
6.2.9 Management adjudication of the estimate .........................................147
6.3 Pre-contract Planning ....................................................................................149
6.3.1 The pre-contract planning process.....................................................149
6.3.2 The pre-contract meeting and arrangements for commencing work .149
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6.3.3
The pre-contract meeting - contractor's team ....................................150
6.3.4
Chief estimator...................................................................................150
6.3.5
Contracts manager .............................................................................150
6.3.6
Company buyer or quantity surveyor (In the medium sized
organization) ......................................................................................151
6.3.7 Office manager ..................................................................................151
6.3.8 The pre-start meeting .........................................................................152
6.3.9 Placing orders for subcontractors and suppliers ...............................152
6.3.10 Site layout planning ...........................................................................152
6.3.11 Construction method statements........................................................156
6.3.12 The master programme preparation...................................................157
6.3.13 Preparation of requirement schedules................................................158
6.3.14 The preparation of contract budgets ..................................................160
6.4 Planning During Construction .......................................................................166
6.4.1 Meetings as part of control process ...................................................169
Chapter 7
Planning Techniques ...............................................................................................172
7.1 Levels of Planning in Construction ...............................................................172
7.2 Involvement in Planning................................................................................173
7.2.1 The client (sponsor) ...........................................................................173
7.2.2 The designers .....................................................................................173
7.2.3 The contractors ..................................................................................174
7.3 Planning Techniques......................................................................................175
7.3.1 Bar-charts and linked bar-charts ........................................................175
7.3.2 Network analysis................................................................................179
7.3.3 Line of balance...................................................................................194
7.4 Other Planning Techniques............................................................................203
7.4.1 Programme evaluation and review technique – PERT ......................203
7.4.2 Space-time diagrams..........................................................................209
7.5 Computers and Construction Planning ..........................................................210
7.5.1 Preparing a schedule of activities ......................................................211
7.5.2 Resources ...........................................................................................212
7.5.3 Monitoring and control ......................................................................213
7.5.4 Cost and revenues ..............................................................................214
7.5.5 ‘What-if’ modeling ............................................................................215
7.6 Data Exchange ...............................................................................................216
7.6.1 Estimating ..........................................................................................217
7.6.2 Planning..............................................................................................218
7.6.3 Cost control ........................................................................................218
7.6.4 Valuations ..........................................................................................219
7.6.5 Variations ...........................................................................................219
Chapter 8
Least Cost Scheduling andResource Levelling .....................................................220
8.1 Introduction....................................................................................................220
8.2 Least Cost Scheduling ...................................................................................220
8.3 Important Terminologies ...............................................................................221
8.4 Variation of Direct Costs with Time..............................................................222
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8.5 Variation of Direct Costs with Time .............................................................224
8.6 Schedule Compression ..................................................................................225
8.7 Resource Levelling ........................................................................................230
Chapter 9
Human Resources Management.............................................................................246
9.1 Basic Principles of Resources Management..................................................246
9.1.1 Introduction .......................................................................................246
9.1.2 Nature and scope of construction projects.........................................247
9.1.3 Key resources in construction projects and their determination........248
9.1.4 Key tools in the determination of resources for a project..................250
9.2 Human Resources Management and Labour Productivity ............................254
9.2.1 Rationale for human resources management.....................................254
9.2.2 Team building for small projects.......................................................255
9.2.3 Contractor’s organization structure ...................................................257
9.2.4 Labour productivity ...........................................................................270
9.2.5 Scheduling of labour on a construction site.......................................294
Chapter 10
Equipment and Materials Management................................................................298
10.1 Introduction ...................................................................................................298
10.2 Construction Equipment Management ..........................................................299
10.2.1 Basic principles of equipment management ......................................299
10.2.2 Equipment productivity and cost control...........................................309
10.2.3 Estimation of equipment productivity ...............................................319
10.2.4 Plant and equipment maintenance .....................................................329
Chapter 11
Procurement and Management of ConstructionProfessional Services Contracts342
11.1 Introduction ...................................................................................................342
11.2 Principles of Procurement of Construction Professional Services Contracts 343
11.3 Procedures for Selection of Consultants........................................................344
11.3.1 Types of procurement of construction professional services ............344
11.3.2 Quality and Cost Based Selection (QCBS) .......................................344
11.3.3 Quality Based Selection (QBS) .........................................................346
11.3.4 Selection under a Fixed Budget (SFB) ..............................................348
11.3.5 Least Cost Selection (LCS) ...............................................................349
11.3.6 Other methods of selection ................................................................350
11.4 Procedures of Procurement of Construction Professional Services ..............351
11.4.1 Steps in the selection process ............................................................351
11.4.2 Preparation of the Terms of Reference..............................................352
11.4.3 Preparation of the cost estimate and budget for the assignment........354
11.4.4 Advertising for Expression of Interest...............................................355
11.4.5 Preparation of shortlists .....................................................................355
11.4.6 Request for Proposals ........................................................................356
11.4.7 Preparation of Proposals....................................................................358
11.4.8 Receipt and opening of Proposals .....................................................358
11.4.9 Evaluation procedure for Proposals...................................................359
11.5 Criteria for Evaluation of Proposals ..............................................................361
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11.6 Negotiation and Award of Contract...............................................................363
11.7 Management of Construction Professional Services Contracts .....................364
11.7.1 General principles ..............................................................................364
11.7.2 Supervising consultants .....................................................................365
11.8 Performance evaluation .................................................................................368
Chapter 12
Selection of Contractors andManagement of Works Contracts .........................370
12.1 Introduction....................................................................................................370
12.2 Construction Project Procurement Using the Traditional Approach .............372
12.2.1 Construction project stages................................................................372
12.2.2 Selection of a contractor ....................................................................374
12.3 Construction Contracts ..................................................................................385
12.3.1 General principles on formation of contract ......................................385
12.3.2 Contract documents and their interpretation.....................................391
12.3.3 Conditions of Contract.......................................................................394
Chapter 13
Insurance Requirements inConstruction Industry...............................................410
13.1 Introduction....................................................................................................410
13.2 Historical Background ...................................................................................411
13.3 Principles of Insurance...................................................................................413
13.4 Insurance Policy.............................................................................................417
13.5 Major Types of Insurance Policy...................................................................417
13.5.1 Professional indemnity insurance (PI)...............................................417
13.5.2 Contractor’s all risks policy...............................................................418
13.5.3 Contractors third party liability policy ..............................................418
13.5.4 Contractors employers liability policy...............................................419
13.6 Insurance Requirements in African Construction Sector: Discussion and
Summary........................................................................................................419
Chapter 14
Claims and Dispute Resolution Mechanisms in the Construction Industry ......423
14.1 Introduction....................................................................................................423
14.2 International Projects .....................................................................................424
14.3 International Contracts...................................................................................425
14.4 Definition of Contract....................................................................................426
14.5 Types of Contracts .........................................................................................428
14.5.1 Re-Measurement form of contract .....................................................428
14.5.2 BOT form of contract ........................................................................428
14.5.3 Turnkey Projects ................................................................................429
14.5.4 Lump sum form of contract ...............................................................429
14.6 Forms of Contract Administration.................................................................429
14.6.1 International forms of contract administration ..................................429
14.6.2 The FIDIC form of contract...............................................................431
14.7 Claims in International Projects.....................................................................432
14.8 Classification of Claims.................................................................................433
14.8.1 Claims within the provisions of the contract ...................................434
14.8.2 Claims outside the provisions of the contract ..................................434
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14.8.3 Claims in sort...................................................................................434
14.8.4 Quantum meruit (“as much as it is worth”) claims .........................435
14.8.5 Ex-Gratia claims ..............................................................................435
14.8.6 Claims concerning disruption and delay .........................................435
14.8.7 Claims concerning delay on site handoverrights of way.................436
14.8.8 Claims concerning the execution of works......................................437
14.8.9 Claims concerning variations ..........................................................439
14.8.10 Claims concerning importation issues.............................................440
14.9 Assessment of Claims by the Engineer .........................................................440
14.9.1 Delays for which the client is responsible .........................................441
14. 9.2 Delays for which the client is not responsible ...................................442
14.9.3 Evaluating a claim for costs...............................................................442
14.9.4 Evaluating a claim for delay..............................................................442
14.9.5 Concurrent delay................................................................................444
14.10 Dispute Resolution Mechanisms ...................................................................446
14.10.1 Direct negotiation .........................................................................448
14.10.2 Mediation .....................................................................................448
14.10.3 Conciliation ..................................................................................448
14.10.4 Mini-trial ......................................................................................449
14.10.5 Claims review board.....................................................................449
14.10.6 Pre-arbitral review board..............................................................449
14.10.7 Arbitration ....................................................................................450
14.11 Impact of Claims ...........................................................................................451
14.11.1 Financial impact of claims ...........................................................451
14.11.2 Effect of claims on project completion time ................................452
14.11.3 Other effects of claims .................................................................452
14.12 Observations in Selected Ethiopian Road Projects........................................453
14.13 Proposed Changes to the FIDIC Forms of Contract......................................455
14.13.1 Instruction to tenderers.................................................................455
14.13.2 The FIDIC form of contract .........................................................456
Chapter 15
Occupational Health and Safety in the Construction Industry...........................457
15.1 Introduction ...................................................................................................457
15.2 Principles of Safety Management Systems in the Construction Industry .....458
15.2.1 Policy and planning ...........................................................................460
15.2.2 Refurbishing contracts .......................................................................471
15.2.3 Protection from excessive noise ........................................................472
15.2.4 General tools: safe use and handling .................................................473
15.2.5 Working with heavy plant .................................................................473
15.2.6 Demolitions .......................................................................................475
15.2.7 Working near existing services..........................................................476
15.2.8 Personal protection ............................................................................480
15.2.9 Working over water ...........................................................................484
REFERENCES ..........................................................................................................486
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Chapter 1
Civil Engineering Construction
1.1 Introduction
During the pre-medieval period design of the constructed product proceeded in an

evolutionary manner for several thousand of years as materials were utilized on a
trial and error basis following on from prior experience. The ancient Egyptians, for
instance, used the new material of stone for constructing columns in a similar manner
to the reed bundles which had previously been used for column construction, as well
as for constructing the Pyramids, which have remained structures of great marvel till
now.
During the first Century BC Vitruvius is famous for asserting in his book De
architectura that a structure must exhibit the three qualities of firmitas, utilitas,
venustas – that is, it must be strong or durable, useful, and beautiful. According to
Vitruvius, architecture is an imitation of nature. As birds and bees built their nests,
so humans constructed housing from natural materials that gave them shelter against
the elements. When perfecting this art of building, the ancient Greek invented the
architectural orders: Doric, Ionic and /Corinthian. It gave them a sense of
proportion, culminating and understanding the proportions of the greatest work of
art: the human body. This led Vitruvius in defining his Vitruvian Man, as drawn
magnificently by Leonardo da Vinci: the human body inscribed in the circle and the
square (the fundamental geometric patterns of the cosmic order).
During the eleventh and twelfth centuries, buildings and other structures were
constructed using a master builder system. Masons, carpenters and labourers were
itinerant workers who traveled from job site to job site in search of work. The master
2 Fundamentals of Civil Engineering Construction Management
builder obtained his status through personal reputation, completed projects or a

combination of the two. He worked directly for the client, and served as the architect,
engineer and constructor as we know them today. Training and education in the
various skills was usually handed down from one generation to the next. However,
occasionally masters of the various trades took on apprentices.
During the twelfth century a much more formalized system centered on craft guilds
began to develop. By the beginning of the thirteenth century, building industries in
Europe were organized around the craft guild system (Salzman 1952; Harvey 1972).
These guilds took on the responsibility for training building craftsmen. Much as in
earlier centuries, some master masons or carpenters became employers of skilled
craftsmen and took on the responsibility of design, coordination and supervision
(Mitchell, 1977). The structure of the medieval building team is illustrated in Figure
1.1.
Client
Master Builder
Craftsman Craftsman Craftsman
Figure 1.1 Structure of medieval building team
Due largely to The Great Fire of London around 1666, the system shown in Figure 1
could not keep pace with the speed of reconstruction required by industry and the
general public (Mitchell, 1977). Individual craftsmen began to form their own
companies and to compete for work. Engineers and architects began to separate from
craftsmen. They usually tended to be formally educated rather than artisans or
craftsmen. Quantity surveyors also began to appear and were generally synonymous
Civil Engineering Construction 3
with architects. The structure of the building industry during this time is shown in
Figure 1.2.
Client
Quantity Surveyor
Architect
Master Builder Master Builder Master Builder Master Builder
Figure 1.2 Structure of building industry in the medieval period.
Due to various influences such as the industrial revolution and technological

advances, the nineteenth and twentieth century witnessed further changes in the
building industry. Designers became more specialized resulting in the field of
consultants. Master tradesmen became actual subcontractors and increasingly more
specialized. These changes led to the structure of the building industry shown in
Figure 1.3. This structure is still largely representative of the industry today.
Irrespective of the differences between design and the construction process and the
structure of the industry there is evidence to suggest that there has always been to
some extent a problem of communication between members of the construction
team. An example of this relates to the construction of an aqueduct planned in the
second century AD by one Nonius Datus. Part of the aqueduct had to pass through a
mountain and so two teams of contractors started tunneling from opposite sides of
the mountain. Unfortunately they passed each other. Datus returned to the site to
check his specifications and found that they were correct but that the contractors had
failed to follow them (Bersidge, 1976).
Client
Architect
General Contractor Consultant Consultant
Subcontractor Subcontractor Subcontractor
Figure 1.3 Twentieth century building team.
1.2 Engineering as a Profession
Prior to the Renaissance, there is little evidence of written history proclaiming that
the artist, engineer and architect, were more honourable professions, as viewed by
society, than the stonecutter and labourer. However, during the Renaissance (1400's
to 1600's) intellectuals began to judge, classify, and stratify manual work of which
they had little or no knowledge (Gimpe, 1983). This stratification and classification
are reinforced in the writings of Leonardo de Vinci. It is interesting to note that both
architecture and engineering, as academic disciplines, recognized that in order to
achieve professional status as viewed by society, and in order to be accepted as an
academic discipline they had to first separate themselves from the manual processes
of construction. Additionally, they had to redefine the terms so that architecture and
engineering were not synonymous with construction and with each other.
During the seventeenth and eighteenth centuries, architecture and engineering

increasingly separated themselves from construction due to formal education,
industrialization, and other factors. The term civil engineering was first used in the
18th century to distinguish the newly recognized profession from military
engineering, until then preeminent. From earliest times, however, engineers have
engaged in peaceful activities, and many of the civil engineering works of ancient
and medieval time-such as the Roman public baths, roads, bridges, and aqueducts;
the Flemish canals; the Dutch sea defenses; the French Gothic cathedrals; and many
other monuments reveal a history of inventive genius and persistent experimentation.
1.3 The Role of Education
Engineer's struggle to be recognized as an academic discipline and as profession did

not end with the establishment of professional organizations. Education and
economic factors were to ascend this final hurdle for professional recognition. The
beginnings of civil engineering as a separate discipline may be seen in the foundation
in France in 1716 of the Bridge and Highway Corps, out of which in 1747 grew the
Ecole Nationale des Ponts et Chaussées (“National School of Bridges and
Highways”). Its teachers wrote books that became standard works on the mechanics
of materials, machines, and hydraulics, and leading British engineers learned French
to read them. As design and calculation replaced the rule of thumb and empirical
formulas, and expert knowledge was codified and formulated, the non-military
engineer moved to the front of the stage. Talented, if often self-taught, craftsmen,
stonemasons, millwrights, toolmakers, and instrument makers became civil
engineers. In Britain, James Brindley began as a millwright and became the
foremost canal builder of the century; John Rennie was a millwright’s apprentice
who eventually built the New London Bridge; Thomas Telford, a stonemason,
became Britain’s leading road builder.
It was not until 1802 when curricula in military engineering were developed at the
Military Academy at West Point, that engineering programs in the United States
were begun. These programs were patterned after the French programs, which
concentrated on theoretically, oriented engineering education (Reynolds, 1991). By
1860 there were only a half dozen successful civilian engineering programs in the
United States. With the passage of the Morril Act in 1862, establishing agricultural
and mechanical colleges, civilian engineering programs grew rapidly. There were
approximately seventy such programs by 1872 and eighty-five by 1880 (Reynolds,
1991). Many of these programs were initially weak and were often not viewed as
scholarly (Pletta, 1984). It was the graduates of West Point who were hired as faculty
during the 1860's that brought both academic respectability and theoretical based
engineering education to these early programs. By 1868 over one hundred West
Point graduates were faculty in these programs (after the Civil War there was an
abundance of engineers seeking employment who had been trained at the military
academies).
There was, for approximately the next thirty to forty years, a continuous struggle
between apprenticeship and on the job training methods for engineers and academic
engineering education. However, economic forces were again to permanently change
the engineering educational system and the engineering profession. The late
nineteenth century witnessed tremendous growth in American industry.
Apprenticeship and on the job training techniques could not keep pace with the
demand for engineers. Academic engineering programs could meet this demand.
Thus, by the late 1890's, academic methods for training engineers were firmly
established as the predominant method for training engineers in America (Reynolds,
1991). Additionally, what had emerged was a system, which was general, based in
theory but which retained, to varying degrees, some hands on training; i.e.,
labouratory and fieldwork (Reynolds, 1991).
World War II provided the engineering education still in existence today. Prior to
World War II, engineering education still retained some of its hands-on training and
some of its practical focus. However, World War II and later high technology events
sharply tilted engineering education toward science, mathematics, and theory
(Reynolds, 1991). To continuously tap into readily available research money
provided for scientific research to meet new demands, engineering programs needed
graduate programs, graduate students and curricula which prepared undergraduates
for cutting edge research (something academicians had been left out of during World
War II). Thus, in the 1950's and 1960's, engineering schools reduced or eliminated
their hands on and practical courses and added more mathematics and science
courses. By 1970, engineering education closely resembled science education in both
organization and emphasis (Reynolds, 1991). Engineering used this adoption of more
science and mathematics to further distance itself from lower status personnel such
as skilled craftsmen and technicians (Reynolds, 1991). Most of the educational
efforts of engineering graduate programs is research oriented, even though only

fifteen percent of job opportunities involve research (Pletta, 1984).
1.4 Engineering Professional Organizations
Developing a formal means of professional education is only one element in the

development of a profession. Another important element is the creation of
professional institutions to standardize and improve the profession, to represent the
profession on common concerns and to promote and diffuse new knowledge
(Reynolds, 1991). These foundations of a profession are supported in the following
quote (Pletta, 1984, p. 118):
“Let it also be remembered that professional status is conferred by
the public upon those groups of practitioners whose knowledge
requires a long period of formal education, whose practice provides
beneficial public service, and whose expertise is unknown to laymen
but has a mystique often feared by the public”.
The development of professional organizations in engineering was a long and

arduous task. It is interesting to note that engineering’s professional societies
developed after or in conjunction with a formalized engineering education, as
compared to architecture whose professional society developed prior to a strong
formalized architecture curriculum. Members were originally viewed as elitists, a
view which did not change well into the 1900's. These elitists, however, were able to
mould engineering education based upon their own beliefs, in addition to passing
licensing/registration laws, which have been adopted widely in various forms.
Membership in professional bodies has historically been very limited, with only a
small number of design professionals joining or participating in their activities.
Reynolds (1991) stated that a full seventy-five to eighty percent of engineers do not
belong to any professional society nor do they participate in their societies’ activities.
Again, however, this small number of members was able to exert tremendous
influence on licensure/registration laws and on engineering education. Unlike
architecture, engineering professional organizations exploded from four main
disciplines in 1900 to several hundred today (Pletta, 1984).
Initially, the engineering professional societies in America met with strong

opposition from other engineers. Engineering professional organizations were able to
elevate their "trades" to professional status. This was no easy task. A great deal of
help came from European efforts. However, American efforts were tremendously
important in defining these professions. Through redefinition of the terms of
engineering, concerted efforts to base their education in theory, and thus be accepted
as academic disciplines, and through licensing and registration laws, engineering
professional societies in concert with higher education, have been able to change the
general publics’ perception of their industry from that of a trade to that of a
profession.
1.5 The Construction Discipline
Engineering's struggle to be recognized as a profession and academic discipline has

spanned several centuries. Its resulting success has been a combination of its own
effort and of economic forces beyond its control such as the Great Fire of London,
the American Civil War, and the Industrial Revolution. However, by recognizing the
efforts of engineering in its struggle to be recognized academic discipline and
profession, constructors can be better prepared in their ongoing efforts as they
struggle for the same recognition.
Several distinct requirements for acceptance as an academic discipline and as a

profession can be identified in engineering's struggle. All of these requirements are
necessary for construction to achieve success as a profession:
i) Redefinition of the terms Construction/Constructor or the adoption of different

terms;
ii) Rigorous academic standards based in theory; and
iii) Influential professional organizations.
The role of professional societies is critical. These organizations must take the lead
in redefining construction, be instrumental in forcing licensure and registration laws
and provide a Canon of Ethics for professional behavior. Similarly, the current
efforts in many institutions to redefine construction, pass registration and licensure
laws, provide canons of ethics and provide guidelines for an industry relevant
education are to continue. These organizations’ memberships are low. However, a
study of history shows that the participation and membership of architecture and
engineering societies were also very small (by some estimates less that 10% of the
industry). Yet they were influential in redefining their disciplines and in their
attempts to pass legislation with regards to licensure and registration. Similar to
architecture and engineering professional organizations, construction professional
organizations have extremely low membership and participants when compared to
the entire industry. However, these organizations should learn from the history of
architecture and engineering professional societies and press for change.
If construction is to be recognized as a profession and as an academic discipline, one

of the first tasks to be achieved is the redefinition of the, term construction. In the
US, the American Institute of Constructors (AIC) began this process in 1971 with
their formation and with their definition of constructor (the realization of this need
actually began with the industry's demand for separate academic programs for
construction). The need for a redefinition of the entire construction process was also
recognized by Lefkoe (1970), who felt that construction companies had historically
viewed their primary purpose to be on site construction. It was this view, held by
both the public and the construction industry that was the single most important
factor responsible for the organization and methods of operation in the construction
industry. Lefkoe (1970, p. 134) states:
“It is obvious that if most of the companies in the construction industry
view their purpose as on-site production work only, they will not
concern themselves with the design of the structures they erect,
research and development, the financing of the structures they
construct, and so forth. These aspects of the construction process are
not included in construction activity as defined by most contractors and,
because they have not assumed the responsibility for these functions,
‘non contractors’ have taken them over. As a result, the overwhelming
majority of contractors not only lack complete control over a great
many aspects of the construction process, they have virtually no say
whatever regarding them”.
Lefkoe (1970) proposes that construction companies should expand their definition
of the meaning of construction. They should not view their services as the on-site
fabrication of the production of products, but as providing value satisfactions. The
satisfaction of a client's desires and requirements for manufacturing products,
treating sick people, generating electricity, housing people, educating people, etc.
should be the goal of the constructor. In lieu of simply building a structure,
constructors should make it as easy as possible for customers to obtain the value
satisfactions that the structure ultimately provides. This definition is consistent with
current efforts to introduce total quality management, partnering, and other modern
management techniques into the industry. Constructors who apply this definition will
take control of the entire construction process (Lefkoe, 1970).
The construction’s process of achieving professional stature can be considerably

shorter than that of engineering and architecture due to several factors. One factor is
architecture's and engineering's continual shedding of their management
responsibilities for the construction process. Due largely to their theory based
education and the litigious nature of the construction industry, they have
concentrated their efforts and responsibilities on the aesthetics and or design, leaving
a void in the actual constructability of their designs. This void has been forced upon
and accepted by constructors. However, unwillingly constructors have accepted this
additional responsibility, they have grown to enjoy the additional control of the
construction process. Another factor is the recognition by owners that constructors
are providing them with the most economical constructed facilities which are within
the initial budget when they are involved early in the planning process or when they
actually manage the entire process. Owners want certainty earlier in the construction
process, a single point of contact and responsibility, guaranteed prices and schedules,
and a project, which does not end up in court (McManamy, et al, 1994).
Increasingly, general contractors are becoming managers of the construction process.

This in turn is fueling increased specialization in the field of subcontracting, as
subcontractors take on functions, which general contractors once performed. In many
instances, electrical and plumbing and mechanical subcontractors have more actual
risk than the general contractor.
1.6 Developing an Academic Theory
Having been developed by industry, construction programs have never based their
academic discipline on theory. Instead, they were designed to fulfill the immediate
needs of a highly fragmented and diversified construction industry. This resulted in
fragmentation and diversification in the construction programs, which had been
established to specifically address regional needs. Most programs were and continue
to be located in departments such as civil engineering, architecture, industrial arts,
business and agricultural engineering due to the interests and efforts of one or two
faculty members (Construction Industry Cost Effectiveness Report A-5, 1982). The
initially small faculty numbers, the requirements of the wide variety of departmental
locations, the distinct regional industry needs, and the wide variety of faculty
backgrounds, have prevented construction from having a clear focus and from being
accepted as a distinct academic discipline. These same factors have continued to
shape the course content of construction education and thus prevent the development
of any theory-based curriculum. To the present day, this highly diverse curriculum
has adequately served the industry. However, the economic conditions of the past
decade and the rapidity of technological advances have permanently altered the
needs of industry and thus the curriculum requirements for construction programs in
university and college setting. A study carried out by Dorsey (1990) shows that
formal education should be responsible for only 30% of the skills/traits, which are
needed to perform in construction management positions. Dorsey's (1992) study also
shows a hierarchy of priorities for construction curricula, as provided through
surveying industry and academia as follows:
i) Numerical (mathematics, computers, problem solving);
ii) Written Communication;
iii) Oral Communication;
iv) Graphic Communication;
v) Financial Management;
vi) Planning and Control;
vii) Ethical Decision-making;

viii) Leadership;
ix) Personnel (people management); and
x) Manual and technical applied skills.
It should be noted that the focus of this hierarchy, is management and not
engineering, architecture, or the wide variety of focuses found in construction
programs today.
1.7 Cost Implications
As with any action there is a consequence. Before management is accepted as the

theory upon which construction management programs base their curriculum, a
careful examination of the consequences of such action should be undertaken. One
main consequence is the abandonment that will be required of the manual processes
of construction. A study of history and the processes by which architecture and
engineering achieved professional standing in the eyes of the public and the
processes by which they adopted or created a theory on which to base their
education, reveals that construction academics must separate themselves from the
manual processes of construction. This is exactly how architecture and engineering
achieved their "professionalism." Although this may seem dramatic and unnecessary
to many, it, in actuality, is a process, which is being forced upon academia through
industry's response to the rapidly changing demands of owners. Two year and trade
school programs are already responding to the demand for technical training, filling
the void left as construction education programs begin to change their focus.
Another consequence which must be carefully examined is the result of the adoption
of a common theory based in management. If programs become so theoretically
based, as many programs in architecture and engineering have, then contact is lost
with the construction industry and their needs. This results in construction education
programs failure to provide qualified and respected graduates. If the focus of
educational efforts becomes graduate level study and research as has occurred in
civil engineering, then programs undoubtedly will fall victim to the golden ru1e "The
one with the gold makes the rules". Care must be taken when basing our curriculum
on theory, that the curriculum does not loose sight of reality. If it loses sight of
reality, programs will lose their industry support.
Lastly, construction programs should consider the question "Is what we're leaving
worth what we're adopting?" Undoubtedly, a widely varied educational curriculum,
which many have viewed as strength, will be sacrificed. This type of program served
the industry well for several decades. However, just as economic forces forced
change in engineering and architecture, economic forces are forcing academia to
change in response to the needs of industry. These revised needs are much more
management based. Today's economy demands certainty as early as possible in the
construction process. This is best accomplished when a constructor is involved as
early in the process as possible. Earlier involvement requires an expanded definition
of construction, an increased emphasis on management skills, and a revised
curriculum to meet these demands.
Insistence on the status quo will only hinder the evolution of the industry in tandem
with developments in other industries such as information technology. The
construction industry has always been slow to react innovation generally mainly
because of the many different sections of the industry. However, these many
segments of industry shall be coordinated better if the industry adopts a common
theory based on management.
Chapter 2
The Members of The Construction Team
2.1 The Promoter
The promoter (also known as client) is the most important member of the
construction team without whom work would simply not exist. The word client is
more often used than promoter and, therefore, it will be used throughout the chapter.
The energies of the whole profession revolve around the client. The suggestions by
many people that the role of the industry is to give the client exactly what it wants
are to a large extent valid. However, others would argue with greater conviction that
the client should receive what it needs. For this reason, part of the responsibility of
the industry should aim at the education of the client in order that its real needs are
established. Expertise should be exercised in order that both its short-term and,
equally important, its long-term needs are fulfilled. The client should be given a
comprehensive service worthy of the construction industry. The sources of clients
include the following.
2.1.1 The private sector
The private sector consists of work commissioned or financed by an individual client

that may include, among others:
(i) a private individual: such as a vendor requiring a contractor to provide new
premises from which to operate;
(ii) a partnership: Such as two garage proprietors who are in partnership requiring
a contractor to construct a new warehouse; and
(iii) a limited liability company: such as a glass manufacturing company
approaching a contractor to provide a factory and office block development.
2.1.2 The public sector
The public sector consists of work commissioned by publicly financed sources that
may include, among others:
(i) a local authority: A local authority may require a contractor to build a library
complex;
(ii) a government department: The department of Employment may approach a
number of contractors to submit tenders for work involving altering of an
existing structure, in order that it may be used for the conducting of Industrial
Tribunals;
(iii) a statutory authority: A region of the power generating board may require a
small generating station to be constructed; and
(iv) a public undertaking: A region of the Water Board may approach a number of
constructors to submit tenders for the construction of a showroom in a small
market town.
The client, as the financier of the work, is the employer of the other members of the
construction team. The consulting engineer, private quantity surveyor, specialist
engineers, resident engineer, clerk of works and contractor are all employed by and
are responsible to the client. Its interests should, therefore, be uppermost in the minds
of all these parties.
Throughout the project, the client would, of necessity, take legal advice from its
solicitor who would also, if requested, advise on financial matters. The client could,
if its own funds are insufficient, seek capital from investing public and financial
institutions.
Effectively, the client pays out large sums of money in the form of stage payments
for a facility, which it has not yet received. The client, therefore, is faced with the
situation of tying up its own funds or borrowing capital in the interim period between
the commencement and completion of the works. Only when the project is handed
over to it on completion does it become available for its use.
The Members of The Construction Team 16
In summary the client’s responsibilities and duties are normally written into the
memorandum of agreement with the Engineer and the contract for construction and
are generally:
(i) to define the functions that the project is to perform;
(ii) to provide information and data held by it and required by the Engineer;
(iii) to obtain the necessary legal authority to allow construction of the project;
(iv) to obtain money to finance the project; and
(v) to acquire the necessary land.
2.2 The Construction Process
The process of construction is largely dependent upon the contractual relationships of

the client and the contractor. In the public sector, for example, it is popular for the
client to employ its own architect and other professionals directly on a salaried basis.
In the private sector, however, the process is different and is represented in the form
of a diagram (Figure 2.1) outlining the roles and relationships of the parties who
form the construction team. To understand the workings of the industry, it is not only
necessary to recognize the major parties, but also to be able to appreciate and
develop a clear awareness of the relationship between (and the duties and
responsibilities of) the individual members of the team.
Sources
of Client Solicitor
Finance
Service Fire and Construction

control officer Private
Engineer Planning quantity
Officers Surveyor
Consulting Structural
Other
Consultants Engineer engineer
Nominated
Nominated Sub- Resident
Suppliers Contractors engineer
Factory
Main Contractor inspector
Labour-
Suppliers Sub- Plant only Sub-
Contractors Hirers Contractors
Figure 2.1 The main parties involved in the process of civil engineering.
2.3 The Construction Team
The construction team is most often composed of the parties listed below; no attempt
has been made to arrange the members by level of importance as they all make a
significant contribution to the process of construction.
i) Consulting engineer;
ii) Private quantity surveyor;
iii) Structural engineer;
iv) Service engineer;(s)
v) Resident engineer;
vi) Clerk of works;
vii) Supplier(s);
viii) Subcontractor(s);
ix) Plant hirer(s);
x) Building control officer;.
xi) Factory inspector; and
xii) Contractor.
2.3.1 The consulting engineer (the Engineer)
The consulting engineer (or Engineer) is considered to be the leader of the

construction team and is employed by, and under contract to, the client. He/ she is
the client’s legal agent and translates the concepts and needs of the client into a
construction form. He/ she then records them in the form of drawings and
specifications in order to communicate them to the other members of the team. He/
she must be able to interpret not only the client’s true requirements, but also to
present them in such a form that they are acceptable to society and conform to
general safety, planning and constructional standards.
The Engineer’s role is complex and brings with it responsibilities to the community
for the environment that he/ she creates, to the engineering profession for upholding
standards of performance and conduct, to the fellow members of the construction
team for a well designed and documented structure and moreover to the client for the
creation of a structure equal in performance to the standards of his/ her profession.
Engineers are governed by a strict code of conduct, and rigid guidelines govern the
advertising of their services. For ethical reasons they cannot hold directorships
within construction companies. They usually operate as sole traders or partnerships
and sometimes operate as consortia. The main duties of the Engineer are as follows:
(a) Offering advice of a competent nature. As a professional person, the consulting
engineer is liable for his/her actions should he/she show professional
negligence;
(b) Providing services to enable the project to proceed in an efficient manner. The
services include the production of adequate working drawings, site inspections,
approval of workmanship and materials and resolving constructional problems
as and when they occur on site;
(c) Advising on all matters regarding statutory regulations, contractual matters and
other controls, e.g., Planning controls etc.;
(d) Co-ordinating the construction team to ensure that optimum use is made of the
expertise, which is available; and
(e) Supervising the work of the team members and agreeing variations in order to
ensure that the client’s requirements are fulfilled.
Whereas the Engineer has the responsibility to ensure the desired quality is achieved,
it is not the role of the Engineer to instruct the contractor on the method of
construction. The Engineer specifies what is required; the contractor decides how it
is achieved. This may, however, vary in certain situations, usually arising out of the
specific contractual conditions governing the parties.
The strict guidelines governing advertising severely limit the methods by which an
Engineer can secure work (referred to as commissions). In an industry which
experiences severe changes in workload, this can create a huge problem; however,
common methods of securing work are as follows:
(i) Reputation. The past performance of a consulting engineer, sometimes referred

to as track record, is of paramount importance. To create ‘goodwill he/she must
be seen to be fulfilling the requirements of his/her clients.
(ii) Expertise. A consulting engineer may specialise in a particular area of work,
thus gaining the distinction of being an authority in that section of construction.
(iii) Personal contact. Consulting engineers may secure work from their own
personal acquaintances or on the personal recommendation of satisfied clients.
It is important, therefore, that they carry out their work in a competent
professional manner, gaining and retaining the confidence and respect of their
clients.
(iv) Design competitions. The consulting engineer may from time to time compete
against his/her peers in design competitions organised by clients, research
organisations or professional and other such bodies. Competitions are most
commonly used on prestige projects such as bridges or towers.
(v) Serial or long-term work. A consulting engineer may carry out work on a long-
term basis, the client retaining his/her services and thus securing the benefits
arising out of a long-term personal and working relationship. These
arrangements are particularly common with, and advantageous to, clients such
as road authorities, or where projects are of a similar or repetitive nature.
Whichever methods of securing work are used, it is important to bear in mind that
long-term success is best achieved by fulfilling the needs of existing clients. A good
reputation is created over a great length of time, but can be destroyed in a very short
period.
2.3.2 The private quantity surveyor
The private quantity surveyor is often referred to as the “construction economist” or

the “construction cost consultant”, both descriptions reflecting the financial aspect of
his/her role. He/she is appointed directly by the client, but the appointment is often
made on the recommendation of the engineer.
The private quantity surveyor is skilled in all matters relating to cost, and contractual
matters, and is thus able to act impartially and advise the client on how structures can
be constructed within predefined cost limits. His/her major objective is to provide the
client with the structure it requires at an economic price, giving it the best value for
its money, at the same time allowing an efficient contractor an equitable profit
margin.
At the commencement of a project, the private quantity surveyor is presented with an

array of interrelated financial and economic problems, the solutions to which could
have dramatic consequences with the passage of time. He/she must therefore develop
a logical, analytical and objective approach to his work.
The private quantity surveyor should be appointed at the earliest possible stage in a
project and should play a major role in the design procedure. His/her duties include
the following:
(a) Giving preliminary advice and “approximate estimates” of what a project will
ultimately cost.
(b) Advising on the form, size and standard of structure and finishing that can be
erected within the predetermined sum of money.
(c) Preparing an over-all “cost plan” and “budget” stating exactly where and when
the client’s money is to be expended in a project. This enables the client to
achieve the correct balance of expenditure throughout the whole building, and
also allows a check to be made during the pre-contract period that the money
allocated to be spent within the client’s expenditure limits.
(d) Preparing the necessary tender inquiry documents, including the bill of
quantities, and arranging the necessary formal contract with the successful
contractor.
(e) Preparing and agreeing the valuation of work completed by the contractor and
subcontractors at the interim periods stated in the contract.
(f) Controlling the costs of a project during all stages, and advising the client of
the anticipated total expenditure on the final product.
(g) Preparing and agreeing the final account of the project (the total financial
settlement to the contractor at the completion of the work). The contractor
should receive equitable payment for all variations or work additional to that
which he/she contracted to undertake.
(h) Analysing the project costs, so as to provide feedback data in order to forecast
the cost of future work.
In conclusion, it is important to stress that the private quantity surveyor is a

representative of the client and as such looks after its financial affairs. It is equally
important to appreciate that the contractor also employs a quantity surveyor to deal
with his/her financial matters, and who accordingly is referred to as the contractor’s
quantity surveyor
2.3.3 The structural engineer
The structural engineer is normally employed as a consultant directly by the client

but, as with the private quantity surveyor, on the recommendation of the consulting
engineer. The role of the structural engineer is to offer advice to the consulting
engineer to enable the selection of the most efficient and economical structure to be
used in any particular situation.
The consulting engineer decides what is required and the structural engineer suggests
the structural form by which it can be achieved. He is therefore responsible for the
stability of the structure, and will design such elements as foundations, piers,
abutments, pylons, bridge decks etc. The structural engineer must have a scientific
background in order that he/she may apply mathematical concepts to calculate the
sizes and material properties of the various structural components within a structure.
He must be conversant with the relevant Regulations and Specifications relating to
structural methods and materials.
The role of the structural engineer is demanding and his/her duties include the
following:
(a) Investigating and advising on the structural feasibility project at the design
stage. He/she would advise on the material approximate size of the various
structural components.
(b) Preparing and seeking approval of working drawings schedules. The drawings
would include structural steelwork, concrete work and the related bending
schedules specifying the types and size of steel reinforcement.
(c) Supervising the erection of the structure checking that the correct type, quality
and quantity of materials been used and the workmanship is of a satisfactory
nature.
(d) Checking and advising on the work of other specialists, as piling
subcontractors or pre-cast concrete suppliers.
2.3.4 The service engineer
To comply with comfort from the environment in which people operate, great
demands are placed on the consulting engineer to produce a structure free of
environmental problems that have simply been accepted in the past. No one person
can be expected to be expert in a wide range of activities; therefore, on complex
structures it is common for the consulting engineer to recommend the client to
appoint specialists in some of the following areas of work:
(i) Fire precaution - alarm and sprinkler systems;
(ii) Heating - electrical, gas, oil, solar energy and solid fuel;
(iii) Acoustics - sound insulation and absorption;
(iv) Air conditioning heating and refrigeration;
(v) Sanitation - above and below ground level;
(vi) Telecommunications - switchboards, internal and external systems;
(vii) Lighting natural and artificial;
(viii) Refrigeration freezing compartment and cold storage areas;
(ix) Transportation-lifts, conveyors and escalators; and
(x) Ventilation natural and mechanical.
The engineer(s) should be appointed at the earliest possible stage and it is essential
that the work and drawings of the specialists is coordinated with the efforts of the
other members of the design section of the construction team.
For example, the sanitation engineer would be required to liaise with the structural
engineer in connection with the sizes of openings he/she would require to allow the
drainage conduit to pass through the structural section of a road. The consulting
engineer would also have to coordinate the work of the sanitation engineer in order
that the conduit passes within one layer of the structural road section.
The duties of each service engineer reflect to the individual service he/she provides
but may include:
(a) investigating and giving advice on the requirements and feasibility of services
at design stage;
(b) preparing and seeking approval of working drawings and related schedules
associated with the provision of services; and
(c) supervising the services element within the structure.
2.3.5 The resident engineer (RE)
The resident engineer is appointed by the consulting engineer and acts as his/her
representative on site.
The function of Resident Engineer (RE) is to watch and supervise on a day to day
basis the construction and maintenance of the project. Depending on the size of the
project, the RE may have assistant staff under him/her. Such staff, particularly the
clerk of works and inspectors, should be selected with regard to their practical
experience of the type of work to be supervised. While his/her assistants deal mainly
with detail, the RE must plan ahead and discuss future parts of the Works with the
Agent of the Contractor to ensure that the phasing of the Works is properly planned
to suit the approved programme. This close collabouration of RE and Agent also
facilitates consideration of changes proposed by the Contractor, and the subsequent
submission of such proposals to the Engineer for approval. The principal duties of
RE are:
(a) to organize his/her work to suit the approved programme;
(b) to co-operate closely with the Contractor on matters of safety;
(c) to supervise the Works to check that they are executed to correct line and level
and that the materials and workmanship comply with specifications;
(d) to examine the methods proposed by the Contractor for the execution of the
Works, the primary object being to ensure the safe and satisfactory execution
of the permanent work;
(e) to execute and/ or supervise tests carried out on site, and to inspect materials
manufacture at source where this is not done by the Engineer’s head office
staff;
(f) to keep a diary constituting a detailed history of the work done and of all
happenings at the site, and to submit periodic progress reports to the Engineer;
(g) to measure in agreement with the Contractor’s staff the quantities of work
executed, and to check daywork and other accounts so that the interim and final
payments due to the Contractor may be certified by the Engineer;
(h) in the case of any work for which the Contractor may claim payment as
additional work, to agree with the contractor and record all relevant
circumstances so as to ensure that agreement exists on matters of fact before
any question of principle has to be decided by the Engineer;
(i) to record the progress of the work in comparison with the programme; and
(j) to record on drawings the actual level and nature of all foundations, the
character of the strata encountered in excavation and full details of any
deviations from Drawings which may have been made during the execution of
the Works, i.e., to produce all record drawings.
A competent RE must have three very important qualities integrity, ability and
vigilance. He/she must possess a high degree of tact when dealing with people, the
ability to persuade rather than dominate and above all, he/she must have a sharp eye
for detail. To acquire these assets, many people believe it is necessary to have a great
deal of experience working on construction sites.
It is important for the resident engineer to create a good working relationship with
the contractor’s site manager on the project. The contractor in return must provide
him/her with every reasonable insight which normally includes the exclusive use of a
site office that is well equipped and has a private telephone.
2.3.6 The supplier
Satisfactory supply of both raw and manufactured materials is necessary for smooth
completion of any construction project. It is essential that close cooperation is
achieved between the contractor and his/her supplier in order that the client’s needs
are fulfilled. Suppliers are selected not only on the basis of price, but also with
reference to quality and delivery in time.
Three sources of material supply are possible: direct from the source of raw
materials; the manufacturer; and the builder’s merchant or a material agent. Bulk
materials such as sand and stone that may form a major part of a project are often
obtained direct from the source of the raw material, whereas manufactured items,
such as cement, can be purchased from the manufacturer. Agents may also be
appointed by manufacturers, such as paving companies, to supply large quantities of
materials to individual users. The contractor may also obtain materials from a
builders’ merchant; however, this method is not usually favored for bulk supplies
because it usually results in an inflated cost.
In addition to the contractor’s own suppliers, the consulting engineer may specify
that a certain supplier must be used which is therefore term a “nominated supplier”.
Whichever source of material supply the contractor decides to use, it is essential that
an official order is placed, clearly stating the terms and conditions of the transaction.
The functions of the supplier include:

(a) producing literature stating the performance of the material;
(b) advising the consulting engineer and/or contractor of the suitability of a
material to meet specific performance requirements;
(c) submitting competitive quotations for the supply of materials;
(d) advising the contractor on delivery dates;
(e) delivering materials of the required quality and quantity, at the agreed price
and in accordance with the contractor’s delivery requirements; and
(f) advising the contractor on any special storage requirements the materials.
2.3.7 The subcontractor
The construction industry is well-known for its wide variety of tasks; however, the
vast majority of contractors only employ experienced operators in major trades such
as machine operators, pavers and occasionally, carpenters. The remaining work,
which can represent between 50 and 75 per cent of the total value of a structure, is
carried out by specialist subcontractors. The contractor generally sublets such trades
as piling, structural steelwork, heating and ventilating, drainage and electrical work.
The subcontractors generally supply and fix their own materials, the main contractor
coordinating their work.
Certain contractors favour the use of labour-only subcontractors. They are often
referred to as “lump labour”, because the self-employed operatives contract their
labour to fix the contractor’s material for a lump sum payment.
The practice of labour-only subcontracting has been the cause of much controversy
over the years. Bodies such as the trade unions suggest that the system of the “lump”
leads to poor standards of workmanship, tax avoidance, and poor conditions of work
for the labour force. Others would argue that the system of labour-only sub-
contracting is a means whereby contractors can accommodate the great fluctuations
in demand and the high cost of employing permanent labour within the industry. As
governments have passed successive legislation such as the Employment Protection
Act and have chosen to impose a wide variety of employment taxes, pressure has
been placed on the main contractor to use such services.
The consulting engineer can also nominate subcontractors to carry out work; these
are therefore termed nominated subcontractors. The main advantages associated with
the use of specialist subcontractors, be they nominated by the engineer or the
contractor, or working on a labour-only basis, are that they have detailed specialist
knowledge well in excess of the main contractor, have access to specialist advice and
training within their own organizations, they are usually competitive in price, they
employ operatives who are exclusively engaged in the specialist work, and they
eliminate the need to employ operatives for whom the contractor does not have
continuity of workload.
The functions of the subcontractor include:

(a) advising the consulting engineer and contractor on all matters of specialist
nature relating to their work;
(b) assisting the consulting engineers if required in the design process;
(c) submitting competitive tenders for work,
(d) performing the work to the client’s requirements;
(e) supplying an accurate programme of work;
(f) advising the contractor on matters affecting progress; and
(g) advising the contractor of attendance requirements (assistance).
2.3.8 The plant hirer
The amount of mechanical plant (machinery) and equipment in use on civil

engineering sites is large and continues to grow at a tremendous rate. This is the
result of the bulky nature of most civil engineering projects and contractors’ desire to
construct more quickly keeping labour costs to a minimum. To meet these needs,
new machines are under constant development and the contractor strives to achieve
maximum utilization.
Contracting organizations must decide whether to purchase each item of machinery

or whether to arrange to hire it from a special firm. The plant hire firm therefore
plays an important role within construction and enables the contractor to obtain up-
to-date efficient machinery without making a large capital outlay.
The functions of the plant hire firm include:
(a) providing competitive quotations for the hire of plant an equipment;
(b) instructing the contractor in the use of (or providing a skill operator for) the
item of plant;
(c) advising contractors on the selection and output of plant in relation to function;
(d) maintaining plant in an efficient working order; and
(e) arranging transportation of the plant in accordance with the contractor’s
instructions.
2.3.9 Planning control officer
Planning control officer is a representative of a local authority, to whom the contract

drawings are submitted at the design stage to ensure that they conform to the
requirements of the Planning controls. He/she also visits the site at regular stages to
carry out statutory inspections.
2.3.10 Factory inspector
In many countries, the Factory inspector is employed by the Department responsible

for labour matters and his/her duty is to ensure that the legislation concerning safety,
health and welfare is implemented by the contractor.
2.3.11 The contractor
The success of the whole industry ultimately depends on the contactor, that is, the
firm, who actually carries out the work. All others participants are, either directly or
indirectly, served by the contractor.
The contractor is responsible for constructing and maintaining the Works in

accordance with the requirements of the Contract Documents. There should exist a
strong bond of common interest between the Engineer and the Contractor because
both wish to see good construction materialize and want a successful outcome. It is
in the interest of all parties that the contractor should be as free as possible under the
terms of the Contract to execute the Works in the way he/she wishes. His/her
preference for a particular design of and method of carrying out Temporary Works
and his/her idea of the order of sequence of construction may differ from those of
others. However, he/she is better content, and therefore works better, when he/she
uses his/her ideas. Frequently, there may be circumstances, which necessitate
restrictions. Part of the work may be wanted first for reasons outside engineering. In
such cases the Engineer usually specifies the necessary requirements, but it may still
be possible and desirable to allow the Contractor to submit alternative proposals for
meeting them.
The significance of cash flow to the contractor hardly needs to be emphasized and it
is not surprising that the incidence of bankruptcy is high. Many contractors
experience rapid growth during which time the practical constructor does not always
mature into an effective financial manager.
Several studies have shown that there is a predominance of small firms within
construction, which no doubt reflects the ease of setting up a business. Often, these
firms set up as a one-man business, but as it expands there is a need to employ
personnel to carry out the increased workload.
It becomes necessary with the continued expansion to delegate authority to

personnel, in order that they may play a part in the management of the firm. If they
are to be held responsible for their actions, they must be given the authority by which
to act. The manager must also clearly define the responsibilities of all personnel, so
that the parties are aware of their duties. In the final analysis, because the head of the
firm is ultimately responsible for the actions and decisions of his/her staff, he/she
must institute a system of control on their work in order to check that the aims of the
business are being fulfilled. Failure of many construction firms, particularly in
developing countries are attributed to the inability to set up appropriate
organizational structure and delegate authority accordingly.
2.3.12 The construction project manager
To oversee the construction process that has been fragmented over the years the
industry has embraced the concept of the construction project manager and a number
of countries have already taken this on board. The main function of the construction
project manager is to coordinate a construction project from inception to completion
and ensure that it needs the key success parameters of cost, time, utility and quality.
The countries such as South Africa that have adopted this concept have established
regulatory structures that ensure practicing construction project managers have the
required qualifications and experience.
2.4 The Contractor’s Head Office Structure
It is not possible to trace more than a general pattern among contractors’ head office
organizations. Contractors include both public and private companies, and firms
with varying financial and other resources and records of experience. Accordingly
methods of business operation and details of internal organization differ
considerably. The contractor’s head office is usually the centre from which the
board of directors controls the whole of the organization. Clear thought must be
given not only to the duties and grouping of the various sections and departments but
also to the interrelationship between them.
There are five main methods of grouping activities:

(a) by product, e.g. roads, dams, airfields;
(b) by function, e.g. planning, quantity surveying, buying;
(c) by client, e.g. Customer A, Customer B, Customer C;
(d) by machine, e.g. typing, computing, photocopying; and
(e) by region, e.g. northern, central, southern.
In a large contracting organisation, it is common to find all of the above methods of

grouping activities within one structure. It is important to stress that as a firm’s
policy changes or as it grows in size it is necessary to keep the structure under
constant review.
It is clear that no single organization structure can be presented which is universally

adopted by all construction firms. Each firm develops a structure to meet its
particular needs. In order to comprehend the relationships between the members of
the contractor’s staff, an organization chart is shown in (Figure2.2) defining the head
office structure for a medium to large-size contractor engaged in roadwork on a
regional basis.
Figure 2.2 Typical organizational chart for a medium to large-size road contractor.
The major sectors are responsible to the Managing Director who can also be referred
to as the General Manager of the firm. He/she may be advised by the Company
Secretary on legal points and by outside Consultant Firms on matters in general. The
main individuals in the head office structure include the following:
(a) Contractor’s quantity surveyor;
(b) Planning engineer;
(c) Work study; engineer;
(d) Bonus surveyor;
(e) Estimator;
(f) Buyer;
(g) Personnel officer;
(h) Industrial relations officer;
(i) Safety officer;
(j) Plant manager;
(k) Contracts manager;
(l) Wages and accounts manager; and
(m) Office supervisor.
2.4.1 The contractor’s quantity surveyor
The contractor’s quantity surveyor carries out a parallel role to that of the private
quantity surveyor as the contractor’s “construction economist”. He/she looks after
the interests of the contractor during all negotiations and it is his/her objective, in
conjunction with the management team, to offer advice to ensure that effective
economic decisions are made in order to achieve an equitable profit for his/her
employer.
He/she must possess similar qualities to those of the private quantity surveyor, in
order that he may carry out some of the following duties, which may vary according
to the size or type of firm.
(i) Analysis of “cash flow” associated with the project in order that the contractor
is aware of his/her financial requirements
(ii) Requisitioning the materials to be used in the project.
(iii) Measuring and evaluating the work executed by subcontractors.

(iv) Measuring work for interim valuation purposes and securing the agreement of
the private quantity surveyor.
(v) Ensuring that the contractor receives payment for all additional work that is
undertaken.
(vi) Preparing interim costing so that the financial position of the project can be
ascertained at any stage in time in order that the contractor can take appropriate
action where necessary.
(vii) Preparing and agreeing the final account with the private quantity surveyor at
the conclusion of the project.
(viii) Collecting feedback information about the cost of various operations from
which the contractor can prepare future estimates.
(ix) Comparing the costs of alternative methods of working so that the most
economical process can be adopted.
2.4.2 The planning engineer
A construction project consists of a great number of interrelated operations, and it is

the role of the planning engineer to seek greater productivity by applying his/her
knowledge of construction to plan the work in such a way as to make the most
economical use of management, manpower, machines, materials and money (five
Ms). In effect, the planning engineer carries out the duties or work of a site manager
without physically being involved in the execution of the work. The role, therefore,
is an important one and it is for the planning engineer to involve the site manager in
his/her work at the earliest possible stage. If the site manager is expected to put the
plan into action, he/she should have the opportunity to contribute towards its
formulation.
The duties of a planning engineer can be taken to be as

(a) Preparing pre-tender programmes and liaising with the estimator at the pre-
tender stage.
(b) Preparing detailed over-all programmes of projects in order to establish the
contractor’s labour, machinery, material and equipment requirements.
(c) Preparing short-term programmes, which review in detail the contractor’s work
over a short period of time. (The programmes are usually of one, seven or
twenty-eight days’ duration.)
(d) Preparing schedules of the contractor’s resource requirements.
(e) Preparing site layouts showing the positioning of huts, compounds, stores etc.
(f) Establishing the most economical methods of working and seeking greater
productivity for the contractor.
(g) Preparing schedules of labour incentive rates in conjunction with (and to be
ultimately issued by) the bonus surveyor.
(h) Establishing feedback information of the actual methods used to carry out the
operations, and their duration for future planning and estimating purposes.
2.4.3 The work study engineer
The work study engineer examines work to improve its efficiency and economy, i.e.
its productivity. He works in close liaison with the planning engineer and site
manager to achieve this objective. An increasing number of construction
organizations have work study sections; however, in addition, most managers and
engineers adopt a work study approach in solving everyday problems.
The work study engineer’s work can be divided into two major areas: Method Study
and Work Measurement. When examining an operation, he/she initially carries out a
Method Study, which is a systematic technique concerned with the reduction of the
work content associated with a job, and seeks easier and more efficient ways of
performing the operation. Having established the best method to do the job, the
engineer then carries out the Work Measurement process to eliminate the ineffective
time associated with the job and to establish time standards for the operation. The
“standard time” for a task is the amount of time that it would take an average,
qualified person, working at a natural pace, to complete a job, providing that he/she
is sufficiently motivated and using the correct method. “Organization and Methods”
is a term used to describe the adoption of work study techniques to investigate
problems of an administrative nature in an office situation.
The work study engineer must develop a clear, logical and objective approach to
his/her work. He/she must be able to listen to, assess the contribution of, and
moreover, gain the co-operation of all personnel within the construction team. In
order to achieve this aim, it is essential that he/she involves the people within his/her
study who are to carry out the operation.
If people are involved in an investigation, they will feel they have contributed
towards the achievement of an efficient method of work. If people are not involved,
the following statement may assume an unfortunate significance: “If people don’t
want to make something work, it never will work.”
The duties of the work study engineer may include:

(a) studying work and advising management on how to increase productivity; and
(b) establishing time standards to be used as a basis for estimating, planning,
budgeting, costing and incentive schemes.
2.4.4 The bonus surveyor
The bonus surveyor is responsible for the operation of a contractor’s bonus incentive
scheme. An “incentive scheme” is a system of payment in which the amount earned
over and above a person’s basic wage is dependent on the amount of work
completed, thereby offering the employee an incentive to achieve better results.
The bonus surveyor issues the operative a target or bonus rate for each item of work.
The individual rates are usually fixed by the planning engineer working in
conjunction with the bonus surveyor and/or the work-study engineer. The bonus
surveyor subsequently measures the work and calculates the total value of work
completed over and above the basic amount, and then the balance is authorized as a
“bonus payment”. Most bonus schemes allow a man working at average pace to
achieve a bonus incentive payment of between 25 per cent and 33 per cent of his
basic earnings.
The advantages associated with an incentive scheme are numerous, arising out of the
high motivation of the participants. Poor timekeeping, slow working and absenteeism
of operatives is kept to a minimum, allowing the project to progress at a faster pace,
thus reducing the duration of the contract and hence the corresponding overhead
costs to the contractor. For example, if by achieving greater productivity the project
is completed a month ahead of schedule, the contractor saves four weeks’ charges for
site cabins, hoardings, site management salaries etc.
The bonus surveyor must be capable of negotiating with operatives at site level and
must adopt a firm but fair attitude to his/her work. The role of the bonus surveyor is
viewed by many as an excellent training ground for the newcomer to the industry.
He/she rapidly acquires knowledge of the technology of construction and develops
an awareness of the intrinsic value of good industrial relations.
The duties of the bonus surveyor include:

(a) operating a bonus incentive scheme;
(b) preparing information regarding the cost of operations to be used as an aid to
decision-taking by management; and
(c) providing a feedback of information for estimating and planning purposes.
2.4.5 The estimator
In a competitive tendering situation, when the private quantity surveyor has prepared
the bill of quantities, it is sent with the other tender documents to the contractors who
wish to submit a price for the job. The estimator’s major role is to establish the
estimate of the overall cost of the job by calculating a price for items included in the
bill of quantities. He/she does this by analyzing each item into its constituent parts
(labour, plant, materials and equipment) and then applying rates to each part, which
represent the amount that it will cost the contractor to do the job. The estimator must
also include sums of money, normally as a percentage addition, for overheads which
provide for a wide range of items such as head office rent, rates and heating costs,
management salaries, stationery or telephone charges.
The estimator must also decide which items of work the contractor is not able or does
not want to carry out. The relevant sections of the bill of quantities are normally
photocopied and forwarded to subcontractors for separate quotations. Usually the
most competitive prices are entered into the bill.
When the estimator has priced all of the items in the bill of quantities, he/she submits
his estimate of the over-all cost of the project to the senior management of the firm
who adjudicate on the amount of profit, which is required from the job. The size of
profit to be added will vary from time to time, dependent upon the contractor’s
current workload and the general level of demand within the industry. The estimator
then takes the estimate figure and adds to it the profit margin to give a final price,
which is known as the tender sum of the project.
The estimator plays a vital role in a firm. He/she must be capable of working under
great pressure and must possess a high degree of technical knowledge and
forecasting ability. If his/her calculations are high the contract will be awarded to
his/her competitors; if his/her price is too low, the potential profit may be non-
existent.
The estimator’s duties may include:

(i) estimating the ultimate cost of carrying out work;
(ii) producing schedules of materials and subcontract work in order that the buyer
may obtain suitable quotations;
(iii) analyzing the rates of successful tenders in order that the information can be
used by management for cost control purposes; and
(iv) collating and analyzing feedback information of all costs associated with
completed work.
2.4.6 The buyer
On receipt of a requisition form from the contractor’s quantity surveyor, the buyer
invites suppliers and subcontractors to submit quotations to supply materials or carry
out work. The buyer carefully analyses the quotations in order to isolate the most
beneficial terms for the contractor.
The buyer will often order materials directly from builders’ merchants or, should the
quantities prove sufficient, direct from the manufacturers. By building up long-term
relationships and ordering bulk quantities, the buyer is often able to negotiate
substantial discounts for the contractor. Some building firms allow individuals to
order materials directly from approved suppliers, but it is a normal practice to carry
out the buying function from the central head office in order to secure the best
possible terms for the contractor.
The buyer must therefore possess the skills of a negotiator, the presence of a planner,
the awareness of a technologist and above all must develop skill for a bargain. The
duties of a buyer may include:
(i) inviting and analyzing competitive quotations to allow beneficial orders to be
secured for materials and subcontract services;
(ii) maintaining a list of current costs of materials and services to used for
estimating purposes;
(iii) anticipating and advising management of price fluctuations; and
(iv) maintaining a follow-up system in order to call forward materials when
deliveries are imminent, and to advise subcontractors when their services are
required on site.
2.4.7 The personnel officer
The role of the personnel officer in construction is an onerous task. In some

countries, due to the widespread geographic location of the workplace, site managers
recruit and dismiss labour on site. Often, little or no documentation is available on
the labour force, which tends to be nomadic in nature due to the great fluctuations in
demand within the industry. This is becoming more difficult as the result of
globalization of the construction industry that has lead to internationalization of

labour conditions
Whilst it is rarely possible for the personnel officer to deal with the recruitment and
dismissal of site labour in person, many organizations insist that all changes in work
strength are authorized and coordinated by him/her. The actual physical hiring and
firing of site labour is usually carried out on site by the contracts manager.
As well as supervising personnel procedures, the officer is usually responsible for the
recruitment of all managerial and technical staff. He/she must, therefore, possess a
wide knowledge of all the functions of the members of the team and be perceptive in
reviewing the capabilities of potential employees. The occurrence of these
characteristics is rare and difficult to attain, other than by experience.
The personnel officer’s duties will differ from firm to firm but may include:
(i) selecting and recruiting managerial and technical staff;
(ii) authorizing and coordinating the recruitment, transfer and ultimate dismissal of
site-based operatives;
(iii) advising on all matters relating to employment;
(iv) supervising the training and development of all employees;
(v) maintaining adequate employment records for all personnel; and
(vi) maintaining an effective channel of communication between all employees and
senior management.
2.4.8 The industrial relations officer
The industrial relations officer attempts to secure good industrial relations by

creating harmony between all parties within a firm. Some people would suggest that
individuals, be they management or operatives, have different objectives. It is the
role of the officer to bring the individual objectives together to work towards the
over-all aims of the firm. A flourishing business should provide sufficient rewards to
make this possible.
The position of industrial relations officer is increasingly favored by larger

companies. In smaller firms, the role of the officer is combined with that of the
personnel officer and it is fitting to suggest that both parties require similar personal
characteristics.
The duties of the industrial relations officer are flexible but may include:
(i) negotiating with employee representatives (trade unions) in order to secure
industrial harmony;
(ii) foreseeing potential areas of industrial unrest;
(iii) investigating and advising management on all matters relating to industrial
relations; and
(iv) providing a channel of communication between all parties in connection with
industrial grievances and disputes.
2.4.9 The safety officer
The role of the contractor’s safety officer should not be confused with that of the
factory inspector. The contractor’s safety officer is employed directly by the firm and
as such he/she is the contractor’s representative on all matters relating to safety,
health and welfare. The Factory Inspector is an employee of the Government and has
a legal obligation to ensure that the various legal provisions are complied with: in the
event of non-compliance he/she must take such sanctions as deemed necessary in the
situation.
The duties of the contractor’s safety officer include:

(i) advising management on all matters relating to safety, health and welfare;
(ii) carrying out regular inspections of sites to ensure that the contractor is adopting
good safety practice, and foreseeing potential hazards;
(iii) ensuring that adequate safety records are maintained by the firm;
(iv) investigating and determining the cause of accidents and safety hazards; and
(v) fostering an awareness of all matters relating to safety, health and welfare
within a firm.
2.4.10 The plant manager
The plant manager is responsible for all aspects relating to mechanical plant
(machinery) within a firm. He will therefore be required to select the right machine
to carry out a particular function in a certain situation. Although it depends on a
firm’s policy, it is normal practice for a contractor to own items of machinery for
which either there is a continuous use or which are difficult to obtain on hire. Other
plant can be hired so that the contractor only pays for the machine when it is
physically operating. The contractor can thus be sure he/she is using the ideal
machine to perform a particular task and that it is the up- to-date model working at
peak performance.
The plant manager’s duties may include:

(i) advising management on the selection of plant in relation to its function;
(ii) advising management on the hire or buy policy of the firm;
(iii) maintaining plant in an efficient working order and supervising the training of
operators to seek maximum performance;
(iv) arranging transportation of the plant to and from its destination;
(v) arranging suitable supplies for the plant; and
(vi) supplying feedback relating to the suitability and output of plant for estimating
and planning purposes.
2.4.11 The contracts manager
Although a contracts manager is often classified as a member of head office staff,

he/she spends the majority of his/her time visiting the sites under his/her control. For
this reason the role of the contracts manager will be explained under site
organization.
2.4.12 The wages and accounts manager

The wages and accounts manager controls the wages, costing and accounting
functions of a business. Many medium and large contractors make use of computer
techniques in order to carry out the processes in a prompt, efficient manner.
In some firms, all wages and salaries are processed through the wages section;
however, other contractors make use of consultant firms for staff salaries, which are
regarded as confidential in nature. The costing section ensures that all expenditure is
allocated to the source, i.e. site or department, which was instrumental in incurring
the cost. The total expenditure over any period can then be analyzed against the
budgeted (allowed) expenditure or the income from any source. The accounts section
ensures that payment is made to the sources that have supplied goods or services.
The duties of the wages and accounts manager are wide, but may include:
(i) supervising and controlling the wages, costing and accounting functions within
a firm;
(ii) providing financial and statistical data required by outside bodies, e.g. V.A.T.,
P.A.Y.E.; and
(iii) advising management of the current financial position of any site, department,
or of the business as a whole.
2.4.13 The typing supervisor
The typing supervisor performs an important function in any organization and must
be able to recognize the priority of items of work. The section may also be
responsible for the issue of stationery and reprographic services within the firm.
The typing supervisor’s duties may include:

(i) supervising and controlling the typing, stationery and reprographic services
within the firm; and
(ii) establishing the priority and sequence of work.
2.5 The Contractor’s Site Organization Structure
Civil engineering structures are rarely alike. Consequently each construction site has
an individual organization structure. The organization of construction projects not
only differs from contractor to contractor, but also from site to site within a single
firm. The organization structure of any project is dictated by the size and nature of
the project, the effectiveness of the personnel involved, the needs of the client and
also the current workload of the contractor.
The site organization chart (Figure 2.3) shows a structure designed to meet the needs
of a 5 km road project. Members of the following sections visit the site to carry out
the duties described earlier:
(i) Quantity surveying;
(ii) Bonus surveying;
(iii) Work study;
(iv) Planning;
(v) Personnel;
(vi) Industrial relations; and
(vii) Safety.
The respective representatives work in close liaison with the site manager and act in
a support capacity; however, they are ultimately responsible to their individual heads
of departments for the performance of their function.
On larger projects, the members may be based on site and certain contractors would
arrange that they then become responsible to the resident projects manager for the
duration of a particular contract. The projects manager would have a similar status to
a contracts manager; however, he would carry out his duties on only one, albeit large,
project. At the end of the project, the functional personnel would return to their
respective head office sections and the projects manager would move to a further
contract. Site management would also be able to call upon the remaining service
departments for advice and assistance with relevant problems.
Figure 2.3 Typical contractor’s site organization chart.

It would not, however, be normal for the representatives of the following to visit site
on a regular basis: estimating; buying; plant; wages and accounts, and typing.
The site management team is headed by the contracts manager. He/she visits the site
from time to time in order to coordinate and supervise the work of the remaining
members of the team which include the following: site manager, general foreman,
trades foreman, ganger, charge hand, operative, site engineer and site clerk/materials
controller.
2.5.1 The contracts manager
As leader of the site management team on a number of projects, the contracts

manager is rarely resident on any one site but visits the projects on a regular basis or
as the need arises. He/she is responsible to the chief construction manager for the
over-all planning, management and control of the construction operation, to ensure
that the project is completed to the required standard, at the desired time and at a
economic price.
He/she and his/her site management team must be proficient in all of the seven
processes of management. The major portion of the contract manager’s time is taken
up with carrying out the “thinking” processes of forecasting, planning and
organizing. The “doing” processes of motivating, coordinating and controlling,
whilst forming an important part of his/her duties, adopt a lower significance.
If the role of the contracts manager is contrasted with the supervisory tasks of the
charge hand, the reverse situation is found. The charge hand is mainly concerned
with the “doing” processes, that is putting into action the plans of senior
management.
The seventh process of communicating is of equal importance to both parties. The

position of contracts manager demands an individual of the highest caliber,
enterprise and integrity. He/she must possess the greatest powers of leadership, a
wealth of organizing ability and the highest degree of managerial skill. It would be
difficult to isolate a more demanding function. It would be equally difficult to find a

more satisfying and truly worthwhile job.
The duties carried out by a contracts manager on a number of projects include:

(i) forecasting resource requirements and planning the work in conjunction with
the service departments of the firm;
(ii) organizing the work to secure maximum productivity;
(iii) motivating all parties and seeking good industrial relations;
(iv) coordinating the work of all members of the contractor’s team;
(v) reviewing and controlling the progress of the project;
(vi) analyzing site cost data;
(vii) attending site meetings and liaising and communicating with the client’s
representatives;
(viii) analyzing the cause of and resolving site problems; and
(ix) carrying out the policies of the firm.
2.5.2 The site manager
The site manager sometimes called the agent, as the contractor’s senior
representative resident on site has complete responsibility all personnel employed on
the site. He/she is directly responsible to contracts manager and his/her aim is to
achieve maximum productivity within the limitation of the resources he/she has
available to him. He/she should be involved with the project at the earliest possible
stage a make a major contribution to the planning of the contract.
In the past, site managers have usually been selected from a craft background, but
with the developments in management education at technician and professional level
the site manager with a academic background is coming to the fore. He/she should
have similar characteristics to those of his/her superior, the contracts manager, but
with a higher emphasis placed on the ability to lead and motivate his/her workforce.
He/she carries out similar duties to the contracts manager, with the addition of;
(i) providing feedback data in the form of reports to head office, regarding
progress on site, labour engaged on site, information required from the
engineer, additional or variation work carried out on site, urgent material and
plant requirements etc.; and
(ii) achieving safe methods of working on site and maintaining the relevant records
of inspection.
2.5.3 The general foreman
On large contracts, a general foreman may be appointed who is subordinate to the

site manager and is responsible for coordinating the work of the trades foremen
under his/her control.
He/she has similar duties and characteristics to the site manager; however, his/her
work is more supervisory in nature. He/she will normally have a craft background to
enable him/her to call on his/her vast experience to solve intricate constructional
problems, which may arise from time to time.
The general foreman’s duties may include:

(i) advising site management on practical constructional problems;
(ii) coordinating the work of the trades foremen;
(iii) minimizing wastage of materials, labour and plant;
(iv) foreseeing and reporting potential industrial relations problems; and
(v) liaising with the clerk of works on a day-to-day basis.
2.5.4 The trade’s foreman
The trade’s foreman is usually appointed to supervise the work of a particular trade
(foreman earthworks, foreman formworks etc.).
The duties of the trade’s foreman may include:

(i) supervising a particular trade;
(ii) planning and organizing work on a day-to-day basis;
(iii) checking standards of work;

(iv) ensuring adequate supplies of materials and plant are to hand; and
(v) verifying the standard of work prior to bonus payments.
2.5.5 The ganger
The ganger is usually responsible for the supervision of the semiskilled labourers
(drain layers, pavers, concreters etc.) and the general labourers on site. He/she
performs similar duties, and has a similar status, to the trades foreman.
2.5.6 The charge hand
On larger contracts, charge hands may be appointed to assist the trades foreman to
supervise a subsection of a particular trade. For example, the foreman formworks
may have charge hands responsible for timber forms (preparation and installation of
timber forms), proprietary forms (standard forms usually made of steel to fit specific
dimensions), and finishing (finishing according to specifications, particularly fair
face concrete). In addition to supervisory duties, many charge hands also, should
time allow, carry out the normal physical work associated with their trade.
The duties of a charge hand may include:

(i) planning the daily work of the operatives in conjunction with the trades
foreman;
(ii) ensuring that requests are made for bonus incentive rates prior to the
commencement of work; and
(iii) supervising a small team of operatives carrying out work of a specific nature.
2.5.7 The operative
The term “operative” is used to describe the personnel who carry out the physical
work of the construction process, i.e. tradesmen and labourers. No construction work
could ever commence without the construction operative and the value and
contribution of their efforts should never be overlooked or minimized. It has been
said that the success of a charge hand depends on the quality of his/her operatives;
the trades foreman on his/her charge hands and so on up to the contracts manager. It
would be possible to conclude that the success of a contracts manager is, to a large
extent, dependent on the quality of his/her operatives.
The duties of the operative include:

(i) performing to the required standards the tasks allotted to him by his charge
hand, ganger or foreman; and
(ii) observing safe methods of working.
2.5.8 The site engineer
The role of the site engineer, who is sometimes referred to as the land surveyor, is to
ensure that the project is constructed in the right place. The line or position and level
of a structure must be accurate to within tolerances of 2 or 3 mm, and it takes
considerable knowledge and experience to ensure that this takes place.
To assist him/her in this task, he/she uses many tools including tapes, rules, plumb
bobs, spirit levels and lines. His/her most important tools, however, are his/her
surveying instruments. The two most commonly used are the quickset level and the
theodolite. These are optical instruments and allow him/her to achieve great
accuracy. Site engineering, whilst being a respected profession in its own right, is
also the starting position for many careers in other branches of the industry.
The duties of the site engineer include:

(i) setting out the gridlines of a structure which comprises a number of fixed
points that can be connected by a system of horizontal and vertical lines from
which all future measurements are taken;
(ii) setting out the structure of a facility, such as a bridge to enable the framework
to be constructed to fine tolerance limits;
(iii) establishing levels on the site as and when required;
(iv) checking the line and level of the basic structure throughout its construction;
(v) assisting in the quality control of materials such as concrete; and
(vi) providing feedback information about additional work to the contractor’s

quantity surveyor.
2.5.9 The site clerk/materials controller
The role of the site clerk/materials controller is to carry out all administrative duties
and to control materials on site. On larger projects, the function may form two
separate positions.
The duties of the site clerk/materials controller include:

(i) recording the arrival, transfer, or departure of personnel and items of
mechanical plant;
(ii) preparing wages sheets in order that the wages section at head office can then
compile the wage packets of site personnel;
(iii) distributing wage packets at the appropriate time;
(iv) ensuring that adequate stocks of material are on site to suit the progress of the
work; and
(v) calling forward, recording and checking deliveries of materials to site from
suppliers and manufacturers, and noting their ultimate distribution.
Chapter 3
Stages of Civil Engineering Projects
3.1 Introduction
The main parties involved in a civil engineering project: the Client (promoter),
Consulting Engineer (Engineer) and the Contractor were discussed in detail in
Chapter Two. This chapter points out the key stages of a civil engineering project
from initiation to completion, and Figure 3.1 illustrates the contractual involvement
of the three main parties and the principal activities in their logical sequence. Only
the conception, preliminary design and design proper stages that lead to preparation
of contract drawings will be treated in this chapter.
Construction projects begin with an idea, resulting from a perception of a need, and
in the process of its provision aim to make a profit. Every project is unique in the
sense that it represents a specially designed effort to develop and use some portion of
the earth’s natural resources at some particular location. In this effort it is needful,
first to conceive the aim of the intended works; second to design them in practical
detail; third to construct them; and fourth to put them into working operation. This
fourfold process may commonly use the labours of hundreds of people; the
knowledge of several specialists gained over many years, and incorporates the
natural and manufactured products of scores of different trades. Owing to their
unique nature, civil engineering works must be commissioned in advance of need;
they are not purchased ready-made. As a result there must be a client who has
defined the need for the works, has resolved to undertake them and agrees to pay for
them, and who will own and operate them when complete. The client has to find the
money to finance the scheme, either from his/her own resources or by borrowing
money from others. It is also possible for the client to seek partners, either in the
Stages of Civil Engineering Projects 53
public or private sector in order to raise finances or other resources needed in the
project.
The main obligations of the client can be summarized as:

i) to define the nature and magnitude of the functions of the project;
ii) to satisfy himself that the intended project will serve his/her needs;
iii) to obtain any statutory or other powers necessary for construction and
operation of the project including environmental approvals;
iv) to find the money to pay for the design and construction work; and
v) to take over the project when complete and operate it.
3.2 Feasibility Study (Investigation and reports)
The Client initiates the project by appointing an Engineer, whom he/she may want to
assess the project requirements and to devise and present alternative schemes for
consideration. Occasionally it may be known in general terms what is required and
will need to have only the details determined and developed.
54 Fundamental of Civil Engineering Construction Management
Promoter Engineer Contractor
Recognize a need Define Client’s need

Brief Engineer Study need
Recommend solution
Investigation and report
Decide to proceed
Decide how to raise funds
Obtain legal powers to

execute works
Prepare Drawings,
Acquire land Specification and Other
Raise funds Contract Documents
Design and contract
Advertise publicly or
invite selected contractors
Documents
to tender
Appraise tenders and select Prepare and submit

Contractor tender
Sign Contract Appoint Resident Engineer Sign Contract

and other site supervisory
staff
Appoint Agent and other
site staff
Complete Works design as
necessary and transmit to
Interpret design
contractor
Construction
information plan and

programme. Move men,
Vet Contractor’s methods materials and machines
and temporary Works to site
Design and construct

Oversee construction Temporary Works
Permanent Works to
Specification
Construct Works
Make record drawings of

Works
Get paid for work done
Pay Contractor
Certify payment
Use
Take over, operate and

maintain the Works
Commission and hand over
Figure 3.1 Activities of the parties to a project (Adopted from Civil Engineering
Procedures, 1986).
It is to be recognized that the civil engineering construction sector has profound

impact on the natural environment-both negative and positive. Hence the legal
requirement to conduct an EIA for major projects measuring the impact on a range of
“receptors”, including human beings, flora, fauna, soil, water, air, landscape, climate
and material assets.
Besides the regulatory control of EIA, many civil engineering companies are now
looking to control the environmental consequences of all of their operations through
the development and implementation of an environmental management system
(EMS). This allows an organization to manage its operations in line with a clearly
defined environmental policy, objectives and procedures.
A particular challenge for the civil engineering sector is that many of its
environmental impacts relate to the temporary construction phase as well as the
longer-term impacts of the completed project. At any one time, one company may
have environmental responsibilities on a range of sites, distinguished by differences
in client, output, legal and planning requirements and other local factors.
Environmental management practices therefore need to be flexible enough to suit
individual site or project requirements, while achieving overall improvements in
environmental performance.
Thus, the feasibility study must provide the client with assurances that:
(i) the intended project will meet his/her needs in the most satisfactory and
economic manner;
(ii) the estimated cost of the project will be acceptable;
(iii) the project is technically feasible and will give the results intended; and
(iv) any powers needed to construct the project can be obtained.
Although the engineer appointed for the investigation need not be the engineer who
will design the Works nor become the engineer who will supervise the Works, the
continuity achieved if this is so is advantageous to all parties.
3.2.1 The nature of the feasibility study
The project conception is the Engineer’s first task, which necessitates him/her to
become acquainted with and to review the Client’s requirements, and then to agree a
brief for the investigations to be carried out. The Engineer as principal professional
adviser should enjoy the confidence of the Client and be given timely knowledge of
all the requirements so far as they can be defined. Normally, the Engineer will
inspect the site and consider physical, financial and political constraints, devise
possible solutions and compare them.
In the initial stages, the studies usually concentrate on various options for the
location, design and layout of the project. Accompanying this work there will be
data gathering and analysis, followed by the development and costing of alternative
layouts and designs (preliminary designs), so that the client can be assisted to choose
that which seems most suitable. There will follow further feasibility tests, which
could include substantial site investigations and, if necessary on the very largest
projects, some trial construction. The latter might include construction of some trial
earthworks, sinking of test borings, or some trial tunneling or excavation. Model
tests of hydraulic structures may be required.
Then he/she will submit a report to the Client summarizing his/her findings and
conclusions and, usually, recommending a preferred solution with an estimate of its
capital and likely maintenance costs.
3.2.2 Importance and extent of investigation
The report on the investigations carried out by the Engineer should recommend the
basis for the economic design of a project. It should therefore review the main
design choices and the major problems, which may affect construction. These
should therefore have been investigated thoroughly by this stage. It is important that
the feasibility studies include a close examination of the client’s needs and the data
on which they are based. Many instances exist where large sums of money have
been saved on a project by carrying out, at an early stage, a critical examination of
the basic data the promoter has relied upon. These data might not have been
procured according to the latest techniques or requirements and therefore might not
be sufficiently accurate in the light of current knowledge. They have to be tested for
accuracy, reliability, and correctness of interpretation. Inaccuracies in them or
misinterpretations of them could lead to wasted expenditure, or problems in
construction that are costly to overcome. Indeed, investigations and reports cost only
a small fraction of the total cost of construction, so it is false economy to restrict the
scope or thoroughness of the Engineer’s investigations and design studies.
3.3 The Engineer’s Terms of Reference
3.3.1 Scope of work statement
The Engineer’s duties in respect of feasibility study should be defined in a scope of

work statement as part of his/her brief. The Client usually initiates the brief, but the
final version should be agreed between the Client and the Engineer so that full
advantage can be taken of the latter’s specialist knowledge and his/her experience of
similar studies. In preparing the document the Client must state its long-term and
short-term objectives and it must indicate all the constraints of which it is aware.
The scope of work statement should also indicate the nature and details of the
information to be presented in the Engineer’s report and the supporting documents,
what existing information can be made available, the time available for preparation
of the report, and whether interim or progress reports will be required.
Site conditions and their possible exploitation often present risks to the costs of
projects, which are not realized by Clients. In such cases the scope of the basic
objectives may be a matter for exploration and advice by the Engineer before the
brief for the project is finalized.
3.3.2 Flexibility and consideration of alternatives
The scope of work statement should permit flexibility so that the Engineer can
consider new developments that may occur while the investigation is in progress.
The extent to which the Engineer may consider alternative solutions should be
agreed. It is generally advisable for the scope of work statement not to indicate a
preferred scheme, as the value of a report can be seriously diminished if it can be
inferred that any matter has been prejudged. This is particularly true when
environmental issues are involved.
3.3.3 Types of investigation or study
The extent, nature and detailed content of the Engineer’s study will vary according to
the value and complexity of the project, the number of solutions to be considered,
and the nature and number of the decision-making processes involved before the
scheme can be constructed. For some projects, a single study with the preferred
scheme and its estimated cost outlined in the report will suffice; others will require a
series of separate studies, each more detailed than the last. Similarly, some studies
will be undertaken wholly by engineers, whereas others will be the work of a team of
specialists of many disciplines.
The studies required to develop a preferred scheme for a major project may be some
or all of the following:
(a) a study which assesses the requirements of a particular sector of a country or
industry in order to identify individual projects for investigation.
(b) a pre-feasibility study which investigates whether or not there is likely to be a
viable demand for the project to be studied, whether or not the required
resources of implementation would be available within acceptable cost limits,
and whether or not a feasibility study would be justified.
(c) a feasibility (or pre-investment) study which involves preliminary surveys to
investigate technical and economic viability, an estimate of capital and
operating costs, and other information to enable the Client to decide whether or
not to finance the project; it does not include detailed design, but may include
some outline design.
(d) a master plan which is a long-term development programme, and which
generally indicates how construction and expenditure can be phased.
(e) an environmental impact study which considers the effect the proposed
development would have on the environment.
(f) a geotechnical study which investigates the nature of the ground where works
may be constructed and assesses possible problems.
(g) a project study which develops the preferred scheme in detail, especially its
technical aspects; this is sometimes known as the final design study.
(h) a financing study: in most cases the Client will make the necessary financing
arrangements, but exceptionally the Engineer may be required to identify
possible sources of finance and to assist the Client in establishing the
arrangements for the provision and repayment of the funds needed, in which
cases a special report on the financing arrangements will be needed.
3.4 Nature of Investigations
3.4.1 Technical investigations
Technical investigations are required to resolve the engineering aspects for a project.
Further investigations will be required on projects likely to affect the environment,
economic, social or environmental studies may need to be undertaken in such cases.
3.4.2 Economic and social investigations
The need for economic, demographic or other studies depends on the type of project
and it’s Client. Although they will generally be carried out under the direction of the
Engineer, they will usually be performed by a specialist in another discipline. The
team for any large study may include several non-engineering specialists.
3.4.3 Use of existing information and plans
For all investigations and surveys full use should be made of existing available data,
and topographical maps and marine charts where these exist. It may be necessary to
carryout additional studies to supplement the available information and, in the case
of topographical investigations, to undertake land, air or hydrographic surveys to
make possible the preparation of accurate plans of the sites considered for the
construction of the Works.
3.4.4 Site exploration
The importance of thorough site exploration to the economic design, efficient

planning and execution of any project hardly needs to be emphasized. Existing
topographical and geological maps and data should be studied, and thorough
investigations should be carried out under the direction of the Engineer. Special
investigations (e.g. by resistivity and seismographic surveys) and soils investigations
should be undertaken by specialists who should provide borehole logs, samples and
labouratory test results. Their reports should include an interpretation of results by a
geotechnical expert, but the Engineer must make the final assessment of the results in
so far as they may affect the design and specification of the Works.
3.4.5 Physical data
Among the items that may require investigation are the conditions of access to the
sites both for permanent use and also during construction, statutory or local authority
restrictions on the sites or the special rights of adjacent landowners, and the
availability of services such as drainage, sewerage, water, electricity and gas. The
source and transportation of materials for construction and operation and the disposal
of waste material should be studied, and data on the climate and the incidence of
storms and flooding collected. The existing ambient noise levels may have to be
measured and studies undertaken to predict, and restrict as necessary, the noise levels
during and after construction.
3.4.6 Models
There are four principal types of model: experimental, mathematical, computer

graphic and physical. Experimental and mathematical models are used in complex
problems to provide information for the assessment of the effects of various design
options. Physical and computer graphic models can be valuable for planning the
layout of projects, studying the use of space, and deciding on the methods and
sequence of work in construction. Physical models are valuable for discussing
proposals with a Client’s staff and also for training those who will take over the
operating activities of the completed project.
3.4.7 Public participation
The execution of most civil engineering projects affects the public in some way.
Although the general public benefit from most projects, there are usually some
people who suffer. For example, the landowner whose land is compulsorily acquired
for a new road scheme, and the householder who experiences noise nuisance as a
result of the construction of a new railway line, may both reasonably have objections
to a proposed scheme. Attempts have been made to involve the public in he
decision-making process at an early stage. Frequently the problem and possible
solutions are publicized, and the public are encouraged to express their views and
preferences, which are duly taken into account during the feasibility and planning
stages. Involvement of the public in the planning stage of a project can reduce
objections and eliminate the need for a public inquiry; it can also produce
construction ideas to the benefit of the project.
3.4.8 Outline programme
An important part of an investigation is the preparation of an outline programme for

the detailed design and construction of the Works. In formulating this, the Engineer
must take account of the availability of finance, labour, materials and feasible
methods of construction and Temporary Works: each of these factors may influence
the others. The outline programme must be realistic but it should not impose
unnecessary restrictions on tenderers or the Contractor.
3.4.9 Cost estimates
The Engineer is usually required to prepare estimates of the capital cost of proposed
schemes, of the land, buildings, plant and machinery involved, and of the operating
and maintenance costs of the project. Some of these estimates may have to be
obtained from or confirmed by outside sources. Capital and annual cost estimates
will have to be drawn up so that the economic viability of alternative schemes or
sites can be assessed and the costs to the Promoter of implementing the schemes
ascertained. When comparing alternatives, economic techniques such as discounted
cash flow and net present value should generally be adopted. It is essential to state
the month and year or other basis on which cost estimates have been prepared, and in
financial plans to indicate the estimated actual expenditure in future years and the
rates of inflation assumed.
3.5 The Engineer’s Report
3.5.1 Objective
On completion of his/her investigations the Engineer should present to the Client a

report summarizing his/her investigations and conclusions. Normally he/she will
outline the scheme, which in his/her opinion, is best suited to the requirements
(which will usually, but not always, be the least costly of the feasible options), and
give forecasts of costs and financial viability to help the Client visualize the project
as a whole.
3.5.2 Presentation
The style and form of the Engineer’s report should vary according to the Client’s
needs, the nature of the project and the purpose for which the project was
commissioned. As a general rule the report will review the investigations
undertaken, compare feasible options on technical, economic and financial grounds,
and make appropriate recommendations on which the Client can base future
decisions. The report should be written in a simple and unambiguous form so that it
can be readily understood by the Client and others who may refer to it, who may
neither be able to appreciate the technical detail nor have the time to absorb it. The
report must contain sufficient technical information to convince any other engineer
or specialist of its facts and of the soundness of its judgments.
3.5.3 Form of report
The report should set out in a clear and concise manner what the Engineer has been
asked to do, what he/she has done and his/her conclusions. It is often convenient to
summarize the salient points in one chapter and to include the technical matter in
appendices or in separate volumes.
In most cases the main body of the report should include:

(a) the terms of reference;
(b) a statement of the problem, its importance, scope and history;
(c) the basic assumptions, data or trends on which the Engineer’s investigations
have been based, and reasons for adopting these;
(d) details of the investigations carried out;
(e) the design and other criteria adopted and the reasons for their adoption;
(f) a comparison of the options considered and the reasons for the rejection of
non-preferred schemes;
(g) cost estimates of the scheme;
(h) a description of the recommended scheme;
(i) proposals for the organization and management of the design and construction
of the recommended scheme, advice on the contract arrangements and perhaps
the raising of finance; and
(j) conclusions and recommendations.
3.6 Proceeding with the Project
3.6.1 The next stage
The client can only decide to proceed with the project after considering the
Engineer’s report that is based on the preliminary design and satisfy himself/herself
that the project is feasible. If he/she finds the project to be feasible he/she must then
take steps to obtain the legal authority to construct the Works. In all cases it is
necessary to obtain planning permission or its equivalent as part of the procedure,
and to seek comment from adjacent landowners or other interested parties who may
have objections to the project. Having obtained this the Client can instruct the
Engineer to proceed with the design of the project and the preparation of tender
documents. This work will usually proceed concurrently with the procurement of
finance and the purchase of the necessary land.
3.6.2 Public inquiries
Whereas the questions of need and national policy are generally matters for
Parliament, proposals for a particular project are of concern mainly to those who live
in the area. For many types of project provision is made by statute for holding a
public inquiry, which is a public hearing of objections to a particular proposal. An
independent inspector chairs the public inquiry. At the hearing the Client puts
his/her case for the scheme, calling witness in support as necessary. The objectors
are then heard. Parties are frequently represented legally, and expert witnesses are
called if the scheme is of a high technical nature. As part of his duties, the inspector
visits the site during the proceedings.
After the public inquiry, the inspector writes a report that is submitted to the
appropriate government minister. This report contains an outline of the evidence
given at the inquiry, the inspector’s findings of fact and his/ her recommendations.
In due course the government minister makes decision, which does not necessarily
have to be in accordance with the inspector’s recommendations. Appeal against the
minister’s decision is possible on legal grounds but not on the merits of the decision.
3.7 Design and Preparation for Contract Documents
3.7.1 Design proper
At this stage the Engineer has to prepare designs for the Works and to provide
adequate information on which contractors can be invited to tender. To enable
him/her carry out this task, further site investigations are usually required.
Labouratory tests or model tests may also have to be undertaken, and the approval of
outside authorities obtained for certain aspects of the proposed Works. The Engineer
must give attention throughout to the aesthetic and environmental aspects of the
design, and should be free to seek other advice as he/she wishes on these and other
subjects.
3.7.1.1 Specialist firms
Depending on the type and size of project the Engineer may need to employ
specialist firms for consultation and design on certain parts of he Works. The
design of specialist work may be delegated to specialists who may later, with
the Client’s approval, become nominated subcontractors for the detailed
design and construction stages for the project. Equitable arrangements for
payment for specialist design work must be made between the Engineer and
the specialist consultant or contractor. The Engineer should retain ultimate
responsibility for all specialist design work.
3.7.1.2 Outline designs
Depending on the complexity of the project, outline designs, giving more

information than was contained in the Engineer’s initial investigation report
but less detailed than tender designs, may be required for approval by the
Client. The need for such designs should be stated in the agreement between
the Client and the Engineer.
3.7.1.3 Scope of tender designs
Ideally, detailed designs of all the Work should be completed before tenders
for construction are invited. In some cases this is not practicable because of
the urgency of the Works, and the drawings on which tenders are invited are
supplemented by a series of further drawings issued by the Engineer during
construction.
The more complete the drawings, specifications and bills of quantities are at
the time of the call for tenders, the better the tenderers will understand what is
required, the more accurate will be their prices, the smoother the subsequent
execution of the work will be and the lower the cost. Certain information can
be known only when construction is under way, and in such cases redesign or
supplementary design work during the construction phase may be
unavoidable. Examples include excavations in ground which proves to be
different from that inferred from the information available at the time of
design, and structures housing machinery the precise details of which are
unknown at the design stage.
3.7.1.4 Time
The Engineer should advise the Client of the time needed to prepare designs
and Contract Documents, as shortage of time at this stage is highly likely to
lead to delays and additional expenditure. An early decision should be taken
as to the type of contract to be used for construction, as this will affect the
form of the documents the Engineer has to prepare.
3.7.2 Preparation of contract documents
3.7.2.1 Types of contract
Civil engineering construction is usually executed under a contract entered

into between the Client and a contractor. Contracts may be classified as:
(a) measurement contracts, in which the basis of payment to the Contractor
is a priced bill of quantities and/or priced schedule of rates.
(b) lump sum contracts.
(c) cost reimbursement contracts .
(d) all-in contracts.
3.7.2.2 Direct labour
As an alternative to execution by contractor the Client may decide to use the

method known as direct labour. Under this system the Client uses labour
already available within its own organization or recruited specifically for the
project. It undertakes all the responsibilities of management and risks of
construction, and pays all wages and expenses as they are incurred. There
may be no contract in the normal sense, unless the Client requires the work to
be undertaken in competition with contractors. More treatment of the topics
on tendering and construction contracts will be given in Chapter 12.
3.7.3 Overall approach to design and possible alternatives
The traditional and still widespread approach to civil engineering projects is to

undertake design and construction separately. For design, either the Client uses
his/her own staff, or he/she employs a firm of consulting engineers to do this. The
design includes the production of all drawings of the works required, together with
specification of the works and a contract for their construction. Civil engineering
contractors are then invited to submit tenders, which state prices for constructing the
works, and the client chooses the tender that he/she considers best: usually the lowest
priced one, but not always necessary.
A Client may have sufficient staff to undertake design work “in-house”; or it may
decide to do some work in-house and let out other work in separate “packages” to be
done by others. For large schemes, it may be appropriate to divide the whole project
in “design packages”, which are let out to appropriately experienced consultants,
with overall control exercised by the client’s staff, assisted by a firm of consultants.
Irrespective of how the much design work is let out to others, the client’s own staff
will have to maintain some controlling input to ensure that it stays within the
financial targets set.
On many projects there is a need for specialist design inputs. In some cases
specialist consultants may be brought in; in other cases specialist contractor or
supplier may be consulted at the design stage, especially when some patented or
unique process is considered for use. In some situations it may be appropriate to
employ a contractor to design and construct a discrete part of the works.
Alternatively all design work can be passed to the contractor. In the following
sections the commonly adopted principal design options are discussed.
3.7.3.1 Detailed design in-house or by a consultant
In this approach the whole of the design is completed in detail before

tenderers are sought for construction, except for matters such as details of
concrete reinforcement, which are not necessarily for tendering purposes.
The balance of detailed drawings is supplied to the contractor awarded the
contract as required by his/her programme. There may be elements of design
left for the contractor or by domestic subcontractors to undertake, such as
heating, lighting and plumbing systems. Specialist designers may, however,
be brought in for the design of such services and other special facilities.
3.7.3.2 Outline designs provided with detailed design by others
In this approach the client or his/her consultant draws up outline designs and
a specification of requirements. Separate design firm appointed by the client
then carries out detailed design. This sort of arrangement can be seen in
some management contracts where the management contractor coordinates
both detailed design and the construction. The design can also be let out as
separate packages dependent on the size of the project: for example, design of
an industrial estate may be packaged into roads and drainage, water and
sewerage, electricity supplies etc.
3.7.3.3 Layout design by client; detailed design by contractor
In this approach the promoter specifies functions and supplies layout plans.
The contractor then undertakes the detailed design before proceeding with
construction. The design element may be relatively small, such as designing
the final alignment and levels for a pipeline; or it may be fairly substantial,
such as the structural and reinforced concrete design required for a water
tower or service reservoir.
Such design by a contractor may offer some advantages in that the contractor
may design to suit his/her construction methods and the equipment he/she has
available. The disadvantages are that some control over the design is lost to
the client, the design may tend to suit the contractor more than the client, and
time may also be lost, as design cannot start until the contract is awarded. The
contractor also has to take some design risk, for which he/she must increase
his/her price.
3.7.3.4 Detailed design for civil works: Mechanical and Electrical design by others
This method is widely used for projects that combine both civil and
mechanical and electrical works. There are many such projects in the field of
hydro-power, drainage, waste treatment and water supply. The detailed
design of the civil works carried out by the client or its consultant
incorporating requirements to suit the Mechanical and Electrical equipment
being supplied. The Mechanical and Electrical work is normally undertaken
by specialist contractors, who produce detailed drawings of their plant
conforming with the general layout drawings and the specifications they have
received under their contract. Close liaison is needed between the civil works
design team and the plant designers.
3.7.3.5 Functional specification by client: design by contractor
This is similar to item 3.7.3.3 above except that the client specifies only the
functions the project is to perform and provides drawings of the location of
the intended works and a tentative layout for them. The contractor then
proceeds to devise the full layout required followed by detailed design in
accordance with the specification, which may set out the design standards
required. This is the basic set-up for design and construct where the
contractor holds most of the design responsibility.
Chapter 4
Financial Project Appraisal,
Depreciation and Inflation
4.1 Introduction
A capital expenditure situation is one in which the company’s or individual's funds are
committed to projects, which will return the invested funds and profits during future
periods. The objective is to evaluate from alternatives the project (investment) which
will promote the profitability and long-range growth of the enterprise.
Managerial problems requiring time-based financial appraisal may be broadly classified

as:
a) new construction, e.g. whether to build a new factory or expand existing facilities;
whether to build a new bridge, embankment, etc.
b) replacement and modernisation, e.g. replacement of an old plant and machinery by
modern and more efficient models.
c) economic choice. In a new construction and replacement and modernisation, there
may be several ways of achieving the desired result. For instance, in building
works steel-framed building may be economical than reinforced concrete, each
offering different life spans, initial costs, running cost, etc.
d) financing problems, whether to finance projects from loans, retained profits, trade
credit on a short-term basis, etc.
Before considering the various investment appraisal methods it must be appreciated that
they do not give a definite decision. They simply act as a guide and help communicate
useful information to the decision-maker. The actual decision is based on many diverse
factors, which cannot be incorporated into an overall formula or technique. In making
economic comparisons it is important to ensure that the various alternatives are
substantially equivalent, particularly with regard to their technical specification and
performance characteristics. Factors other than income or expenditure may override a
calculated optimum solution. Personal, social and political factors, for example, may
dictate a ‘prestigious’ construction project, which would be difficult to evaluate in
purely monetary terms.
When two or more alternatives are present, the decision analyst often finds that some
attributes of one alternative are superior to those of the others, while other alternatives
may also have different attributes for which they exhibit superiority. It is these situation
that pose a decision-making dilemma: how to choose? A sound analytical treatment,
which is based upon time value concepts and reliable quality data, would help much in
selecting the “best” alternative option. It should be, however, recalled that modelling
the attributes of an alternative cannot capture all of its relevant details and thus should be
viewed as an aid to sound decision making and should be thought of as just one part of
the overall process of wise, human decision making.
Financial methods of choosing between schemes competing for the same financial
resources are called methods of financial project appraisal. Notwithstanding the
importance of such factors, there are five basic approaches to capital expenditure
evaluation, which will be considered in the following sections.
4.2 Methods of Financial Project Appraisal

Financial Project Appraisal, Depreciation and Inflation 72
There are different methods of financial project appraisals ranging from simple rule of
thumb; methods to sophisticated software supported computer analysis that speed up
calculations. In all cases, the worthiness of the methods depend more on the quality of
data used. In this regard, one should put more effort in gathering data from reliable
sources so that the result of the analysis will be representing the reality and guide
investors in selecting the most profitable investment options.
In this Chapter, the following five basic methods of financial project appraisal are
discussed:
1. Straight Cost Method;
2. Payback Method;
3. Rate of Return Method;
4. Present Value (cost) or Net Present Value Method; and
5. Internal Rate of Return Method.
Methods 1, 2 and 3 are considered to be crude “rule of thumb” methods in comparison

with the more sophisticated methods 4 and 5.
4.2.1 Straight cost method
This method deals with the determination of project costs simply from immediate cost
approach and is based on “Which is the cheapest?" concept.
Example 4.1. Three reinforced concrete beam designs have been developed for a
particular section having a length of 8m. All would be equally satisfactory and details
are given as follows:
Overall dimensions Reinforcement Concrete

[mm] [kg/m3 of concrete] Grade
Beam No. 1 300 x 600 100 C-25
" 2 400 x 600 80 C-30
" 3 300 x 500 120 C-40
Cost of materials and labour

Concrete Formwork - supplied, fixed and struck
C-25 $120.00/m3 beam sides = $20/m2
C-30 $130.00/m3 beam soffits= $30/m2
C-40 $150.00/m3
Reinforcement - supplied, bent and fixed $150/100 kg.
If you work it out, you should find that Beam No. 3 is the cheapest, although you
probably would not have thought so. The advantages of the method are its simplicity and
speed. It is suitable when the alternatives have directly equivalent options and when all
cost is actual current price.
4.2.2 Payback method
The aim of this method is to determine the number of years it takes to pay back the
original investments from profits arising from the investment. According to this method,
projects can be considered on:
a. an accept-reject basis depending on the payback period; or
b. project ranking, where the faster paying-back project is accepted from a number of
mutually exclusive projects.
Example 4.2 - Accept or reject situation

Considering the expected cash flow from project 1 (Table 4.1) and assuming that the
basis for acceptance is a 3-year maximum payback period. This project is thus
economically acceptable as it pays back the initial outlay of $200,000 in the 3-year
period.
Table 4.1
Project 1
Year Cash flow ($)
0 -200,000
1 60,000
2 80,000
3 70,000 Payback period
4 40,000
5 20,000
Example 4.3 - Project ranking

If projects 2, 3 and 4 (Table 4.2) are mutually exclusive, project 3 has the fastest speed
of payback and is therefore economically worthwhile.
Table 4.2
Project 2 3 4
Year Cash flow Cash flow Cash flow
($) ($) ($)
0 -150,000 -60,000 -200,000
1 35,000 35,000 60,000
2 40,000 25,000 70,000
3 30,000 10,000 50,000
4 25,000 5,000 30,000
This is a simple appraisal method concentrating on speed of return. There are, however,
serious disadvantages with this method. Negative cash flows create a problem in that
the payback period may be ill defined as demonstrated in Table 4.3. Is the initial cash
outflow in Table 4.3 $100,000 or $150,000? (These are both capital outflows). Project
6 (Table 4.4) also highlights similar ambiguities in that it contains negative cash flows.
In the examples given in Tables 4.5 and 4.6, each successive project is more profitable
than the preceding one although the payback period does not show this. It is clear from
these results that the payback method does not make any allowance for the time value of
money.
Table 4.3
Project 5
Year Cash flow ($)
0 -100,000
1 -50,000
2 +50,000
3 +50,000
4 +60,000
5 +50,000
Table 4.4
Project 6
Year Cash flow ($)
0 -100,000
1 +60,000
2 -20,000
3 +30,000
4 +50,000
5 +80,000
Payback period?
Table 4.5
Project A B C
Year Cash flow ($) Cash flow ($) Cash flow ($)
0 -100,000 -100,000 -100,000
1 50,000 50,000 50,000
2 50,000 50,000 50,000
3 - 50,000 50,000
4 - - 50,000
Payback Period 2 years 2 years 2 years
Table 4.6
Project A B C
Year Cash flow ($) Cash flow ($) Cash flow ($)
0 -100,000 -100,000 -100,000
1 10,000 25,000 40,000
2 20,000 25,000 30,000
3 30,000 25,000 20,000
4 40,000 25,000 10,000
Payback Period 4 years 4 years 4 years
It is worth noting that the technique of payback method should not necessarily be
considered as an investment appraisal technique as such but rather a means of providing
information on the speed of return of the initial outlay.
Example 4.4
Five possible investment projects for a small company with a capital of $100,000 to
invest are given as shown in Table 4.7. Using the payback method, which project would
you recommend?
Table 4.7
Project A B C D E
Year Cash flow Cash flow Cash flow Cash flow Cash flow
($) ($) ($) ($) ($)
2000 -100,000 -100,000 -100,000 -100,000 -100,000
2001 10,000 60,000 30,000 50,000 40,000
2002 10,000 20,000 20,000 50,000 20,000
2003 40,000 10,000 10,000 10,000 10,000
2004 40,000 10,000 20,000 10,000 10,000
2005 20,000 10,000 20,000 10,000 10,000
2006 20,000 10,000 20,000 10,000 10,000
Payback 4 yr. 4 yr. 5 yr. 2 yr. 6 yr.
period
Accordingly, project D is recommended since it has shorter payback period of 2 years.
Advantages of the pay back method:

It is simple, quick and may help in decision-making depending on other factors. It is
suitable for the following cases:
- for highly speculative venture, for example in countries where investment
could easily be nationalised without compensation - or where technological
change is particularly rapid;
- where audience would not appreciate or understand more significant
methods of appraisal;
- to make a preliminary selection of investment proposals which are worth
considering further; and
- for comparing very similar proposals with constant returns.
Disadvantages of the pay back method:

- no account is taken of return after payback period;
- no account is taken of any remaining asset value;
- no account is taken of when the payments are made. i.e. early or late in the
payback period; and
- no account is generally taken of interest payments.
4.2.3 Rate of return method
With the return of return method the annual profit is expressed as a percentage of the
capital required to produce that profit. There are various methods of computation
according to the definition of capital and profit. Generally, however, investment is taken
as the initial outlay on the project, while profit is calculated as an average annual figure,
after deduction of depreciation, operating costs and expenses, over the life of the project.
For example, consider example 4.4 discussed above:
average annual return

Rate of return = capital invested ............................[4.1]
Project A:
1 [10,00010,00040,00040,00020,00020,000] X 100
rate of return = 6 100,000
= 23.3%
Project B:
1 [60,00020,00010,00010,00010,00010,000] X 100
= 20%
Project C:
1 [30,00020,00010,00020,00020,00020,000]
rate of return = 6 100,000 X 100
= 20%
Project D:
1 [50,00050,00010,000 10,000 10,000 10,000]
rate of return = 6 100,000 X 100
= 21.6%
Project E:
1 [40,000 20,00010,000 10,000 10,000 10,000]
= 16.7%
Project A is selected since it has a higher rate of return. Note that Project D was rated to
be the best alternative using the payback period method.
The return on capital employed method can assist management in two ways:
1. If a minimum target is set then those projects exceeding it will be accepted and
those below rejected.
2. Projects may be ranked in order of investment preference. The higher a project’s
percentage rate of return the more it is preferred.
Advantages: It is simple and quick. The method is suitable for: i) where-audience

would not appreciate or understand more significant methods of
appraisal: ii) making a preliminary selection of investment proposals
which are worth considering further and iii) comparing very similar
proposals with constant returns for a large number of years.
Disadvantages:
- Different answers can be obtained by taking average return over
different periods of time and no account is taken of payments outside
the period of the average;
- Similar to the pay back method, no account is taken of: any remaining
asset value; when payments are made - i.e. early or late in the payback
period, and of interest payments; and
- The readily observed weakness of this method (as shown in Table 4.7)
is that it cannot take into account the fact that earnings from the initial
investment may vary from year to year, neglecting the higher returns in
the earlier years.
Table 4.8
Project A B C
Year Profit ($) Profit ($) Profit ($)
0 -100,000 -100,000 -100,000
1 10,000 25,000 40,000
2 20,000 25,000 30,000
3 30,000 25,000 20,000
4 40,000 25,000 10,000
Rate of Return (%) 25 25 25
- Another disadvantage is the vague nature of the method. There is no firm

agreement on how capital employed should be calculated or how profit is
defined.
- Since the measure of a potential investment is an absolute rather than a
relative measure it is unable to take into account the financial size of a
project when alternatives are compared.
4.2.4 Present value (cost) method
A major limitation or criticism of the earlier rule of thumb methods has been that they
take little, if any, account of when payments are made. Finance needs to be raised for
most civil engineering projects and that means paying interest on the money that is
borrowed for the time it is borrowed. Even if the finance is readily available it will be
invested while it is not actually required and will be earning interest - which will cease
when it is required. Present value (cost) and Internal Rate of Return methods take
account of time by including this interest.
If you have $ 100 and put it in the Bank (assuming an 8% of interest), after 1 year you
will have
i
$ 100 x ( 1 + ) , where i = rate of interest (%)
100
= $ 100 x 1.08
= $ 108
If you have it there a further year you will have

i 2
$ 100 x (1 + ) = $ 100 x 1.082
100
= $ 116.64
and after n years you will have
i n
$ 100 x (1 + ) [4.2]
100
Conversely The value now (called present value) of $116.64 in two years time at an
116.64
“interest” rate of 8% is = $100. In other words the value of $116.64 in two
1.082
years can be discounted to a present value of $100. Similarly the present value of $100
100
in n years time is only .
i n
(1 + )
100
The present value of $108 in 1 year discounted at 8%
or $116.64 in 2 years discounted at 8%
i n
or $100 (1 + ) in n years discounted at 8%
100
are all equals $100 and are considered as equivalent. It is assumed that considering an
interest rate of 8% with the firm promise of $108 in 1 year's time, someone would let
you have $100 now.
Example 4.5
Suppose a rich grandfather gives you two options:
i) He will pay $10,000 now into your savings account (at an interest rate of 8%) but
you must promise not to take it out until your 25th birthday in 4 years time.
ii) He will give you $12,000 on your 25th birthday.
Which option should you choose?
Obvious Approach - How much will you get when you are 25?
Considering alternative i) after 1 year savings you will have $10,000 + interest of
8
x 10, 000
100
i.e.: $10,000 (1.08)
and after 4 years you will have $10,000 (1.08)4 = $13,604.90
Whereas alternative ii) would only produce $12,000.

Therefore, alternative i) is preferable!
Alternative Approach - What is the present value?

(a) Present value = $10,000
(b) What sum would become $12,000 after 4 years if invested at 8%?
Assume $x to be the present value.

After 4 years = $x (1.08)4 = $12,000
12,000
x   $8,820 .34
(1.08) 4
Therefore, present value of Option (ii) is $8,820.34, which is less that $10,000. Both
approaches are, of course, equivalent.
For comparing schemes or options it does not matter which year you relate or discount
costs to, the result will be the same. But you must obviously use the same year for all
schemes or options you are comparing. The net present value of an investment is the
present value taking account of all cash flows including the original investment, (+ve =
income, -ve = expenditure). When the result is positive it means that the return is greater
than the interest rate used.
Example 4.6. Find the net present value (NPV) of the five projects given below. All
the sums are multiples of $1,000 and assume the cost capital to the company to be 11%.
A B C D E
Year Disc. Cash Disc. Cash Disc. Cash Disc. Cash Disc. Cash Disc.
Factor flow flow flow flow flow
2005 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100
2006 1 10 9 60 54 30 27 50 45 40 36
111
.
2007 1 10 8 20 16 20 16 50 41 20 16
. 2
111
2008 1 40 29 10 7 10 7 10 7 10 7
. 3
111
2009 1 40 26 10 7 20 13 10 7 10 7
. 4
111
2010 1 20 12 10 6 20 12 10 6 10 6
. 5
111
2011 1 20 11 10 5 20 11 - 10 5
. 6
111
NPV -5 -5 -14 6 -23
Projects A, B, C and E all show negative net present values - i.e. the company should not
invest in any of these projects. Project D shows, however, a net present value of
+$6,000, which is a profitable investment.
Note that project A and B give the same net present value of $ -5,000. If the cost of
capital were 8% then show how project A has a positive net present value (i.e.
profitable); whereas project B has a zero net present value - i.e. break even situation -
neither profitable nor loss making.
Capitalised Cost and Equivalent Annual Cost
These are two slight variants on the present value (cost) method. The capitalised cost is
really the same as the present value (cost) but it is applied to projects, which have a very
long life - (for practical purposes of analysis an unlimited life). For example a sewage
treatment works or power station might be considered to have near unlimited lives
although it may be necessary not only to continually maintain the pumps etc. but also
actually to completely rebuild at about approximately 50-years intervals. Thus the
present cost of the sewage treatment works for evermore would normally be called the
capitalised cost. The capitalised cost is, therefore, the lump sum now, which if
spent/invested at the given rate would be sufficient to provide and maintain the facility
for all time. As one can expect, costs very far in the future are negligible when
discounted at high positive rates.
The equivalent annual cost is the sum, which would have to be paid each year to fund
the service (sewage treatment plant, power station, etc.) assuming a given rate of
interest. It is convenient for comparing with annual income - particularly in the
nationalised industries where cash flows result from long-term budgets and where sales
of electricity, gas etc. are fairly predictable.
4.2.5 Internal rate of return method
The Internal Rate of Return (IRR) is defined, as that rate at which future cash flows
when discounted will equate to the initial investment. This may mean that the present
value for an investment will be zero when cash flows are discounted at the internal rate
of return. In other words “you have to find a discount rate such that the present value is
zero - usually by trial and error - having found it then that discount rate is known as the
Internal Rate of Return.”
The IRR is the value for v, which satisfies the expression:
t0
At
(1  r ) t
 0 [4.3]
where
At = the project cash flow
t = the time period [0 to n]
r = the annual rate of discount.
This formula can be used for projects, the cash flows of which extend up to three
periods. If they extend beyond this, complex polynomial equations are required for
solution. Fortunately a good approximation of a project’s IRR can be found through
linear interpolation. In this method, cash flows are discounted at a series of ‘trial’ rates
of interest to determine the rate of interest at which the value of incomes is exactly equal
to the present value of expenditures.
Example 4.7 If a simple initial investment of $1,000 is expected to produce cash flows
of +$200/year for 6 years, what is the Internal Rate of Return?
Year Cash flows Discounted Discounted

at 5% at 10%
0 -$ 1000 -1,000 -1,000
1 +$ 200 x( 1.105 ) = 190 x( 11.1 )
2 +$ 200 = 182
1 2
3 +$ 200 x( 1.05
) = 181 x( ) 1 2
11
. = 165
4 +$ 200 x( 1.105 )3 = 173 1 3
5 +$ 200 x( )
1.1 = 150
6 +$ 200 x( 1.105 ) 4 = 165
x( )1 4
1 .1 = 137
1
x( 1.05 )
)5 = 157 1 5
x( )
1.1 = 124
x( 1.105 )6 = 149
x( 11.1 )6 = 113
Present value + $ 15 - $ 129
Interpolating, Internal Rate of Return is equal to
 5  (1291515 ) x 5  5.52 %
As a check discounting at 5.52%

-$1,000 = $1,000
+ 200 x 1/1.0552 = ..........................................190
2
+ 200 x (1/1.0552) = ..........................................180
+ 200 x (1/1.0552)3 = ..........................................170
+ 200 x (1/1.0552)4 = ..........................................161
+ 200 x (1/1.0552)5 = ..........................................153
+ 200 x (1/1.0552)6 = ..........................................145
.......................................- 1 0
which checks satisfactorily.
The IRR can also be obtained graphically as shown in Figure 4.1
40 5.52
0
2 4 6 8 10 12
-40
USD
-80
-120
-160
Discount (%)
Figure 4.1 Plot showing the IRR of a project.
Example 4.8: A firm has two investment opportunities for which the cash flows are as
given below. Find the Internal Rates of Return for both and recommend which project
should be adopted assuming they are mutually exclusive projects. Show how (by means
of a diagram) a different recommendation could have been made if the present value
method had been used with a low discount rate.
Project A
Year Cash flows Discounted Discounted Discounted Discounted

($) at 2% ($) at 5% at 10% at 15% ($)
($) ($)
Initially -100,000 - 100,000 - 100,000 -100,000 -100,000
End yr. 1 + 80,000 78,431 76,190 72,727 69,565
End yr. 2 + 20,000 19,223 18,141 6,529 15,123
End yr. 3 + 10,000 9,423 8,638 7,513 6,575
+$ 7,077 +$ 2,969 -$ 3,231 $ 8,737
Interpolating for project A
2 , 969
 5  x 5  7.39%
2 , 969  3 , 231
Project B
Year Cash flows Discounted Discounted Discounted

($) at 2% at 5% at 10%
Initially - 100,000 - 100,000 - 100,000 - 100,000
End yr.1 + 5,000 4,902 4,762 4,545
End yr.2 + 20,000 19,223 18,141 16,529
End yr.3 + 90,000 84,809 77,745 67,618
$ 8,934 $ 648 -$11,308
Interpolating for project B
= 5
648 x 5  5.27%
648 11308
Therefore Internal Rate of Return for project A is 7.39%, which is higher than the 5.27%
of project B. On this basis, project A is, therefore, preferable. The same is shown in
Figure 4.2.
10000 7.39
Project A
5000
5.27 Project B
D 0
S 0 5 10 15 20
U -5000
-10000
Figure 4.2 Diagram showing IRR values for two projects.
-15000
%
If present values had been used with a discount rate of 2% (or less than 3% as can be
seen from Figure 4.2) project B would be recommended, as it would show a higher
present value.
4.3 Dealing with Multiple Alternatives
Most construction and business projects comparison can be accomplished by more than
one method. Invariably, the alternative methods require differing levels of capital
investment, giving rise to different incomes and may in turn have varying economic
lives. The investment of additional amounts of capital in various alternatives usually
results in increased capacity, increased revenue, decreased operating expenses, or
increased life and thus enhances the manager’s chances of obtaining a greater profit. If
mutually exclusive projects are to be compared, then it is not possible to select the
correct project solely on the basis of an Internal Rate of Return analysis.
4.3.1 Mutually exclusive projects
Suppose a company requires one new factory and three possible sites are under
consideration. The projects are mutually exclusive since only one new factory is
required, so if it is built on site 1, sites 2 and 3 are therefore excluded and vice versa.
Mutually exclusive projects can be defined as those, which compete for acceptance in
that it is not possible or desirable to accept more than one. For instance when two or
more schemes for the use of one plot of land; or two or more financially acceptable
contracts when a contractor has sufficient management staff or labour for only one, can
be considered as mutually exclusive projects.
It is not possible to compare such projects by IRR analysis because the IRR does not
give any indication of either the amount of capital involved in an investment or the
duration of the investment. Discrimination can easily be made, however, on the basis of
incremental cash flows.
4.3.2 Incremental analysis
Incremental analysis consists essentially of two stages: 1) the subtraction of one cash
flow from another, and 2) the application of a discounted cash flow (DCF) method to the
differences between them. Incremental analysis method is discussed using an example as

shown below.
Example 4.9 The project with the smaller capital investment is subtracted from the
project with the larger capital investment. Project A seems initially to be preferable to
project B. Project B, however, uses more capital than project A, so it is necessary to
know the profitability of the extra investment. This 8%, which, depending on the
attractive rate of return, may or may not be acceptable. Incremental analysis in this way
is useful for comparison of projects of different sizes and lives because it directly relates
the extra profitability to the extra investment of life.
Table 4.9
Year Project A Project B Increment
($) ($) A-B ($)
0 -2,000,000 -3,050,000 -1,050,000
1 1,000,000 1,500,000 500,000
2 1,000,000 1,500,000 500,000
3 1,000,000 1,200,000 200,000
23.4% 20% 8%
This incremental approach should also be used for comparing three or more alternatives
in order to obtain a true relationship between the merits of each alternative.
Example 4.10
Consider the following alternative investment schemes:
i) Scheme A's initial investment is $5,000 and has annual income of $1,500.
ii) Scheme B's initial investment is $25,000 and has annual income of $6,000.
iii) Scheme C's initial investment is $35,000 and has annual income of $9,000.
iii) Scheme D's initial investment is $48,000 and has annual income of $12,000.
Assuming the life of each scheme is five years and an attractive rate of return is 8%, the
IRR values are summarised as given in Table 4.9.
Table 4.10
A B C D
Capital ($) -5,000 -25,000 -35,000 -48,000
Additional capital ($) - 20,000 10,000 13,000
Annual income ($) 1,500 6,000 9,000 12,000
IRR (%) 15 6 9 8
Increase in income ($) 4,500 3,000 3,000
IRR on increased outlay (%) 4 15 5
Choose scheme C!
4.4 Postponing an Investment
The incremental rate of return method of choosing between alternatives can be extended
to determine whether or not an investment in a project should be postponed. This
problem can only arise where the project’s inflow will be higher (or the capital outlay is
lower) if the project is postponed. For example, capital outlays on new machinery or
plant will often need to be postponed until an increasing level of repairs or operating
diseconomies on the old plant make for profitable replacement.
4.5 Depreciation
The fact that there is, in general, depreciation in value of construction assets (in civil
engineering plant, projects and equipment) is self evident. The depreciation or decrease
in value may be due to, but not limited to, the following:
- passage of time - rusting, deterioration;
- reduced performance - wear, corrosion, decay, more frequent
breakdown, difficulty in obtaining spares,
difficulty in repairing;
- change in requirements;
- change in legislation - no longer meeting stricter Health and
Safety requirements;
- destruction by accident;
- replacement by new technology; and
- replacement by newer more efficient equipment.
The life span of civil engineering assets varies considerably. It is no easy matter to
know the correct figure and it is easy to think of examples where they got it wrong.
However, typical figures might be:
- dams, tunnels, harbours 50 - 100 years
- breakwaters, bridges, roads 40 - 60 years
- buildings, outdoor cranes, railways, power stations 35 - 50 years
- portable Machine tools, office furniture 10 - 15 years
- construction plant 5 - 10 years
- direct electronic stations 15 - 20 years
- railway station 20 – 35 years
The estimated life span of the asset may be the sensible period over which to depreciate
the asset, but it may be preferable to depreciate its value over a shorter period. It will
depend on the purpose of the depreciation. The need to make allowance for that
depreciation occurs for a variety of reasons such as when:
a) the asset will need replacing at some stage and this will require funds;
b) assessment of profitability or efficiency of the equipment;
c) assessment of profitability or efficiency of the overall organisation;
d) for taxation purposes; and
e) company law.
4.5.1 Methods of depreciation calculations
There are a variety of common methods in depreciation calculations. They each have
advantages and disadvantages and which should, or could, be used will depend on the
application, reason why depreciation is to be calculated and the choice of the user. The
methods are:
1. Assessment of resale value;
2. Straight-line depreciation;
3. Constant percentage (often called declining balance);
4. Sum of digits; and

5. Sinking fund.
To illustrate the different methods, consider the case of Mr Jacob, who is a machine
operator and wins $200,000 on the National lottery and buys himself a small backhoe
excavator. He then becomes self-employed, advertises and obtains work for himself and
his machine working on a series of small building sites. He needs to take account of the
depreciation of his asset, the backhoe excavator, in assessing what his charges per hour
ought to be, or how much he needs to save to replace it, or how much work he needs to
obtain, or how much he can pay himself, or whether his business is profitable etc.
4.5.1.1 Assessment of resale value.
Mr Jacob looks at Construction News and various other local trade journals and sees
from the small advertisements that the apparent going rate for similar second hand
backhoe excavator are as follows:
1 year old  $160,000
2 years old  $120,000
3 years old  $ 90,000
4 years old  $ 70,000
5 years old  $ 40,000
and he, therefore, considers depreciation of the excavator to be $40,000, $40,000,

$30,000, $20,000 and $30,000 in the five years which he considers that he intends to
keep the machine. Hence, when considering the situation at the end of his first year self
employed and assessing his profitability or otherwise he takes into account that his asset
has decreased in value by $40,000.
Advantages
He could actually sell the asset for the depreciated value of $160,000 at the end
of 1 year. If he obtains the resale value actually at the end of the first year it will
have taken account of inflation.
Disadvantage
It is often difficult to find the resale value. The resale value for a very specialised
piece of equipment might be almost zero, because no one wants to buy it, but the
equipment might have considerable value to you.
4.5.1.2 Straight line depreciation.
The resale price or salvage price at the end of 5 years is $40,000.
I n itia l C o s t  S a lv a g e o r r e s a le v a lu e
D e p r e c ia tio n 
e s tim a te d life
PS 200,000  40,000

   $32,000 p.a [4.4]
n 5
The method has the advantage since it is easy to work out and constant depreciation
amount each year. However, one of the disadvantages is that the depreciation value (or
book value) is likely to be higher than actual realisable value.
4.5.1.3 Constant percentage depreciation

The asset is assumed to depreciate by a constant percentage each year.
Depreciation in the first year = D x P
 Value after 1st year = P - PD = P(1-D)
Depreciation in second year = D x P(1-D)
 Value after 2nd year = P(1-D) - DP(1-D)
= P(1-D)2
 Value after n years = P(1-D)n [4.5]
Hence, if resale or scrap value after n years = S
Then S= P(1-D)n
s S 1
1 n  1 ( )n [4.6]
D  1n S / P D=
p P
 for the backhoe excavator D

40 ,000
 1 5  0.275
200 ,000
Depreciation for the first year =0.275 x 200,000 = .$55,000

 Asset book value after 1 year =200,000 - 55,000 = $145,000
Depreciation for the 2nd year = 0.275 x 145,000 = $39,875
 Asset book value after 2nd year = 145,000 - 39,875 = $105,125
Depreciation for the 3rd year = 0.275 x 105,125 = $28,909.4
 Asset book value after 3rd year = 105,125 - 28,909.4 = $76,215.63
Depreciation for the 4th year = 0.275 x 76,215.63 = $20,959.3
 Asset book value after 4th year = 76,215.63 - 20,959.3 = $55,256.33
Depreciation for the 5th year = 0.275 x 55,256.33 = $15,195.5
 Asset book value after 5 years = 55,256.33- 15,195.5 = $40,060
Sum of depreciation = 159,940
 $160,000
The advantages of the method include the fact that it is fairly realistic. Furthermore asset
depreciates quickly in the early stages and fairly easily calculated. On the other hand
depreciation varies each year and resale or scrap value has fairly significant effect on
amount of depreciation in early years.
To illustrate the last point consider the effect of assessing that at 5 years the asset of the
Mr. Jacob’s excavator may be saleable only for scrap or spares at $15,000 instead of
$40,000, and using equation 4.6,
 15,000 
1  5   0.404
 200,000 
D 
and first year depreciation = $(0.404 x 200,000) = $ 80,800, which is very different
from $55,000. In fact as final salvage value approaches zero the first year depreciation
tends to be full value. This is nonsense - and hence the constant percentage method
should not be used for zero or very low salvage resale values.
4.5.1.4 Sum the digits of the life
Sum the digits of the life. In this case, = 1 + 2 + 3 + 4 + 5 = 15

5
Depreciate in the first year
15
5
= [200,000 - 40,000] = $53,333.33
15
Thus, depreciated value after 1st year
= 200,000 - 53,333.33 = $146,666.67
4
Depreciate in the second year
15
4
= [200,000-40,000] = $42,666.67
15
Thus the depreciated value after the second year
= 146,666.67 - 42,666.67 = $104,000
3
Depreciate in the third year
15
3
= [200,000 - 40,000] = $32,000
15
Thus depreciated value after 3rd year
= 104,000 - 32,000 = $72,000
2
Depreciate in the fourth year
15
2
= [200,000 - 40,000] = $21,333.33
15
Thus depreciated value after 4th year
= 72,000 - 21,333.33 = $50,666.67
1
Depreciate in the fifth year
15
1
= [200,000 - 40,000] = $10,666.67
15
Thus depreciated value after 5th year
= 50,666.67 - 10,666.67 = $40,000
The method is usually fairly realistic and depreciates asset quickly in the early stages
and is easily calculated. It is not super sensitive to very low scrap values. The fact that
depreciation varies each year can be considered as its disadvantage.
4.5.1.5 Sinking fund method
It is the sum which is to be put into an investment account such that it will when added
to the resale or salvage value produce a sum equal to the original purchase price. The
depreciated value of the asset is then taken as the original purchase price less the sum in
the account.
For the backhoe excavator and assuming the account earns interest at 10%, the sum to be
set aside each year is
i
 (P  S ) [4.7]
(1  i ) n 1
01
.
 (200,000  40,000) X
. n 1
11
= $26,207.6
Check!
- After 1st year $26,207.6 is paid into account.
- After 2nd year the account has 1.1 x $26,207.6 in it and a further
$26,207.6 is paid in to give $55,036.
- After 3rd year the account has 1.1 x 55,036 in it and a further $26,207.6 is
paid in to give $86,746.56.
- After 4th year the account has 1.1 x 86,746.56 in it and a further
$26,207.6 is paid in to give $121,628.8.
- After 5th year the account has 1.1 x 121,628.8 in it and a further $26,207.6
is paid in to give $160,000 which with the 40,000 salvage resale value
equals the $200,000.
 Depreciated value after 1 year = 200,000 - 26,207.6 = $170,792.2

2 years = 200,000 - 55,036 = $144,964
3 years = 200,000 - 86,746.6 = $113,253
4 years = 200,000 - 121,628.8 = $ 78,371.2
5 years = 200,000 - 160,000 = $ 40,000
The annual depreciation charges calculated by this method are lowest in the early years
and largest in the later years. It is based on the concept that the depreciation recovers
each year are placed in a sinking fund. The method depends on interest rates - if interest
rates were zero, it would of course become identical to the straight-line depreciation.
The method is convenient if concentrating on replacing the asset and is fairly easily
calculated.
Summary of results highlighting features of the depreciation methods discussed above

are given in Table 4.11 and are schematically shown in Figure 4.3.
Table 4.11 Summary of depreciation values.
Depreciation Methods
Year 4.5.1.1 4.5.1.2 4.5.1.3 4.5.1.4 4.5.1.5
1 40,000 32,000 55,000 53,333 26,207.60
2 40,000 32,000 39,875 42,666 28,828.40
3 30,000 32,000 28,909 32,000 31,710.60
4 20,000 32,000 20,959 21333 34,882.24
5 30,000 32,000 15,195 10,666 38,371.20
240,000
4.5.1.1
200,000
4.5.1.2
4.5.1.3
160,000
Book value
4.5.1.4
120,000 4.5.1.5
80,000 Salvage value
40,000
0
0 1 2 3 4 5 6
Time (year)
Fig 4.3 Summary of book values of an asset calculated by the different depreciation
methods.
Which method Mr. Jacob ought to use is debatable.

i) If he wants to reduce his tax he would like to show that his business is scarcely
profitable and depreciate as much and as fast as possible. Tax regulations state
minimum depreciation periods.
ii) If he wants to sell his business as a going concern he would like to minimise his
depreciation and show assets of his business to be as large as possible so that he
will obtain a higher price.
iii) If he wants to control his business and know how well it is doing, he wants a
system that accurately reflects the value of his assets
4.6 Inflation
The effect of inflation is to increase the price of things. If the rate of inflation is x then
something costing $A will cost $A(1 + x)n after n years, (assuming that its price goes
up at the same rate as inflation. Conversely the numerical sum of $A in n years time will
1 th
only buy (1 x) of what it will now.
4.6.1 Interest and inflation
Let ireal be the real rate of interest where imon is the monetary rate of interest, and x is
the rate of inflation. If you have $A which you invest, after 1 year you will receive $A x
imon interest so that you have a total of $A(1 + imon).
th
1
But these are in 1 year on $’s, which are only worth 1 x of today's $’s.
(1imon )
So in today's $’s you only have $ A (1 x )
(1imon )
A(1+ ireal) =A (1 x ) or [4.8]
(1 + imon) = (1 + ireal) (1 + x)
In some cases ireal may be -ve. For example investing $100 in the Bank might pay you
8% interest after tax, whereas the rate of inflation could be 14%, i.e. i mon = 0.08 and x =
0 .14
1 i mon
 ireal = 1 x
 1  11..14
08
 1   0 .053
= -5.3%
4.6.2 Working in real terms
In the past most people have worked completely in real terms for financial appraisals.
Doing this the price of an item generally remains constant. For instance, a bridge costing
$150,000 today can be replaced by an identical bridge costing $150,000 in 100 years
time.
4.6.3 Working in monetary terms (or numbers of $'s)
Doing this the price of an item (measured by the number of $'s) will generally increase -
although in real forms (e.g. measured in today's $) it may remains constant. Thus the
$150,000 bridge (if costs increase at 10%/year) will cost $150,000 x 1.1100 = $150,000
x 137,806 = $2,067 million to replace in 100 years, but since the $'s they use will only
1
be worth 137806 of ours if the general rate of inflation is also 10% it will still cost
$150,000 in today's $'s.
Working in either should give the same answer. Because of the immense difficulty of
estimating rates of inflation (especially over a long time) and because the numbers tend
to get out of hand it is suggested to try and work in real terms, where possible.
Exercise problems
4.1 A contractor is looking back over the last five years and wondering whether,
with hindsight, he should have bought a dozer for $1,350,000 instead of hiring it.
His workload has been such that he would have saved hiring costs of $540,000,
675,000, 585,000 and 450,000 i.e. a total of $2,250,000 over the five years. He
has heard that the hire company has only been involved in costs (maintenance
etc.) of $150,000; 280,500; 250,500; 237,000; 180,500 and is now spending
$55,500 reconditioning it with the aim of selling it for $250,000. Assuming all
costs are real costs and are paid at the end of the relevant year, find what the
internal rate of return would have been for the contractor’s use if his maintenance
costs etc. had been the same as the Hire Company?
4.2 A company is considering the purchase of a large crawler excavator for

$1,200,000. It expects to save, after allowing for maintenance costs, etc,
$350,000 after 1 year, $280,000 after 2 years, $210,300 after 3 years and
$170,000 after 4 years when it will be sold for $300,000. Assuming that these
sums are in money terms (i.e. not real terms) received at the end of each year and
assuming the rate of inflation remains at 8% what is the internal rate of return in
real terms?
4.3 A contractor is negotiating for a package deal contract including design and
construction of a certain project. He has estimated the times and costs to be as
follows:
- Design and ordering of materials 6 months $500,000
- Fabrication and delivery to site 12 months $2,800,000
- Erection 9 months $2,000,000
The contractor works on a 15% profit margin or mark up on all estimates of cost.
The contractor borrows money at 12% and therefore uses this as the discount rate
when calculating net present value.
a) What would the net present value of the project be to the contractor if he is
paid under the following three different payment arrangements?
i) Paid a lump sum on overall completion.
ii) Paid as costs incurred.
iii) Paid 20% when all materials delivered to works
20% when all fabrications delivered to site.
50% on overall completion, and
10% at end of first year maintenance period.
b) What is the net present value (cost) to the client who works on a discount
rate of 8%?
You may assume that:
i) costs incurred by the contractors are uniform over the period
estimated and may therefore reasonably be lumped half way
through that period.
ii) because of the requirement to check that work is actually
satisfactorily completed before authorising payment, there is a delay
of one month between when payment is due and when it is actually
paid.
4.4 Suppose you have to choose between the following two alternatives: Invest in a
new building of $500,000 now or in two years time. By delaying the investment
for two years maintenance costs on the existing building of $60,000 per annum are
anticipated. For the new building, maintenance costs are estimated as follows:
First year $10,000; second year $15,000 and $20,000 for each succeeding year to
the end of an 8-year study period. If the cost of capital is taken as 12%, which
alternative is preferable?
4.5 The cash flow of two alternative investments is tabulated as shown below in
Table 4.12.
a) Considering 6% interest rate, tabulate cash flows and identify the
preferable options.
b) Repeat question 4.5(a) above with an interest rate of 12%.
c) What would be the result if the projects were compared over a common life
span of four years? (Use the equivalent annual cost method and comments
on your answer).
Table 4.11
Alternative 1 Alternative 2
Year Cash flow ($) Cash flow ($)
0 -45,000 -53,000
1 +24,000 +15,000
2 +38,000 +25,000
3 - +30,000
4 - +10,000
4.6 Suppose you have received your annual electric bill of $3,000. Since you expect
that electric costs will increase at 20% per year whereas the general rate of
inflation will be 8% you are considering installing solar cell, which should reduce
your electric bills by 30%. You have the necessary $2,500 in the Bank earning
10% interest in the monetary terms. Compare the saving in electric costs with the
interest payments for each year over the next 10 years in monetary terms and real
terms. What are the various payback periods? (Within 5 years, 8 years, 10 years,
never).
4.7 A farmer’s cooperative is planning to buy a simple oil-extracting machine costing

$15,000. It is estimated that the annual cash receipts will be $2,000, $5,000, $7,000
and $9,000 over the next four years and the machine will then have a scrap value of
its own of $5,000. Assuming that the rate of inflation is 8% and that all the sums are
in monetary terms should the cooperative go ahead if its cost of capital in real terms
is 5%?
Chapter 5
Sources of Large Development
Project Finance
5.1 Introduction
Baum and Tolbert (1985b, pp. 333) defined a development project as: “a discrete
package of investments, policies, and institutional and other actions designed to achieve
a specific objective (or set of objectives) within a designated period”. In addition, a
development project is often an essential part of a country’s development plan. In
developed countries similar projects may well go under different names, for example,
“infrastructure investment”, the difference being that development investment is made
specifically to increase capacity, whether it be through structures, organizations or
methods. It is wrong to consider development projects purely as physical investments.
The objective of any development project should be to improve both physical and non-
physical aspects (for example, skill and acquisition).
5.2 Sources of Finance
Large development projects can be financed from several sources. In wealthy countries,
such projects can be funded internally from a single source (mainly from the government
budget). However, this is not possible in most developing countries, as government
funds are often inadequate. If this is the case, development projects will have to be
funded mainly from external sources. These external sources often prefer to finance
only part of the project, while the remainder will have to be financed internally.
Sources of Project Finance 105
Although most foreign-aided projects allocate 100% of foreign expenditure to the

external source of finance, there are four main types of transaction that can occur. These
are listed as follows:
a) the donor or lender pays for local expenditure;
b) the donor or lender pays for foreign expenditure;
c) the recipient country pays for local expenditure; and
d) the recipient country pays for foreign expenditure.
There are many international development agencies, which provide extensive funding.
Some of these are presented in Table 5.1.
Table 5.1 International development agencies

1. International Bank for Reconstruction and Development (IBRD), World Bank,
Washington, DC
2. International Development Association (IDA), World Bank, Washington, DC
3. International Finance Corporation (IFC), World Bank, Washington, DC
4. Multilateral Investment Guarantee Agency (MIGA), World Bank,
Global: Washington, DC.
5. International Fund for Agricultural Development (IFAD), Rome
1. Abu Dhabi Fund for Arab Economic Development (ADFAED), Abu Dhabi
2. African Development Bank (AfDB), Abidjan
3. Arab Bank for Economic Development in Africa (ABEDA), Khartoum
4. Arab Fund for Economic and Social Development (AFESD), Kuwait
Regional: 5. Asian Development Bank (AsDB), Manila
6. Caribbean Development Bank (CDB), Barbados
7. European Development Fund (EDF), Brussels
8. European Investment Bank (EIB), Luxembourg.
9. Inter-American Development Bank (IADB), Washington, DC
In most cases, external donors will set a limit on the funds made available. If project
costs are higher than expected, resulting in the donor’s limit being exceeded, a
considerable burden will be placed on the local economy. If several sources are used to
finance a project, there are additional problems that may have to be overcome, some of
which are discussed below:
i) Each source (donor/lender) has a legitimate interest in monitoring the project and
thus several accountability reports may be required.
ii) Accounts will have to be verified through project audits. Very often one auditor is
responsible for the local component, while another looks after the international
element. If this is the situation, the jurisdiction of these auditors may not be clear
and the local auditor may not be able to review the external element of projects
funded in his or her own country.
iii) As with most construction projects, the executing agency spends money on the
project and then claims it back from the sponsors. Failure to claim back
expenditure is uncommon, but extensive delays in submitting claims do occur.
This results in additional costs due to both the time-value of money, and any short-
term foreign exchange deals that are used to overcome the delay.
iv) Project expenditure may have to be made in several currencies, and it is difficult to
decide how these should be built into the project costs and when they should be
presented as a single currency.
5.3 Development Banks
Development banks can be defined in a variety of ways and in practices have little in
common apart from the basic concept. There are many types of ownership, objectives,
and sources of finance, policies and degree of government involvement that can be
adopted. A development bank is considered by the United Nations to be an institution
concerned primarily with long-term loan capital.
However, this vague definition can be applied to most banks. In practice, the main
objectives of a development bank must be to speed up the development process. In most
cases, these institutions have been established by governments mainly to encourage
growth within the private sector of their own economy. International development
banks can be characterized on a geographical basis, i.e. as national, regional (e.g.
African Development Bank – AfDV; Asian Development Bank – AsDB) or universals
(World Bank group) (Table 5.1). The ownership and membership of regional
development banks is not restricted to the regional States, hence entities other than
States can also be included.
The objectives of most regional development banks are generally restricted to economic
development and integration. Some, such as the AfDB, are also concerned with the
encouragement of social progress. In order to achieve these objectives, sections are
often established within the bank, which have one or more of the following functions:
a) to facilitate economic construction or reconstruction;
b) to help development planning and programming;
c) to cooperate with other institutions with similar goals;
d) to provide funds for capital investment;
e) to encourage and promote both public and private investment from abroad; and
f) to generate international capital flow.
Each region has its own problems and regional development banks can produce
solutions to encourage economic development but these have to be restricted to the
individual bank’s scope of activities. A comparison of the approaches taken towards the
construction industry by the different regional development banks would be interesting,
but difficult to achieve without full disclosure from the institutions concerned. The
policies and where possible, the procedures adopted by three different regional
development banks and by the World Bank are highlighted in the following sections.
5.3.1 African Development Bank group (AfDB group)
The African Development Bank Group comprises:

i) the African Development Bank (AfDB);
ii) the African Development Fund (AfDF), i.e. the soft loan window to member
countries with GNP per capital below US$510;
iii) the SIFIDA Investment Company; and
iv) the Nigerian Trust Fund (NTF)
The AfDB Group provides both human and capital resources for the economic and
social development of 51 African countries (1993). In addition to project/programme
lending, it also co-finances projects with the World Bank Group, the European Union
(EU) and many other leading agencies.
AfDB was established on 4th August 1963 in Khartoum. In 1993 it had 51 regional
member countries and 25 non-regional member countries. Loans to poorer counties are
usually repayable after 40 years with a ten-year grace period. Other loans have
maturities ranging from twelve to 20 years with a two-to five-year grace period. The
Bank participation rarely exceeds 50 per cent of project cost.
The project cycle is very similar to that of the World Bank, as discussed in section 5.3.4.
It usually takes between eight months and three years to complete the approval process.
Once the Bank has approved a project involving large and complicated contracts for
construction services, it normally requires pre-qualification for all major supplies. Pre-
qualification is usually based upon:
 Financial stability;
 Previous experience and performance on similar projects;
 Knowledge of local conditions; and
 Capabilities with respect to personnel, equipment and plant.
Contractors who have pre-qualified are invited to tender and the contract is awarded to
the lowest evaluated bidder, defined as being “the bid price which appears to be the most
economic after evaluating all terms and conditions of the bid as well as the qualifications
of the bidder”.
The Bank also offers many consultancy services, which include; preparation or pre-
investment studies; detailed design of projects, supervision and control of projects; and
provision of technical assistance.
5.3.2 Asian Development Bank (AsDB)
The Asian Development Bank encourages economic growth and co-operation in Asia
and the Pacific, and also assists in the economic development of its member countries.
It comprises the bank itself and its affiliates such as the Asian Development Fund
(AsDF), which is the soft loan window providing loans with a 1 per cent per annum
service charge, with repayments extending over 40 years including a grace period of ten
years.
AsDB was established on 22 August 1966 in Manila. It is owned by 36 Asian counties

and 16 countries from Europe and North America. Since 1987, most of the AsDB
activities have been directed towards economic programme lending and prefers
predefined projects.
The AsDB has traditionally been oriented towards the public sector, but this has started
to change and the Bank’s association with the private sector has grown. Between 1986
and 1989, 18 private sector projects received a total of US$180.7 million from the Bank.
However, the AsDB is still reluctant to provide un-guaranteed loans to the private sector.
Programme lending can be defined as “a lending mechanism through which loans are
provided not for a specific project but for a particular economic programme such as
agriculture diversification, etc.”
Most governments seem to favour programme lending rather than project lending
because of the flexibility that lies within a particular broadband programme. However,
the AsDV prefers predefined projects which its staff understands and can account for. In
order to overcome this problem and reach a compromise, the AsDV has started to lend
to the private sector with government guarantees, by lending to the national development
banks, which in turn lend directly to the private sector. In addition, the Bank has used
other mechanisms such as venture capital, leasing or co-financing. The power station
recently built in Hong Kong on a Build-Operate-Transfer basis and the equity interest
position in the Nepalese cotton industry are good examples of the AsDB’s new
approach.
The activities of the AsDB involve mainly transport or communication systems but,
where appropriate and possible, funds are made available for education, health and
urban development. It is not usual to identify the construction industry as a separate
sector when funds are allocated. However, the construction element of most industrial
projects usually makes up around 20 per cent of the loan.
5.3.3 Inter-American development bank (IDB)
The Inter-American Development Bank was established on 8 April 1959 in Washington,

DC, to promote the investment of public and private capital in the region for
development purposes. It had 44 members in 1995. The IDV comprises: the Bank
itself; the United States Social Progress Trust Fund; and the Fund for Special Operations
(i.e. the soft-loan window).
Agriculture, rural development, urban improvement and energy development have in the
past been the main focus of the Bank’s lending strategy. Of its total lending, 35 per cent
has gone towards physical infrastructure involving construction works. Until 1987,
lending was traditionally directed towards infrastructure projects, for example, roads,
bridges, dams and ports. Since then, there has been a deliberate shift away from
infrastructure development forwards “basic human needs” such as housing. However,
construction work remains an important aspect of the Bank’s lending policy, even
though the number of major construction projects is decreasing.
5.3.4 The World Bank group
The term “The World Bank” is used mainly to refer to both the International Bank for
Reconstruction and Development (IBRD) and its affiliate, the International
Development Association (IDA). There are two other affiliates to the World Bank,
namely the International Finance Corporation (IFC) and the Multilateral Investment
Guarantee Agency (MIGA). These four bodies are collectively known as the World
Bank Group as shown in Figure 5.1.
The World Bank

Group
The World
............vvvvvB
Bank
IBRD IDA IFC MIGA
Figure 5.1. The World Bank Group structure
Projects supported by the World Bank include the construction of dams, roads, bridges,
ports and many other large infrastructure projects. However, there has recently been a
significant trend towards smaller projects in the agricultural and social sectors. In the
fiscal year ending 30 June, 1991, the World Bank provided US$27.7 billion worth of
IBRD loans and IDA credits. Since most projects only receive approximately 35 percent
of the total cost from the World Bank, projects totalling US$60 billion are made possible
each year through the support of the Bank. The aid is used to purchase goods,
equipment, consultancy services and construction of the works required to complete

specific projects.
5.3.4.1 The International Bank for Reconstruction Development (IBRD)
The IBRD’s operations are governed by its charter, which spells out certain basic rules.
It aims to benefit member States by:
 Promoting economic development by making loans on favourable terms to
governments for priority productive projects where finance cannot be obtained on
reasonable terms elsewhere.
 Providing technical assistance to aid economic development; and
 Cooperating with other donors of financial and technical assistance to improve the
effectiveness of the International Development Association (See below).
IBRD was established on 27 December 1945 in Washington, DC. It is owned by the

governments of 151 States and is subscribed to by its member States. IBRD finances
lending operations mainly by borrowing on the world capital markets. Substantial
resources come from retained earnings and loan repayments. IBRD loans are usually
repayable over 15 years; in which grace period for loans extend up to five years. IBRD
is directed towards developing countries at more advanced stages of growth.
5.3.4.2 The International Development Association (IDA)
The IDA aims to promote economic development by providing finance on more flexible
terms and bearing less heavily on the recipient country than conventional loans. In the
fiscal year 1993, the IDA provided credits amounting to US$6,751 million in 43 member
countries. Most funds ($5,921 million in 1993) are provided to countries with an annual
per capital income of less than US$635 (in terms of 1991 United States dollars).
IDA was established on 24 September 1960 in Washington, DC; and is open to all IBRD
member States. It has the same purposes as the IBRD; and primarily focuses on poorer
developing countries. IDA gives balance of payments less importance and loans are
termed as credits. Usually, IDA credits have ten-years of grace periods; and 35 to 50
year maturities. No interest is payable, but there is a service charge of 0.75 per cent.
Funds are obtained through subscription, top-ups from richer countries and transfers
from IBRD profits.
5.3.4.3 The International Finance Corporation (IFC)
The function of the IFC is to encourage economic development in less developed

countries, to stimulate private sector growth and to help mobilize domestic and foreign
capital to this end.
IFC is established on 24 July 1956 in Washington, DC; and has separate entity to IBRD.
Members of IFC must be IBRD members. IFC Provides venture capital to productive
private enterprises without government guarantees.
5.3.4.4 The Multilateral Investment Guarantee Agency (MIGA)
The main aim of the Multilateral Investment Guarantee Agency (MIGA) is to encourage
flows of investment for productive projects to developing member countries through the
mitigation of non-commercial investment barriers. This is achieved by: providing
coverage for non-commercial risk; heightening awareness of investment opportunities;
enhancing relationships between host governments and foreign investors; and consulting
or negotiating on conditions for foreign investment.
MIGA is established on 12 April 1988 in Washington, DC. and offers guarantees against
non-commercial risks;. It advises developing member governments on design and
implementation of policies relating to foreign investments; and sponsors a dialogue
between international businesses and host governments.
5.4 The World Bank Approach to the Project Cycle
Most projects and executing agencies have their own characteristics based upon needs
that have to be satisfied. Consequently, the final financial package that is used to service
the project is often unique to that project. In arriving at the final package, several routes
will have to be explored and considerable backtracking may be required. Each funding
agency, including the development banks, has procedures and policies that must be
followed. Although most development banks have a mandate or charter that governs
their actions, and from which its policies evolve, its procedures and policies do change
with time. The controlling factors are, therefore, the policies of the bank, but flexibility
may well exist within its procedures. This flexibility is required because of the varied
nature of the projects encountered.
This approach provides the executing agency with a clear picture of the work, which it
has to perform, and indicates when the development agencies should be approached and
the type of information that should be presented. The whole process is one of
negotiation and should therefore be based upon good communications between the
various parties involved, as well as comprehensive documentation until project
completion.
The definition of a development project was presented earlier. It is possible to break

down a project into various stages, often referred to as “the project cycle”. This term
emphasizes that a close link should exist between the various stages of projects, and that
the final stages should provide the basis for further projects. There are several terms that
can be used to define the different stages of a project cycle.
According to Baum and Tolbert (1985b, pp. 334-335), the World Bank uses the
following:
 Identification: - The first phase of the cycle is to identify ideas that appear to
represent a high-priority use of the country’s resources to achieve an important
development objective. Such project ideas should meet an initial test of
feasibility; that is, there should be some assurance that technical and institutional
solutions – at costs commensurate with the expected benefits – will be found and
suitable policies adopted.
 Preparation: - Once a project idea has passed the identification “test”, it must be
advanced to the point at which a firm decision can be made whether or not to
proceed with it. This requires a progressive refinement of the design of the
project in all its dimensions – technical, economic, financial, social, institutional,
and so on.
 Appraisal: - Before approving a loan, external agencies normally require a

formal process of appraisal to assess the overall soundness of the project and its
readiness for implementation. For an internally generated and financed
investment, the extent of formal appraisal varies widely in accordance with
government practice. Some explicit appraisal, however, is a necessary, or at least
a desirable, part of the decision-making process before funds are committed.
 Negotiation: - This stage involves discussions with the borrower on the

measures needed to ensure success for the Project. The agreements reached are
embodied in loan documents. The Project is then presented to the Executive
Directors of the Bank for approved. After approval the loan agreement is signed
and the project can proceed into its implementation stage.
 Implementation: - The implementation stage covers the actual development or

construction of the project, up to the point at which it becomes fully operational.
It includes monitoring of all aspects of the work or activity as it proceeds and
supervision by “on-site” agencies within the country or by external lenders.
 Evaluation:- The ex post evaluation of a completed project seeks to determine

whether the objectives have been achieved and to draw lessons from experience
with the project that can be applied to similar projects in the future. Although
some lending agencies such as the World Bank routinely require an ex post
evaluation of all projects that they finance, few developing countries have
established a comprehensive system for evaluating the results of their project
investment portfolio. This cycle is presented in Figure 5.2.
5.4.1 Project identification
Although large capital projects are selected in order to satisfy effective demand, the
process should involve the consideration of other economic, technical, managerial and
financial issues. Project identification stems from the translation of national
development plans into specific action programmes and investments. In formulating
such plans, potential project will have to be identified and ranked in order of priority.
The aims of individual projects must be clearly defined and agreed at an early stage. It
is essential that all parties involved be consulted, among them the government, the
beneficiaries and the funding agencies. One of the parties involved may be more
interested in increasing export earnings, where another may prefer to see a reduction in
local unemployment and improved distribution of wealth. It is crucial that full
agreement is reached on the project objectives by all parties associated with it. In the
past, failure to achieve this has often generated considerable friction, resulting in poor
project implementation. Individual governments, with assistance from outside agencies,
should therefore take a systematic approach to the identification process, which should
include the following steps:
 Thoroughly review the borrower’s country and highlight underdeveloped sectors
with potential for investment;
 Formulate general national development plans identifying potential projects;
 Compare the potential for development with other countries;
 Identify the potential for development in terms of:
- Extraction of domestic natural resources;
- Processing of domestic natural resources;
- Import reduction;
- Export expansion; and
- Expansion of current industries;
- Select specific projects for further considerations;
- Asses selected projects in the basis of market, technical, resource and
financial considerations, and
 Formulate a specific national development plan identifying specific projects, their
objectives and an appropriate time-scale.
Stage Activities
Identifying projects that have high priority and appear

Identification suitable for Bank support. The Bank, the Government
and the borrower should all be involved
Preparation A "project brief" is prepared describing objectives and

principal issues critical to project identity and
comparing the full range of technical, institutional,
economic and financial conditions necessary to achieve
the project's objectives
Appraisal
The Bank's responsibilities are to review all aspects of
the project and lay the foundation for implementing the
project and evaluating it on completion. It covers four
major aspects: technical, institutional, economic and
financial.
Negotiation
The Bank and the borrower endeavour to agree on
measures necessary to assure the success of the project.
Agreements are converted to loan documents.
Implementation
and
Supervision Implementation over the construction period and
subsequent operation of the borrower. The Bank is to
assist only.
Evaluation
Ex post audit: review of the investment, i.e. actual
implementation costs and expected benefits
Figure 5.2. The World Bank Project Cycle

Source: Baum, 1982
Once the project objectives have been established, it should be possible to present them
in the form of a Project Brief. The World Bank has developed procedures to be
followed during the preparation of a project brief. These enable early agreement to be
achieved between the World Bank and potential borrowers on the following issues:
 development objectives of the project;
 basic project features;
 alternatives still to be considered;
 institutional, policy and other matters to be considered during preparation,
appraisal or implementation; and
 actions required to prepare the project and the main resources to be employed.
The World Bank, along with other multilateral agencies, offers valuable assistance with
the project identification phase. In some cases, they have regional offices whose main
role is to help identify and prepare projects. Another option is to send identification
missions from the head office. United Nations agencies, including the United Nations
Educational, Scientific and Cultural Organization (UNESCO), the United Nations
Industrial Development Organization (UNIDO), the International Labour Office (ILO),
and the Food and Agricultural Organization (FAO) provide specialized services for both
project identification and preparation.
Another source of financial and technical assistance is the United Nations Development
Programme (UNDP), which provides funds for resource surveys or pre-feasibility
studies carried out in order to identify suitable projects.
5.4.2 Project preparation
Once a project has been identified, the next stage of the cycle involves project
preparation and appraisal. These tasks must be completed before the decision to allocate
funds can be made. The process is not straightforward and is often an iterative process.
Project objectives and the means of achieving them will have to be refined, several
options will have to be considered and a cost-benefit analysis performed.
Project preparation or refinement is not just aimed at assessing whether a project is a

good idea and is economically worthwhile, but it should identify the best solution
available under the predicated conditions. The main steps of project preparation or
refinement are listed below:
 specify production increases expected to result from various phases of the
project, and quantify them in various types of output;
 identify project beneficiaries in terms of location, income groups or social
characteristics;
 specify the quality and extent of services to be provided;
 examine in detail the technical aspects of the project (e.g. ground conditions);
 develop into action programmes any institutional reforms that have to be
achieved; and
 perform a cost-benefit analysis on the remaining alternatives.
The World Bank has tended to adopt a policy of lending at a late stage of project
preparation, very often after detailed engineering aspects have been completed and other
steps have been initiated. Once the detailed economic and financial analyses have been
completed, a valid judgement can be made as to the project’s viability before any funds
are allocated. However, it is important to realize that funds spent during the preparation
stage could produce more concrete results if allocated to the implementation stage.
The cost of project preparation
The cost of a feasibility study varies, but is usually about 5 per cent of the overall project
cost. There can be little doubt that good project preparation reduces the possibility of
problems during implementation. When the process described above is started, there
will be many options available. However, some of these will be eliminated, and when
the alternatives have been reduced to a more manageable number, more detailed
preparation of the remaining projects can be undertaken in the form of a feasibility
study.
The feasibility study
A feasibility study provides both national and international decision makers with a basis
for deciding if the project should proceed and identifying the most desirable option
available. It is necessary to perform a feasibility study even when a pre-feasibility study
has been undertaken. Some agencies prefer to use the term “preparation report”, but the
objectives are just the same. There are many aspects that form part of a feasibility study,
including financial considerations, technical problems, environmental impact and many
others. Each of these have to be analysed both separately and in relation to each other.
Sources of technical and financial assistance
There are several organizations that can provide technical and financial assistance. If a
project is to be funded from external sources, it is necessary that prospective lenders
provide substantial input into the project preparation. If project preparation is
undertaken without reference to specific lenders, considerable reworking may be
required in order to satisfy the requirements of individual lenders.
Projects funded by the World Bank usually involve the appointment of several
consulting services, such as engineering feasibility and design services or construction
supervision. These services should be procured in accordance with the procedures
outlined in the Bank’s publication Guidelines: Use of consultants by World Bank
borrowers and by The World Bank as executing agency (Washington, DC, 1981), which
recognizes that the selection process should concentrate on the quality of service rather
than minimum price. The UNDP is an important source of finance for feasibility studies
and similar preparatory work. The World Bank finances this type of work through
several routes; for example, preparatory studies for future projects may be included as
part of funding for current projects. Other organizations such as the FAO and UNESCO
are also valuable sources of funds specifically for preparatory work.
Conducting a feasibility study requires many professional skills. If local staffs are used,
then details relating to the local environment, social conditions and legal aspects can be
included. In some cases, such as agricultural projects, the inclusion of local staff is
essential. The development of the ability to produce feasibility studies and undertake
similar project work can be beneficial to a developing country and is considered to be a
worthwhile objective on its own merit. Some of the more advanced developing
countries have established very strong technical departments, which are able to compile
complex feasibility studies.
5.4.3 Project appraisal
Agencies such as the World Bank, the FAO and UNIDO have produced checklists of
topics that should be included in feasibility studies or project preparation reports. Some
of these checklists are extensive and have originated from previous projects. These
should be used only as a reminder or guide and should not be totally relied upon. The
preparation of a feasibility report is a creative process and should not be confined to
areas contained in available checklists. However, if these checklists are used as
intended, the chances of a favourable response to the proposal from the lenders are
increased.
The World Bank relies mainly on its regular staff or appraisal missions for its own
appraisal of each project. Project appraisal reports have to pass through an elabourate
review procedure before the Bank will enter into negotiations with the borrower and
before the application is forwarded to the Board of Executive Directors for their
consideration. The current demand for World Bank funds exceeds supply; consequently,
additional funds have to be sought from other sources, for example, regional
development banks, commercial banks or official government agencies. In addition to

generating additional capital, this process enables the risks associated with individual
projects to be shared and is known as “co-financing”. Where co-financiers adopt
different procurement methods, the main difference usually being the countries eligible
to supply goods and services, each co-financier can finance individual contacts based on
its own procedures; this process is referred to as “parallel financing”. When agencies
have identical procedures, a common funding arrangement can be adopted, i.e. “joint
financing”.
5.4.4 Negotiations
Negotiation is the stage at which the Bank and the borrower endeavour to agree on the
measures necessary to assure the success of the project. These agreements are then
converted into legal obligations. Set out in the loan documents. We may have agreed
with a public utility borrower that, to earn an adequate rate of return and finance a
reasonable proportion of its investments, prices must be increased by say 20 per cent
immediately and 10 per cent in two years time. A financial covenant agreed upon
during negotiation will define the overall financial objectives and specify the necessary
rate of return and the timing of the initial rate increase. If a new project unit must be set
up to administer the project or to coordinate the activities of the various ministries
involved, the loan documents will specify when and how it is to be established and
staffed. In fact, all of the principal issues that have been raised prior to and during
appraisal are dealt with in the loan documents. Thus, the drafting and negotiation of the
legal documents are and an essential part of the process of ensuring that the borrower
and the Bank are in agreement, not only on the broad objectives of the project but also
on the specific actions necessary to achieve them and the detailed schedule for project
implementation.
Negotiations are a process of give and take on both sides of the table. The Bank, for its
part, must learn to adapt its general policies to what can reasonably be accomplished in
the particular setting to the project, sector, and country. The borrower, for its part, must
recognize that the Bank’s advice is generally based on professional expertise and world-
wide experience, and that the Bank’s requirement that its funds be invested wisely is
computed with the best interests of the project.
Despite the differences that inevitably arise when difficult issues have to be resolved, the
relations that have developed over time between the Bank and its borrowers at this and
other stages of the project cycle are generally very good. Bank staffs have become more
aware of and sensitive to local conditions, which are critical to the successful outcome of
a project. Borrowers have come to appreciate that the Bank’s approach is professional
and objective, that we are in business to lend for well-conceived and well-executed
projects, and that this is indeed our only interest in project work.
After negotiations, the appraisal report, amended to reflect the agreements reached, is
presented to the Bank’s Executive Directors, together with the President’s report and the
loan documents. If the Executive Directors approve the operation, the loan is then
signed in a simple ceremony, which marks the end of one stage of the cycle and the
beginning of another.
5.4.5 Project implementation
The importance of the early stages of the project cycle has already been emphasized.
However, project implementation is the critical part of the project, as it is here that the
earlier plans, designs and analyses are to be tested in the harsh light of reality. Although
the responsibility for project design and implementation lies with the borrower, the
World Bank is deeply involved throughout the process. Implementation begins when
resources are committed to an investment. The start of the implementation stage for
certain projects, such as roads or buildings, is easily identified, but projects comprising a
variety of activities may not have a clear commencement date.
To have received World Bank financing, project proposals will have detailed the
procurement procedures in line with the Bank’s publication, Guidelines for procurement
under World Bank loans and IDA credits (Washington, DC, 1985). These procedures
form part of the Loan Agreement. The borrower plans and schedules the procurement,
prepares bidding documents, evaluates the bids and awards the contracts. The Bank will
pay out its funds only if the terms of the Loan Agreement have been followed, and this
includes the procurement procedures.
Planning the implementation stage of a project has only recently started to receive the
attention it deserves. Previously, work done during the earlier stages concentrated upon
establishing alternatives and assessing their feasibility, along with the preparation of
action programmes.
There is a definite need to plan in clear detail the implementation stages of the project,
ensuring that adequate account is taken of the institutions, which will execute and
operate them. Three main aspects of the implementation stage must be given
consideration if the project is to be successfully implemented. These involve: - (a)
selecting the implementation unit; (b) supervising project implementation; and (c)
establishing the co-ordinating mechanisms. These are discussed in detail, along with (d)
monitoring and evaluation of project implementation.
(a) Selecting the implementation unit

Most developing countries have few resources that can organize and manage large
projects. If complex designs are produced, then the demands on these resources will
increase and the project implementation will be subjected to unnecessary problems. An
imbalance between the capabilities of the implementation agency and the project’s size
or technical requirements has in the past often proved to be a major cause of problems
during project implementation. Some projects may be considerably larger than anything
that the implementation agency has previously experienced. This situation usually
occurs in poorer countries or where the first loans are made to a specific agency.
The implementation of smaller projects may be incorporated within an agency’s routine

programme. For example, the construction of a new road could be implemented within
the highway department’s programme. However, some projects may be, by comparison,
very large or may come under the remit of several agencies. If this is the case, a special
project unit may be set up within the agency to oversee the project implementation. On
previous projects, this approach has often been a source of conflict, and hence the
practice of the World Bank has been to create project units detached from the
established agencies and operate them under a different set of rules. These units will
have their own administrative procedures regarding the use of funds and staffing
regulations.
While this approach lends itself to improve project implementation, it does have its
drawbacks. There are no long-term institutional benefits, as the units; rules and methods
are not easily transferred. Existing agencies may suffer, as their staff may leave to join
these special units. Therefore, this approach should only be taken when the benefits to
be obtained through improved management of the investment are greater than the
disadvantages to existing organizations.
(b) Supervising project implementation

The implementation of every project is monitored by World Bank staff through
correspondence and field visits. A considerable amount of time has to be spent
reviewing draft bidding documents and evaluation reports prior to the award of
contracts. Some contracts are selected for a review by the Bank before loan
disbursement. If the borrower awards a contract that does not conform to the Loan
Agreement, no disbursement is made and that part of the loan is cancelled. In the case
of a dispute, the Loan Agreement takes precedence under the generally accepted
principles of public international law.
The World Bank (and other external agencies) will often have a supervisory role.
However, this is not a substitute for the country’s own responsibility to ensure that
project implementation is performed effectively and efficiently. Supervision may be
provided from another unit within the same agency, so long as it is administratively
independent of the units doing the work. Alternatively, another unit within the same
agency, so long as it is administratively independent of the units doing the work.
Alternatively, another agency or outside consultants may be used to oversee project
implementation.
(c) Establishing the coordinating mechanisms

It is not unusual to have several agencies involved in the implementation of multi-
component projects, such as rural or urban development schemes. However, it is
essential that these agencies are able to communicate effectively and can coordinate
their actions. In order to achieve this, coordination mechanisms have to be established.
There are several approaches that could be taken, but to ensure full coordination it is
necessary to:
i. clearly define the responsibilities of each participating agency; and
ii. provide sufficient incentives to encourage them all to contribute to successful
project completion.
In the past, three different coordinating mechanisms have generally been adopted:
i. establish a special project unit which allocates funds to each of the implementing
agencies through a central budget;
ii. appoint one of the implementing agencies at the lead unit, which the remaining
agencies and dispenses some of the funds; and
iii. appoint a committee with the appropriate authority to coordinate the
implementing agencies. The members of this committee must have close contact
with the project. In the past, committees comprising ministers or the like have
not functioned effectively.
(d) Monitoring and evaluation of project implementation

The World Bank’s experience has demonstrated that the monitoring and evaluation of
project implementation can provide an early indication of potential problems, and
system adopted should be kept as simple as possible, while following some specific
guidelines. In the past, some monitoring systems have proved to be complicated and
time-consuming, without providing the results required. The basis of a monitoring
system should be a predefined, simple set of indicators (such as early traffic flows).
Ongoing project evaluation involves the reassessment of project objectives and the
methods being used to achieve them. Some projects last for several years, and over this
period many new developments occur and have to be taken into account. Very often,
project monitoring and evaluation are added too late during project implementation and
are designed without due consideration of the following elements required to produce an
effective system:
i. management must need and be prepared to use the information produced;
ii. the data collection must be directed towards the difficulties that have to be
overcome during implementation.
iii. realistic levels of accuracy and cost must be programmed into the data collection;
and
iv. data should be collected early on, in order to provide the basis for future
comparisons.
5.4.6. Project evaluation
The ex post evaluation is the last part of the project cycle, and is performed once a
project has been completed and has started to operate. The aim of such an evaluation is
to take a broad look at the potential benefits of the project once it has been completed,
and compare these with the original objectives. If the project is allowed to run for a
defined period, the ex post evaluation can be based upon actual project costs, operating
costs and any early benefits. It should determine whether or not the project was
worthwhile and also indicate whether:
 the original objectives were properly defined and achievable;

 appropriate technical choices were made;
 appropriate procurement procedures were adopted;
 the project’s target group was correct;
 the local conditions were correctly identified;
 there were excessive cost overruns; and
 project institutions were strengthened.
The World Bank was the first of the multilateral aid organizations to develop a
comprehensive ex post evaluation methodology and make the findings readily available.
Although all the projects funded by the Bank have to produce a completion report, only
about half of them are subjected to a detailed audit by the Operations Evaluation
Department (OED) (in fact 10 per cent of these will be selected at random). An annual
summary of the evaluated projects is produced by the OED staff, and is published as the
Annual Review of Project Performance Audit results, with country and project omitted
to ensure client confidentiality. There are also certain types of project that may be
specifically selected for a performance audit. These may include: projects that suggest
a poor performance or have had particular problems; projects that are the first of their
type in a particular country; or projects that are similar and can thus form part of a
comparative study. These procedures were designed to satisfy the Bank’s own
requirements, but can easily be adopted by other agencies and comprise two phases:
Phase I
Every World Bank assisted project is reviewed by the operational staff within two years
of final disbursement. Phase I involves the preparation of a project completion report by
the individuals directly involved in the project preparation and implementation.
Phase II
Phase II in the evaluation process is performed by OED staff detached from the
operational side of the project. This phase is required to ensure that objectivity is
achieved during the evaluation process.
It is inevitable that disagreements will occur between reports and audits produced by the
OED staff and the operational staff. A large proportion of these discrepancies can be
clarified through discussions. However, the OED staffs have the responsibility for the
final audit memorandum, although any remaining disagreements should be noted. The
borrowers are also included in this evaluation process. As part of the loan agreement,
and in addition to other reporting commitments, the borrower has to produce a project
completion report.
5.5 Other Approaches to the Project Cycle
Section 5.4 describes the World Bank’s approach to the project cycle. The various
stages are defined and the associated activities discussed. The cycle is deemed to start
with project identification and finish with an ex post audit review of the investment, in
order to assess actual implementation costs and expected benefits. The process is
referred to as a cycle because the results of the ex post audit should be fed into
subsequent project identifications. This concept of the project cycle is not confined to
the World Bank; many other aid agencies take a similar approach.
There are, however, some differences as to how the project cycle is broken down into
the various stages and the activities performed during each stage. To illustrate this
point, the approaches taken by the World Bank, the Kreditanstalt für Wiederaufbau
(KfW) in Germany and the Asian Development Bank (ADB) are presented in Figures
5.2, 5.3 and 5.4.
In addition, the development stages for water supply and sanitation projects are
presented in Figure 5.5 to show how the World Bank’s approach is occasionally
modified. The information contained in these diagrams has been extracted from the
references given, but has been modified into its current form to illustrate the different
approaches taken to the project cycle.
Stage Activities
Careful preparation and agreement on the selection of

Preparation and the project
selection of the
project
KfW appraises whether the project is economically and

Appraisal technically sound and suitable for promotion for
development policy reasons
Agreement KfW, the borrower (or in the case of grants, the

recipient) and the project executing agency agree on the
project to be financed and on the disbursement
procedure.
Implementing
the project
Assignment of consultants, award of contract, contract
for goods and services, supervision of implementation
by Kfw.
Operating the
project
Responsibility of the executing agency. Supportive
measures where necessary
Final follow-up Final analysis after completion of project. Final

evaluation inspection by the Governments.
Debt service and

rescheduling
KfW supervises debt service; debt consolidation
following agreement in the Paris Club.
Figure 5.3 The KfW project cycle.

Source: KfW, 1990
Stage Activities
Stage ........................................................................................................................................
Identification (selection) of Government request for Bank assistance. Study of country's
project economy and development plans.
Coordination with and agencies
Project formulation Preparation by government. Feasibility study by consultants.
Pre-appraisal mission
Examination of feasibility study. Examination of the need for
further advance action on procurement and consultant
selection.
Appraisal mission
Examination of project's technical, economic and financial
aspects. Determination of loan terms and conditions. Signing
of Memorandum and Understanding.
Preparation of Board
documents
Drafting of President's Report and Recommendation. Bank
internal review.
Dispatch of draft loan documents to government.
Loan negotiations
Loan approval
Discussion of draft loan/project agreement. Examination of

various aspects of the project and state of the country's
Project implementation: economy. Approval by Board
a) by the executing
agency
b) by the Bank Selection and recruitment of consultants. Detailed engineering
design and preparation of bidding documents. Review and
approval of executing agency's action. Examination of
quarterly progress report.
Project completion
Commission of project facilities. Closing of loan account for

disbursements. Preparation of project completion report.
Project benefit
monitoring and
evaluating Detailed examination of socioeconomic impact of project
Preparation of project
Performance audit report
Evaluation of actual implementation against original plan
target. Assessment of economic, financial and social benefits.
Lessons learned to apply to future project preparation and
implementation.
Figure 5.4 The Asian Development Bank Project cycle.

Source: AsDB, 1991
Stage Activities
Awareness of need for improved services.

Assignment of planning responsibilities.
Pre-investment Planning
Identification report.
Identification
Pre-feasibility report.
Feasibility report.
Preparation
Appraisal.
Investment decision.
Approval
Implementation Construction of facilities.

Supporting activities.
Operation and maintenance of facilities.

Operation
Continuous provision of services.
Evaluation Monitoring of project results.

Feedback for future projects.
Figure 5.5 Development stages for water supply and sanitation project..
Source: Grover, 1983.
5.6 Summary
In most developing countries, there are many major construction projects that would not
have been possible without the financial aid provided by the development banks. This
chapter discusses the approaches taken by many of the national, regional and global
development banks, and outlines the conditions that have to be satisfied if funds are to
be attracted. The project cycle has been discussed at length in order to highlight the
various stages, which must be considered when either putting a case forward or
justifying expenditure once a project has been completed. The project cycle will vary
from bank to bank and it is crucial that such differences are recognized if sufficient
funds are to be obtained at a reasonable cost.
Chapter 6
Planning Before, During and
After Construction
6.1 Introduction
The stages of civil engineering projects including the planning that is carried out by
the Engineer before design and consequently construction were discussed in Chapter
Three. This chapter discusses the planning process: before, during and after
construction and it focuses on the contractor.
Planning is the process that determines what course of action shall be taken to
achieve a specific purpose and it aims to provide the guidelines upon which
management ultimately acts. Logical decisions are taken regarding future events in
order that detailed thought at an early stage can often prevent potential problems
occurring. By its nature, planning deals with the unknown; however, it is the skills
of managers and planning engineers that seek to remove many of the uncertainties.
Planning, by its nature, attempts to make effective use of the resources available
(labour, plant, materials and subcontract services). It can be applied in various
degrees to detail, dependent on the limitations of time and finance at the disposal of
the contractor. Figure 6.1 illustrates the process of planning in construction, which
can be divided into three distinct stages:
(i) Pre-tender planning: The planning considerations during the preparation of an
estimate and its conversion into a commercial bid.
(ii) Pre-contract planning: The planning consideration after being awarded the
project, prior to commencing work on the site.
Planning Before, During and After Construction 137
(iii) Planning during construction: The planning which is required to be

implemented in order to maintain control and ensure that the project is
completed on time and within the cost limits established at the tender stage.
It is important to mention that the processes explained here are based on the
traditional procurement of construction, there is, however, other procurement
approach, particularly the Design and Build that focuses in combining the design,
permit and construction schedules in order to streamline the traditional design-bid-
build environment. This does not shorten the time it takes to complete the individual
tasks of creating construction documents (working drawings and specifications),
acquiring building and other permits, or actually construction the facility Instead, a
design-build firm will strive to bring together design and construction professionals
in a collaborative environment to complete these tasks at the same time..
6.2 Pre-tender Planning
This is a systematic approach to assist in the establishment of the costs of

construction at the estimating stage of a project. The aim of pre-tender planning
therefore is to minimize the risk of inaccurate opinions influencing pricing decisions.
Basically, the pre-tender planning is carried out for the following reasons: to
establish a realistic contract period on which the tender may be based; to identify
construction methods; to access method related items which affect the bid price; to
aid the build-up of contract preliminaries and plant expenditure; and to aid the
tendering process.
Although it is appreciated that time is at a premium, the contractor will have to

consider the following stages during the preparation of his/her estimate and the
assessment of a commercial competitive bid.
(i) Decision to tender;
(ii) Pre-tender arrangements;
(iii) Site report;
(iv) Enquiries to subcontractors; and suppliers;
(v) Method and resource statement;

(vi) Site organization structure
(vii) Schedule of preliminary items and site overheads
(viii) Pre-tender programme
Decision to tender
Pre-tender arrangements
Site visit report
Enquiries to subcontractors and suppliers
PRE-TENDER Tender method statement
PLANNING Build up estimate
Pre-tender programme
Build up programme
Build up preliminaries
Management adjudication
Analysis of tender performance
Pre-contract meeting and

arrangements for commencing work
Place subcontractor orders
PRE- Site layout planning
CONTRACT Construction method statement
PLANNING Master programme
Requirement schedules
Contract budget forecasts
Monthly planning (long term)

CONTRACT
PLANNING
Weekly planning (short term)
Progress reporting
Report to management
Figure 6.1 Overview of planning process
6.2.1 Decision to tender
The decision to tender needs to be carefully considered by the contractor as

'tendering costs money'. Tendering costs can be in excess of 0.5% of turnover and
therefore an enquiry for a US$600 000 contract may cost the contractor in the order
of US$3000. Contractors' head office overheads vary of course, but can be as low as
3-5% in a large company and thus tendering costs represent a considerable
proportion of the total. However, without this overhead expense the contractor
cannot win any work.
The following factors will influence tendering policy in general as well as specific
factors that may be due to market conditions:
(i) General tendering policy
Does the work fit into strategic plan of the company?
Current workload in both the contracts division and estimating section - Does
the company have the resources in both financial and management terms to
undertake the work?
(ii) Working capital available to fund the project - effect on company financial
resources.
(iii) Availability of resources in respect of management personnel, labour, plant,
and subcontractor resources. The resources of individual sub-contractors will
also require consideration.
(iv) Contract location - Is it within the working radius of the company’s trading
operations? A contract located some kilometres from head office will often
create management and control problems.
(v) The size, type of work and monetary value of the project will need
consideration.
Contractors often take on contracts that are too big for them. This can result in
placing years of planning and sustained growth at risk. The inherent risk in the
contract failing to make adequate returns and the consequential risk and effect
on the viability of the business needs consideration.
(vi) Extent or value of the contractor's work in relation to that of the subcontract
element of the project.
The main contractor may simply find himself/herself managing subcontractors.
There may be very little profit in the subcontractor element and hence more
risk is placed upon the main contractor.
(vii) Degree of competition - The number of other contractors invited to tender. It is

in the contractor's interest to establish who he/she is tendering against. This
may be considered an essential part of the contractor's marketing strategy,
although some may consider this rather dubious.
(viii) Consideration of the tendering period - Recommendations are indicated in
Form of Contract
(ix) Terms and conditions of contract. Consideration should be given to: The form
of contract to be used; Any amendments to the standard form; The contract
period stated in the documents; Extent of liquidated and ascertained damages;
Retention applicable; Defects liability period; Extent and provision of any
bonds or specific insurance requirements; Payment conditions and terms.
The quality and accuracy of tender documentation will reflect the degree of
contractual risk evident in the contract. Poor tender documentation is often a
sign of impending problems and potential claims. In many drawings and
specification projects, responsibility is placed on the contractor to assess
quantities and undertake some design input that may ultimately be reflected in
higher prices.
(x) The contractor's previous experience of working with the client, Engineer and
other members of the design team. The financial standing of the client may
need to be established.
The contractor tendering may previously have had difficult experiences with
one of the client's design team and may wish to allow for this contingency.
(xi) Market factors - these include consideration of: General market conditions in
relation to the availability of work; Bank interest rates and borrowing facility;
Government policy and its effect on the construction sector.
6.2.2 Pre-tender arrangements
When the contractor has decided to submit a tender, the estimating, buying and
construction team will need to be motivated into action. A number of head office
personnel will be involved in assisting with the tendering process in order to ensure
that the bid is submitted on time. Delegation of responsibility for the estimate and
tender preparation is often necessary and could be carried out as below:
Estimator
 to deal with the management and pricing of the bills of quantities; and
 to deal with subcontract and material price enquiries when there is no
company buyer available.
Contracts Manager
 to arrange to visit the site with the Estimator;
 to prepare the site visit report;
 to prepare the Method Statement and discuss it with the Estimator;
 to prepare an assessment of the project plant requirements;
 to advise the Estimator on the requirements of the contract preliminaries;
 to prepare an assessment of the pre-tender programme - this would be
undertaken in conjunction with the company planning engineer;
 preparing an assessment of the project safety requirements in response to the
“Construction Design and Management Regulations"; and
 to arrange to view the project drawings, if not included with the tender
documentation.
Company Planning Engineer

 preparation of an assessment of the pre-tender programme; and
 assistance in the assessment of the construction method statement.
Senior Management
 responsible for overseeing all stages of the estimate;
 liaison with the Contracts Manager with regard to major decisions; and
 chairing the tender adjudication meeting and taking all necessary decisions on
mark up and profit additions.
6.2.3 Site report
The proposed site should be visited and a report prepared giving precise details of the
project including:
(i) location of site;

(ii) accessibility of site;
(iii) location of local authority and other statutory bodies;
(iv) nature of any works to be demolished;
(v) condition of adjoining premises;
(vi) topography of site;
(vii) nature of ground conditions;
(viii) evidence of existing services;
(ix) climatic conditions, i.e., exposed site;
(x) local suppliers;
(xi) local subcontractors;
(xii) security required on site; and
(xiii) location of tip for disposal of surplus excavated material.
The facts should be recorded on a prepared form and, where necessary photographs
and sketch diagrams should be included. It should be noted that site ground
conditions and the effect on pricing temporary earth support need careful
consideration. This particular item may be treated as an item of contractual risk
within the tender. Many contractors have lost projects because of their inability to
assess contractual risk carefully. Tenders are won on the items that the contractor
does not price and simply put down to contractor risk.
6.2.4 Enquiries to subcontractors and suppliers
The activities involved in the selection of subcontractors and suppliers include:

compiling their shortlist, setting selection criteria; getting information for tender
enquiries, comparison of quotations and management adjudication of the bid. Figure
6.2 shows subcontractor input into the pre-tender planning process
6.2.5 Method and resource statement
This is a detailed schedule which considers alternative proposals and makes

recommendations, having due regard to the time and costs, of the precise methods,
techniques and resources necessary to perform major activities in a project. An

example of a method and resource statement is shown on Figure 6.3. It enables the
estimator to gain a detailed appreciation of the proposed methods of construction on
which he/she will calculate the estimated costs of operations. In addition, the form is
used as a basis to prepare pre-tender programme.
The form is completed to varying degrees of detail and some firms also prefer to
produce two specific documents – a method statement and a separate statement of
resources. This, however, duplicates effort and does not enable the reader to gain an
over-all appreciation of the nature of the work
Compiling the shortlist

Subcontractor register
Obtain
Subcontractor selection criteria
quotes
Obtain quotations
Receipt of subcontractors’ quotation

Decision on Comparison of quotations
Subcontractor Check subcontractors’ quotations
prices Decision on subcontractor’s prices
Management adjudication
Tender
Subcontract mark up
Adjudication
Assess subcontract risk
Submit bid
Figure 6.2 Subcontractor input into the pre-tender planning process.

Example of a Tender Method Statement
Rigid pavement on a two-kilometer road section.
Project brief
A subcontractor has received an enquiry to undertake the concreting operations to a
two-kilometer stretch of a rigid pavement. Concrete is to be laid 300 mm in thickness
and each bay is 60 m2 in area. Access to each bay is via a service road. Alternative
proposals for placing the concrete may be considered.
The contracts manager for the subcontract company prepares the method statement in
order to advise the estimator of proposed methods for inclusion in the estimate. The
following points should be considered when preparing the tender method statement:
 a list of operations to be included in the statement;
 consideration of available resources - labour gang size, plant and supervision
approximate quantities, output rates- per gang, per day, etc.;
 bay or pour sizes; and
 any reasoned alternatives.
Tender Method Statement - Written Format
Operation
Handle and place concrete in pavement bays.
Option One: Place concrete using Dumpers

Ready-mixed concrete supply to be discharged on the spot.
Consolidate the concrete using poker vibrators and float off with
patent steel leveling screeder to obtain required tolerances.
Concrete to be placed in 10 meter wide bays running full 6 meter

width of the road. Alternate bay construction to be used. Pavement
surface to be covered with polythene to aid curing for a one day
period.
Two bays per day to be poured.
Resources:
Plant
1 No.5 meter timber screed board
1 No. steel leveling screed board

1 No. petrol vibrator
Labour:
3 No. labourers placing concrete
2 No. labourers leveling and finishing
I No. foreman supervisor
Output and Quantities
Quantity: 18 m3 Class C Concrete per bay. Quantity poured per day: 36 m3
Option Two: Place concrete using Mobile Concrete Pump
Mobile concrete mixer to be used to mix concrete on site. Concrete to be transported

by dumpers to the location where it is to be placed. Place concrete and tamp into
position. Additional cost of using flowable concrete to be considered. Level off each
bay using vibrating screed board and steel-levelling screed. Protect as before.
Resources:
Plant
I No. hired concrete mixer
I No. vibrating screed board
I No. steel leveling screed
I No. petrol vibrator
4 Nos. dumpers
Labour
3 No. labourer with concrete mixer
4 Nos. labourers placing concrete
2 Nos. labourers leveling and finishing
I No. foreman supervisor
Output and Quantities

Quantity 18 m3 per bay
One bay is to be poured per day
This could be illustrated in the tender method statement and presented in a tabular
format. This has the advantages of showing the operational resource requirements in
a somewhat clearer format.
The estimator or planning engineer would be responsible for assessing the costs of
the alternative proposals and reporting his/her findings to the contracts
6.2.6 Site organization structure
Having completed the method and resource statement, it is then necessary to develop
a suitable site organisation structure.
6.2.7 Schedule of preliminary items and site overheads
Having defined the site organization, and having due regard to the pre-tender report
and method and resource statement, the preliminary items and general site overhead
costs can be established. In basic terms, this schedule attempts to identify and
quantify all additional costs, which are not included within the measured rates of the
bills of quantities, such as:
(i) site staff and supervision;
(ii) transportation of materials;
(iii) unloading of materials;
(iv) mechanical plant not included in the measured rates;
(v) small plant, equipment and hand tools;
(vi) scaffolding;
(vii) installation and supply of temporary services;
(viii) welfare facilities-first aid and safety provisions;
(ix) site accommodation;
(x) abnormal overtime;
(xi) lodging allowance; and
(xii) cleaning building on completion.
Great care must be taken to ensure that all additional items of expenditure are
included and, at the same time, that any duplication of costs is avoided.
6.2.8 Pre-tender programme
This is an essential component of the estimating process. In certain tender

documentation the contract period may be stated, while in others, the contractor may
be required to insert his/her own assessment of the contract period. Where the
contract period is specified, it is necessary for the contractor to assess whether
his/her period is realistic or not. It is no use tendering for a contract on the basis of a
30 week programme, if the contractor considers that he/she needs 40 weeks to
construct the project. Likewise, if he considers that he/she can build the project in 25
weeks, then he/she should base the tender on this period.
At the tender stage the pre-tender programme is normally presented in bar chart
format. The programme will cover the major stages of the work to be undertaken
based on the information available from the tender drawings. The utilization of
linked bar chart techniques based on project management software will enhance the
programme presentation at this stage. It is now becoming normal practice for the
pre-tender programme and method statements to be submitted with the priced bid.
Where a project is being negotiated, it may be the practice of the contractor to

present pre-tender programme in network or precedence format. This however,
depends on the complexity of the project and information available.
6.2.9 Management adjudication of the estimate
The Code of Estimating Practice (1996) indicates a suitable form for the Estimate
Summary, Analysis and Report. One must pose the question “Who attends the
adjudication meeting and what are they supposed to contribute?” Maybe the
management wishes to take all the decisions and simply obtain approval of their
intentions. At the end of the day it is the management who must assess the risk
inherent in the tender and decide upon a competitive bid price. It is now too late to
blame anybody else.
The following documents are considered at the adjudication stage:

i) Supporting documentation produced during the estimate build up such as: site
visit report; schedule and pre-contract sums; pre-tender programme; and pre-
tender method statements.
ii) The estimator’s project reports, produced during the estimate build up.
iii) Details of current and future contractual reports.
iv) Details of parties involved in the contract.
v) Overview of construction methods allowed in estimate, planning report and
pre-tender programme.
vi) Contract conditions: amendments to the standard form, including an overview
of the damages for non-completion, and situation regarding insurances and
bonds.
vii) Working capital implications.
viii) Summary of the net cost analysis: amount of work to sublet. Risk inherent in
the subcontract prices.
ix) Knowledge of competitors: the management hope at this stage that all known
competitors have taken a “cover price”.
x) Consideration of mark up in respect of the quality of tender information,
contractual risk in both the construction time and methods allowed.
Assessment of head office overheads (% addition), discounts and addition for profit.
Profit percentages may be in the range of 1% to 20%, especially if you do not wish to
win the tender.
Once decisions have been made on the adjudication, the revisions will have to be
expressed in the submission of a priced bill or form of tender. The form of tender
will have to be signed by a responsible person and submitted in the appropriate
envelope. If alternative proposals have been invited, these should be clearly stated.
6.3 Pre-contract Planning
6.3.1 The pre-contract planning process
On award of the contract the pre-contract planning process commences. The

contractor may have up to six weeks in order to plan the commencement of works on
site, or he/she may simply have six days. The commencement date will normally
have to be negotiated with the client's representative or may be specified in the
tender documents. On a major contract of say US$40 million in value the following
stages will be involved in the pre-contract planning:
i) The pre-contract meeting and arrangements for commencing work. Placing
orders for subcontractors and suppliers;
ii) Site layout planning;
iii) Construction method statement;
iv) Master programme preparation;
v) Preparation of requirement schedules;
vi) Preparation of contract budgets; and
vii) Preparation and approval of the construction health and safety plan.
It must again be pointed out that no two companies undertake exactly the same
procedures at the pre-contract stage. Procedures are dependent upon the policy of the
company and the need for establishing standard routines, which may be followed on
every new contract. The procedures to be outlined normally apply to the larger company
or the more organized medium sized organization. Within the larger organization a
more formal approach will be taken to the arrangements for commencing work.
6.3.2 The pre-contract meeting and arrangements for commencing work
The purpose of the pre-contract meeting is to hand over the tender documentation: It is
also to delegate responsibility to those responsible for arranging the commencement of
the project. Prior to the commencement of the project, a pre-contract meeting will also
be called by the client's representative in order to coordinate the start of works on site.
The pre-contract arrangements outlined here will relate to those undertaken by the
contractor on a traditional contract.
The pre-contract arrangements will require consideration of the following:

i) the pre-contract planning meeting;
ii) the registration of drawings and distribution of information;
iii) preparation of the project health and safety plan (compliance with CDM); and
iv) arrangements for commencing work.
6.3.3 The pre-contract meeting - contractor's team
A meeting will be held to announce the award of the contract and allocate responsibility
to the construction team responsible for undertaking the work. All documentation
produced at the tender stage will now become available to the construction section. The
following personnel will normally attend the meeting, which will be chaired by the
Chief Estimator or the Contracts Manager:
6.3.4 Chief estimator
To act as meeting chairman, as he/she is fully aware of all decisions taken at the
tender stage. He/she will be responsible for handing over all the estimating data to
the contracts section including:
i) Estimate summary and analysis;
ii) Build up of the 'all-in rates' and net bill rates;
iii) Summary of subcontractors and suppliers quotations. Pre-tender method
statements;
iv) Preliminaries build-up;
v) Pre-tender safety assessment; and
vi) Tender adjudication report.
6.3.5 Contracts manager

Responsible for organizing the commencement of work. At this stage, it is not

unusual for the construction manager to be appointed or available. On the larger
multi-million dollar projects it would prove advantageous however to have him/her
allocated to the project team at the pre-contract stage. The contracts manager is
therefore responsible for all pre-contract activities within the medium and smaller
sized organization. He/she would be responsible for finalizing the operational
method statement and assisting with preparing the master programme.
The contracts manager's responsibilities will also include arrangements for the
transfer of key staff to the project or the recruitment of additional staff to manage the
project. Arrangements will have to be made for the delivery of site accommodation
and the mobilization of plant and equipment for the initial site operations.
6.3.6 Company buyer or quantity surveyor (In a medium sized organization)
Responsible for placing orders for subcontractors and suppliers based on the
information received at the tender stage. It may be the policy of the company to ask
subcontractors and suppliers to re-quote for the work.
In many of the medium sized construction firms, the contract quantity surveyor
undertakes the responsibility for placing subcontract orders and preparing contracts.
This practice enables the surveyor to become familiar with the project from the
outset. The placing of subcontract orders will however continue throughout the
project period. The scheduling of key subcontract dates will need to be tied in with
the master programme and related to the project requirement schedules.
6.3.7 Office manager
It will be necessary to establish communication channels for the distribution of

project information as it is received from the Engineer. This will involve establishing
procedures for the circulation of drawings and correspondence. The office manager
will also be responsible for allocating office staff to deal with wages and material
invoicing. Notices to the factory inspectorate will have to be issued together with
applications for hoarding. licenses, footpath crossings and the provision of temporary
service connections. The necessary insurance requirements for the contract will also
need to be organized.
6.3.8 The pre-start meeting
A client's pre-contract meeting is usually held by the Engineer, design team, client's
representative and the contractor in order to establish initial contact between the
parties. This enables channels of communication to be set up for the issue and
distribution of project information. At the pre-contract meeting the contractor may be
required to present his/her outline programme. This may indicate the requirements
for key nominated subcontract dates, in order that realistic information requirements
may be assessed. Outstanding matters in relation to the contract commencement
dates may be discussed, together with arrangements for the signing of the contract.
6.3.9 Placing orders for subcontractors and suppliers
As indicated above, it will be necessary to consider the company policy with regard
to the procedures to be adopted for the placing of orders for subcontractors and
suppliers. Within the larger organizations procedures are implemented to award
subcontracts on the basis of standard forms of subcontract.
Within the small and medium sized organizations, subcontracts may simply be
awarded on the basis of a letter of appointment with no formal written contract being
entered into. Nominated subcontracts are let on the basis of standard forms of
contract, such as the Nominated Subcontract Form (NSC/C).
6.3.10 Site layout planning
Site layout planning is an essential part of pre-contract planning. The contractor is

often required to submit his proposals for approval by the client's representative prior
to commencing work on the project. It is important to consider the allocation of

preliminaries facilities allowed in the original estimate, as this establishes the basis of
the preliminaries budget. Overspending on the preliminaries is a common problem
on contracts and one must learn to work within the moneys allocated at the tender
stage - no matter how inadequate.
The following are necessary in preparing a Site Layout Plan

i) Location of offices and site accommodation
This is directly related to the space available on site, and the 'open' or
'restricted' site situation may apply. On open sites, the site accommodation
should be located close to the entrance in order that vehicles and personnel
may be readily observed entering the site.
Site notices, instructing personnel entering the site to report to the office,
should be displayed. Site compound areas should be adequately stoned up or
tarmaced and consideration should be given to the site parking of vehicles for
staff and operatives. The site office area may be fenced and provided with
secure gates.
On restricted sites consideration may be given to locating the offices on a

gantry over the pavement or alternatively renting some space adjacent to the
site. The contractor may also consider locating his/her offices in the building
being refurbished, if this ties in with the sequence, of work. Consideration
may also be given to moving the accommodation into completed parts of the
building as it is being constructed. On restricted sites problems are also
relevant to the storage of materials and the location of plant and equipment.
The location of offices and accommodation will also be influenced by the

location of access roads and site services. Careful consideration is required
with regard to site security. Arrangements should be made to have the site
well illuminated at night. Powerful security lighting may be used for this
purpose in order to deter theft and break-ins. Consideration will have to be
given to the sitting and location of the site signboards and any site component
sample panel areas.
ii) Location of site services

Consideration will have to be given to the location of existing and new site
services. This is in respect of existing water, drainage connections, electricity
and telephone services serving and crossing the site. The statutory authorities
will need to be contacted in order to establish existing locations and entry
points for new services. The contractor will be required to establish the
proposed location of temporary standpipes for site mortar mixing or facilities
for the washing down of site vehicles. On open, greenfield sites, permanent
services may require to be laid early in the project in order to provide
temporary service connections.
Power supplies to major items of plant such as tower cranes will need
consideration together with the provision of electrical service connections for
site power tools and site temporary lighting.
iii) Temporary roads, hard standings and access to the works

Reference will again have to be made to moneys allocated in the contract
preliminaries. Temporary hard standings may be required for the location of
cranes, piling rigs or for the unloading of materials such as ready mixed
concrete. On a factory project it may be necessary to provide a temporary
access road around part of the building for mobile lifters during the cladding
stage of the works.
It may prove opportune to lay hardcore to car park areas at a lower level early
in the contract, in order to use them as temporary hard standings for the
works. Foundations for tower crane bases or tracks will require preparing
early in the contract prior to the erection of the cranes.
iv) Location of plant and equipment

The contractor will have to consider the storage and security of plant during
evenings and weekend periods. A locked compound may be provided. The
location and working radius of cranes will require to be marked on the site
layout plan in order to establish the best location for delivery points.
Consideration will have to be given to the rights of adjoining owners with

regard to the swinging of tower crane jibs and booms over land adjacent to
the site. The contractor has no rights to enter the air space of an adjacent site
without permission from the owner, and may be sued in trespass if he/her
does so. Likewise the contractor has a duty of care to persons using footpaths,
streets and highways adjacent to the works. With respect to an adjacent
highway, the main contractor is responsible for the deeds of his
subcontractors when working in the vicinity of an adjacent highway. The
contractor may be sued for negligence in the case of an accident involving the
public.
Consideration will also have to be given to site space requirements around the
building for the provision of scaffolding.
v) Materials storage areas on site

One of the major considerations is the safe and secure storage of materials
and components. This is in order to reduce waste and ensure safe working
procedures. Materials constitute an expensive commodity and care must be
taken in their handling, storage, protection and placing in position.
Recommendations for materials storage areas should be shown on the site
layout plan.
Bricks and blocks

These should be stored on a firm clean surface or on pallets suitable for
handling with a fork lift truck. Blocks should not be stacked too high. Bricks
should be stored in locations which do not become waterlogged or where the
brick stockpiles may become contaminated by mud.
Structural timber
To be ordered in cut or stock lengths to avoid cutting waste. May be banded
for ease of handling. Must be stored clear of the ground and protected with
polythene or tarpaulin sheets to avoid changes in moisture content.
Finishing timbers (architraves and skirtings)

Architraves and door linings to be ordered in door sets. Skirtings and timber
mouldings to be stored on horizontal racking internally. Where it is possible,
garages should be erected early in the project and used for storage purposes.
Roof trusses,
May be stored on purpose-built, timber or steel storage racks, which support
the trusses clear of the ground. It is preferable to deliver the trusses to site in
phased deliveries in order that they may be lifted directly into position.
Scaffolding and props

May be stored on horizontal racking with the fittings store_ in drums or bins.
These are expensive components to lose as the contractor will be charged
for'" material losses.
Drainage goods
A material which is brittle and easily damaged if mishandled. Drainage
fittings may be delivered to site in a crated form. Pipes may be banded and
stored on timber separators. Materials may be stored adjacent to the works in
a small compound.
6.3.11 Construction method statements
These may be presented as a written statement or in tabular form. It will be necessary

to incorporate method statements into the project Health and Safety Plan together
with those of any subcontractors. Safety hazard assessments may also be included in
order to cover the main stages of the works. Approval of construction methods may
be a requirement of the client prior to commencing any operations on site. Reference

will have to be made to any pre-tender method statements prepared.
6.3.12 The master programme preparation
The contract master programme is an important management tool. It is an essential

requirement in the coordination of the many integrated tasks to be undertaken during
the project. On a major project, many different programmes are required to cover
each stage of the work in order to ensure the smooth flow of information during the
project. This includes consideration of:
i. A contract master programme covering the major phases or sections of work and
clearly indicating the planned sequence of construction;
ii. A programme indicating the key dates for the release of design team information
in order to meet the requirements of the contract master programme;
iii. A programme to coordinate the requirements of subcontractors, material
supplies and the resources of the main contractor; and
iv. Separate detailed programmes relating to the various project phases or stages,
highlighting the links between each work stage.
The master programme forms the basis of the contractor's budgetary control and
financial forecasting procedures and aids the client in assessing his/her cash funding
requirements at the monthly payment stages. It is also important in relation to the
contract.
Firstly, the contract programme is not usually part of the contract documents. If it was
included as a contract document it would somewhat impair its flexibility and usefulness.
This would involve both parties having to strictly adhere to the programme and the
contractor would be required to start and finish each operation by the programmed dates
and in the programmed sequence. In this respect the programme would lose its purpose
as a flexible contract tool and become unworkable.
Consideration should also be given as to whether or not the master programme

constitutes notice of the contractor's information requirements to the Engineer. If it
gave sufficient detail, it would be a notice of the contractor's requirement for further
information, and so it follows that a post-contract programme is 'a unilateral declaration
of the intention by the contractor, and notice of when he/she requires information.
It is good practice for the contractor and design team to' agree amicably a realistic
contract programme prior to the commencement of the project. This will avoid recourse
to legal threats which only tend to lead to strained relationships which everybody can do
without.
The master programme may be presented in bar chart, network or precedence format
depending upon the programming techniques adopted by the contractor. Contractors
tend to use the programming technique, which best suit, their mode of operations and
works for them. The master programme indicates the sequence of operations and
relationships may be shown between related operations by introducing links in the
form of a linked bar chart.
Copies of the master programme should be circulated to the Engineer for courtesy
approval and to the major subcontractors in order to indicate their approximate
commencement dates and periods on site. The programme is used to record progress
weekly and monthly throughout the contract period in order to achieve the planned
completion date.
6.3.13 Preparation of requirement schedules
Many contractors may consider that 'the claims start here'. This should not be the
reason behind requesting information requirements at this stage of the contract. The
purpose of requirement schedules is to aid the smooth running of the project. The
release of information to the contractor continues throughout the contract; it is no use
asking for information relative to painting schedules at the first week of a project of
one year duration, and then expecting to formulate a claim after six months, simply
because you have not received the information.
The following requirements schedules may be used by contractors when requesting

information from the client's representative. Certain schedules relate to the
contractor's internal requirements whilst others concern key dates for the release of
information from the client or client's representative.
i) Contractor's internal schedules:
 Key materials schedule;
 Plant schedule; and
 Domestic subcontractor requirements.
ii) Client based information requirements:
 Subcontract schedule (Nominated subcontractors and suppliers); and
 Drawings and information requirements schedule.
Key information requirements may also be highlighted in the form of milestone
events on the master programme.
Key Materials Schedule

This schedule which is prepared in conjunction with the contractor's planning or
buying section and shows the key materials scheduled to meet key operational
programme dates (Figure 6.4). The materials requirements are assessed from the
contract drawings, with the quantities in the bills being used as a check. Phased
deliveries may be arranged for materials such as bricks and precast floor units.
It is important that the material schedule contains full information with regard to the
supplier. Site management personnel must be encouraged to use the schedules
presented to them. It is important that material suppliers are kept information of the
contract's progress position with regard to any amendment to planned delivery
schedules.
Plant Schedule
This schedule indicates key dates for the major items of plant allocated to the
contract (Figure 6.5). The schedule may be presented in tabular format or as a bar
chart programme. The plant schedule enables the plant department to plan its
resources between projects. It enables a balance to be obtained between owned plant
utilization and hired plant suppliers.
Reference must be made to the allowances for plant within the contract preliminaries
because over spending on plant is a common source of loss at site level.
Sub-contract Schedule
The co-ordination of subcontractors and suppliers is an essential part of project
control. The schedule illustrated in Figure 6.6 enables the site manager to overview
key contract dates with respect to contract progress. Details are also shown relating
to details of the subcontract order, contact address and notification dates. Reference
should be made to the sub-contractor's programme prepared at the contract stage. The
release of key information relative to nominated subcontractors and suppliers may
lead to an extension of time when the delay is caused by the Engineer.
Drawings and Information Requirement Schedule

It is essential to monitor and record the issue of contract drawings and contract
information from the Engineer. It is the contractor's responsibility to give adequate
notice relative to key information requirements.
Typical requests may include:

 Setting out dimensions - measurements to site boundaries;
 Reinforcement details for pile caps, foundation beams, etc.;
 Details of services;
 Fixing details for cladding panels;
 Color schedules for internal decoration; and
 Service layout details.
Where information is delayed by the Engineer, the contractor may apply for an
extension of time. The schedule shown in Figure 6.7 allows the contractor to record
the date of the information request, and compare this with the information release
date.
6.3.14 The preparation of contract budgets

The essential budgets that are prepared by the contractor at the pre-contract stage
include:
 The cumulative value forecast - based on the master programme;
 The preliminaries budget;
 The labour expenditure budget - based on the master programme; and
 The plant expenditure budget.
These and other budgets prepared in a contracting organization are monitored and
reported upon as part of the company's control procedures.
MATERIALS SCHEDULE
SHEET No.:- Date issued:-

CONTRACT:- PREPARED BY:-
SUPPLIER DETAILS
CONTRACT No. :- PROGRAMME REF :-
Material BoQ Latest Latest Delivery Required Supplier Tel. Order Comments/
Ref Req. Date Order Period on site No. No Remarks
Date Date
Figure 6.4 Material Schedule

PLANT SCHEDULE
CONTRACT:- PREPARED BY:- SHEET No.:-
CONTRACT No:- PROGRAMME REF:- DATE PREPARED:-

Ref. Operation Plant Item Date Date Duration on Plant Actual Notes/
Requested required site Release Release Comments
on site Date Date
Figure 6.5 Plant schedule

SUB-CONTRACT SCHEDULE
CONTRACT:- PREPARED BY:- SHEET No.:- Date Prepared:-
SUBCONTRACTOR DETAILS
CONTRACT No.:- PROGRAMME REF.:-
Trade/ Specialization Nominated Latest Latest Period Comm. Subcontractor Tel. Order Notes
or Inquiry Order Of S/C Date No. No.
Domestic Date Date notice on site
Figure 6.6 Sub-contract schedule
DRAWING AND INFORMATION REQUIREMENTS SCHEDULE
CONTRACT:- PREPARED BY:- SHEET No.:-
CONTRACT No:- PROGRAMME REF.:- DATE PREPARED:-

Ref. Information Request Date Date Date Receipt of Comments/ remarks
Requested Required Received Final
on site Details
Figure 6.7 Drawing and information requirements schedule

6.4 Planning During Construction
During a major construction project, the contractor will need to implement

appropriate procedures in order to keep the master programme under constant
review. Figure 6.8 indicates the relationship between the master programme, stage
programmes, 4-6 weekly programmes and the weekly programming at site level.
Personnel Involved
MASTER PROGRAMME
Based on agreed commencement and

Contracts Manager completion date
Head office Senior Planner
WEEKS
STAGE PROGRAMME
Site based Planning Engineer

Breakdown of Master Programme
Site Manager into work sections or stages STAGE
PLANNING
WEEKS
4-6 WEEKLY PROGRAMME
Prepared to cover a 4-6 week period

Site based Planning Engineer (1 or 2 week review period) MONTHLY
Site Manager PLANNING
DAYS or WEEKS
1-2 WEEKLY PROGRAMME
Site based planning based on work

Site based Planning Engineer allocation to trade groups or WEEKLY
operations PLANNING
Trades foreman
Subcontract representatives DAYS
Figure 6.8 Relationship in planning during the construction stage.

Support will be required at site level to monitor the planning in the form of site-based
planning engineers or head office based planners visiting the site. Monthly and
weekly site meetings will assist in standardizing the reporting procedures at site
management and senior management levels. Figure 6.9 indicates the relationship
between the various programmes produced and the reporting and control meetings
taking place at site level.
MASTER PROGRAMME MONTHLY SITE MEETINGS
Based on agreed commencement and complete date Reports to client on progress situation. Assess
information/ design requirements. Overviews
contract completion date
WEEKS
STAGE PROGRAMME CONTROL AID
Breakdown of Master Programme into work

sections or stages Detailed analysis of stage problems
Subcontractor coordination
WEEKS
4-6 WEEKLY PROGRAMME MONTHLY SITE MEETINGS
Meetings held with subcontractors to discuss

Prepared to cover a 4-6 week period (1 or 2 short-term strategy/ monthly plan of work for
week review period)
major operations
DAYS or WEEKS
1-2 WEEKLY PROGRAMME WEEKLY SITE MEETINGS
Site based planning based on work allocation

to trade groups or operations Meetings at site foreman level
Preparation of weekly plan of work
Report co-ordination problems
DAYS
Figure 6.9 Relationship between programming and reporting and control meetings.
Source: Cooke and Williams (1998)
6.4.1 Meetings as part of control process
Meetings are an essential component of the control process of any construction

project. They are part of the control cycle and their purpose is to:
i) Collect and distribute project information;
ii) Review the current situation;
iii) Consider ideas for resolving bottlenecks;
iv) Consider the opinion of other parties;
v) Develop a team approach to problem solving;
vi) Discuss problem areas and suggest alternative solutions; and
vii) Decide on appropriate action.
Various meetings are held in relation to the construction process in order to develop
communication links between the parties, i.e., the client, Engineer, design team,
contractor and subcontractors. Meetings help in building a team approach to
decision-making and problem solving. The various meetings that may take place
during construction process include:
i) Tender Stage
 Pre-qualification meetings (Client/Engineer-Contractor);
 Pre-tender meeting (Contractor);
 Tender coordination meetings (Contractor); and
 Tender adjudication meeting (Contractor).
ii) Pre-Contract Stage

 Pre-contract meeting (Contractor’s personnel);
 Pre-contract meeting (Client/Engineer, etc.-Contractor);
 Pre-start meeting (Client/Engineer, etc.-Contractor); and
 Pre-start meeting (Contractor-Subcontractors).
iii) Contract Stage

 Monthly site meetings (Engineer/Contractor);
 Meetings to discuss defects issues (Engineer-Contractor);

 Meetings to progress the final account (Quantity Surveyor-Contractor);
 Monthly meetings (Contractor-Subcontractor);
 Weekly or fortnightly progress meetings (Contractor); and
 Weekly meetings to problem solve contract emergencies (Contractor).
Meetings may be held on a formal or informal basis. Formal meetings such as the
client’s pre-contract meeting and monthly site meetings have procedures and rules.
Informal meetings such as tender co-ordination meeting and weekly site meetings
with the trades foreman may be of a more casual and relaxed nature. However, all
meetings should have an agenda and minutes should be recorded and circulated.
6.4.1.1 Monthly site meetings
The meeting agenda is the responsibility of the meeting chairman and it should be
circulated before the meeting in order that the personnel attending are fully aware of
the items to be discussed. Minutes of previous meeting should also be circulated in
order that they can be formally accepted as true record.
6.4.1.2 Weekly progress meetings
Weekly progress meetings are held are held at site management level in order to
review the programme in the short term and to coordinate the activities of sub-
contractors and the contractor’s own trade gangs. Coordination is essential for the
success of the contract and the weekly site meetings are used to discuss the short
term programme and interfaces for the following one or two week period.
On large projects involving the integration of a number of specialist subcontractors,

separate weekly site meetings may be held between the subcontractors.
PAVEMENT TO A OPERATIONAL
TARMAC ROAD METHOD AND RESORCE STATEMENT…………………… STATEMENT
NO. OPERATION QUANTITY METHOD RESOURCES NOTES

PLANT LABOUR
1 Removal of top soil 600 m3 Removal of top soil Hydraulic 1 – Surveyor Duration
using a bull dozer (CAT Excavator 1 – Operator 1 week
650)
Load trucks and remove 3 nos. 15 m3 3 - Drivers

to tip off site trucks (BELL
65)
2 Reduced level excavation 1000 m3 Excavate to reduced

(0.5 m deep) level using hydraulic
backactor (JCB 6 C)
Load 15m3 trucks and

remove to a tip on site
Figure 6.3 Method and resource statement

Chapter 7
Planning Techniques
7.1 Levels of Planning in Construction
Strategic and operational planning are the two main levels of planning associated
with construction projects. Strategic planning deals with the high-level selection of
overall project objectives, including the scope, procurement routes, time-scale and
financing options. Strategic planning for a project results in broad outlines of what
the project has to achieve and how it is to be undertaken. Operational planning, on
the other hand, involves establishing a method statement for each activity.
Operational planning that includes a tender plan, feasibility plan, and construction
plan, among others, allows a more detailed treatment of the project’s resource
requirements that is not obvious at the strategic level.
A construction programme of works, as explained in Chapter 6, primarily presents

the sequence in which the various activities should occur with their associated
durations and resource requirements. Programming of construction works is
normally undertaken for a project as a whole and these are called master plans.
However, programming of works can also be for only a part of the project, for
example the construction of a section for a road project, the procurement of major
materials and equipment. Plans are also required for functional aspects of the project
such as management quality, as well as health and safety issues.
Strategic planning by its nature looks at the future and propose a plan of action to
best suit the organization at that particular time. For this reason no tools are
specifically designed to assist the planner. Operational planning for a construction
project, on the other hand, employs various tools and techniques to help the planner
Planning Techniques 173
achieve better optimization for the decisions involved as discussed below: In any
case, operational planning benefits from Work Breakdown Structure (WBS) that
clearly show how the scope of work is broken down into various levels until work
packages and activities are defined.
7.2 Involvement in Planning
Planning in the construction industry takes place at all major stages of the
construction process and involves all the key stakeholder organizations, i.e., the
client organization; the engineers or designers; and the constructor as described
below:-
7.2.1 The client (sponsor)
The whole-life cycle of the project requires the client to get involved in all stages in
one way or another. The plan of the overall project from the inception to the use of
the facility is of great interest to the client. The client is interested in the overall
strategic management of the project and the times of cash outflows for which it has
to make provision. Time scales that are most relevant to the client are months and
weeks rather than days. The project plan also enables the client to make decision on
the timing of procurement of key components to the project that may require long
lead-time to process.
The client’s organization will rely heavily on the project’s plan or programme as a
decision aid when considering these and other strategic issues. Later, the client
organization will use the project’s plan to monitor progress.
7.2.2 The designers
The Engineer will normally carry the responsibility for preparing the plans used by
the client in taking the strategic decisions. It is around a project plan that the design
team will manage its resources through determining the order in which various
sections of work will be designed, the numbers of designers allocated to each work
section and the cost, in terms of designer-hours, of the design tasks. To bring a set of
contract documents to conclusion in order to issue them for tendering purposes like
any process of multiple activities, it is necessary to plan, monitor and control.
Investigations; design calculations; drawings; statutory planning approvals;

preparation of specification; preparation of contract documents, tender programme,
and preparation of quality systems are the activities that need to be planned as
explained in Chapter 3. The control of the design process has benefited from the use
of planning techniques. The duration of the activities used by designers tends to be
in weeks rather than the larger units of time used by the client.
7.2.3 The contractors
Due to the nature of their involvement in projects, the contractor’s organization is

one of the three parties in the construction process that has historically put greatest
effort into the planning process. Planning within the contractor’s organization is
divided into: planning at the estimating stage and production planning as explained
in Chapter 6.
The role of the estimating process and as part of the projection control process hardly
needs to be emphasized as can be clearly seen in Figure 7.1. In estimating, a project
plan of work is required around which to develop proposed construction methods and
hence estimates. The units of time used in the activities of the pre-tender programme
would normally be weeks or days.
Plans or work programmes are needed by the site manager at the start of the project
to determine their resource requirements. During the execution of the project the site
manager needs plans to assist in directing those resources, to monitor progress, to
evaluate the effect of the changes that may be imposed by varying productivity, by
mistakes, by weather or by the client and their designers. In certain forms of contract
the site manager needs the project plan to determine payments due at interim stages.
At site manager level the unit of time used for activities is usually weeks or days.
The section engineer is usually required to plan the work of their section in great
detail week by week and so may use smaller units of time of days or half days.
Depending on the size of the organization there may or may not be formal planning
section specifically assigned the task of planning.
Estimating Planning
Cash
flow
Production Cost Cash

Planning Control Valuation flow
Figure 7.1 Contractor’s management function
7.3 Planning Techniques
7.3.1 Bar-charts and linked bar-charts
The most common and widely used techniques available for planning are bar charts
and linked bar-charts; network analysis, either activity on the node or activity on the
arrow; and line of balance, for repetitive construction work.
Henry Gantt first introduced bar charts in the early 1900s by popularizing the
graphical presentation of work versus time. Bar charts are the easiest to understand
and the most widely used form of planning tool. Even when a more sophisticated
technique like network analysis is used the eventual schedule of work is usually
presented in bar-chart form. They can be used to link the programme prepared at the
tender stage with the master programme and likewise with the short term planning
throughout the contract period. Bar charts are easily and readily updated at weekly
and monthly time intervals.
The chart consists of vertical column, listing the individual operations on the left-
hand side of the sheet and a time scale on the horizontal axis. The operations are
signified by a series of horizontal bars, the length of which denotes their duration.
The bar chart in Figure 7.2 shows the typical form: a list of activities with the start,
duration and finish of each activity shown as a ‘bar’ plotted to a time scale. The
level of detail of the activities depends on the intended use of the plan. The site
manager may be content with an activity as broad as ‘construct abutment 1’. The
section engineer will break this into a finer level of detail; say ‘excavate’, ‘blind’,
‘fix reinforcement’, ‘erect formwork’, ‘concrete’, ‘strike formwork’ ‘cure’ and
‘backfill’. Similarly the time scale will be chosen to suit the user’s purpose. The site
manager may use weeks while the section engineer may use days or half days.
Activity description Time (weeks)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 16 16
Excavate to
foundations
abutment 1
Excavate to
foundations
abutment 2
Installation of
geotextile filter
Demolition of
existing abutment
Concrete
foundations
Abutment 1
Concrete
foundations
Abutment 2
Concrete abutment
walls
Time now
Figure 7.2 Typical bar-charts
Figure 7.2 could be used to control the progress of the project. A second bar is
superimposed on the lower section of main bar showing the planned time, to indicate
progress for each activity. At the end of each time period the amount of work done
in each activity is recorded and expressed as a percentage of the planned work for
that activity. Figure 7.2 shows time now as being end of Week 7, the shading on the
chart shows activities ‘Exc. to found abutment 1’ and ‘Conc. founds abutment 1 are
100% complete. Activity ‘Exc. to founds abutment 2’ is shown as being 67%
complete whereas, to be on programme, it should be 83% complete. This means that
this activity is unlikely to finish at the end of Week 8 as planned. By working at the
achieved rate of progress for that activity, its finishing time will extend by one and
half weeks beyond the planned time. The effect on the other activities would need to
be calculated. This effect would be more easily studied by using an extension to the
simple bar chart such as the linked bar chart.
The linked bar chart, as in Figure 7.3, shows the links between an activity and the
preceding activities, which have to be complete before this activity can start.
Similarly, the links are shown between the activity and the succeeding activities,
which are dependent on the activity being completed. This illustration of
dependency between activities has the advantage that the effects of delays in any
activity are easily seen. The time available for each activity is also displayed: for
example, in Figure 7.3 activity ‘Conc. abutment 1’, is shown as starting on Week 3
and ending on Week 5, but it can be seen that the absolute deadline before it
interferes with the next succeeding activity, ‘Conc. abutment 2’, is end of week 9.
This activity has some ‘float’ or extra time available before any delay affects other
activities. Activity ‘Exc. to founds abutment 2’, for example, has no float and must
be completed by Week 8; this is called a critical activity.
The bar-chart is also useful for calculating the resources required for the project. To
add the resources, say labourers to each activity and total them as in Fig 7.3 is called
resource aggregation. An aggregation chart similar to the one produced in Figure 7.3
for labourers can also be done separately for other resource types such as carpenters
or steel fixers, or cranes.
Activity Time (weeks)

description 1 2 3 4 5 6 7 8 9 10 11 12 13 14 16 16
Exc. to (4) (4)
foundations
abutment 1
Exc. to (4) (4) (4) (4) (4) (4)

foundations
abutment 2
Installation. (2) (2) (2) (2) (2) (2)
of geotextile
filter
Demolition of
existing
abutment
Conc. (3) (3) (3)
foundations
abutment 1
Conc. (3) (3) (3)
foundations
abutment 2
Concrete (3) (3)
abutment
walls
7
6
5
4
3
2
1
Figure 7.3 A linked bar-chart and resource aggregation chart.
The bar-chart and the resource aggregation charts are useful of estimating the work
content in terms of labour-hours or machine-hours. Similar calculations done on site
may be used to check the work content implied by the estimate, so as to determine
whether the chosen construction methods will result in a profit or loss. Cost control
is more effectively based on such assessment of construction method than on simple
historical cost checks.
It could be said that the main advantage of a bar chart are:

(i) Clear easily understood document at all levels of management
(ii) Relates clearly to all stages of the planning process: pre-tender/pre-contract and
contract planning. Assists in showing the relationship between the pre-tender
programme, master programme and short-term programme.
(iii) Easily updates at weekly and monthly time intervals for review purposes and
progress reports
(iv) Clearly relates the construction sequence – the use of linking on bar charts aids
the overlapping of related operations
(v) Key milestone symbols may be introduced to highlight critical dates with
regard to key contract stages and information requirements
(vi) Resources may be readily related to the rate of working – labour histograms,
value forecasts (value/time), cumulative labour and plant forecasts in the form
of project budgets
(vii) Requirement under the contract-the contractor is usually required to submit a
programme prior to commencing work on the project. The programme must be
realistic and achievable.
(viii) The “as built” programme may prove an asset to the contractor in the
formulation of contractual claims. The effect on the receipt of late information
on programmed operations can be monitored and reported upon. Copies of the
contract position at the date of a specific occurrence may provide evidence of
the resulting delay
(ix) The programme forms the basis of financial forecasting for both the client and
the contractor
(x) Symbols and signs may be introduced to aid subcontractor and materials
procurement.
On the other hand, the main disadvantages of a bar chart relate to its construction as
follows:
(i) If the bar chart is produced manually, that is, constructed on paper and not as a
by-product of a computer system, then the bar chart is limited in size (say a
maximum of 100 activities); and not easy to update or schedule.
(ii) Does not clearly indicate which operations directly relate to the successful
completion of the project
(iii) Complex interrelationships cannot be clearly shown.
7.3.2 Network analysis
Network analysis also known as Critical Path Analysis (CPA) or Critical Path
Method (CPM) has its origins in 1956 when E.I du Pont de Nemours Company
established a team to study new management techniques relating to the company’s

engineering functions. One of the first areas to be considered was the planning and
scheduling of construction work, and with the aid of computer data was input in the
form of construction sequences and activity durations in order to generate a schedule
of work.
The basic principles of CPM were developed in 1957 by J.W.Mauchley, J.E.Kelley

Jr and M.Walker, and a test group was set up to apply the new technique to a
chemical plant project in Kentucky, USA. In 1958 the Special Project Office for the
Polaris missile programme originated the Programme Evaluation and Review
Technique (PERT).
The planning data in a network is linked through the logic that defines the
relationships between the activities. Thus changes can be made in the data relating to
individual activities, i.e. the duration, the resources, etc., or changes can be made in
the logical relationships between activities and the consequences re-calculated and
represented. In addition, the steps to produce and process a network plan are more
clearly defined, self-contained and offer a more rigorous approach to planning
complex operations. The greater rigor imposed by the logic diagram produces more
realistic models of the proposed work.
Thus the advantages of network analysis include:

(i) Through the discipline of CPM, the user can achieve better planning due to the
logical approach undertaken during the development of the construction
sequence;
(ii) Identification of critical operations on which effort and resources can be
applied aids the contractor’s management;
(iii) CPM allows the planner to express his/her ideas in graphic form;
(iv) The planner has the facility to assign priorities to labour, plant, materials and
subcontractor resources to each operation on the network;
(v) Bar chart analysis aids understanding at site management level for both the
contractor and client;
(vi) The effect of changes and variations can be evaluated and time cost
optimization analysis undertaken; and
(vii) Cash flow assessments and valuation forecasting information may be output in
graphical format and readily updated during the project;
The main disadvantages of the CPM include:

(i) The development of a network is mainly based on “finish to start” relationships
and this often does not represent the situation on the project. The relationships,
which can be developed on precedence diagrams aids the overlapping of
related operations; and
(ii) The method is hardly used by managers in small and medium sized companies.
The network analysis can be divided into two broad stages: construct network; and
analyze network. The steps that are commonly followed in producing a network are:
(1) Listing the activities;
(2) Producing a network showing the logical relationship between activities;
(3) Assessing the duration of each activity, producing a schedule; and determining
the start and finish times of each activity and the float available;
(4) Assessing the resources required.
In producing a bar chart (2) and (3) are taken in one step and therefore in complex
projects the various alternatives are unlikely to be considered. There are two popular
forms of network analysis: activity-on-the-arrow and activity-on-the-node, the latter
usually called a precedence diagram.
An activity is an operation requiring time or resources, which has a definite
beginning and a definite end. It is portrayed by an arrow and represents the smallest
unit over which control is desired.
An event node is a significant point of time within the project. It is portrayed by a
circle and represents the beginning or end of an activity. No expenditure of
resources is associated with an event.
7.3.2.1 Activity on the arrow

The preparation of a network follows steps 1-4 as shown above.

Step 1: Listing the activities
The comments regarding the level of detail are the same as those
given for bar charts.
Step 2: Producing a network showing the logical relationship between
activities.
In this system of planning, the activity is represented by an arrow as

defined above. The arrows are joined together in a logical relationship,
and as each arrow is included in the network the following questions
are asked to ensure that correct logic is being maintained:
 Which activities must be complete before this activity starts?
(finish to start relationship)
 Which activities cannot start until this activity is complete?
 Which activities can be undertaken at the same time?
Subject to the restraints that will be placed upon the sequences of activities by
resources, either labour or plant, the network that satisfies the above questions will
show the logical relationship of all activities. It may be necessary to introduce
dummy arrows, drawn as broken lines, which do not represent any activity but are
simply a logical link. For example, if activity C was dependent on A and B being
completed and activity D was dependent only on B being completed, the network
would require a dummy arrow to represent the logic as shown in Figure 7.4.
A C
B D
Figure 7.4 A dummy arrow to maintain correct logic.

The numbering of these events provides a method of identification. For instance, the
“Conc. abutment 2” activity in Fig 7.5 would be called activity 4-5. The numbering
begins at the start of the network and progresses thorough the events in numerical
order until the end event is reached, ensuring that the number at the tail of an arrow
is always smaller than that at the head of the arrow. There may be situations where
two arrows leave the same event and arrive together at another event. In this case the
activities would have the same identification numbers. To avoid this, a dummy is
used and extra event introduced thus ensuring that each activity has a unique
identification. Figure 7.6 gives an example.
8 8
3 Install geotextile filter

Exc. founds abut.2
14 14 16 16
0 0 2 2 6
6
Break old 5 6
1 2 struct. 2(0)
1
2 Conc. abutment walls
3
Exc. founds abut. 3 Conc. found abut 2
1
Conc. found abut. 1 4
9 11
Figure 7.5 A network showing duration, event numbers and event times
16 18
17 16
17
Figure 7.6 Use of dummies for unique identifications of activities.
Step 3: Producing a schedule

The time required for each activity needs to be estimated; the estimate of duration
will be based on knowledge of the work, experience, records and work-study. Once
estimated, the duration of each activity is marked against the arrow in the logic
network. The earliest possible time of each event is then calculated and written in
the left-hand square alongside each event. This has determined the earliest possible
start time of each activity.
The calculations are shown in Figure 7.5. For example, the earliest time of event 1 is
0, the earliest time for event 2 is 0 + 2, the earliest time of event 3 is 2 + 6 = 8 and so
on. The point to watch is that where two paths or chains of activities merge, as for
example at event 4, the longest path determines the earliest possible time of the
event. At event 4 the path via event 3 produces an earliest time of 8 + 1 = 9 which is
greater that the path direct from 2 which produces an earliest time 2 + 3 = 5.
Therefore 9 is the earliest time of event 4. The calculation of the earliest event times
is known as the forward pass.
The reverse process, the backward pass, determines the latest possible time for the
event, which is the latest possible time for each activity finishing without delaying
the completion date of the project. The latest event time is calculated and written in
the right-hand square alongside each event. The calculations are shown in Figure
7.5. The latest time of the finish event, event 6 is taken as 16 weeks; the latest time
of event 5 is 16 – 2 =14; and of event 4 it is 14 – 3 = 11. Event 3 has two activities
leaving it, and the latest time of event 3 is determined by the earliest or smaller
calculated latest time, i.e. one calculation for event 3 from event 4 is 14 – 6 = 8 and
the other is 11 – 1 = 10, therefore the latest time of event 3 is 8. If event 3 were any
later than 8 the time to complete activities 3-5 and 5-6 would extend beyond the
project end date of 16.
Having completed the forward and backward passes, the earliest and latest times of
each event are known. From this, the ‘float’ or spare time available for each activity
can be calculated. Critical activities, which have no float, are those whose earliest
and latest times of start event coincide, whose earliest and latest times of finish event
coincide and the time difference between the start event and finish event equals
duration of the activity.
Figure 7.7 shows an activity extracted from the network in Figure 7.5.
Earliest Latest time Earliest time Latest time

time of of start of finish of finish
start event event event event
2 2 9 1
3 1
2 4
6
Earliest and Earliest time

latest time of of finish
start event event
Latest time of
finish event
2 9 11
Total time available for
activity 2-4
Activity 2-4
Total float
Latest
starting
time
Activity 2-4
Earliest Interfering
finishing float
time
Figure 7.7 Calculation of float
The times shown refer to the event times and have the following meanings:
(i) the earliest time of start event is the earliest possible time the activity can start;
(ii) the latest time of finish event is the latest time the activity can finish without
delaying the completion of the project;
(iii) the latest time of start event is the latest time a preceding activity may finish;
and
(iv) the earliest time of a finish event is the earliest time that a succeeding activity
may start.
Knowing these times, the float can be calculated. Figure 7.7 shows the calculation of
total float and free float.
Total float is the total amount of time by which the activity could be extended or
delayed and still not interfere with the project end date. Total float is the total time
available for the activity less the duration, i.e. the latest time of the finish event less
the earliest time of the start event less the duration.
If the total float for one activity is completely used up by the activity then some of
the total float of the succeeding activity is also used. Free float, however, is the
amount of time by which an activity could be extended or delayed without interfering
with the succeeding activity. Free float is calculated by the earliest time of the finish
event less the earliest time of the start event less the duration. Free float assumes
both the preceding and succeeding activities start as early as possible.
Using the examples in Figure 7.7 the total float of activity 2-4 is 11 – 2 – 3 = 6, and
the free float is 9 – 2 = 4.
The difference between total float and free float is sometimes referred to as
interfering float as shown in Figure 7.7. It is the amount of total float shared by the
succeeding activity. Interfering float is rarely used in any subsequent calculations.
Step 4: Assessing resources

The resources required for an activity will have to be considered in estimating its
duration. The resources can be written alongside each arrow in the network. For
example, an activity with a work content of 20 carpenter days requires two
carpenters for ten days. The first and most widely used assessment of resources is
the aggregation chart. Figure 7.3 is an example of a resource aggregation chart for
labourers. In many cases a more elabourate approach is not justified. The resource
aggregation chart is useful in assessing work content for estimates and can be used in
conjunction with the linked bar chart (Figure 7.3); a visual assessment of the float
available within activities (shown as a broken line) allows the distribution of peaks of
resource demand. In many practical situations this is sufficient resource

manipulation.
Besides the resource aggregation, two other approaches are used to assess resources
required:
(i) time-limited problem, i.e. the project must be completed by a specific date; and
(ii) the resource-limited problem, in which a project must be completed within the
limited resources available even if this means extending the project deadline.
In the first method time analysis will provide the minimum time possible for
completing the project. If the minimum is taken as the time limit, adjustments in the
timing of any activity that may affect resource requirements must be undertaken
within the float available. The steps in assessing the resources required in a time-
limited situation are:
(1) Prepare a list of activities ranked in order of their earliest start dates.
(2) Produce a resource aggregation chart as in Figure 7.8, based on this list of
activities in earliest start order and the resources required as shown in Figure
7.8. This gives the resources required assuming all activities start as early as
possible.
(3) Produce a list of activities ranked in order of latest start dates. (Note: The
latest start date of an activity is the latest time of the finish event less the
duration.)
(4) Produce a resource aggregation chart as in Figure 7.8 based on this list of
activities in latest start order, and starting at these latest start times. These are
the resources required when all activities start as late as possible.
(5) Compare the resource aggregation charts from (2) and (4). These provide the
extremes of resource requirements, all activities starting as early and as late as
possible. Between these extremes a compromise to produce acceptable
resource requirements can be sought by visual inspection and manipulation of
activities within the two extremes.
In the second method the production of a resource-limited aggregation chart is

similar to that of the unlimited resource aggregation, except that activity must be
delayed. To produce reasonable results, and so that earlier activities are allocated
their resource first, the activities must be arranged according to a system of priorities
or ‘decision rules’.
The decision rule is a device whereby activities are ranked in the order in which their
resource demand is added to the resource aggregation chart. Each activity is thus
given its appropriate priority in the queue for resources. It is possible that not all
activities can receive the resources they required at the earliest time they require
them. Consequently, some activities will be delayed until the resources are available.
The ordering according to a chosen priority or decision rule ensures that activities
high in the priority list receive their resources first. Activities low in the priority list
may get delayed.
Activities in early start of order

Resources
Activity Earliest Start Total float Duration (Labourers)
1-2 0 0 2 2
2-3 2 0 6 4
2-4 2 6 3 3
3-5 8 0 6 3
3-4 8 2 1 1
4-5 9 2 3 3
5-6 14 0 2 2
2-4
3-4
Labourers
4-5
3-5
2-3
1-2 Weeks 5-6
Activities in late start of order

Activity Latest Start Total float Duration Resources

(Labourers)
1-2 0 0 2 2
2-3 2 0 6 4
2-4 8 0 6 3
3-5 8 6 3 3
3-4 10 2 1 1
4-5 11 2 3 3
5-6 14 0 2 2
3-4
2-4 4-5
Labourers
2-3
3-5
1-2 5-6
2 4 6 8 10 12 14
Weeks
Figure 7.8 Resource aggregation charts for activities starting as early and as late as
possible (based on network in Figure 7.5).
Sorting is the ranking in a priority order, and one of the more common sorts or
decision rules is to sort in order of ‘early start time’. For activities with the same
early start time a second sort is required and this could be in order of total float. The
upper part of Figure 7.8 gives the activities for the network shown in Figure 7.5
ranked in order of early start as the first or major sort and in total float order as the
second or minor sort. This ranking has been used in preparing the resource
aggregation chart shown in Figure 7.9. This example shows that activity 2-4 is the
first to exceed the resource limit and is therefore delayed from starting on week 2 to
starting on week 8.
Labourers
3-4
4-5
5-6
2-3 3-5
1-2 2-4 Weeks
Activity Scheduled start

date
1-2 0
2-3 2
2-4 8
3-5 11
3-4 8
4-5 17
5-6 20
Figure 7.9 Resource-limited histogram and table of scheduled start dates.
When the resources for all the activities have been entered in the resource
aggregation chart a list of scheduled start dates can be extracted as in the table shown
in Figure 7.9. Figure 7.10 gives similar examples for two types of resource, for
demonstration purposes the decision rule or priority sort used in this case are early
start as the major sort and largest duration as the minor sort. The choice of decision
rule or sort is left to the user of these techniques. The decision rules in common use
are early start-total float, late start-total float, and since each type of decision rule
may load the resources into the aggregation chart in a different order the resulting
resource aggregation chart will be different. The priority list guides the user towards
an acceptable solution
Activity Earliest Duration Resource Resource Scheduled

start type start date
1-2 0 2 2 C 0
2-3 2 6 4 L 2
2-4 2 3 3 L 8
3-5 8 6 3 L 11
3-4 8 1 1 C 8
4-5 9 3 3 C 11
5-6 14 2 2 C 17
Resource limit 4
2-3 2-4 3-5
2 4 6 8 10 12 14 16 18
Resource
5-6
3-4
4-5
2 4 6 8 10 12 14 16 18 20
1-2
Figure 7.10 Resource allocation for two resource types
7.3.2.2 Activity-on-the node (precedence diagrams)

Precedence diagrams were developed in the early 1970s by the Cementation
Company as an alternative approach to network analysis, which could more readily
be applied to works of a civil engineering nature. They consist of a series of
operational boxes representing a construction sequence, which are linked together by
a series of lines that represent the relationships between the operations.
The finish to start limitations or arrow diagrams causes difficulties when, for
instance, one activity is required to start before the preceding activity is completed.
This either means dividing the preceding activity into smaller parts as shown in
Figure12 (a) or introducing a dummy with a time value as shown in Figure12 (b).
Dependency list
Activity Duration Dependency
1 2 Start
2 6 1
3 6 2
4 1 2
5 3 1
6 3 4 and 5
7 2 3 and 6
Earliest Duration Earliest

start finish
8 (6) 14
8 3 14
Latest Activity Latest
start identifier finish
2 (6) 8
14 (2) 16
2 2 8
14 7 16
0 (2) 2
0 1 2 8 (1) 9
9 (3) 12
10 4 11
2 (3) 5 11 6 14
8 5 11
Figure 7.11 Precedence list and diagram showing the same network as in Figure7.5.
A B
a
B cannot start until A is complete

A part 1 A part 2
b A B part 2
B part 1
4 4
B
4
4
C
Figure 7.12 Adjustment to arrow networks to produce overlaps between activities.

This difficulty resulted in the precedence approach being developed which

introduced activity boxes rather than activity arrows. The boxes permit a number of
different relationships to be expressed between activities, which relate more to the
real situation on a construction project. The relationship includes:
o Finish-start
o Finish-finish
o Start-start
o Part complete-start
o Part complete-finish
o Finish-part complete
Step 1: Listing the activities

The activity list can be extended to show the dependency between
activities, as shown in Figure 7.11.
Step 2: Producing a network showing the logical relationship between
activities.
In precedence diagrams the ‘node’ represents the activity and the link or arrow
represents only the logical relationship. Figure 7.11 shows the precedence network
and the list of activities on which it is based. No dummies are needed to maintain
correct logic or for unique numbering or activities.
Each node representing an activity can be given a single unique number. As for
arrows, the duration of each activity is estimated and the forward and backward
passes are done and the earliest and latest start and finish times of each activity are
entered as shown in Figure 7.11. These times calculated refer to the activity whereas
the calculations for arrows referred to event times. Float can be calculated as before,
for example the total float of activity No. 5 is latest finish time less earliest starting
time less duration, that is 11 – 2 – 3 = 6.
The main difference between activity-on-the-node diagrams and the arrow equivalent
are that node diagrams have no dummies, no change of reference number when
additional activities are added, and complex relationships. The incorporation of node
diagrams in several commercial software packages has contributed to their increased
use by planning engineers in construction.
7.3.3 Line of balance
A line of balance diagramme comprises a series of inclined lines, which represent the
rate of working between repetitive operations in a construction sequence. It is thus a
planning technique for repetitive work whose basis is to find the required resources
for each stage or operation so that the following stages are not interfered with and the
target output can be achieved.
Figure 7.13 illustrates the construction of a quay as represented by three operations:

(i) drive piles;
(ii) construct pile cap; and
(iii) fix deck.
This sequence had to be repeated ten times to finish the quay.
The interrelationship of the three basic operations can be shown in a simple logic
diagram, as in Figure 7.13(a). To provide for a margin of error in the time taken to
complete each of these operations, a time buffer is usually placed between
operations, as in Figure 7.13(b). This construction plan shows that a total time of 50
days is needed to complete one sequence of operations. The target output of the
project can be expressed in terms of the completion rate of these sequences. For
example, it may be that the quay comprising ten sections has to be completed in 100
days. Thus if a target rate of completion of one section per five-day week was
chosen, the total time taken for ten sections would be 95 days, as in Figure 7.14.
Deck
Pile cap
A A
Sketch of the quay
A B C
Drive piles Construct piles Fix deck

18 days cap 12 days 10 days
(a) Simple linear logic diagram
Drive Buffer Construct Buffer Fix

piles 5 days piles cap 12 5 days deck
18 days days 10
days
(b) Logic diagram with buffers
Figure 7.13 Logic diagram
Total time 95 days

10
9
8
7
6
Completion rate of
5
Sections
approximately
4 1 section/5-day week
3
2
1
10 20 30 40 50 60 70 80 90 100
Time (days)
Figure 7.14 Time for completion of ten repetitive sequences at the rate of one per week.
Total time 95 days
P C D
10
9 P – Pile
8 C – Cap
7
Sections
D – Deck
6
5 Completion rate
4 1 Section/ 5-day week
3
2
1
10 20 30 40 50 60 70 80 90 100
Time (days)
Figure 7.15 Logic diagram for each section added to the completion schedule.
The logic diagram or construction plan for section 1 in Figure 7.13 can be added to
Figure 7.14, as in Figure 7.15 for the other sections. The sloping lines added to the
start and finish of each operation to allow dates to be established for each section.
This is the line of balance schedule, if sufficient resources are made available to
maintain the production represented in the schedule.
Note that the schedule shown in Figure 7.15 is only possible if the required number
of teams of operatives is available to start at the scheduled start dates of each section.
The basic approach is to determine the resources available and calculate the rates of
construction that can be achieved. This example only demonstrates the procedure.
If, for example, operation ‘pile cap’ required a team of six operatives to construct the
pile cap in 12 days and two teams of six operatives were employed the output of the
gang of two teams would be 0.83 sections per five-day week and not the one section
per five-day week required by the target. This is because if two teams were
employed, team ‘a’ would start on section 1 on day 23 and finish on day 35 (from
schedule Figure 7.15) and team ‘b’ would start on section 2 on day 28 and finish on
day 40 (from schedule Figure 7.15).
Total time 104
days
10 P – Pile
9
C – Cap
8
7 D - Deck
Sections
6
5
4
3
2
1 P C D
10 20 30 40 50 60 70 80 90 100 110
Time (days)
Figure 7.16 Effect of scheduling operation.
Section 3, according to the schedule, is due to start on day 33, but team ‘a ’is not
available until day 35. Therefore the rate of completion of the operation ‘pile cap’
would be less than 1.0 section per five-day week; calculations show this rate to be
0.83 and Figure 7.16 shows the delay to the project.
If three teams were employed on operation ‘pile cap’ the output would be 1.25
sections per week. This is because team ‘a’ completes the first section on day 35 and
moves to section 4, which is not due to start until day 38.
Total time 104 days
P – Pile
10
9 C – Cap
8 D - Deck
7
Sections
6
5
4
3
2
1 P C D
10 20 30 40 50 60 70 80 90 100 110
Time (days)
Figure 7.17 Effects of scheduling operation ‘Pile cap’ at a completion rate of 1.25 per
week.
Figure 7.17 shows that the project completion date is in fact later than the original
despite the speeding up of operation ‘pile cap’. This is because operation ‘pile cap’
is no longer in ‘balance; with its preceding and succeeding operations.
How to prepare a line of balance schedule

(1) Prepare a logic diagram as in Figure 7.14
(2) Estimate the labour-hours required to complete each operation.
(3) Choose buffer times which will guard against the risk of interference between
operations.
(4) Calculate the required output target in order to meet a given project
completion date.
(5) Complete the table as shown in Table 7.1
(6) Draw the schedule, from the information calculated in Table 7.1. The
example is as shown in Figure 7.18
Total time 86.5 days
20
19
17
15
13
11
Houses
A B C D E
10 20 30 40 50 60 70 80 90 100
Figure 7.18 Line of balance schedule drawn from Time (days)

data in Table 7.1.
Table 7.1 The calculations for a line of balance schedule

Activity or Labour- Operatives Theoretical Actual gang Actual rate of Time in days Time from Min. buffer
operation1 hours per per activity3 gang size at size5 output6 for one start on first time9
activity2 the chosen activity7 section to
output of rate start on last
of R4 section8
A Substructure 110 3 8.25 9 3.27 4.58 29.05 5

B Superstructure 320 8 24.00 24 3.00 5.00 31.67 5
C Joinery 365 9 27.38 27 2.96 5.07 32.09 5
D Plumbing 35 2 2.63 4 4.56 2.19 20.83 5
E Finishes 210 5 15.75 15 2.86 5.25 33.22 5
Note: Operations are sequential. Total no. of houses = 20. Target rate of build (or completions) R = 3 per week (one week comprises
five eight-hour days)
The columns in the table are:

1
Activity descriptions and identification
2
The estimated labour-hours for each activity
3
The optimum number of operatives for each activity, this is the number of operatives in one team
4
The theoretical gang size required to maintain the output rate R given by R x (hours per activity )/ (Number of working hours per
week). R would be the number of sections to be completed each week.
5
The actual gang size would be chosen as a number, which would be a multiple of the operatives required fro one team3 near to the
theoretical gang size. If the actual gang size is greater than the theoretical gang size the rate of output will be more than the target rate,
and if the actual is less than the theoretical the actual rate of output will be less than the target rate.
6
The actual rate of output is given by (actual gang size/ theoretical gang size) x target rate
7
Time taken for one activity in days is given by [operative hours for activity/ (no. of operatives in one team x no. of hours in a working
day)]
8
The time in days from start on first section to start on last section is given by [(no.of sctions -.1) x (no. of working days per week) /
actual rate of build]. This is useful in plotting the schedule
9
Minimum buffer time is assessed from knowledge of the likely variability of the preceding activity
(7) Examine the schedule and assess possible alternatives to bring about more
‘balanced’ schedule which might include:
(a) Changing the rate of output of one activity by reducing (or increasing)
the gang size pathway through the project; an example is given in Figure
7.19.
(b) Lay-off and recall one gang; an example is given in Figure 7.20.
(c) Overlap some activities, i.e. have a non-sequential logic diagram, which
means that the schedules shown as sloping lines on the diagrams would
be superimposed. Such schedules become difficult to read and this
severely reduces the effectiveness as a means of communication with
operational staff such as foremen and gangers.
(d) Schedule every activity to work at the same rate. This is known as
‘parallel scheduling’ and involves employing enough resources to ensure
that the rate of output required can be achieved. In the example in Table
4.1, if activities C and E had actual gang sizes one team more than shown
then all activities could proceed at a rate of 3.0 per week. However, this
means that most gangs of operatives are working at less than their natural
rate. The parallel schedule would have a shorter overall duration. Before
employing parallel scheduling, examination would be needed as to
whether the savings in overall duration and hence indirect overheads
offset the extra costs in over-manning.
Total time 81 days

20
19
17
15
13
11
7
Houses
A B C D E
10 20 30 40 50 60 70 80 90 100
Time (days)
Figure 7.19 Line of balance schedule drawn from data in Table 7.1.
Total time 81 days

20
19
17
15
13
11
7
Houses
A B C D E
10 20 30 40 50 60 70 80 90 100
Time (days)
Figure 20 Line of balance schedule drawn from data in Table 7.1.
How to use the schedule

The complete schedule is based on chosen resources, therefore the rates of
construction calculated have taken account of these resources. This is different from
the network calculations, which separated logic and resource allocations.
The schedule and the start and finish dates of the various teams on each operation
can be used to monitor progress. Figure 7.18 shows time now as day 25 and the
completion of operations A and B marked on their respective lines of balance. The
situation portrayed is operation A on schedule and operation B ahead of schedule.
The danger from this is the B may run out of work because it is progressing at a
faster rate than A. Action is needed either to speed up A or slow down B.
Updating a line of balance schedule once the project has started, and if the rates of
construction prove to be different from those calculated, can be difficult and quickly
becomes unclear.
Another use for the line of balance schedule is checking material orders or deliveries.
If a deadline for ordering and/or receiving materials is marked on the schedule, as
shown in Figure7.20 for plumbing supplies, then a simple check can be made in good
time.
7.4 Other Planning Techniques
7.4.1 Programme evaluation and review technique – PERT
PERT was developed in the late 1950’s as an integrated planning and control system
to manage the hundreds of contractors involved in the design, construction and
testing of the Polaris Submarine missile system. It was developed to apply a
statistical treatment to the possible range of activity time durations. A three time
probabilistic model was developed, using pessimistic, optimistic and most likely time
durations (Figure 7.21). The three times were imposed on a normal distribution to
calculate activity’s expected time.
o m p
o - optimistic m - most likely p - pessimistic
Figure 7.21 A three time probabilistic model
Activity-on–the-arrow and activity-on-the-node assume that information employed in

programming is reasonably accurate. In practice time and cost overruns are not
uncommon in construction due to part to the uncertainty of information employed in
planning. PERT addresses such uncertainty by introducing three values for an
activity’s duration to replace the single time adopted for arrow diagrams. These are:
(i) Optimistic duration (d 0 ) minimum duration if everything goes well
(ii) Most likely duration (d m ) based on analysis of work from previous projects
and the planner’s experience and judgement
(d p )
(iii) Pessimistic duration maximum time if everything goes wrong
The technique is based on probability and assumes that the probability of exceeding
d 0 is about 99% and d p is about 1%. The following define key activity parameters
used for analysis in PERT.

de ( d 0  4d m  d p ) / 6
Expected duration =
Standard deviation d e = (d p  d 0 ) / 6
Variance vd e = (d p 
 d 0 ) / 6 i.e.d e 
2 2
The following example shows the application of PERT to a small construction

project and illustrates the computation of overall project duration and identification
of critical activities. The example also illustrates the other use of PERT such as
assessing the risk of timely completion for activities and the overall project in order
to facilitate project schedule control.
Table 7.2 Expected duration (weeks) and variances for activities.

Optimistic Most likely Pessimistic Expected Variance of
Preceding duration duration duration duration duration
Activity activity (d 0 ) (d m ) (d p ) (d e ) (vd e )
A - 1 2 3 2 1/9
B A 4 5 12 6 16/9
C B 5 6 7 6 1/9
D B 0.5 1 1.5 1 1/36
E A 1 2 9 3 16/9
F D, E 1.5 3 4.5 3 ¼
G C, F 2 2 2 2 0
Table 7.2 outlines the optimistic, pessimistic, and most likely time estimates provided
by the planning engineer for the project. It presents the calculated expected duration
and variance for each activity. The expected duration for PERT reflects the activity
times for simple activity-on-arrow and activity-on-node techniques. The
representation of a PERT diagram can either be as an arrow or a node diagram, with
the additional information on activity variances. For convenience of relating the
analysis of the PERT programme to the concepts outlined earlier in this chapter
(forward and backward pass, earliest and latest times) the PERT diagram for our
project is presented here as an arrow diagram.
7.4.1.1 Project duration and critical path
Figure 7.22 shows the PERT programme presented in arrow diagram format. To
establish the project duration and critical activities the activity event times with the
expected durations are computed by following the same procedure as in activity on

the arrow. Commencing with activity A, a forward and backward pass is run with
the expected activity durations. This yields overall project duration of 16 weeks and
activities A-B-C-G as the critical path. The calculation of float times follows the
same approach as in a general arrow diagram.
8 8
3
C
6(16/9)
14 14 16 16
0 0 2 2 6(1/9)
B
D 5 6
1 2 2(0)
1(1/36)
2(1/9)
G
3(1/4)
3/16/9) F
A
E 4
9 11
Figure 7.22 A PERT diagram showing duration, event numbers and event times.
7.4.1.2 Uncertainty of project completion date
In Figure 7.22 although the planned project duration is 16 weeks, in practice the
completion date for this project will be negotiated with an extra time to cater for any
contingencies that might arise during the execution stage. It is essential that there is
a clear appreciation of the potential to deliver the project within the negotiated
period. This is a measure of the risk associated with the programmed project
schedule, and provides useful information for the Contracts Manager who has to
negotiate a delivery date for the project. This is illustrated by using the project in
Figure 7.22 as an example. The Contracts Manager has negotiated an acceptable
delivery date of 18 weeks after its start time, then the overall project will have a two
week float to cater for contingencies. An estimate of the risk associated with
delivering the project within the negotiated 18 weeks can be assessed utilizing the
additional information of variances that is provided by PERT.
If it is assumed that the activities of this project are statistically independent of each
other, then the probability that it will be completed within the 18 weeks can be
established. In order to use the areas under a normal distribution curve to do this, the
deviation of the target duration (TD) from the expected project duration (EPD) in
units of standard deviation has to be calculated. The standard deviation (and
variance) represent the degree of spread associated with any distribution. The target
duration (TD) is the desired or agreed project completion time. The expected project
duration, which is the mean duration for completing the project, is the critical time of
the project. This is defined as the sum of expected activity duration (d e ) for those
activities on the critical path. The overall variance of the project (v) is the variance
of the critical path (the sum of the variance vd e for all activities on the critical path).
The expected duration of the whole project can be calculated as: EPF   d e for the
critical path and the variance of the overall project as v   vd e of the critical
activities. The Z, the number of standard deviations of a normal distribution is given

by the equation
Z = (target duration – expected project duration standard deviation
Z = TD  EPD) / (√v) [7.1]
The variance (v) of the overall duration for the activities on the critical path (A-B-C-
G) is
1 16 1 18
  0 2
9 9 9 9
For an 18-week target contract period (TD) based on the programmed expected
project duration (EPD) of 16 weeks with a variance (v) of 2 weeks, this yields:
Z = (TD – EPD)/(√v)
Z= (18 – 16)/ (√2) = √2 = 1.414 standard deviations.
The equivalent probability can be read off a normal probability distribution table.
P ( Z  1.414) = 0.92 which equals 92%
It implies that there is a 92% chance that the project will be delivered within the
negotiated 18-week period. The higher the percentage the lower the schedule risk
associated with the planned project, and vice versa.
For most practical situations, a working probability of 0.95 or a 95% chance is

considered a reasonable level of risk. By adopting this as the level of risk for this
project, we can compute the target project duration to be negotiated for, based on the
planned programme. Reading off the corresponding Z value for 95% from the
normal probability table gives:
Z ( P  0.95)  1.65
The contract period that will give the project a 95% chance of delivery on time is
calculated as follows:
TD95  EPD  Z (√v)
where TD95 is the target duration to be negotiated for the project to have a 95%
chance of completion on time; EPF is the expected project duration based on the
critical path; and v is the overall project variance.
This gives
TD95  16  1.65  1.414  18.33 weeks or 18 weeks 2 days
A similar analysis can be undertaken for individual activities by replacing the target
duration (TD) expected project duration (EPD) with the earliest and latest times of
the activity as shown below. The target duration for the activity is the overall period
within which the activity can take place without disrupting the project delivery time.
Then:
Period within which activity can take place = latest finish time – earliest start time
Expected activity duration = d e
Activity variance = vd e
All activities on the critical path will have a Z value of zero, equivalent to a
probability (P-value) of 0.50. This indicates that all the activities on the critical path
have a fifty percent chance of slipping out of schedule, and presents a higher risk to
the overall project schedule than say activity F for which there is a lesser schedule
risk. By substituting the values of any critical activity with that for activity F the
equivalent probability of completing activity F on time can be obtained as follows:
Period within which activity can take place F (TD ) = 11 – 2 = 9
Expected activity duration F (d e )  3
Activity variance F (vd e ) =1/4
Number of standard deviation units associated with activity F is Z F

Z F  (9  3) / √1/4 = 6 x 2 = 12 deviations
Twelve standard deviations are equivalent to a probability (P-value) of 0.9999. This

implies that activity F has approximately a 100% chance of being delivered on time.
The introduction of multiple times associated with each activity presents a means of
allowing for the uncertainty associated with project delivery. This main advantage of
the use of PERT is in establishing the schedule risk associated with the planned
proramme. This element is missing from both the simple arrow and node diagrams.
7.4.2 Space-time diagrams
Space-time diagrams for planning construction works were generally utilized before
the advent of computer-based planning packages, which became the norm in
industry. They were normally two-dimensional graphs that represent time (elapsed
project time) on one axis, and a measure for production (chainage or distance, area,
volume of works) on the other axis. The resulting plot then presents a pictorial view
of how the works should progress on site. Used as a planning tool, it allows the
identification of potential constraints in the utilization of resources, such as plant for
excavation, which can then be re-organized. It also serves as a realistic tool for
communicating information on the programme of works for a project. Space-time
diagrams lend themselves to projects that are essentially linear in nature, for example
road-works, pipe laying, overhead pylon construction, where there is considerable
repetition. However, they can be applied to projects of a non-linear character where
there is considerable repetition of a work package. The main disadvantage
associated with space-time diagrams is the difficulty in effecting alterations for
control and updating purposes. The use of the space-time diagram as a planning tool
is illustrated by the example below.
A new road is required to link a new housing development that is 4 km away from
the main town. The project also includes the construction of a 75 m bridge and two
culverts. The symbols that are used in representing a project in a space-time chart
are line and boxes. A line and a box represent respectively a unit or multiples of
duration and chainage. The width of a vertical box indicates the chainage over which
the activity covers its height represents the time it takes to complete the whole
activity. For inclined boxes, the horizontal length and vertical height across the
incline are taken to establish the chainage and time it takes to complete a unit of the
activity.
7.5 Computers and Construction Planning
Planning without computers is now rare. The key attraction to construction and
project managers is the speed of processing and the manipulative power available.
The arrival of microcomputers and interactive systems resolved most of these
difficulties and the use of network planning based on a computer system is now
much more credible. The installation of the computer equipment on the desk of the
construction managers and the site planner has generated a working relationship
between construction manager and this powerful aid. It is the immediacy of the
results that has convinced manager that computer-aided planning is an indispensable
aid.
The use of these planning systems varies from the simple programming of activities
up to a complete time, resource and cost modeling system used in analysis of ‘what-
if’ situations and in making forecasts. These are normally organized as separate but
compatible packages that allow data transfer between packages, with each package
focusing on only one aspect of planning. At the other extreme, programming
software comes as one integrated package, which is able to undertake the whole
range of project planning requirements. The choice between an integrated package
and a standalone one will depend on project complexity and size as well as
organizational preference. As the use of the planning system becomes more complex
the data required increases and the computer system required becomes more
sophisticated. The following is a review of these uses.
(1) Planning by preparing a schedule of activities.

(2) Adding resources to the basic plan and preparing a resource plan.
(3) Monitoring progress in terms of time and resources and updating the plan.
(4) Costing the resources to produce estimates. Including revenues on each
activity- producing cost and revenue forecasts and cash flows.
(5) Experimenting with the activity schedule and resource allocation to determine
likely outcomes to assumed scenarios in terms of time, resources and costs.
7.5.1 Preparing a schedule of activities
All systems require project data that describe the overall parameters of the project
before accepting data at individual activity level. This project data relates to ‘time
units’, ‘start dates’, ‘days in weeks’, ‘holidays’, etc.
The data required to prepare a schedule of activities will normally comprise for each
activity:
a. Activity number;
b. Description;
c. Management reporting codes;
d. Duration; and
e. Logic links to other activities
Later when resources are introduced this activity data will be extended. Some
computer systems will display the network being constructed on the screen. This is
helpful in checking the logic of the network.
From this input the most important report that will be available will be a bar-chart.
This will be supported by reports showing the start and end dates of all activities and
float, if required. The generation of a time-base logic diagram will achieve a basic
planning model and will have developed the planner’s understanding of the project
and interrelationships between the major activities.
7.5.2 Resources
Allocation of the right amount of resources to the basic activities is essential for the
timely execution of the whole project. Most software packages have a facility for
creating a list of resources. The list of resources allows the planner to enter all of the
resource information for the project in a database, which can then be assigned to
activities. Depending on the sophistication of the system available the resource
requirements of each activity will be identified to cover. Individual or groups or
resource types for the duration of the activity and resources shared by other
activities.
The resources will be identified by: resource numbers, descriptions and management
reporting codes. The availability of the resources will be described to the computer
system in terms of total availability or restricted data availability. From this
additional data the computer system will calculate the consequences of the resources
demands. The report will show for each resource the resource requirements for each
time period as a table, histogram or cumulative graph.
This resource report will be available for:

i. All activities starting as early as possible;
ii. All activities starting as late as possible;
iii. All activities schedules to suit resource restraints; and
iv. Other activities, depending on sophistication of computer system.
These reports allow the planner to assess, in terms of resources used, the implications
of the basic plan. The logic may be reworked in the resource demands are
unrealistic. In practice the most commonly used form of computer-based planning is
to complete the logic diagram and to assess the resource requirements assuming all
activities start as early as possible. The reports produced as bar-charts and resource
histograms are used to take strategic planning decisions. The number of resources
analyzed in this way is, in practice, usually quite limited and well below the capacity
of the existing computer systems.
7.5.3 Monitoring and control
Equipped with the basic logic model and the resource requirements of each activity
the planner possesses the tools to monitor the progress of the project. As the project
proceeds many occurrences may not be as planned. Thus the computer system needs
to allow updating for each activity by:
- Changing start date;
- Changing duration;
- Changing end date; and
- Changing resource requirements.
The consequences of these changes can be processed and updated and reports
produced. The effect on identified target dates set in the basic plan can be
monitored.
The act of checking actual progress and actual resource usage against planned
progress and planned resource usage is the act of monitoring. The act of taking
decisions to alter the likely future outcome and bring the project back on the planned
scheduled is control.
The decisions relating to the rescheduling of activities, the reordering of activities,

the altering of resources to change the duration of activities are control. Thus the
planner must collect the information on the rate of progress to date and current
resource usage in order to update the computer model and monitor progress. This
information can be presented to the construction managers together with suggestions
for re-scheduling. The rescheduling decisions taken by the managers may need
processing before the control decisions are implemented.
7.5.4 Cost and revenues
Some computer systems allow the cost and revenue to the included. For example, an
activity has the following details:
- Description : Formwork erection
- Duration : 4 weeks
- Carpenters : 3
- Labourers : 1
- Crane : 50%
The costs of resources are:

o Carpenters : US$345.00 per week
o Labourer : US$287.50 per week
o Crane : US$230.00 per week
Thus, the cost of the activity is:
o Carpenters : US$345.00 x 3 x 4 = 4140
o Labourer : US$287.50 x 1 x 50 = 1150
o Crane : US$230.00 x 0.5 x 4 = 460
TOTAL = US$5750
All this data entered separately and held on file provides the basis for calculating
costs. It also provides a means for exploring the consequences, in cost terms, of any
alterations being considered to re-plan the project.
For example, the number of carpenters may be increased and the overall duration of
this activity reduced; this on its own would be simple enough to calculate but the
consequences on the rest of the project would be more tedious. This is where these
computer systems show their advantages.
Overheads or on-cost can be held in ‘hammocks’ that span a number of activities and
derive their duration from the interaction of the activities they span. Thus the
manipulation of activity costs can be extended into a grade-off calculation between
direct and indirect costs.
If provision is also made for the activities to hold details on revenue then income
graphs can be produced for the project, for example:
- Description : Formwork erection
- Duration : 4 weeks
- Quantity : 800 m2
- Revenue : US$10.40/m2
With both cost and revenue details it is possible, with additional data relative to
payment conditions and credit delays, to calculate the project’s cash flow. Thus with
the inclusion of cost and revenues the simple planning tool has been extended to be a
basic estimating and cash flow model. Thus all the key elements to managing a
project are present:
- Time;
- Resource;
- Costs;
- Revenues; and
- Cash.
7.5.5 ‘What-if’ modeling
Having developed the planning model it is now possible to use it as a strategic

planning tool. This gives the planners the ability to explore envisaged scenarios
before they occur. It allows the manipulation of: the basic logic network; the
resource; resource costs; and revenues. As a planning aid it is this modeling element
that is the most powerful and its use has been proved advantageous by clients and
their designer; project manager; estimators and pre-tender planners; and by
construction managers on site.
Clients and their designers have found such modeling advantageous to study the
overall development of their project managers; estimators and pre-tender planners;
and by construction managers on site.
Clients and their designers have found such modeling advantageous to study the
overall development of their project, the phasing, the timing of the engagement of
their specialists, etc. Questions such as the effects of procurement delays and their
consequences have led to design sequencing being altered to place orders earlier.
Project managers have found the modeling useful to explore the ramifications of the
interdependence between the many contractors involved in major project.
The pre-tender planner finds use in these modeling techniques to explore the effect of
different construction methods on time, costs and revenues. The site manager has
found such techniques useful in controlling sub-contractors and in exploring the
consequences of changes of construction methods even after the project has started.
Although the use of computers has brought a dimension of speed and possibly
efficiency in construction projects, the plethora of software to choose from is one of
the main challenges of the project manager. Any software has some advantages and
disadvantages when compared with others that are available on market. Hence, the
ability of the Project Manager to select suitable software for the project goes a long
way towards ensuring the benefits outlined above.
7.6 Data Exchange
All the modern computer systems allow exchange of data between the planning
system and other systems. Now that the construction industry is mainly computer
literate, there is a reluctance to do much, if anything, by manual calculation. At a
minimum the computer planning systems are able to pass data files to spreadsheet
packages where the users can generate their own calculation routines for other
purposes such as cash flows. Other examples of data exchange are where the
planning system passes on data to estimating or cash flow systems. The planning
system, itself, could be the recipient of data from other systems. For example, the
estimating system may hold details on resources and resource costs on a bill item by
bill item basis. By allocating these bill items to activities in the plan the resource
details are passed from the estimating to the planning system. Thus an appraisal of
the quality of computer systems must now include a review of the system’s ability to
pass on and receive data from other systems.
As computer systems become more and more ‘linked’ or ‘integrated’ the sources of
data for the various systems come under scrutiny and it is clear that if contractual
systems were being created with computers in mind certain contractual system as the
one involving bills of quantities would not be created. The nature of the data created
around the bill of quantities is not ideal for use in other systems. It would arguably
be better to construct a contractual system around activities rather than bill items.
However, various attempts at new systems have shown how resilient the existing
contractual systems are.
Forms of contract without a bill of quantities have payment to contractors based, not
on bill items, but on completion of activities in a schedule of activities. This form of
contract, used internationally, offers the contractor the opportunity of using the
planning model’s database in a number of linked functions such as:
- Estimating;
- Planning;
- Cost control;
- Valuations; and
- Variation pricing.
7.6.1 Estimating
The estimating function required information obtained from the outline tender
programme and method statement and the take-off of quantities required for each
activity. The resource required for each activity, labour, plant or materials, were
entered and costed. Also the subcontractors were identified, allocated to activities
and costed. The preliminaries and on-cost calculations are undertaken and allocated
to activities or hammocks as were profit and overheads; the key being that all this
assembly of estimator’s cost data was being structured around the planning model.
Estimating by this approach required that the planning model be developed to a more
refined stage than in the traditional process. The value of this is that the data so
assembled and structured is available for use in other functions.
7.6.2 Planning
Much of what was described as estimating above could well be described as

planning. If he estimate was calculated as described the planner on site would begin
their production planning with a well-developed plan. The well-developed plan
allows all the efforts of monitoring and control to begin against a background of
knowing how he costs were calculated in terms that were readily understood by site
planners and construction managers. Difficulties that arise in merging separately
assembled data from estimators and planners are substantially overcome if both the
planning and cost monitoring systems had the data they required available from the
first day.
7.6.3 Cost control
The elements in cost control system are:

a. Measure progress;
b. Calculate the budget allowance for the progress;
c. Compare the budget allowance with actual costs; and
d. Take corrective action.
The use of a planning system, which has been used for estimating and contains all
the planning and estimating data, allows the first two items to be executed with speed
and efficiency. The monitoring of progress will identify which activities are
complete and which are partially complete. The entry of this progress data enables
the budget allowances to be calculated. Each activity has allocated to it, at the
estimating stage, the resources (labour, plant, materials and subcontractors) and their
associated costs. Thus if the activity is identified as complete the budget allowance
for the activity is the cost of those resources. If the activity is partially complete the
costs can be calculated on a pro rata basis. Thus the use of a planning based system
can considerably ease the calculations of the budget allowance for any measured
progress. What such systems cannot do is calculate the actual expenditure. This
must come from the accounting systems that control expenditure on labour, plant,
materials and subcontractors.
What is of value in any actual versus allowances comparison is that the planning
system holds data on: resources; durations; and costs. Thus, if actual expenditure is
significantly different from the budget allowance the data is readily available to
extend the analysis into whether the resourcing was at planned levels or if time
overruns were the cause.
7.6.4 Valuations
In some systems interim valuations are based on completed activities. Since each
activity has had its value allocated or calculated at the estimating stage the
calculation of an interim valuation required only the identification of a completed
activity. Thus the process is reduced to identifying the completed activities, updating
the planning model and calculating the last valuation.
7.6.5 Variations
One bugbear of all contractual systems is the determination of a fair price for
variations. Variation proposals calculated on the same basis as the original
estimating calculations, with the implications and overheads because of any
disruption, are more clearly demonstrated in a planning model than in other systems.
The above brief review thus demonstrates the advantages to be gained in having
systems that are capable of data exchange.
Chapter 8
Least Cost Scheduling and
Resource Levelling
8.1 Introduction
A resource is a physical variable quantity such as manpower, material, money,

equipment, time or space, which are required for carrying out a project. While
developing CPM and PERT networks, it is generally assumed that sufficient
resources are allocated to perform the various activities and complete the project.
But in real practice, resources are always limited and limitations on resources can
significantly affect the initiation, performance and completion of activities on the
scheduled time and can cause the project to be extended beyond the scheduled
duration. Therefore, the various activities of the project are to be scheduled in such a
manner that there is best possible utilisation of available resources.
8.2 Least Cost Scheduling
A least-cost schedule is one with optimum project duration such that to lengthen or
shorten it would increase the total cost. Time and cost are the two most important
components of project economy. If time is not important, management can utilise its
resources in the most efficient way. Even stopping work on one project, moving to
another for a while, and then coming back. If money is not important, management
can obtain the best of resources and schedule work around the clock. This process is
usually inefficient but produces a completed project in a minimum time. Both ways
have their uses, but in the normal situation cost effectiveness calls for a study of the
trade-off between time and cost which yields a “least-cost” solution.
There is no absolute, provable least-cost solution to a real problem because the value
of variables cannot be known exactly in advance. For instance, one cannot determine
exactly what working overtime on a particular activity will achieve. Generally, it is
known that premium pay for overtime will increase direct cost but will reduce the
number of days needed to complete the activity, which in turn, should reduce the
time needed to complete the project, thereby saving some overhead. How much time
can be saved, and the importance of saving that time, must be analysed.
8.3 Important Terminologies
Before going into the details of the subject matter, it is worth understanding the
following important terminologies, which are important in the discussion of least
cost scheduling and resource levelling.
Complex compression: When direct costs of activities vary nonlinearly with

their durations, or the overhead costs vary nonlinearly
with time.
Crash: Shortening project activities in order to shorten the
project length.
Crash cost: The cost of an activity at crash duration.
Crash duration: The minimum practicable duration for any activity.
Direct costs: The costs directly attributable to project work items
(e.g., labour and materials). These costs are usually
non-linear and to accelerate or to delay the work direct
costs increase.
Least cost: The least total cost for a project.
Normal cost: The cost of an activity at normal duration.
Normal duration: The normal duration of an activity.
Optimum time: The project duration at least cost.
Overhead costs: The costs, which are spread over the entire project
(e.g., office, staff, management, and equipment).
These costs are usually linear, within a range; i.e., one
Least Cost Scheduling and Resources Levelling 222
day saved on a project saves one day’s overhead costs,

and one day’s delay cost the same amount.
Simple compression: When direct costs of activities vary linearly with their
durations and the overhead costs vary linearly with
time.
Resource aggregation: Listing the total resource requirements for each time
period.
Resource levelling: Arranging activities so that resource limitations are not
exceeded while minimising project duration.
Resource smoothing: Arranging activities so that the project duration is not
exceeded while fluctuations in resources are
minimised.
8.4 Variation of Direct Costs with Time
Direct costs, once a target schedule has been developed, increase with either an
increase or decrease in time. To solve the time/cost problem, i.e. searching for a
least-cost solution, one must make some assumptions. Let us consider an activity A
that normally would require 6 days at a direct cost of $8,000. We estimate that by
adding more equipment or more labour hours per day (more workers or over-time)
we could reduce the time to 3 days at a new direct cost of $14,000. We also estimate
that the same activity can be done in 5 days for $10,000 or in 4 days for $12,000.
Therefore, the “normal” duration for activity "A" considering our available resources
is 6 days, and the “crash” duration is 3 days. There is an implicit assumption that to
increase the duration beyond 6 days would not result in a direct cost reduction
because of underutilisation of resources - otherwise the “normal” duration would not
have been 6 days. To summarise, we have a choice of 6 days at a cost of $8,000, 5
days at $10,000, 4 days at $12,000, or 3 days at $14,000. For simple compression
we consider that the direct cost curve for each activity is linear, so these figures
result in the time/cost curve shown in Figure 8.1.
16,000
Direct cost ($)

14,000
12,000
10,000
8,000
6,000
2 3 4 5 6 7
Time (Days)
Figure 8.1 Linear activity direct cost vs time curve.
Another scenario would be that 6 days cost $8,000, 5 days cost $9,500, 4 days cost
$11,000, and 3 days cost $15,000. This is often the case because 1 day can be saved
with overtime, while to save 2 days requires new hires and to save 3 days requires
more equipment. For complex compression we consider that the direct cost curve for
each activity is non-linear, so these figures result in the curve shown in Figure 8.2.
16,000
Direct cost ($)
14,000
12,000
10,000
8,000
2 3 4 5 6 7
Time (Days)
Fiure 8.2 Non-linear activity direct cost vs time curve.
Once we know the cost of shortening each activity, we can see the effect on the
project schedule. Shortening some activities - those on the critical path - may result
in advancing the completion date, while shortening other activities may simply add
more float. Sometimes it is advantageous to shorten an activity to free up a resource,
but it is almost always beneficial to shorten an activity that would cause the
completion date to be advanced, if the cost is not too great. In the subsequent
sections we will only consider taking action to shorten the project duration.
8.5 Variation of Direct Costs with Time
Generally, overhead costs vary directly with time; i.e. increase in time causes an
increase in overhead costs, and vice versa. So far we have only discussed about
increasing our direct cost while shortening a project’s duration, but along with this
project shortening there is a cost benefit. For example, if we finish a project 1-week
early, we save on security cost at the job site, management costs, equipment rental
costs, insurance, etc.- these are overhead costs.
Like direct costs, overhead costs may be linear or non-linear. For simplicity,
consider a case where overhead costs are linear at a cost of $1,000 per workday, as
shown in Figure 8.3.
7,000
6,000
Overhead cost ($)
5,000
4,000
3,000
2,000
2 3 4 5 6 7
Time (Days)
Figure 8.3 Linear overhead cost vs time curve.
For the cases mentioned above, the total cost is the sum of direct costs plus overhead
costs and is shown in Figure 8.4 (a) and (b). For the linear direct and overhead costs
(Figure 8.4(a) the optimum time is 6 days with a least cost of $14,000
(=8,000+6,000), and for the non-linear direct and linear overhead costs (Figure 8.4(b)
the optimum time is 5 days at a least cost of $14,500 (=9,500+5,000).
Direct and overhead cost ($)

18,000
17,000
16,000
15,000
14,000
13,000
2 3 4 5 6 7
Time (Days)
Figure 8.4 (a) Linear direct and overhead cost.
19,000
18,000
Overall cost ($)
17,000
16,000
15,000
14,000
2 3 4 5 6 7
Time (Days)
Figure 8.4 (b) Non-linear direct and linear overhead cost.
8.6 Schedule Compression
The systematic process of arriving at the least-cost solution is sometimes called

schedule compression. When direct costs of activities and overhead costs vary
linearly with time, we have simple compression, while if we have one or more costs,
which vary nonlinearly, we have complex compression.
Least-cost scheduling is an optimisation process whereby project activities are

shortened in order to shorten the overall project length. When activities are
shortened, their direct costs increase. When the overall project is shortened, its
overhead costs decrease. If one can shorten a schedule so that the overhead cost
savings are greater than the increased direct costs, then it is optimally solved.
Since the critical path is the longest route through the network it is these activities to
which attention is initially directed. It must be remembered that when shortening the
contract duration the position of the critical path may change. The planner and/or
manager will select the actual activities to be shortened depending on cost and
practicability. As an example, if two activities on the critical path can be shortened
by 1 week and the costs of shortening are $2,000 and 3,000/week, then the former
obviously takes priority for crash costing.
Consider the network shown in Figure 8.5 and its normal and crash durations and
respective costs are shown in Table 8.1. As activities on the critical path are
shortened, the float associated with activities, which are not critical, may be reduced
depending on the location of such activities. As further shortening takes place these
non-critical items become critical.
13
3
B
13
0 8 13 18
5
A C E
1 5 6
2
5 6 5
0 5 D 13 18
9
4
4
13
.
Figure 8.5 Network based on normal project completion time.
Table 8.1 Normal and crash durations and their respective costs.
Activity Normal Crash time Normal Crash
time (days) (days) cost ($) cost ($)
A 5 3 2,000 2,400
B 8 2 2,500 4,500
C 6 4 3,000 4,500
D 4 4 2,000 2,000
E 5 3 1,000 3,500
As shown in the Table 8.1 and Figure 8.5, the normal completion time is 18 units of
time and normal cost of completion is $10,500. In order to determine the activity,
which should be crushed initially, it is suggested to calculate the cost slope, i.e. the
cost per day of speeding up each activity, using Equ. 8.1.
crash cost - normal cost

cost per day =
normal time - crash time [8.1]
The summary is prepared as shown in Table 8.2.
Table 8.2 Calculation of cost slope.

Activity cost slope ($) Priority
A [2,400 - 2,000]  [5-3] 200 1st
B [4,500 - 2,500]  [8-2] 333 2nd
C [4,500 - 3,000]  [6-4] 750 3rd
D cannot be shortened
E [3,500 - 1,000]  [5-3] 1,250 4th
To reduce the contract duration from 18 weeks to say 12 weeks:

- initially shorten activity A by 2 weeks (least cost slope);
- then shorten activity B by 2 weeks, and
- finally shorten activity B and C by 2 weeks.
The summary of contract durations and costs are given in Table 8.3 and the
completely crushed network is shown in Figure 8.6.
Table 8.3 Summary of crushed duration with its respective cost.
Total cost Total time Cost/week Contract duration

($) saved (weeks) saved ($) (weeks)
shorten activity A 400 2 200 16
shorten activity B 666 2 333 14
shorten activity B & C 2,166 2 1,083 12
3,232
3
B
7
0 3 4 7 12
A C E
1 5 6
2
3 4 5
0 D 7 12
3
7 2
4
4
7
Figure 8.6 Network based on crushed duration and cost.
The increase in direct cost with weeks saved is shown in Figure 8.7. Suppose the
indirect costs are assumed to be $500 per week, then over the normal contract
duration this would have been $9,000 as shown in Figure 8.8.
15,000
14,000
Direct cost ($)
13,000
12,000
11,000
10,000
10 12 14 16 18 20
Time (Days)
Figure 8.7 Direct cost graph.

12000
Indirect cost ($)

10000
8000
6000
4000
2000
0
0 5 10 15 20 25
Time (Days)
Figure 8.8 Indirect cost graph.
The direct cost graph (Figure 8.7) and indirect cost graph (Figure 8.8) are combined
in order to determine the optimistic contract duration. This optimum time/cost
relationship is 14 weeks duration resulting in a cost of $9,566. Both a shorter and a
longer contract duration increases cost as shown clearly in Figure 8.9.
11,500
11,000
Overall cost ($)
10,500
10,000
9,500
9,000
10 12 14 16 18 20
Time (Days)
Figure 8.9 Combined direct and indirect cost graphs.
8.7 Resource Levelling
There is always a conflict of demand among resources required for a construction

work. Resource allocation is a means of determining within the constraints of the
float available an optimum combination of activity schedules, which will best
achieve contract completion. By rescheduling activities within certain limits it may

be possible to reduce the peak demand. The aim is to achieve a reasonably constant
demand for a particular resource during construction.
Figure 8.10 shows a qualitative simple bar chart with each activity needing the same
resource. The resource histogram indicates the peak resources as well as the pattern
of demand. By rescheduling activities within their float times it is possible to smooth
out the resource demands. As a guide, initial priority is given to those activities with
least float during scheduling. The rescheduled (levelled) chart and resource
histogram is shown in Figure 8.11. Resource scheduling enables management to plan
for regular gang sizes, etc. to be used on site with minimum fluctuation in demand.
Activity
A
B
C
D
E
F
G
H
E
F
G
H
Resource
s
Resource histogram based on

early start time
Time
Figure 8.10 Bar chart and resource histogram before resource scheduling.
A
B
C
D
E
F
G
H
Resources
Resource levelled
within float time
Time
Figure 8.11 Bar chart and resource histogram after resource levelling.
Resource levelling is an attempt to assign resources to project activities in a manner

that will improve productivity and efficiency. In this section we will deal with
labour, but the same approach can be used for allocating other resources such as
equipment and money.
Levelling the daily labour allocation may be desirable for several reasons, some of
which include:
1. Fixed crew size: Obviously, if the schedule demands more workers per day
than are available or if we have workers standing around without jobs, we have
a problem;
2. Learning curve: When a new hire is trained, there is a loss of productivity. So,
it may be recommended to keep the trained people and reduce the number of
new hires;
3. Start-up problems: Every project suffers from start-up problems of some sort.
At this time the supervisors are very busy trying to get everybody working in a
productive manner. Therefore, if we can start with a small crew and increase
its size gradually, we will eliminate some of the start-up problems;
4. Completion congestion: Most projects suffer from congestion around project
completion time because of reduced work areas. Thus, if we can gradually
reduce the crew size as we approach project completion, we can improve
productivity by reducing congestion.
In order to take advantage of labour allocation techniques, the planner must assign a
minimum crew size to each activity (less than or equal to the normal crew size). This
minimum crew size represents the least number of workers per day that are needed to
complete the activity within the planned worker-days (workers times days).
The following assumptions are made in resource levelling:

1. Any worker can do any activity. While this isn’t usually the case for a
complete project, the allocation techniques are still useful. They can be applied
to activities of a certain trade where the assumption is probably true;
2. The number of worker-days needed to complete an activity is fixed. If a
planner assigns a normal duration of 5 days and a normal crew size of 4, then
the activity will take 20 worker-days. If the planner also assigns a minimum
crew size of 3, then the activity could be completed by 4 workers in 5 days, or
by 3 workers in 5 days plus 5 workers for 1 day, etc., as long as the crew size
was 3, 4, or 5 and the crew’s combined efforts totalled 20 worker-days;
3. An activity once started will continue. While this is not a necessary constraint
on a real project, it is usually the most efficient way to proceed. Also, this
assumption makes the discussion of the allocation techniques somewhat easier.
Consider an analysed precedence diagram as shown in Figure 8.12 where the

resource requirement graph is drawn from the network based on the earliest start
times (Figure 8.13) and the resource requirement is presented as given in Table 8.4.
It can be seen from the diagram that by manoeuvring activities within their earliest
start and latest finish times a levelling of resources can be achieved as shown is
Figure 8.14.
0 2 2 6 6 8 8 12
A B C E
0 2 2 6 6 8 8 12
2 4 2 4
2 4
D
6 8
Figure 8.12 Analysed precedence diagram.
14 Peak resource (14)

Earliest start time
12
D
10 B
Resource No
A
8
6 B E
A C
4 A
2
A C
A
Day 1 2 3 4 5 6 7 8 9 10 11 12
Figure 8.13 Resource requirement graph.

Table 8.4 Resource requirement for the network shown in Fig 8.12.
Activity Resource no.

A 3
B 8
C 2
D 6
E 8
Latest finish time of D

14
12 Peak resources (8)
Resources No.
10
8
6 D
4 B E
2 Levelled
A resources
C
DAY 1 2 3 4 5 6 7 8 9 10 11 12
Figure 8.14 Levelled resources.
A further example will be used to illustrate the technique when there is a limitation
on resources as shown in Table 8.5 for analysed precedence diagram shown in Figure
8.15. Let in this case the maximum number of resources available at any one time is
five. A bar chart is derived from the analysed precedence diagram. It can be seen
from the resource schedule (Figure 8.16) at the bottom of the bar chart that resources
exceed the maximum available.
Table 8.5 Resource requirements for the network shown in Figure 8.15.
Resources Labour Resources Labour

A 2 I 3
B 3 J 3
C 1 K 1
D 4 L 3
E 1 M 2
F 4 N 2
G - O 2
H 1
3 4 4 7 7 9 9 10 10 11
C F I L M
15 16 16 19 19 21 21 22 22 23
1 3 2 1 1
0 3 3 7 7 12 12 15 15 19 19 23 23 26
A B E H K N O
0 3 3 7 7 12 12 15 15 19 19 23 26 26
4 5 3 4 4 3
3
7 9 9 11 11 14
D G J
12 14 14 16 16 19
2 2 3
Figure 8.15 Analysed precedence diagram.

ACTIVITY DAYS 5 10 15 20 25
A
B
C Critical activity
H
K
N 26 days
O float
C
D
F
G
I
J
L
M
RESOURCES 22237778843444111112222222
Figure 8.16 Resource scheduling based on earliest start time.
A labour resource graph is prepared from the network based on the extremes of early
start and latest finish for non-critical activities. A labour resource chart showing the
possible rescheduling limits within activity floats is shown in Figure 8.17.
Scheduling within these extremes is logical and feasible. The rescheduled resource
graph and bar chart are shown in Figre 8.18 and 8.19, respectively with a maximum
resource requirement of five.
Earliest Peak labour

starts resources (8)
7
Latest starts
6 F
resourcesResou
I
5 M
F
No. of
4 C
rces
D J L
3 M
B L
A C
2
N O
1 2 4 6 8 10 12 14 16 18 20 22 24 26
DAYS
Figure 8.17 Typical labour resource chart showing the possible rescheduling
limits within activity floats.
Peak resources required

6
5 C
4
Resources
D L I F
3 J
2 B M
A
1 N O
E H K
DAYS 2 4 6 8 10 12 14 16 18 20 22 24
26
Figure 8.18 Resource requirements after levelling.
A
B
E
H
K
N
O
C
D 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 5 4 4 4 2 2 2 2 2 2 2
F
G
I
J
L
M
DAYS 2 4 6 8 10 12 14 16 18 20 22 24
26
Figure 8.19 Rescheduled bar chart.
Initial allocations of resources may be insufficient to ensure planned progress. To

determine the optimum number of resources it is usual to start with the smaller level
of availability of resource and gradually increase this until the contract completion
date is reached.
Figure 8.20 shows a network for a small project together with resource requirements
as shown in Table 8.6.
2 6 6 8 9 11
B D F
3 7 7 9 9 11
4 2 2
0 2
A
0 2 11 15
G
2 11 15
2 5 5 9
C E 4
2 5 5 9
3 4
Figure 8.20 Analysed network for a small project.
Table 8.6 Resource requirements for the network shown in Figure 8.20.
Activity Resource
A 2
B 3
C 2
D 2
E 3
F 2
G 3
If there were no limitations on resources the contract could be completed in 15 days.

However, assuming a resource limitation of three, the revised contract duration
would be 20 days as shown in Table 8.7. If the resource limitation is changed to five,
the project could be completed in 16 days as shown in Table 8.8.
Table 8.7 Contract duration with only 3 resource units available
Day 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Activity
A 2 2
B 3 3 3 3
C 2 2 2
D 2 2
E 3 3 3 3
F 2 2
G 3 3 3
20 days
2 2 3 3 3 3 2 2 2 2 2 3 3 3 3 2 2 3 3 3
Table 8.8 Contract duration with only 5 resource units available.
Day 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Activity
A 2 2
B 3 3 3 3
C 2 2 2
D 2 2
E 3 3 3 3
F 2 2
G 3 3 3 3
16 days
2 2 5 5 5 5 5 3 3 3 2 2 3 3 3 3
Exercise problems
8.1 For the normal and crash costs of activities given in Table P8.1 and the
network shown in Figure P8.1, determine the optimum time and cost if the
overhead costs are $100 per day. Plot the direct cost, indirect cost and
combined values in one figure.
A
D
B
E
C
F
Figure P8.1
Table P8 .1
Duration (days) Cost ($)
Activity Normal Crash Normal Crash
A 4 2 400 500
B 8 5 800 980
C 3 2 600 700
D 10 6 500 600
E 8 6 800 950
F 7 4 700 1000
8.2 Using the normal and crash costs of activities given in Table P8.2, completely
crash the network schedules shown in Figure P8.2 and find the optimum time
and least cost. Consider overhead costs to be $60/day.
B
F G
C E
Figure P8.2
Table P8.2

A 6 3 300 360
B 6 4 450 500
C 4 2 360 420
D 6 3 600 675
E 3 2 325 350
F 2 1 250 285
G 2 1 310 350
crash the network shown in Figure P8.3. Assuming overhead cost of $120 per
day, find the optimum time and least cost.
B D
A
F
C E
Figure P8.3
Table P8.3
Duration Cost ($)
A 6 4 600 780
B 10 7 500 875
C 12 8 600 900
D 8 4 800 940
E 6 3 600 795
F 4 2 800 850
crash the network schedules shown in Figure P8.4 and find the optimum time
and least cost. Assuming overhead cost to be $150 per day, plot the direct cost,
indirect cost and combined values in one figure.
E
B
F A C
Figure P8.4
Table P8.4

A 10 8 1,000 1,100
B 4 3 500 575
C 10 6 400 800
D 19 14 1,000 1,100
E 13 9 300 400
F 6 4 120 200
8.5 Using the data given in Table P8.5, completely crash the network shown in
Figure P8.5. Assuming overhead cost to be $80 per day, find the optimum time
and least cost and plot the direct cost, indirect cost and combined values in one
figure.
D
F
H
A
E
B G
I
Figure P8.5
Table P8.5

A 5 3 400 530
B 3 2 350 410
C 7 4 1020 1095
D 4 3 525 560
E 6 3 825 975
F 4 2 610 750
G 6 3 430 565
H 7 4 1250 1415
I 4 2 390 450
8.6 Using the network shown in Figure P8.5, and data given in Table P8.6,
completely crash the following network schedules and find the optimum time
and least cost. Assuming overhead cost to be $100 per day, plot the direct cost,
indirect cost and combined values in one figure.
Table P8.6
A 4 2 400 570
B 5 2 350 455
C 11 6 1020 1145
D 4 2 525 575
E 6 4 825 935
F 6 5 610 650
G 6 4 430 570
H 3 2 1250 1325
I 5 3 390 450
8.7 Completely crash the network schedules shown in Figure P8.6 using the data
provided in Table P8.7, and find the optimum time and least cost. Assume
overhead cost to be $100 per day.
A F J
B D H I
C
G
E
Figure P8.6
Table P8.7
A 6 3 610 700
B 8 4 1020 1140
C 5 3 525 625
D 4 2 430 550
E 2 2 350 350
F 3 2 400 425
G 8 5 615 675
H 3 2 1250 1315
I 4 2 390 480
J 3 2 825 850
Chapter 9
Human Resources Management
9.1 Basic Principles of Resources Management
9.1.1 Introduction
The implementation of any construction project is dependent on the available

resources. Before commencing any discussion on principles upon which effective
control and handling of resources in the construction process is found, it is important
to realize the interrelationship of all the parties within the construction process. This
relationship is governed by the fact that all decisions made by any party must, in
every case, relate to the site. Figure 9.1 shows the relationship between the parties
and their dependence on the tangible reality of the site.
CLIENT
Develop
SURVEYOR/COST
ARCHITECT/
Cost
QUANTITY
ENGINEER
ENGINEER
SITE Design
Construct
CONTRACTOR
Figure 9.1 Relationship between the construction team and the site.
The following should be noted:

a) The Architect/Engineer cannot design a construction project without knowing
the site’s characteristics, orientation and position, and available materials;
b) The Quantity Surveyors/Cost Engineers will find it difficult to prepare a BOQ
without knowledge of the project and its environment; and
c) The contractor must know all details of the site in order to ascertain his
preliminary costs and take into consideration his preliminary costs and the
physical limitations of the site with respect to storage and handling of key
resources on site.
Within the above relationship, it should be appreciated that the Client through his
Consultant has the initial responsibility in determining the resources needed for the
project. The specifications prepared by the Consultant may specify the materials and
method of work to be adopted in the project. This decision on the materials and
method of work need to be made very carefully taking into consideration not only the
suitability for the work, but also availability. Contractors sometimes face problems to
provide the resources required for the project simply because no detailed
consideration was made during preparation of specification for use of the materials.
9.1.2 Nature and scope of construction projects
Construction projects, unlike others, range from discrete projects of relatively long
duration, constructed outside and geographically dispersed and fixed. They normally
fall under two groups:
 Buildings including residential houses, schools, hospitals and dispensaries,

go downs, industrial buildings, etc.
 Civil works including roads and bridges, power stations, large steel and
reinforced concrete structures, water and gas mains, electricity cables, dams,
airports, etc.
248
The majority of such projects are tailor-made to a Client’s requirements, designed
upon prescribed fee scales and built for a price established mainly through a
competitive tendering system. This system creates an unusual situation in which the
product i.e. a building or a road is sold before it is produced. Other characteristics of
construction projects include:
 wide variation of materials used in the production process;
 the product is normally manufactured and left fixed on the clients’ premises i.e.
the construction site;
 many parties are involved in the production process;
 many projects are of one-off designs and lack any prototype model; and
 the location of production area changes constantly and is subject to interference
from weather.
The characteristics of construction projects as listed above makes it very important to

plan very carefully on the resources required before the implementation of any
project. Thorough consideration, during design, of the resources required for the
project, will save the Client unnecessary costs of over-design or specifying the use of
wrong materials or methods of construction. For the contractor, thorough
consideration of resources required early in the implementation of the project will
save him unnecessary costs associated with misuse of resources.
9.1.3 Key resources in construction projects and their determination
9.1.3.1 The resources
The main resources required for the execution of a construction project can be
termed as the 4 M’s. These are: MONEY; MANPOWER; MACHINERY; and
MATERIALS.
However, money is different from other resources. It is the resource that enables the
contractor to provide all other resources. Adequate financial resources are very
important for successful implementation of any project.
Before the start of the project, a contractor will therefore be required to determine
with accuracy, his requirements for labour, machinery (plants and equipment) and
materials. With the knowledge of the quantities and prices of these three resources, it
is then possible to compute the amount of money required to procure them.
9.1.3.2 Determination of resources
Determination of resources involves establishment of the resources required for the

project and their quantities. Equally important is to determine at what time they will
be required on site.
To determine the resources required for a project, some basic documents are required
by the Contractor:
a) Drawings: The drawings are important to show all the details of the
constructed facility. The drawings will provide all the necessary details
required to enable the contractors determine mainly the work to be performed
and the methods of work to be adopted.
b) Bills of Quantities: The Bills of Quantities (BOQ) describes uniquely the
nature and quantity of all components of the finished project. It thus forms a
common basis for determining the labour, materials and equipment needed for
the construction project.
c) Specifications: The specification describes in detail the work to be executed,
the character and quality of materials and workmanship, any special
responsibilities of the contractor that are not covered by the conditions of
contract. It may also lay down the order in which various portions of the work
are to be executed, the methods to be adopted, and particulars of any facilities
to be afforded to other contractors. This document is therefore important to
determine the type of materials, labour and plant required for the work
d) Conditions of Contract: The conditions of contract define the terms under
which the work is to be carried out, the relationship between the Client and the
Contractor, and the powers of the Consultant in the contract. The conditions of
contract may require the contractor to provide some facilities like fencing,
security, signboards, workers protective gears which may not be included in
250
the BOQ. Thus, it is also crucial to enable the contractor to determine the
resources required.
A contractor should therefore make sure that he has read all the above documents
carefully to enable him come up with realistic resource requirements for the project.
9.1.4 Key tools in the determination of resources for a project
9.1.4.1 Method statement
A method statement is a detailed description of how a particular activity in a project

is going to be executed. Through method statement, it is possible to establish the
plant and labour required to execute an activity.
Method statements enable an assessment to be made of different alternative

construction methods and the related cost, time and quality implications.
Objectives of preparing a method statement are:

a) To enable managerial experience to be called upon during estimating, a
demand is created for information relative to performance. Managers find it
necessary to record resources, quantities and time in order to establish costs;
b) To enable data concerning new construction techniques and methods of
handling materials to be included in an estimate.
c) To permit the plant requirements for a project to be summarized for inclusion
in the contract preliminaries or plant schedule;
d) To ensure the output and duration of different methods and machines is
realistically watched;
e) To give guidance to the estimator on specific bill items relating to plant and
labour requirements in order that realistic rates may be built up; and
f) To establish data relating to construction method but not finished work. This
entails expense, which is only recoverable by allowance in measured items or
preliminaries. Scaffolding, material handling and site installations are all
affected.
A comprehensive format for method statement is shown in Table 9.1 This can be
used to indicate method and plant considerations that enable the quantity, output and
operational duration to be assessed.
Example 9.1
A method statement for reduced level excavation for a housing project; area is about
200 m x 150 m with average depth of excavation of 0.6 m to be carted away to a
nearby tip is presented in Table 9.1.
252
Table 9.1: Method statement for reduced level excavation for a housing project
METHOD STATEMENT
Contract:
Tender No.
No. OPERATION QUANTITY METHOD SEQUENCE OF PLANT & OUTPUT DURATION
OPERATIONS LABOUR
1 Excavate to 200 x 150 x 2 D6 bulldozers to excavate and push the Level grid to be 2 D6 dozers 120 m3/h per 15000 = 62.8 h =
reduce levels 0.5 = 15,000 material into spoil heaps adjacent to the established prior machine = 240 8
(0.500 m m3 access roads. 2 draglines fitted with 2 m3 to excavation 2 x 120 =
deep) buckets to be located on top of each spoil 240 m3/h 8 machine days
heap. Lorries to use existing access roads
for loading 1 banksman 75 m3/h 15000 = 100 h =
2 draglines = 75 x 2 150 8
4 lorries per = 150 m3/h
machine 12 machine days
1 Alternative 15000 m3 3 hydraulic tracked excavators fitted Level grid to be 3 hydraulic
method with a backactor arm. Machine fitted established prior excavators 45 m3/h 15000 = 112 h
with 2 m3 bucket. Load lorries direct and to excavation 135 8
remove to tip off site 3 lorries per 45 x 3 =
Note on output in relation to lorries machine = 14 machine days
conveying excavated material to tip 135 m3/h
Machine output 45 m3/h. Time taken to 1 banksman
load 9 m3 lorry
= 9 x 60 min = 12 min
45
Travel to tip and return allow 24 min
Therefore allow 24/12 = 2 lorries + 1 = 3
lorries required for balance of resources.
A method statement would normally include the following information:

a) Operation or work stage: each operation requiring analysis of plant or method
should be listed in the method statement, e.g. excavation work, formwork
operations, and concrete handling and placing;
b) Quantity of work: This will directly affect methods of construction, number of
machines to be selected and number of gangs to be employed;
c) Methods of construction: Realistic methods together with constructive
alternatives should be outlined. Discussion of the obvious does not assist the
estimator in any way;
d) Sequence of operations: Its indication outlines to the planner, estimator and
construction manager alike, the relationship and overlap between related
operations;
e) Plant summary: This will assist in the preparation of the preliminaries plant
element. Note that few items of plant operate independently. Badly matched
plant often restricts production. By specifying alternative plant groupings
rather than items, mistakes may be avoided;
f) Output: The anticipated output of an item of plant must be shown in order that
the duration for the plant may be assessed. From the output and an assessment
of the plant hire rates, the estimator may calculate unit rates for insertion in the
bill; and
g) Duration: From the quantity and output, the duration of the operation can be
assessed. The following technique may be applied in calculations for items of
plant:
Quantity Machine hours

 Machine hours;  Machine days
Out put Hours worked per day
The same technique may be used to calculate the duration of a trade gang
Quantity Person hours
 Person hours;  Person days
Out put Hours worked per day
254
A method statement will assist the contractor estimate different resources,
particularly labour and plant required for the execution of the work. Similarly, it will
assist in determination of materials, labour and plant for temporary works that may
be a result of the selected method.
9.1.4.2 Programme of work
One important aspect of resources management is to determine the timing of

resources i.e. when will the resources (type and their quantities) be required on site to
ensure that the project is completed in time.
In order to determine the timing of materials on site, it will be important to prepare a

programme of work. Various techniques including Bar Chart, S-curves, Line of
Balance, Time Chainage Charts and Networks may be used to prepare works
programme.
In most cases, however, for the purpose of preparing resources schedules a bar chart
will always be useful. A contractor in many cases will be required to transform his
programme into a bar chart to allow for easy determination of the resources required
for the project.
9.2 Human Resources Management and Labour Productivity
9.2.1 Rationale for human resources management
As discussed previously, labour is one of the key resources in the construction

project. The success of any contractor will depend to a large extent on how he
manages labour force. Unfortunately also, unlike other resources, labour is the most
difficult resources to handle due to the unpredictable nature of human behaviour.
In the following sections, effort is made to discuss how a contractor can make the
best use of his workforce in order to improve his business.
9.2.2 Team building for small projects
9.2.2.1 Contractor’s organisation
The success of a contractor depends to a certain extent to his site personnel,

management and planning. The extent to which a contractor is successful is reflected in
his organizational arrangements.
For most contractors, their organizations are usually subdivided into two main parts -
technical and non-technical. The responsibilities of the technical sections are likely to
include the following:
a) All civil engineering/building services, including the preparation of designs for
temporary and permanent structures and the planning and programming of
works;
b) Estimating and tendering, preparation of specifications and quantities,
interpretation and application of contract conditions, negotiations with the client;
c) Supervision of construction work, monitoring progress, preparation of reports,
liaison with the client, purchasing of materials and equipment, preparation of
monthly valuations;
d) Quality control, site investigations and geotechnical processes;
e) Operation of central plant and transport depots with workshops and repair
facilities, routine inspection of plant and equipment, and purchases and sale of
plant; and
f) Staff training.
The non-technical section deals with a wide range of activities including:

a) Secretarial and legal matters;
b) Finance, accounts, audits, payments, cash and payroll cheques;
c) Insurance, licenses and taxation returns;
d) Orders, monitoring deliveries and checking invoices;
e) Cost records and analyses;
f) Plant and transport records and registers;
256
g) General correspondence and records;
h) Labour relations; and
i) Staff training and development.
Since the success of site operation will very much depend on the head office, it is
important that recruitment of head office staff be made very carefully. This can be
achieved through proper manpower planning.
9.2.2.2 Human resources planning
The purpose of human resources planning is to maintain an adequate supply of

suitably experienced personnel. It normally incorporates the following functions:
a) Analyzing and describing posts and preparing job specifications;

b) Assessing present and future human resources needs;
c) Forecasting human resources supply and demand, and preparing budgets;
d) Developing and applying procedures for recruiting, selecting, promoting,
transferring, and terminating the employment of staff;
e) Ensuring compliance with the requirements of employment legislation; and
f) Assessing the cost effectiveness of human resources planning.
Forecasting of future human resources needs is always a difficult assignment and

should take into account:
a) Natural wastage due to retirement and employee turnover;
b) The promotions which create vacancies at lower levels;
c) The company’s plans for growth and diversification; and
d) The availability of labour with necessary skills in the required locations.
A company needs to have readily available adequate information about its employees,
including such aspects as age breakdown, skills analysis, succession plan, training
needs and labour turnover analysis.
The project manager has to forecast human resources requirements for his site, taking
into account the availability of the various categories of labour, including subcontract
labour, the need to avoid sharp fluctuations in manning levels and the overall resource
pattern of the project. In small projects where a small number of workforces are
required it is particularly important that selection of human resources for the work
should be done very carefully to ensure that people who can work together as a team
are selected.
The performance appraisal of employees should be subject to regular review to

determine their likely potential, training needs and appropriate levels of pay. A primary
aim is to make the company more efficient by increasing the competence of its
employees and getting the best from them.
9.2.3 Contractor’s organization structure
9.2.3.1 Typical organization structure
The contractor should have sufficient experienced technical and clerical staff on site at
the start of the contract to ensure that all necessary preparatory work is undertaken on
site. The full component of site staff on a large project can be extensive and the
principal members of staff and their main functions are described below.
For a small contractor, obvious he will need a small site organization. The key
principle is to have members of staff in line with the proposed organization structure,
which is shown in Figure 9.2. The structure is typical of any contractor, however small
contractors may skip some of the positions indicated.
9.2.3.2 Site agent
Site agent is normally appointed to control the contractor’s site organization. He is

usually an experienced engineer (or a technician for a small project) and the contractor
generally gives him wide discretionary powers. In addition to sound engineering and
contractual experience, he must possess good qualities of leadership and integrity. The
258
agent’s main duties are to ensure that the works are administered effectively and that
construction is carried out economically, in accordance with the contract documents
and that they satisfy the requirements of the engineer, architect or the project manager.
9.2.3.3 Site agent’s staff
Both technical and non-technical staff supports site agent with their number and duties
dependent on the size of the project. For example, the personnel might comprise an
engineer, general foreman, plant and transport foreman, cashier, timekeeper and
storekeeper. Larger contracts require proportionately larger number of staff. The
allocation of duties will be influenced by many factors including the locality and
nature of the work, the amount of assistance from head office, and the experience and
capability of the available personnel. The allocation of duties should seek to ensure
smooth and effective communication and the ability to introduce checks at critical
points.
9.2.3.4 Sub-agents
Sub-agents are often appointed to control various work sections of a large project,
and they, in their turn, may have a number of section engineers responsible for them
for the supervision of the actual operations. The direct control of labour and
operation of plant and transport is usually undertaken by various grades of foremen.
9.2.3.5 General foreman
The general foreman directs the day-to-day distribution of labour to particular

operations under sectional or trade foremen, to supervise the supply of materials and
stores and disposition of plant, and to activate the necessary site communications.
9.2.3.6 Field services manager

The field services manager/engineer controls a number of departments, which

provide services needed for the effective execution of the project. These services
often include a concrete batching plant, steel bending yard and plant and transport
department.
9.2.3.7 Chief civil engineer
The chief civil engineer is responsible for the accuracy of the works through section
engineers. He needs to check the co-ordination of drawings received from the
engineer and then issue them to the relevant personnel in the appropriate sections of
the project. He also carries out any local designs that may be required, particularly
those relating to temporary works, and gives general technical guidance where
necessary to personnel on the site.
9.2.3.8 Chief production control and costing engineer
The chief production control and costing engineer keeps routine progress records and
costs and normally operates through departments controlled by sub-agents. He is
often responsible for the routine measurement of work on site.
9.2.3.9 Administration manager
The administration manager is responsible to the agent for the efficient

administration of the non-technical personnel. He usually prepares detailed lists of
duties for the guidance of clerical staff and devises checking and counter-checking
procedures for cash transactions and stocktaking. He needs to be familiar with the
standing instructions of the head office and to ensure compliance with them.
Human Resources Management 269
SITE AGENT
Field services Chief production Administration Chief civil Chief

manager control and costing manager engineer quantity
engineer surveyor
Concrete plant
Scaffolding
Steel bending yard
Joiner’s shop Sub-agent for
Sub-agent for
Plant and transport other works
preliminary works
Section Section Surveying Production Sub-structures

engineer 1 engineer 2 control
Superstructures
Roadworks
Engineers Services
General
foreman Other works
General Technicians
Staff
Figure 9.2 Typical site organization structure of a medium size construction project
His department also controls the payment of wages through timekeepers and cashiers
and the purchasing and checking of receipt of materials and components, in addition
to the checking of accounts, insurance, safety precautions, site welfare and other
matters relating to labour relations.
9.2.3.10 Section engineers
Section engineers are usually engineers with experience of both design and
fieldwork, who, although ultimately responsible to the engineer, report to the chief
civil engineer on the accuracy and control of the civil engineering works. Each
section engineer will liaise with his foreman to plan the work of his section and
report on matters of detail to the managing surveyor or the quantity surveyor engaged
on the project.
9.2.3.11 Chief quantity surveyor
On large contracts a chief quantity surveyor may be employed to take measurements

and check the quantities and value of completed work.
9.2.4 Labour productivity
9.2.4.1 Significance of productivity to construction projects
Productivity is related with the word production. It refers to the efficiency of

production. Making a construction site more productive means getting more output
for less cost, and in a shorter time.
As far as construction site is concerned, production covers every activity that goes into
construction e.g. setting out, digging foundations, making blocks, pouring concrete etc.
Improving productivity for these operations means carrying them out at either lower
cost, in less time, with fewer workers or with less equipment.
Cost, time, workers and equipment are examples of what you put into production. The
less you put in compared to what is produced, the higher the productivity. Productivity
can be raised in four ways:
a) The same is produced, but less is put into production;
b) More is produced with the same inputs;
c) More is produced and less is put into production; and
d) More is produced and more is put into production, but the increase in production
is bigger than the increase in inputs.
There are many different ways of improving productivity on construction sites.

These are summarized in Figure 9.3.
Reduce waiting time Improved site layout

Increased Productivity
Use of more skilled workers More efficient tools
Improved supervision Better methods of payment
More efficient use of equipments Less wastage of materials
Figure 9.3 Factors that can lead to increased productivity.

9.2.4.2 Labour productivity improvement
Rationale for improving productivity

When labour productivity goes up for an activity, it means that less money will be
spent on the activity. Whatever the kind of productivity that is raised, the result is that
money is saved. The money saving add to the net profit a contractor can make on the
job. How the extra profit is used, is up to the contractor. In order to strengthen his
business he will probably use it to invest in equipment, put it in the bank to provide
more working capital, hire extra staff, reward best workers, etc.
Apart from adding to contractor’s profits, there are also other reasons why it is worth
looking into improvements in productivity. Some of these are:
a) Worker satisfaction – some measures lead to a more satisfactory job for the
workers, such as improved methods that make the work easier, better methods
of payment, improved management and worker relations;
b) Client impression – clients who visit contractor’s site and observe that it is run
efficiently, realize that the contractor is good. This may mean more future
contracts, not only for that client, but he may pass the word to other clients;
and
c) Contractor’s own development – to develop the company, make it bigger,
make it more competitive and perhaps expand and become a big firm requires
proper management. Improving productivity involves the use of management
techniques, which are important for the development of the company. By
learning the techniques for productivity improvement and then applying them,
a contractor will be able to develop his company.
Productivity improvement is not so much a method, it is more a way of thinking. The

successful contractor is someone who has got used to always thinking about the
efficiency of what he is doing and how to improve it. This is what makes him prosper
and develop his firm.
9.2.4.3 Techniques for monitoring labour productivity
General
Monitoring of labour productivity on site is very important to allow the contractor to
establish areas where there is low productivity and the reasons contributing to low
productivity. This will enable him devise measures that will enable him to overcome
the problem of low productivity.
Monitoring of labour productivity entails extensive record keeping of work done and
people involved in doing the work. This can be best achieved by using Work-Study
Techniques.
Work-study
The purpose of work-study is to work out ways of improving methods of work and
productivities on construction sites. It is divided into two major areas:
a) Method study, which aims at providing information to assist management in

taking decisions related to the method of work; determining the optimum layout
and most effective use of resources.
Example: Determination of the most effective layout system in a steel yard
where the main activities taking place are stacking unbent steel, marking,
cutting, bending, fabrication and stacking of fabricated steel to optimize effort,
movement and wastage so as to minimize cost per unit; and
b) Work measurement is largely concerned with establishment of yardsticks of
human effort and as such involves the measurement of time required to carry out
a specific job under known conditions. The objectives of work measurement
may include the determination of productivity benchmarks, labour cost or
production costs, etc.
Activity level
The level of activity on site is a measure of how busy the workers are. This means
finding out how much time is spent working and how much time is idle. The lower the
activity level, the higher the loss on the contract. Workers, who stand idle, either
because they have nothing to do or they are waiting for another operation to finish, still
have to be paid. Moreover, the lower the general activity level on site, the longer the
project will take. This also means the contractor will lose money because the extra
time taken to complete the project could have been spent starting up a new contract.
With higher activity level, more money is earned on the contract. When more money is
earned on a contract, the more of it can be paid to workers, which gives them
motivation to work harder.
Activity sampling
In order to improve activity level on site, it is necessary to be able to measure it. The
method used to record the activity level is called Activity Sampling. If it were possible
to look down on the whole construction site continuously throughout the day or the
week and record the output of every worker and machine, a complete picture of
effective and ineffective time for the site could be obtained. But to do this would take
up too much time and money.
Instead a series of tours of the site are made. Each time it is noted, for each worker,
whether he is working or not working. Alternatively, one can stand in a place where he
is able to observe the workers. However, they know that they are being watched, they
will find a way of looking busy. What is needed is a true picture of what is happening,
so as to check up on the scope of improvement. At first there may be some difficulties
in deciding in borderline cases whether someone is “working” or “not working”, but it
becomes easier after a little practice.
A person is to be recorded as working when he is:

a) Actually working;
b) Receiving or relaying instructions;
c) Taking a short rest;
d) Walking to the next task;
e) Fetching water; or
f) Waiting in short periods.
A person is to be recorded as not working when he is:

a) Not present due to starting late or finishing early;
b) Taking unnecessary rest breaks; or
c) Spending unnecessary long periods waiting for other operations to finish.
The more rounds of recording made, the more accurate will be the results. Since the
sampling distributions using large samples are either normally distributed or nearly so,
it is possible to use the properties of a normal distribution to derive a measure of
confidence that a particular estimate of a statistics, such as a mean, will fall between
two given values. For a normal distribution, 68.27 per cent of the values fall between
1 standard deviation from the mean, 95.45 per cent between  2 standard deviations
from the mean, and 99.73 per cent between  3 standard deviations from the mean.
These values are called the 68.27 per cent, the 95.45 per cent, and the 99.73 per cent
confidence limits. An alternative way of looking at the confidence measures is that 95
per cent of the values will fall between  1.96 standard deviations from the mean and
99 per cent will fall between  2.58 standard deviations. Other values for different
confidence limits can be found by using normal curve area tables. The standard error
of the sampling distribution of proportions, n can be assumed to be the total number of
observations (each being considered as a sample). The formula to enable the number
of observations to be computed for any desired level of confidence is as follows:
p(1  p)
n [9.1]
p
2
Where  p
2
is the standard error of the sampling distribution of the proportions
that depends on the desired level of confidence; and

p is the estimated of workers who are actively involved in productive
activity.
Let it be assumed that the confidence limits for a particular situation are set and it is
decided the allowable limit of error is  5 per cent either side of the true value. The
limit of error, k, is the assessment of the accuracy that is required in the result to be
obtained by sampling. It is the percentage variation on either side of the value

obtained using the sampling process within which the results can be anticipated to fall.
It may alternatively be described as the tolerance allowable in the result. A statement
that ‘the accuracy of the result will be  2 per cent at a 95 per cent confidence level’
means that the result obtained will fall within  2 per cent of the value required on 95
occasions out of 100, or hat it will only fall outside those limits on 5 occasions out of
100. It should be noted particularly that the limit of error is calculated on the total
value being sought and not on the value of the proportion, p. The limit of error and the
confidence limits allow a numerical value to be ascribed to  p in formula above. The
confidence limits determine the number of standard errors either side of the true value
within which the result will fall and the tolerance or limit of error prescribes the same
limits but in terms of proportions. Therefore,
z p  k [9.2]
Where z = number of standard errors for confidence limits

p = standard error of proportions
k = limit of error
Thus, if confidence limits are set at 95 per cent which a limit of error of  3 per cent,
the values obtained must fall within  1.96 standard errors of the true value, and
therefore
1.96 p  0.03
and  p  0.03 / 1.96  0.0153
or, if percentages are used throughout instead of decimal proportions,
 p  3 / 1.96  1.53
p(1  p) z p  k
Returning to formula n  and substituting from for
p
2
1
p
2
The formula for the number of samples becomes:
z 2 p(1  p)
n [9.3]
k2
Example 9.2
Establish the number of observations that are required to determine the proportion of
100 operatives who are ‘active’ as opposed to ‘inactive’ on a construction site. The
result is required within confidence limits of 95 per cent and within a tolerance of  2.5
per cent.
Firstly, it is necessary to make an approximate estimate of p in formulae

z 2 p(1  p)
n . This should be for the larger proportion rather than the smaller and
k2
may, if necessary, be determined from a relatively short preliminary study. Let it be
assumed to be 0.75. z, for 95 per cent confidence limits, is 1.96 – usually rounded to 2
– and k will be 0.025.
n  (2) 2 0.75(1  0.75) / 0.025 2  1200 observations
The observation rounds should be made at random intervals. Recording should only be
carried out during typical periods, in which work is not being held up due to factors
that are beyond control, such as bad weather, major plant breakdown etc.
When doing an activity sampling, a form such as the one shown in Table 9.2 below
may be used. Some of the boxes have been filled in to show how it is used.
Table 9.2 Sample of activity sampling record form.
WORKER TOUR OF INSPECTION NO

NO. 1 2 3 4 5 6 7 8 9 10
1 W NW W W W W W NW W NW
2 W W W W W W W NW W NW
3 NW NW NW NW NW NW W NW NW W
4 W NW NW W W W NW NW NW W
5 NW NW W NW NW W W NW NW NW
6 W W W NW W W NW NW W W
It is possible to record in detail what the worker is doing in more detail. Instead of
recording just “working” or “not working” you can use letters to describe what he is
actually doing. Letters that can be used are, for example:
W- Working R- Resting A-Absent WA- Waiting

RE – Repairing I- Receiving or relaying instructions. NW- Not Working
The activity level is the percentage of time, which the workers are recorded as
working. Depending on how heavy the work is, climatic conditions, etc., the activity
level should be 60-80 percent. If it falls below this level, the cause of the inactivity
should be examined.
Example 9.3
In the activity sample above, the number of times the workers are recorded as working
and the number of times they are recorded as not working are counted. The results are
summarized in Table 9.3.
Table 9.3 Activity level computations.
Worker Records Activity level Comments

Total Working Non-working
1 10 7 3 70% o.k.
2 10 8 2 80% o.k.
3 10 2 8 20% Too low
4 10 5 5 50% Low
5 10 3 7 30% Too low

6 10 7 3 70% o.k.
All workers 60 32 28 53% Low
According to these records, workers 1, 2 and 6 are okay but workers 3, 4 and 5 are
working below an acceptable level. The reason for this has to be found. If all workers
were working on the same gang, then the activity level for the gang is 53%, which is
still below the acceptable level.
Remember that for a sufficient sample, the number of recordings should be at least 400
if the level of accuracy required is  5% and the level of confidence is 96%. In this
example the total number is 60, which is too small to give results to an acceptable
accuracy level.
Labour productivity computations

As discussed above Activity sampling can enable us establish time used productively
and unproductively on site. This information together with the amount of work done
during the period of activity sampling can enable us calculate the labour productivity
for a given operation.
Example 9.4
Assume in the examples above that workers were involved in excavation for strip
foundation (700 mm wide, and 800 mm deep) and that the records were taken for
duration of two hours. At the end of two hours the work done was measured, and it
was established that the workers had excavated a length of 5 meters of the strip
foundation.
Total amount of work done = 0.8 x 0.7 x 5 = 2.8 m3
Labour input = 6x2 = 12 person-hours

Two types of labour productivity rates can be calculated from the available
information:
Amount of work done

Overall productivity rate =
Total person  hour input
= 2.8 m3/12 person-hour
= 0.23 m3/person-hour
Amount of work done
Actual productivity rate =
Actual person  hour input
= 2.8 m3/12 x 0.5 person-hour
= 0.463 m3/person-hour
Th e actual productivity rate is in this case twice the overall productivity rate since
the workers were spending half of their time only doing the work. If this idle time is
eliminated they are able to produce twice as much. This information is very important
for a contractor when establishing labour requirements for a construction project.
To be able to calculate actual productivity rate, the contractor must establish the
proportion of time that is used productively on the work. Contractors who assign their
works on a piecework basis can however establish figures, which largely reflect the
actual production capacity of workers. In any case, it is necessary to allow for
sometime for resting in determining realistic productivity.
It is particularly very simple to establish labour output for a gang/individuals working

on a piecework basis by timing how long they take to a job whose quantity is known.
The same would apply to a machine assigned to do a specific job. With this approach,
basically what is required is to establish a system on site, which, for all the tasks
executed, would enable the following information to be reported:
 The start and finish time on a daily basis, and possible rest times;
 The number of people and/or plant involved;
 The quantity of work executed at the end of the day – this entails counting or
measuring; and
 The resources used to execute the task.
9.2.4.4 Motivation of labour force
Factors affecting performance of labour

On any construction site, a contractor's financial gain is dependent, amongst other
things, on completion of work in good time and the least cost, and the productivity of
labour has a direct influence on this. The factors affecting the performance of labour
generally falls into three categories:
a) The human capacity for work;
b) The competence of site management; and
c) The motivation of workers.
The human factor

Human capacity for work is affected by many factors including:
a) Age;
b) Nutrition;
c) Temperature and humidity;
d) Health; and
e) Acclimatization and adaptation.
A contractor should know these factors when deploying his work force and provide for
some facilities that will enable some of those human factors being minimized.
The competence of site management

The various measures that may be taken to improve the physical work capacity or
motivate the workers will not be effective if site management is substandard. It is
essential for the workers to have confidence in their supervisors. If the worker
observes that site management is poor, unfair or corrupt, their morale, motivation and
consequent productivity will be reduced. Examples of management shortcomings,
which reduce the efficiency and productivity in this way, include:
a) Delayed, unclear or inadequate instructions;
b) Delays in delivery of materials, tools or equipment;
c) Provision of poor tools and equipment;
d) Unbalanced work gangs;
e) Use of wrong methods of work;

f) Bad advance planning or allocation of work tasks; and
g) Failure to delegate authority from senior to lower-level supervisors.
Motivation of Workers
Labour can be motivated to produce more. It is possible to improve production by
increasing manpower. However, it is a good practice for the management to ensure
that the existing workforce is producing to the maximum capacity before they can look
into the alternative of employing more people.
Motivation theories
Maslow suggests that man seeks to satisfy his needs subsequently as shown in Figure
9.4. He argues that as each of these needs is gratified then a new set of needs emerges.
The implication is that man is self-motivating.
Basic needs
Firstly by securing a job the worker is able to purchase food, clothing, housing and so
on. These basic needs once satisfied, in the course lead to the desire for better working
conditions such as shorter hours, holiday with pay, security of work, etc.
Higher needs
Maslow postulated that people like to feel necessary in their jobs; they wish to gain
respect, both from their employer and fellow workers, and in many instances positively
wish to identify with a particular skill.
Construction companies, in general, fair badly with regard to this need to belong. The
turnover of staff and workmen in many companies is high, although it is true to say
that many workers remain in the industry and more particularly take some pride in
being associated with one particular skill.
SELF-ACTUALIZATION NEEDS
To achieve total self development
SECONDARY NEEDS
ESTEEM NEEDS
Prestige, status, recognition, self-confidence,
appreciation and respect
SOCIAL NEEDS
Belonging to a group, love, and acceptance
SECURITY NEEDS
Safety, avoidance of pain, financial security,
PRIMARY NEEDS
protection
PHYSIOLOGICAL NEEDS
Food, drink, rest, air to breathe, shelter, satisfactory
temperatures, sex
Figure 9.4 Maslow’s hierarchy of needs
Many workers are dissatisfied with their jobs simply because there is no opportunity
for self-expression. Unfortunately, with the present emphasis on output as opposed to
craftsmanship, it is possible such needs cannot be reached and therefore full potential
of many skilled workers not realized.
Finally, Maslow tops his hierarchy with the need for self-fulfillment. It is difficult to
see any hope for satisfaction of this desire, outside purely creative work, and on this
basis it would be limited to the self-employed, the very senior posts in an organization
and purely independent workers.
Maslow’s higher needs can be grouped under the heading “Motivating Needs”. On the
other hand, Fredrick Herzberg discovered some interesting pointers to motivation and
identified the contributory factors presented in Table 9.4.
Table 9.4 Herzberg’s motivation factors
Job satisfaction Job dissatisfaction

i) Achievement i) Working conditions
ii) Recognition ii) Salary
iii) The work itself iii) Relation with superiors
iv) Taking responsibility iv) Company policy
v) The chance to advance
Job satisfaction is the extent to which a person feels satisfied with the work they have
to carry out, with their place in the hierarchy in relation to the colleagues with whom
they work and with the general environment in which they carry out their work.
Herzberg called the first motivating factors and the second hygiene factors. He
concluded that hygiene factors had little positive effects on job attitudes but served
primarily to prevent job dissatisfaction. Thus, if a company fails to provide adequate
hygiene factors, the worker is dissatisfied no matter how adequate are salaries, working
conditions etc., the worker will not be satisfied until all other motivations are also
satisfied.
The construction industry, particularly with regard to production workers, appears to

concentrate only on one of Herzberg’s hygiene factors, namely pay, to the exclusion of
the rest of motivating needs.
Methods of motivating workers

Labour is motivated by a variety of ways as shown in Figure 9.5. These can broadly
be classified as financial and non-financial methods.
Non-financial incentives
These involve in particular the fulfilment of 'motivating' needs. Thus, the incentives
offered should acknowledge the importance of the individual and recognize his need
for group participation to provide social satisfaction.
Semi-financial incentive
These do not rely on cash motive but concentrate on fringe benefits such as canteens,
sport facilities, medical facilities, pension schemes etc.
MOTIVATION
Non-Financial Financial
i.e. social,
psychological via self-
esteem and job
satisfaction Basic wage salary Bonuses
Figure 9.5 Methods of encouraging motivation to work.
Financial incentive
These rely on cash motive and are widely used, but are often a source of contention
and dispute between management and workforce. The schemes enable workers to earn
bonuses over and above the normal rate of pay for achieving a rate of output at or
above a predetermined standard. It is not always easy to work out what this standard
performance should be, so that the output targets set by management on which the
bonus earnings depend are often inaccurate.
The objectives of financial incentive schemes

The major objectives of financial incentives schemes to a contractor are:
a) To improve productivity;
b) To encourage better methods of working; and

c) To provide opportunity for increased earnings, but without increasing unit cost.
Bonus targets
Targets are set before the work starts usually in the form of:
a) Piecework targets, i.e. payment based on the amount of work done; and
b) Time targets, i.e. a target time is set for completing a specific task. If the task is
completed in lesser time, a bonus is paid based on the time saved.
Basis for setting targets

a) Personal experience: This is immediate and inexpensive. It is normally not
documented and open to bias;
b) Feedback: The records of output figures fed back from previous projects are
used as a basis for both estimating and setting bonus targets;
c) Work measurement: This is the best method as the targets are more likely to be
accurate. However this method is expensive, time consuming and requires a
skilled practitioner;
d) Manufacturer's ratings: These are likely to be optimistic and the estimator can
decide to halve them; and
e) Standard information: These are average outputs provided in several published
works. They also tend to be optimistic and should be treated with caution.
Types of financial incentive schemes

a) Profit sharing: In this type the company pays out yearly a lump sum to its
employees, based on the profit earned by the company. This method is only
suitable in fairly small firms where a more cooperative spirit and sense of
purpose are likely to be found in workers;
b) Day work: In this case an hourly rate is paid related to the skill required by the
task, the worker is then simply paid for attendance at work. The system is most
suitable for highly skilled operations where either there is great complexity
involved or craftsmanship is required, for example workers in maintenance and
inspection;
c) Piecework: In this type a worker is paid a uniform price per unit of production.
As the worker increases his output his earnings increase proportionately. For
example, if a person is paid 10US$ for each item or unit produced and he
completes 10 units, his payment will be 10 x 10 = 100 US$. The system is best
installed on repetitive type activities where the standard time for doing the
work can be accurately fixed. Hence, in the construction industry it is more
workable in the production of materials sector;
d) Task rate or job and finish: In this case, the worker is offered a lump sum of
money to complete an operation. It is useful on large concrete pours or similar
work, where the gang will complete the work as quickly as possible and then go
home but is paid for the full day’s work and any bonus earned;
e) Standard time or hour system: Essentially this is the same as piecework system,
but the targets for the work are expressed in time units rather than money. For
example, if a worker is given a target of 8 hours to complete an activity. He
completes it in 6 hours. His payment will be 8 x hourly rate. He can now start
the next unit 2 hours earlier and thereby increase his overall earnings. The
advantage of this system is that if new hourly rates are negotiated, the time
standards remain unchanged;
f) Plus rate or spot bonus: A minimum bonus, sometimes called a fallback bonus
is paid to workers whatever the output. Such an incentive is always used to
attract labour from other work in the area. It can also be used to pay a
competitive rate when the basic rate is low; and
g) Group schemes: Much of the work carried on construction sites is in gangs,
making it almost impossible to apply individual bonus schemes. But at the same
time the different classes of workers in the gang need to be acknowledged in the
scheme. This can be done by apportioning the bonus on a share basis, usually
the gang foreman being paid slightly more than others.
Advantages of financial incentive schemes

a) The worker is given an opportunity to earn more than the basic wage as a reward
for higher output;
b) The worker's output will be higher, so that the job should be completed in less
time, with a more predictable performance and at lower cost;
c) The system encourages self-discipline and supervision can concentrate on
quality rather than output;
d) The worker himself will try to improve the efficiency of the method. Where a
gang is given a bonus, it will organize itself for maximum efficiency, and the
better workers will encourage inexperienced or less hard-working members; and
e) The operation of the scheme should keep site management on its toes, since the
workers will protest against any delays or mismanagement that reduces their
opportunity to earn bonuses.
Disadvantages of financial incentive schemes

a) In striving for higher output, quality and safety may be neglected;
b) If bonus rates are too low, the incentive to work hard may be destroyed;
c) Differences in earnings between good and poor workers, or due to inaccurate
bonus rates, may give rise to bad feeling and labour problems on the site; and
d) Bonus systems are more complicated to operate, and require special staffing and
organizational procedures.
Rules to be observed in operating financial incentive schemes

a) When it is proposed to introduce a bonus system on a project site, the site
manager should first discuss and agree the principles and operation of the
scheme with worker's representatives;
b) The workers should understand the method of payment and the targets for the
work set before starting any particular item of work. The system should be
simple and easy to operate;
c) Once a particular item of work has started, the bonus rate should not be changed
unless it is found to be too low to offer any incentive and then only after
investigation and agreement with the workers. If the rates are found to be too
high, they should not be reduced during the duration of the particular task for
which they were set;
d) The rates set should be high enough for an average worker who does a good
day's work without over-exertion to be able to earn a reasonable bonus above the
ordinary daily rate;
e) The workers should not be penalized for matters outside their control (e.g.
delays), and where workers are required to work a full normal day they should
never receive less than the daily rate for a normal day's work;
f) The bonus rate should be offered to individuals or small groups of workers rather
than to large groups, so that individual earnings do not become dependent on the
efforts of other workers;
g) Dangerous work should not be offered on a bonus work basis;
h) Since bonus schemes can lead to substandard work, penalties for such work must
be enforced. Very high-quality work should only offered on a bonus work basis
if the supervision is adequate to ensure no loss of quality;
i) Any dispute about earnings should always be investigated fairly and at once;
j) Care should be exercised when setting bonus work rates for raw, in experienced
workers; and
k) All the above-mentioned ways can induce men to give their best performance. It
is the management responsibility to find the best solution, for example financial
incentives can be offered to manual workers and non-or semi-financial
incentives to managerial and clerical workers.
Summary on motivation of workers

Apart from those factors that can motivate workers to work hard, the following need to
be observed by site management to ensure effective utilization of labour force:
a) Assignment of duties to individual worker should put into consideration their
knowledge and experience. Training should be conducted to workers to increase
their knowledge and experience;
b) Should be assigned in duties manageable groups. Large groups pose a danger of
misunderstandings within the group and are difficult to direct and supervise;
c) Workers in dangerous jobs should be provided with protective gears such as
boots, gloves, helmets, etc. This will prevent wastage of time due to accidents
and consequence hospitalization; and
d) Activities need to be planned well in advance and materials and plant required
carrying them, being well prepared. This will to a large extent reduce the idle
time by workers due to waiting of materials and plants.
Supervision
Proper supervision is necessary for a workforce to operate efficiently. It is needed at
various levels, but it is particularly important at site agent and foreman level.
There may be also other levels, for example gang leaders supervising their respective
gangs and who report to their respective foreman. The number of levels that are used
depends on the type, size and complexity of the project. A large project generally
needs more levels of supervision than a small one. A technically complicated project
also needs more levels of supervision than a simpler one.
Site supervision is needed for several reasons:

a) To maintain a sufficiently high activity level;
b) To have people on site who can report on problems or suggest more efficient
ways of doing things;
c) To authorize payments to workers;
d) To measure overall production output;
e) To advise the workforce and give clear instructions as to what is expected from
them;
f) To motivate workers to work efficiently; and
g) To ensure that quality standards are met.
Factors to consider when arranging for site supervision

There are four important factors to note when arranging for proper site supervision
a) Allocate the right number of workers per supervisor
If there are too many workers, it becomes too difficult for the supervisor to
keep an eye on them all. If there are too few workers per foreman, it means that
you have too many foremen on site, which again means extra cost. The
contractors should start with the number of workers per supervisor that seems
right. Then, he should observe as the work progresses to see how well the
individual supervisors cope with the workers allocated to them. One way of
making observations is to conduct a short activity sampling study to establish
the activity level.
b) Organize at all levels

The foreman supervises the gang leaders. The site agent supervises the
foreman. The contractor supervises the site agent. Everybody needs someone
above him or her to guide him or her and check that they work, as they should.
As long as the site staff at all levels know that they have to answer for the
progress of those who are under their supervision, they have an additional
incentive to supervise well.
c) Establish systems of reporting

Reports should be prepared, preferably in writing, by every supervisor on the
operations and daily activities which he is responsible for. Reporting should be
done at every level where there is a supervisor. The foreman, for example,
should prepare daily reports, describing what has taken place during the day.
This will help him to remember all the information, which he is to give to the
site agent or the contractors. The daily report also contains information that
will be useful to check up on later, such as for example the arrival of materials,
recruitment of workers, etc.
Below is a simple example of a daily record which is useful for either the supervisor
or the foreman, depending on the size of the project (Table 9.5).
Table 9.5 Sample of daily site record form
Job: ……………………………………….. Date: ………………………….

Labour
Description of Activities Category Number of No. of hours
Workers worked
Delays and Urgent Labourers
reasons requirements
Bricklayers
Carpenters
Plumbers
Painters
Electricians
Others
Materials, Amount Ordered or Plant and equipment
Received
Concrete
mixer
Poker vibrator
Plate
compactor
Visitors and comments made by them
d) Recruit effective supervisors

Use good, qualified foremen and site managers who can be trusted to get the
work done quickly and an acceptable standard of quality. If they are not
effective, money is lost. Therefore, it usually pays to pay extra for good site
staff that can be relied upon to supervise the work properly.
Responsibility of a site agent in supervision

A site agent should be chosen who could run the operations on site efficiently. He
must be able to prepare daily and weekly programmes, keep records, coordinate the
workforce efficiently and be a good trouble-shooter. It is important to have a site
agent whose self-interest it is to execute the project as quickly and with as good
quality as possible.
The site agent should generally be regarded as a member of company’s permanent

staff, so he will be motivated to get jobs finished quickly without worrying about
working himself out of a job. Even so, motivation can be reinforced and monetary
rewards should be considered if he succeeds in executing the job promptly.
Responsibility of a foreman in supervision

The foreman is closer to the workers. Whereas the site agent needs to have good
overall administrative abilities, the foreman needs to posses personal qualities which
lead the workers to respect him and encourage then to work as efficiently as possible.
These are some qualities that the foreman should possess:

a) Be acceptable as a natural leader. That is, be able to stand out in a crowd and
be the leader, not one of the led;
b) Be able to act with authority and command respect from both his superiors and
command respect from both his superiors and subordinates, but nevertheless be
able to admit to a fault without loosing face; and
c) Have a logical mind, be a natural organizer and above all be a morale booster
and pusher to get work done.
From the above, it should be appreciated that a good site agent can ensure that a
project is executed without any cost or time overruns. On the other hand, a poor site
manager can cause great losses to the contractor through high site costs and long
delays. A very bad site agent can even force the company into bankruptcy. For this
reason, it is important that training is offered to site agents and foremen to enable
them carry out effective supervision.
Other measures to improve labour productivity

In the previous sections, we have discussed in detail the importance of financial
incentives and site supervision in raising labour productivity. There are other factors
that are equally important towards raising labour productivity. These are:
a) Training: In order for workers to improve their performance they must be

continually trained. Training is important in raising the workers awareness in
up to date construction practices and improvement of skills;
b) Retention of key staff: It is important for the contractor to strive to retain key
staff in order to ensure continuity and retain skills earned through working with
the firm over a period of time. Labour turnover has been cited as one of the
major problem contributing to low productivity in the construction industry;

and
c) Organisation of meeting at various levels to discuss progress of works:
Meetings to discuss progress of work are important in order to improve
productivity of site operations. Such meetings could be held at the end of the
day between the Foreman and gang supervisors to discuss the day’s work and
set targets for the next day. Similarly, such meetings could be held at the end of
the week between Site Agent and Foreman to discuss the progress of works
performed during the work and set targets for the coming week. In this way it
is possible to identify areas with problems and take actions to bring the
situation to normal.
9.2.5 Scheduling of labour on a construction site
9.2.5.1 General
Labour schedule is important in the execution of any construction project. It shows

the sequence and number of different categories of workers to be deployed for the
job.
Labour schedule will normally consist of the following information:

a) Different trades required for the project;
b) Number of workers of different trades required for the project; and
c) Dates at which workers of different trades will be required on site.
9.2.5.2 Data needed for preparation of labour schedules
In order to prepare labour schedule a contractor will need to know various

information about the job, number of labourers and their date of requirements on site.
In order for the contractor to establish the resources required for the work he needs to
prepare a method statement (as discussed in section 9.1.3) of every activity that will
be executed in the project. He would also need to have a programme of works
showing the timing of various activities.
9.2.5.3 Preparation of labour schedules
A labour schedule is prepared through a process referred to as labour aggregation.

This is simply a summation on a time –period basis, for example, day to day or week
to week, of labour of various categories that are used to carry out the work in
accordance with the programme of work.
Figure 9.6 illustrates a simple bar chart to which has been added the total labour
requirement on a weekly basis for each individual operation. Along the bottom of the
bar chart the totals are added up, forming a labour aggregation. These totals may be
plotted in graphic form as indicated below the bar chart to form the labour
histograms.
In preparing labour schedules it is important to keep the number of workers on site as

even as possible throughout the project. It is impractical to have 15 workers on site in
one week, 2 in the next week and 5 in the third and 1 in the fourth week. Also the
number of supervisors for the project should match the number of workers to be
employed for the project.
WEEK 1 2 3 4 5 6 7 8 9 10 11 12
Operation
Excavation 10 10
Foundations 8 8 6
Floors 4 6
External Walls 10 10 10 8
Roof 6 6
Wiring 5
Windows 2 1 2
Plastering 6 6
TOTAL LABOUR 10 18 8 10 16 10 10 14 8 6 8 6
20
Labour
10
Figure 9.6 Labour aggregation chart for a simple project.
In case of many resources being used for a project, it is still possible to prepare a
resource aggregation combining of all resources as shown in Figure 9.7.
DESCRIPTION JUN JUL AUG SEP OCT NOV RESOURCES

Mobilize 2 Flatbeds, 10 labs, 1
pickup
Culverts 1 Flatbed, 1 foreman, 8 labs
Reshaping 1 grader, 1 roller, 1 water
browser
Stockpile Gravel 1 D6
Drainage 30 labs, 2 foreman, 1
pickups
Haulage 6 tippers, 1 loader

Wearing Course 1 grader, 1 roller,
2 browsers, 5 labs
Demobilize 2 flatbeds
RESOURCES RAT COST
TOTAL E US US $
$
Pickup 1 1 1 3 2,000 6,000
Flatbed 2 1 1 2 6 3,000 18,000
Bulldozer 1 1 7,000 7,000
Loader 1 1 2 3,500 7,000
Tippers 6 6 12 3,000 36,000
Roller 1 1 1 1 4 3,000 12,000
Grader 1 1 1 1 1 5 4,000 20,000
Browsers 1 1 2 1 5 3,000 15,000
Labourers 10 30 38 38 35 5 156 100 15,600
Foremen 2 3 3 8 200 1600
Figure 9.7 Aggregation for various resources
Using the resources aggregation chart, it is possible to develop budgetary

requirements for the project for the resources. To extend this to a complete budgetary
requirements chart, it is necessary to include all resources.
In the next chapter, the concepts presented in this chapter will be extended to other
key construction resources - equipment and materials.
Chapter 10
Equipment and Materials Management
10.1 Introduction
The basic principles of management of equipment differ significantly from that of

management of materials. The main objective of equipment management is to ensure
that equipment is fully utilized when on site. For equipment to be fully utilized, it
should be available and in good working condition. On the other hand materials are
consumed in the construction process to create finished constructed products.
Therefore the main objective of materials management is to ensure that materials are
available on site when required while maintaining minimum stick levels to avoid cost
of storage, double handling and wastage. However, in both cases, it is also the
objective to aim at ensuring that only the minimum necessary equipment or materials
input is used to achieve the intended final product. The objective of materials and
equipment management is thus to ensure that the inputs of these resources are fully
recovered in the value of the works created.
In this chapter, the principles of equipment management are elaborated, sources of

equipment discussed and typical construction equipment listed for different types of
tasks on construction sites. Equipment maintenance principles and basic concepts are
also presented. In the second part of the chapter, again the principles and techniques
of materials management are presented. In both cases, examples are presented to
illustrate key concepts or demonstrate the use of appropriate resources management
techniques.
Equipment and Materials Management 299
10.2 Construction Equipment Management
10.2.1 Basic principles of equipment management
10.2.1.1 Significance of construction equipment
The trend towards greater use of plant in construction has been in place for many
years. This is due to the following factors:
 Scale of modern construction works is high;

 Short construction periods are required;
 Some tasks are difficult to perform using labour, such as long haulages;
 Equipment are not affected by factors that affect human being, such as social
factors, adverse site conditions, etc;
 If there is a creation of completely new construction product, it is economical
to use specialised equipment rather than continuously train labour;
 If a complete products may result from a single process, it is efficient to use
equipment; and
 Sometimes it is just more economical to use equipment.
Some of the drawbacks of using equipment in construction include:
 It requires very huge initial investment in securing its use;

 Since most are manufactured in developed countries, they carry some
inherent cultural, political and social dimensions of the country that
conceived them; they reflect local resource endowments and also they reflect
the whole production system as for spare parts, etc. These factors may lead to
delays of projects due to breakdown of equipment as a result of lack of spare
parts; and
 Equipment intensive applications increase unemployment.
It is clear that there are construction project circumstances where equipment

intensive technology is necessary even in developing economies. It is therefore
important for engineers to understand the basic principles and techniques of

equipment management. In any case, the guiding principles of whether to choose
equipment or labour intensive technology have to be appreciated.
10.2.1.2 Equipment versus labour intensive construction
The alternative techniques for construction could be best defined by their extremes.
At the lower end of the spectrum is essentially labour intensive method, where output
and quality are, for all practical purposes, determined solely by labour productivity.
In this case the term equipment would be applied loosely to non-mechanical hand
held tools, such as: hoes, spades, shovels, pick-axes, hand rammers, wheelbarrows,
human-drawn rollers, mattocks, watering cans and the like.
At the upper end of the spectrum is essentially equipment-intensive method where

output and quality is, for all practical purposes, determined by productivity of
equipment. Such equipment would include concrete batching plants, excavators,
scrappers, bulldozers, graders, rollers, dump trucks, cranes and the like.
Borrowing words of one ILO expert: "Given a job, a labour intensive technology
expert would first determine the number of people needed for the job and then the
equipment to supplement the human labour. On the other hand an equipment
intensive technology specialist would first determine the equipment needed and then
work out the number of people needed to supplement the equipment".
Between the two extremes, there are a number of labour-equipment mixes that might
be employed, and the degree to which labour or equipment productivity dominates
overall output and quality is the degree to which the technology mix is deemed
labour or equipment intensive.
To this end, we need to introduce a new term "Appropriate Technology". The

Appropriate Technology in this case will mean that type of technology ranging from
purely labour intensive to purely equipment intensive, which can be used to execute
a job to achieve a certain desired objective. An appropriate technology is one that is

both efficient and least costly. The appropriate mix of labourers, animals and
machines will be determined by the technical nature of the project, the available
resources, the prevailing factor prices, and the socio-economic environment in which
the project is executed. The use of heavy equipment and plant is wide spread in large
civil engineering projects. For building projects, it is limited to activities like deep
excavation, pile driving, hoisting equipment (cranes etc), concreting operations
(mixers, pumping equipment etc.). It is associated with faster completion periods.
With regard to quality and cost, it is not necessarily true that high quality jobs and
low cost can be attained by use of equipment intensive method. It is advised to carry
out an economic comparison between different available methods to enable selection
of an appropriate method for a given job.
Labour is almost used in all activities. Even in the so-called equipment intensive
construction, labour is still needed to operate the equipment. There is usually a high
use of labour in building works compared to civil engineering projects, unless a
decision has been taken to use labour intensive methods for construction. The use of
labour in construction works helps to provide employment and therefore alleviates
poverty. On the other hand, the use of labour is associated with longer completion
periods.
However, it must be emphasized here that in most developing countries, there is

abundant idle labour and the rate of pay of operatives is low. This justifies the use of
labour versus plant. Often, it is not in the best interest to the public to use plant
because there is idle labour. Apart from being cheap, labour can be more versatile
and is capable of reaching places inaccessible to machines. Nevertheless there are
situations where it is inevitable to use equipment.
10.2.1.3 Principles of equipment management
Plant ownership is not a fundamental requirement for a construction company as a

wide selection of plant is sometimes available for hire as an alternative. Many
contractors however, opt to buy some of the plant for convenience. Careful decisions
should be made to acquire plant for profit. Plant should be a capital-intensive
business and requires a central organization to provide all the facilities for
maintenance, cost accounting, hiring, etc. For large construction companies, these
may as well be relatively independent entities with clear set of operational
procedures.
It is therefore a major management task to set principal policies for the supply and
organization of plant holdings associated with company’s activities, so that the
objectives for all the company’s operations may be achieved. The basic principles of
equipment management revolve around proper selection, maintaining high
availability levels, ensuring high utilisation levels, setting profitable hire rates, and
disposing when it is no longer profitable to keep the equipment. Without these, the
plant fleet may become a hidden obligation and with constraints on financial
resources. These basic principles lead to a rational sourcing of construction
equipment and the factors influencing their selection. It is also important to
appreciate that most construction equipment cost large sums of money not only to
buy or rent but also to operate and maintain. It is therefore extremely important to
keep construction equipment fully utilised. It is important to remember that idle
equipment costs money.
10.2.1.4 Sources and selection of construction equipment
Plant acquisition options

One important aspect to be considered in management of equipment is the various
options available to a contractor to obtain the much-needed equipment. Three options
available are shown below:
 Own all plant;

 Hire purchase or
 Hire all plant.
The decision of whether to buy it or not is a function of equipment costs, that is

owning and operating costs of the equipment; and it would be economical to keep the
plant fully utilised over its useful life of the equipment. Some other considerations
are possible technological changes during this period that may lead to obsolescence
of the equipment.
Different considerations have to be made when selecting equipment under different

arrangements. In all cases, however, it is absolutely necessary to identify the right
equipment for the intended task. There is no use for selecting earth loading
equipment if the main task planned is earthmoving. In most cases, equipment that is
required is standard - designed to meet a wide range of demand to most of customers,
construction companies or users. However, it is sometimes necessary to require
special equipment manufactured for specific task. Equipment such as those used in
special mining operations, tunnelling, slip-forming, special cranes, etc. Unless
absolutely necessary, standard equipment should be used because of peculiar
problems that are associated with customer made equipment.
Owning all plant

This includes hire purchase, straight purchase and leasing. It has the following
advantages:
 It is more economical if the equipment is used efficiently;
 The equipment is more likely to be available for use when needed;
 Cost of idle time caused by inclement weather, work being behind planned
programme or delay in deliveries of materials will generally be less on owned
plant than hired plant; and
 Because of ownership, it ensures better maintenance and care; therefore the
equipment is kept in better mechanical condition.
The disadvantages of this option include:

 It may be more expensive than renting;
 The purchase of equipment may require a substantial investment of money or
credit that may be needed for other purposes;
 The ownership of equipment may influence a contractor to continue using

obsolete equipment after superior equipment has been introduced;
 The ownership of equipment designed primarily for a given type of work may
induce a contractor to continue doing that type of work, whereas other work
requiring different types of equipment might be available at a higher profit; and
 The ownership of equipment might influence a contractor to continue using the
equipment beyond its economical life thereby increasing the cost of production
unnecessarily.
Hire purchase
One way of obtaining the use of fixed assets without initial borrowing is to resort to
hire purchase finance for plant and vehicles. This is a mixture of buying and hiring
which can be quite useful. The contractor pays a deposit and agrees to purchase the
item outright at a future date. In the meantime, he has the use of the plant, but has to
go on making monthly payments until the debt is completed. The hiring company
naturally includes an interest charge in its hiring rates, and it should be realised that
this is rather higher than would be charged by the bank. However hire purchase can
be very useful way of buying plant for a firm that is sure that it can keep it profitably
employed throughout the period of hire.
Hiring all plant

In many countries, there are specialist plant hire firms aimed at making available
plant for hire to local contractors. Some private contractors also lease out (long term
hire) their equipment when not in use for their in-house projects.
A contractor who takes the advantage of this facility avoids both the responsibilities
for maintenance, care of the plant and tying up his capital. Other advantages include:
 Plant can be hired as required and for short periods;
 Hire firms are responsible for repairs and replacements; and
 Contractor is not left with expensive plant items on his hands after the
completion of the contract.
However, hire rates depend on market forces and are largely beyond the control of
the contractor, except for limited negotiation between competing firms. This could
affect a contractor quoted price for work and the costs incurred later when the work
is carried out.
Owning and hire

This balances between the two options discussed above. The company may decide to
own only very few key equipment, and the rest will be obtained by hire from plant
hire companies when the need arises. However, even when equipment is owned, it is
still good practice to rent equipment to different projects, albeit at a slightly lower
rate than the market rate.
10.2.1.5 Factors affecting equipment selection
Selecting the correct equipment for the job ideally forms part of the construction
planning process and equipment should be chosen for a particular task only after
analysis of many interrelated factors. The important considerations for selecting
equipment include the examinations of:
a) The function to be carried out: for example the choice of equipment in many
instances will be dictated by the need to cope with combinations of horizontal,
vertical and mobile movement. A crane can provide both horizontal and vertical
movement, but is rather poor in manoeuvring, whereas most earthmoving
machinery is mobile and will transport materials very efficiently over long
distances, but cannot be used for lifting;
b) The capacity of the machine: the volume of material to be moved related to the
time available in the construction programme is important. But for cranes and
other lifting operations, the practical weight and size of the units as dictated by
the design are most important factors;
c) The method of operation: the distance and direction of travel, speed and
frequency of movement, sequence of movement, state of the ground etc. must be
taken into account;
d) The limitations of the method: for many earthmoving operations, the choice of
method may be limited by the cost of temporary work facilities, for example haul
roads may not be permitted in a particular areas, the establishment and

dismantling cost of a crane or conveyor system may not be economical over the
length of time required for the task. These are just two simple illustrations; in
practice every project presents different problems;
e) The costs of the method: the most desirable method from a feasibility point of
view may involve expensive and uneconomical units, which may not be
available at the desired time without the incurrence of a high cost premium; and
f) The cost comparison with other methods: it is essential that potential alternatives
be considered in the plan and their costs determined.
10.2.1.6 Costing of the equipment
General
A contractor using equipment is normally required to determine the total “all-in” cost
of each major plant item as an hourly or weekly rate. This will form a basis of cost
control later during the use of the equipment item in the project. The determination
of this all in cost depends on the method of acquisition of the equipment. As
discussed previously the equipment may be hired or bought. Hiring is the more
common and construction companies either hire from their own equipment division,
from other contractors or from specialist independent equipment companies.
Hired equipment
For hired the basic cost is the rate quoted by the equipment hire company to which
the contractor must add the cost of all additional running costs not covered by the
hirer’s quotation. These running costs include: the emoluments of the operator; fuel;
oil; grease; and other consumables.
Most hired equipment is provided with an operator but the contractor may have to
allow for additional moneys to bring the operator rate up to that covered by any site
agreement. Where no operator is provided, the full all in operator must be added.
Fuel costs are normally calculated on the basis of an estimated number of litres per
hour for the equipment. To estimate this, contractors normally use their own records
and data obtained from equipment manuals. However, data obtained from equipment
manuals should always be treated with care as in many cases they assume the
equipment of being in perfect condition which is not always necessarily the case. Oil
and grease are allowed for as an allowance per hour of equipment time or a
percentage addition to the fuel costs. Other consumables are allowed for by a
percentage addition.
Bought equipment
Where the contractor owns the equipment item the rate used must cover both the
ownership and operating costs. Through this costing it will be seen that a contractor
owning a equipment will incur ownership costs irrespective of whether the
equipment is in use or not, hence the need to increase utilization levels of equipment
through contractor’s own use in several projects or by hiring out to other contractor.
Where this is not possible, then it may be advisable to hire equipment instead of
owning. Example 10.1 illustrates how hire rates can be computed.
Example 10.1 Calculation of an hourly rate for a tipper truck

The following information is available to the contractor with regard to the tipper
truck:
 Initial cost 50,000 US $

 Resale value 8,000 US $
 Average working hours per year 2,000 hrs
 Years of life of the truck 10 years
 Insurances premiums per year 1600 US $ per annum
 Licenses and taxes per year 1000 US $ per annum
 Fuel at 10 litres per hour 0.540 US $ per litre
 Oil and grease 10% of fuel cost
 Repair and maintenance 10% of initial cost per year
 Required rate of return on capital 12% per annum
 Overheads are not included for simplicity, but are usually expressed as a
percentage allowance on the hourly rate
The above costs are included in the calculation as follows:

Rate per annum
Ownership costs
 Interest on finance, calculated using a capital
recovery factor from interest tables (CRF = 0.177 at
12% per annum for 10 years) 8,394
 = (50,000 – 8,000) x 0.177 +8,000 x 0.12
 Road tax and licenses 1,000
 Insurance premiums 1,600
Total ownership costs per annum US$ 10,994
Operating Costs
 Fuel cost: 10 litres per hour for 2,000 hours per year 10,800
= 10 x 2,000 x US $ 0.540
 Oil @ 10% of the fuel cost 1,080
 Repairs 10% of US$ 50,000 5,000
Total operating costs per annum US$ 16,880
From the above:

Total cost per annum = ownership cost + operating cost
= 10,994 + 16,880 = 27,874 US$
Hourly rate = 13.937 US$
The above calculation allows for the generation of sufficient income to replace the
asset, cover operating costs and provide a return on the initial capital invested. If the
company equipment division is run a profit centre and is expected to contribute to
head office overheads and profit, then additional allowances for profit and overheads
must be added.
If on the other hand it is not possible to utilize equipment for 2000 hours per annum,
and instead it is only utilised for only 1500 hours, then the hire rate has to raise to
US$ 16.603 per hour. In other words, if the equipment is hired at US$ 13.937 per
hour, it will be losing about US$ 2.666 every hour. This underlies the significance of
equipment utilization.
10.2.2 Equipment productivity and cost control
10.2.2.1 Significance of equipment productivity
We have seen that most construction equipments are expensive, and when a decision
is made to use a piece of equipment on site it must be ensured that it is used as
economically as possible. Equipment productivity, like labour productivity looks at
how efficiently equipment is used on site. Equipment productivity relates to its
ability to produce a given quantity of work over a planned period of time as well as
its availability.
Equipment productivity is therefore important to inform the contractor how

efficiently he is using his equipment. Through well established equipment
productivity monitoring system a contractor will be able to design system which will
enable him decrease equipment costs, maximize equipment utility and minimize
equipment downtime. Equipment productivity data is also important to enable
contractor establish the time input of using a piece of equipment for a particular type
of work.
10.2.2.2 Improvement of equipment productivity
In large civil engineering projects, like road construction, many construction

equipment and plant of the same and different types will be required to perform
different activities. While number of these plants may be important in the effective
completion of the project, to a large extent it is how effectively these plants are
utilized that will determine effective completion of the project at minimum costs.
A small well-balanced fleet of construction plants will produce more than a large fleet,
which is not well balanced. One golden rule in managing construction plants is to have
a fleet of plants in such combinations that will ensure minimum idle time for all the
plants forming the fleet. This is in no way a small task. In some cases simulation of the
anticipated situation on site needs to be carried out to obtain the most economic
combination of construction fleet.
Apart from balancing the fleets of construction plants used in any construction site, the
following points must be observed to enable economic and effective utilization of
construction plants:
a) Construction plants should be assigned to experienced operators who are well

versed in all aspects of plant operation and maintenance;
b) Before the start of the day, the person in charge of construction plants should
ensure that all plants are well checked to ensure that they have all the required
inputs to avoid the possibility of running the plant engines without oil, water,
etc. The same should be done at the end of the day to ensure that all plants are
properly parked or stored. This good habit will enable useful life of plant to be
prolonged;
c) Construction plant should be regularly checked and necessary maintenance
carried out. Again this will enable useful life of a plant to be prolonged. For
this reason proper records on plant maintenance need to be maintained;
d) When carrying out maintenance of plant particular attention should be paid to
time of the year when the equipment is idle;
e) Proper selection of plant should be made to suit particular construction
activities. Assigning a plant a work for which it is not designed for not only
will reduce its output but its life as well;
f) Contractors should have a programme in place for training operators on safe
handling and efficient use of equipment;
g) Contractor should develop and implement methods designed to measure

equipment availability and volume of work that can be performed by a piece of
equipment. This will enable the contractor detect any early signs of
underutilization of equipment and take appropriate actions;
h) Equipment productivity goes parallel with efficient utilization of inputs like
fuel, lubrication tyres etc. Therefore a contractor should have in place a system
for monitoring the usage of these important resources for various pieces of
equipment he owns; and
i) Contractors should have a system in place of replacing old or obsolete
equipment. Most contractors tend to use equipment beyond their economic life,
and this can lead into financial loss instead of the expected profits.
10.2.2.3 Monitoring of equipment performance
Monitoring of equipment performance is important to enable contractors have a

general picture of how efficiently they are utilizing the equipment. A number of
techniques exist of monitoring performance of equipment on site. The important and
simple techniques that can be applied by small contractors include:
a) Keeping daily, weekly and monthly equipment records showing the following:
 The proportion of time that the equipment was working and not working;
 Reasons for equipment not working;
 Type of work that the equipment was assigned to do, and output of work
performed; and
 The inputs supplied to the equipment including fuel, lubrications etc.
b) Spot checks on equipment performance using work study techniques (as
discussed for labour productivity).
10.2.2.4 Classification of construction equipment
There are different ways of classifying equipment, but the most common way used in
construction is by the type of work to be performed by the equipment. Some of these
classifications include:
Hauling machines
These are pieces of equipment used for massive transport of construction materials
from one location to the other. Examples of such equipment include trucks, dumpers,
tractors, etc. Figure 10.1 illustrates a typical dump truck
Figure 10.1 Dump truck for hauling bulk earth.
Earth moving machines or simply called earthmovers

These are machines which can do such works as stripping of top soil, clearing
vegetation, shallow excavation, pushing scrappers, ripping, spreading, grading, etc.
Such equipment includes bulldozers (see Figure 10.2), scrappers, rippers, graders,
etc.
Figure 10.2 Bulldozer for earth moving over short distances.
Excavating machines
Equipment in this category are requisite in most construction project. They are used
to loosen and stockpile or load the earth material to dumpers. They can also be used
for short haulages of up to 250 meters long. Examples of such equipment include
backhoe excavators or loaders (see Figure 10.3), draglines, draggers, drag shovels,
clamshells, etc.
Figure 10.3 Backhoe excavator.

Compacting machines or sometimes called soil stabilizing machines

These equipment apply pressure, vibratory energy or both on the soil material to
improve its density by bringing closer the soil particles hence reducing the air voids
between the soil particles. Examples of such equipment include rollers that can be
classified further into smooth wheeled rollers (see Figure 10.4), tamping rollers,
vibrating rollers; pneumatic tired rollers and sheep’s foot rollers (see Figure 10.5).
Others include vibrating plates some of which are manually driven and while some
are self-propelled, that is they have engines and can compact on themselves.
Manually driven compaction equipment have generally been very ineffective.
Figure 10.4 Light steel drum compaction roller.
Figure 10.5 Sheep’s foot compaction roller.

Concrete machines
These machines are sometimes called concrete mixers though this is not a general
name because some are used for transporting concrete. In this classification there are
various types, such as:
 Batching machines: they use the materials to prepare proportions of
cement, sand, coarse aggregates and water by themselves. These are
mostly stationary and are generally referred to as concrete batching plants
(see Figure 10.6).
 Concrete mixers: they mix the batches prepared by batching machines.

Various types exist. Some of them are:
o Tilting mixers (see Figure 10.7);
o Non-tilting mixers; and
o Rotary mixers.
 Vibrators: they are used to vibrate the freshly placed concrete so as to

remove excessive air voids for densification. Various types exist. Some of
them are:
o Internal vibrators, like porker vibrators;
o Form vibrators; and
o Screed vibrators.
 Concrete transporters: they are in the form of trucks or dumpers and are
used to transport fresh concrete from the mixing point to the placing site.
Care is normally taken with regard to hauling distances and durations so
as reduce possibilities of segregation and setting of the fresh concrete.
Figure 10.6 Modern concrete batching plant.
Figure 10.7 Concrete tilting drum mixer.
Hoisting equipment
Such equipment are used for lifting or vertical transportation of loads on construction
sites. These can either be mobile or stationary. Examples of hoisting equipment
include:
 Cranes:
o Gantry crane used in the workshops;
o Tower cranes (see Figure 10.8(a)); and
o Mobile cranes (see Figure 10.8(b)).
 Jacks: these are used for regulating small heights.
 Winch hoists:
o Chain hoist or jib hoist; and
o Chain pulley blocks.
(a) Tower crane.
(b) Mobile track mounted crane.
Figure 10.8 Lifting cranes.

Other special types of equipment

Construction involves the use of many other types of special equipment such as
conveyors (including belt conveyors, like those used in quarry sites, pneumatic
conveyors, and ropeways), pile driving machines and hammers, pumping and
dewatering equipment, blasting equipments drilling machines used for tunnelling
and drilling for soil explorations as in mines, water, and geotechnical
investigations; rock crushing equipments, concreting forming equipment, etc.
Other machines include air compressors, welding equipment, asphalt mixers,
pavers, grouting equipment and many more. A selection of these is illustrated in
Figure 10.9.
In general, for most construction activities, there is probably a machine that can
be used for the purpose. It is for the engineer to evaluate whether is better to use
equipment or labour for the purpose depending on the specific circumstances.
The most popular type of equipment relevant to civil engineering are earth works
equipment. In the next section, a more detailed treatment of earthworks
equipment shall be presented
.
(a) Pile driver (b) Drilling machine

(c) Tunnelling equipment.
Figure 10.9 Specialised construction equipment.
10.2.3 Estimation of equipment productivity
10.2.3.1 Fundamental considerations
In demonstrating the estimation of equipment productivity, earthworks activity shall

be used. One of the most important activities on a civil engineering construction site
is earth works. It can also be as significant in some types of building projects,
especially where basements are involved, or in cases where site levelling is necessary
prior to construction of buildings. Ensuring that desired equipment productivity
levels are achieved is important to minimise equipment costs. Productivity or output
of machines can be considered at two different levels, both of which are based on
capacity:
 Theoretical or standard capacity
This can be worked out from the manufacturer’s specifications of the
machine. This is the value given in such a way that machine is working in
ideal conditions. Often, ideal site conditions are hardly encountered in reality.
In most cases therefore, it is hardly possible to achieve the theoretical
capacities stated by manufacturers.
 Practical capacity
This is the average capacity, and is calculated from theoretical value by
adjusting it to make it closer to the real capacity. Adjustments are made by
introducing factors, which often depend on specific circumstances. Factors
such as operator experience, soil type, terrain, specific job type, etc.
Productivity of earthworks machines is normally calculated in volume per

hour, expressed in m3/hr. This is known as equipment hourly productivity
rate.
Three units of measuring soil volume are used:
 The Bank Cubic Meters (BCM): If measurements are made to the soil
at its natural state, the unit is called bank cubic meters. It is used in
cases where excavations are made of soil in its natural state.
 The Loose Cubic Meter (LCM): When soil is excavated the soil
particles are loosened and the volume of the soil normally increases. The
extent of increase depends on the soil bulking factor. The unit of measure
of the soil at this state is loose cubic meter. For instance, when
transporting soil, the measurements are made in loose cubic meter; and
 Compact Cubic Meter (CCM): This is the way of measuring the soil in
compacted state, where the volume is reduced from loose form. For
instance, when measuring volume of compacted soil on site.
Conversion can be done from one state to the other using some factors, which depend
on the type of soil. These factors are normally discussed under soil mechanics or
similar topic.
10.2.3.2 Basic (or standard) productivity
This assumes the conditions to be ideal, and the calculations are taken from the
specifications of the machine. For example, manufacturer’s specifications for site
clearing using a bulldozer may be 2000 m2/hour, and therefore in this case, the
conditions are considered to be ideal, but if the topography is bad or the soil is wet or
both, productivity will be lower. Soil type will also affect productivity. Therefore
factors taken for different sites or even for the same site but at different times are not
necessarily the same.
If we assume the machine works in cycle, the basic productivity is calculated as

follows:
Basic productivity = Load per cycle x Number of cycles per hour
Qbasic  q x N [10.1]
Where,
q = output in cubic meters per cycle, measured in a loose excavated
materials determined from the machine ratings.
N = number of cycles made in a particular operation in one hour.
It is convenient to calculate N in minutes as follows:
N = 60/Cm, [10.2]
Where constant Cm = Cycle time in minutes.
Example 10.2
Consider an excavator of bucket size, q = 0.85m3 excavating soil with a cycle time of
0.45 minutes. In an ideal situation, the excavator can perform N = 60/0.45 cycles per
hour. The productivity for the excavator is the load per cycle x the number of cycles
per hour:
Basic productivity, Qbasic = 0.85 x 60/0.45

= 113.3 m3/hr
This productivity value can now be adjusted to practical productivity by introducing

factors such as:
 The job efficiency factor that depends on the operator’s skills, the topography
of the site, the level of maintenance of the equipment. Other factors may
include time of the day, the level of motivation of the operator, etc. All these
will have to be considered to adjust the standard productivity; and
 The duration of the operation factor, will also affect the productivity. If a job
is done in 1 hour, the operator will utilize the whole time and maximum
productivity of machine may be attained. However, for a one 8hour-day,
there are necessary rests and lost times in between e.g. lunch, breakfast and
other needs. In this case, the average hourly productivity of the later will be
less.
10.2.3.3 Estimation of the practical equipment productivity
The same work may be done by different machines e.g. one can use a bulldozer to
move earth as well as for excavating. Selection of the right equipment for the job is a
matter of judgement based mainly on experience. In the absence of experience, it is
best to judge from manufacturer’s specifications and consulting available literature
as a starting point. With time, it is possible to gather experience that will enable one
to judge as to what is possible with a particular type of machine.
Further to these, it is possible to gather sufficient information over time so as to

adjust the standard productivities to a realistic level by applying factors. The
adjustment E is therefore a product of several factors that apply for a specific
situation.
E  f1 xf 2  f 3  ........  f n [10.3]
Examples of some factors, f1 and f 2 that could be applied may be as presented in

Table 10.1 that presents a range of site factors as a function of site or operating
conditions and machine condition. Likewise Table 10.2 presents a personal
performance factor that is a function of motivation and operator’s skill and

experience.
Table 10.1 Site factor f1 as a function of site and machine conditions
Site factor f 1 for different machine conditions

Site Condition Excellent Good Normal Poor Very Poor
Excellent 0.84 0.81 0.76 0.70 0.63
Good 0.78 0.73 0.71 0.65 0.60
Normal 0.72 0.69 0.65 0.60 0.54
Poor 0.63 0.61 0.57 0.52 0.45
Very poor 0.52 0.50 0.47 0.42 0.32
Source: Peurifoy, 2005.
Table 10.2 Personal performance factor f2 as a function of motivation and

operator’s skill and experience
Performance factor f 2 for operator’s skill and experience

Motivation Excellent Good Average Poor
High 1.00 0.95 0.85 0.65
Good 0.95 0.90 0.80 0.60
Normal 0.85 0.80 0.70 0.55
Poor 0.75 0.60 0.55 0.50
Source: Peurifoy, 2005
Example 10.3
If we consider the standard excavator output of 113.3 m3/hr computed in example
10.2, it is necessary to adjust it to a realistic level if for example the site condition is
excellent but the machine condition is poor, (therefore f1 = 0.7) and that the worker is
highly motivated but has average experience, (therefore f2 = 0.85):
The adjustment factor E = 0.7 x 0.85;

= 0.595 (or 59.5%)
The practical productivity for the excavator, Qpractical = 59.5% x 113.3

= 67.4 m3/hr.
If there are other factors, these may be considered to adjust the productivity further to
a realistic level that puts into consideration the practical production situation.
10.2.3.4 Some specific equipment productivity in earth works
In order to demonstrate the process of determining outputs of construction

equipment, a bulldozer has been selected as an example. The general considerations
made would equally apply for most other types of equipment together with necessary
adjustment as discussed above.
A bulldozer is the most often equipment used at construction site as it can perform a
number of activities such as:
a) Stripping of top soil;
b) Cleaning vegetation;
c) Shallow exaction;
d) Pushing scrapers;
e) Maintaining haul roads;
f) Opening up pilot roads;
g) Spreading and grading; and
h) Ripping, which is the loosening of hard surface.
Backfilling may fall under spreading of materials.
Types or kinds of bulldozers:

a) Tracked bulldozer – they are driven by steel tracks; and
b) Wheeled bulldozer – driven on wheels.
One of the drawbacks of wheeled bulldozer over tracked bulldozer is that it requires
enough traction force to make it move. It therefore requires a more powerful engine
to produce the same effect as that of tracks or crawler bulldozer.
Bulldozers are fitted with steel blade in front connected to the dozer by two sets of
hydraulic controls. One set for tilting and the other set for lifting and lowering the
blade.
Types of blades
There are four (4) blades types that are usually attached to the bulldozer:
a) Straight blade: the blade is horizontal with respect to horizontal axis;
b) Angled blade: if looked from top, the blade will be seen angled. It is used for
backfilling;
c) U- blade: It is much deeper such that it forms u-shape. The advantage of this is
that it can take a higher volume as compared to other blades; and
d) Push blade: Difference between type (a) and (d) is that in (d), the blades are
attached with shock absorbers and reinforced to maintain strength during
pushing. This type can be used to push scrappers.
Productivity of a bulldozer
The estimated productivity of one cycle is
q  L x H 2 x 0 .5 a [10.4]
Where :
L = blade width;
H = height of blade;
a = blade factor; and
0.5 = takes care of the geometry of the blade, which is of triangular
section, thus
volume = ½ x base x h x L
= 0.5 H2L
since b = h = H
a is a factor introduced to make corrections of all assumptions made e.g. it is not

necessarily true that blade will be full all times and will depend of a number of
factors including area of blade, conversion of earth volume and loss of materials at
the end of blade etc.
Factor a has three sub-factors, all denoted by ƒ

a  f e xf f xf b [10.5]
Where:
ƒe = earth volume conversion factor.
ƒf = blade fill factor; and
ƒb = factor considering the loss of earth at the blade edge;
It is possible to develop factors that apply for different soil types. The factor a for
such different soil types is presented in Table 10.3.
Table 10.3 Factor a for different soil types.
Soil type ƒe ff fb
Sand, fine i.e., fine sand 0.90 0.40-0.50 0.40-0.50
Gravel 0.85 0.60-0.70 0.60-0.70
Gravel, coarse 0.70 0.90 0.70-0.80
Loam, sandy 0.74 1.0-1.3 0.70-0.80
Loam soil, plastic 0.69 1.0-1.4 0.80-0.90
Clay, plastic 0.72 1.0-1.4 0.80-0.90
Clay, hard 0.66 1.0-1.2 0.80-0.90
Top soil, loose 0.81 0.90-1.10 0.70-090
Top soil, with grass roots 0.87 1.3 0.90-1.00
Rock, well blasted 0.66 0.75 0.70-0.80
Rock, poorly blasted 0.60 0.65 0.60-0.70
The formula q = L x H2 x 0.5a is for 1 cycle. For a bulldozer the time needed to
complete one cycle depends on the following:
 Haul distance, D (measured in meters);

 Forward speed F (m/ min) because it will be moving at a low speed, it is
convenient to use m/ min rather than using km/h;
 Reverse speed R (m/min); and
 Time required for shifting gears Z (min). This includes tilting the blade,
lifting, forward and reverse movements, etc.
The cycle time Cm is now estimated from the following expression:
Cm = time in forward motion + time in reverse motion + time for gear shifting;
D D
   Z measured in min [10.6]
F R
The hourly output is the product of number of cycles per hour and the output per
cycle, therefore, an hourly theoretical productivity for the bulldozer, Qth is as follows:
Qth  q x N [10.7]
60
But N, number of cycles per hour =
Cm
Then we correct by introducing factors to obtain practical hourly output of bulldozer

Qpr by E, the job efficiency adjustment factor.
60
Q pr  q x xE [10.8]
Cm
Where:
Qpr = Practical productivity;
q = Theoretical productivity per cycle (m3)
Cm = Cycle time (min); and
E = Job efficiency factor based on site and machine conditions,
operator skills and motivations and other factors (Tables 10.1 and
10.2 respectively).
60
It should be noted that the highest possible productivity, Qmax  Qtheor  q x ;
Cm
60
Practical productivity, Q pr  q x x E.
Cm
For planning purposes, it is normal to be conservative and use the average

productivities but during actual operation, aim for at least the standard productivity.
Table 10.4 Typical bulldozer blade sizes for different engine sizes.
Engine Size (Hp) 700 450 400 335 300 200 100-150 60-70
Machine Weight 520 340 298 250 224 149 75-112 45-52
(Tons)
Engine size (kW) 85 50 45 35 25 20 10-14 5-8
Blade length (m) 5.5 5 4.5 4 45 3.5 3.5 3.0
Blade height (m) 1.8 1.8 1.8 1.5 1.5 1.2 1 0.8
U-blade capacity 20 18 14 13 9 7 4 2
(m3)
Example 10.4
Determine the theoretical and practical productivity for a bulldozer whose engine
capacity is 400Hp working on a site with hard clay. Assume that the machine
condition is poor but the site condition is excellent. Further, the machine operator is
highly motivated although he is of average skill. Further, it is estimated that the cycle
time for the bulldozer is 3.5 minutes.
Theoretical output per cycle, q = L x H2 x 0.5a;
From Table 10.4; L= 4.5m and H = 1.8m;

q is therefore 4.5 x 1.82 x 0.5 x (0.66 x 1.0 x 0.8) = 3.85 m3 per cycle
(based on factors in Table 10.3);
The theoretical, standard and average productivities are therefore as follows:

Theoretical productivity, Qth = 3.85 x 60/3.5 = 66m3 per hour;
Practical productivity, Qpr = 66 x (0.7 x 0.85) = 39.3m3 per hour;( Tables 10.1
and 10.2)
However, if the same conditions apply but soil type is fine sand, the practical
productivity decreases significantly to only 1.05 m3 per cycle. If on the other hand
the soil type is top soil, with grass roots and that the operator is highly skilled as well
as highly motivated, and the machine is in excellent condition, the other conditions
being the same, then practical productivity increases significantly to 6.23 m 3 per
cycle.
10.2.3.5 Estimation of productivity of other construction equipment
In the previous section, a detailed treatment of estimation of productivity of a

bulldozer was made. This served as an example of the framework for estimation of
construction equipment in general. In principle, job specific factors, equipment
factors, and operator factors have to be considered. It should also be stated that in the
absence of well-documented studies in African situation, the estimates have to be
treated as such. Nevertheless, this call for studies to establish factors those apply not
only in Africa in general but also in specific job environment. The equipment
manufacturers’ handbooks form a good starting point for such studies.
10.2.4 Plant and equipment maintenance
10.2.4.1 General introduction

The aim of establishing a construction company just like any industrial organization
is to make profit. Such profit is a result of the products, which are of higher value
compared to the inputs. The running cost of the equipment and its output has a direct
effect on the profit, which the company makes. As equipment is used for the
production, its economic level of utilization will keep on dropping due to such
factors as wearing, breaking, aging etc. Therefore, it is necessary to attempt to
maintain a high level of performance of the equipment through maintenance.
Equipment passes through a number of stages during its life as can be seen from
Figure 10.10.
Operation synopsis
Specification
Maintenance philosophy
Performance
Figure 10.10 Framework for equipment maintenance.
Contractors owning equipment have to appreciate the basic assumptions made at the
previous stages. The inherent assumptions have implications on equipment use and
maintenance in order to sustain a high level of output. It is therefore particularly
important for equipment owners to adhere to equipment maintenance manuals that
presumably have taken into consideration equipment specifications, design,
manufacture and use.
10.2.4.2 Definition of maintenance
Maintenance is a combination of activities carried out to keep the equipment in a

good running [acceptable] (and productive) order, (or to retain an item in an
acceptable condition). Common terminologies used to describe maintenance include:
 Servicing;
 Repairing; and
 Maintenance.
Maintenance is provided to a piece of equipment so as to obtain an economic

utilisation, and this includes:
 Fuel economy;
 Longer life of the equipment;
 Safety;
 Reliability and availability;
 Compliance with regulations; and
 Comfortability.
Effective maintenance (of any machine) is however expensive and requires:

 Organization and management;
 Depot facilities;
 Workshops; and
 Experienced staff etc.
If the owner decides to cut down costs by providing only minimum maintenance, the
results can be unexpected breakdown, lost production and inefficient machinery.
If a system of maintenance is to be instituted by a company, it is then necessary to

understand the four factors, which affect it. These include:
 Human resources: Interaction between the machines and the human beings is
very important to an effective and efficient system of maintenance. Wrong
attitudes, lack of awareness (of the importance of maintenance), shortage of
technical experience and training are some of the issues to this factor;
 Maintenance organization and its management: Charting out who does what,
(and possibly) where, is another factor that influence the system;
 Material resources: Technical documentation, manuals, consumable items,
spare parts, tools, measuring instruments and financial resources; and
 Faulty design or construction: Operating or functioning of a machine to a

certain expected standard depends on the design and construction of the
machine.
Maintenance of facilities is needed because of the factors that generate that need.
These factors are broadly divided into two groups:
 Man made maintenance factors; and
 Natural maintenance factors.
Man-made factors are failure(s) created by the daily human interaction with the
facilities. These factors include:
 Faulty design, material and manufacturing defects:
o Such type of fault can be built into the item at the time of its
construction/manufacturing process;
o Some of these faults may be built into the item and does not arise
until a certain operation is performed;
o These can be avoided through good design, proper selection of
materials and good selection before buying the item;
o Design/construction, which takes into account the operating
condition, is also important; and
o If possible, modification of the item at early stages can be done
based on the past experience.
 Incorrect handling of facilities:
Exposing an item to actions and or stresses not designed for, like overloading
leads to failure. Operation of items need:
o Training;
o Modification;
o Reduction of human stresses; and
o Good instruction on the use of equipment.
Natural maintenance factors will include:

 Environmental stresses and contamination:
o Exposure of items to the natural environment like dust, heat wind,

moisture, sunshine etc leads to deterioration.
 Wear, tear and ageing:
o Wear and tear occurs when two surfaces slide against one another;
o Ageing deals with the life span of a component where gradually it
becomes weak to withstand different kinds of the loads. Corrosion and
fatigue serve as good examples of ageing;
o To avoid or delay the wear, tear and ageing, it is necessary to:
 Use the recommended lubricants;
 Regular inspection and change of worn-out components; and
 Regular inspection of cracks, wear and tear to prevent breaks.
10.2.4.3 Types of maintenance systems
Maintenance systems are divided into two main types:

 Preventive maintenance: This is carried out at predetermined intervals or to
other prescribed criteria which is intended to reduce the likelihood of an item
not meeting an acceptable condition thus;
o Reducing wear and tear;
o Maintaining the plant in a good working conditions; and
o Preventing unforeseen stoppage.
 Corrective maintenance: This is carried out to restore an item, which has
ceased to meet an acceptable condition. It includes adjustment and repair. In
other words, this is carried out when failure has occurred and therefore does
not have scheduled activities or regular service system. This system requires
the running, shutdown and breakdown maintenance facilities.
Preventive maintenance, (PM)
As defined above, PM is carried out in order to prevent failures or to find failures

before they cause further complications. Failure as a concept needs to be understood
for the system of preventive maintenance to be effective.
Random failures are distributed in time such that they cannot be predicted. Examples
include failure due to overload and mismanagement. This framework is presented in
Figure 10.11.
Observable; if technically and

economically necessary,
continuous surveillance to be
provided
Random failures
Not observable – No PM
action required
Failure
Observable – PM inspection
with necessary corrective
Time-dependent action
failures
Not observable – periodic
replacement
Figure 10.11 Random and time dependent equipment failures.
 Observable random failures: These develop over a period of time. When

inspection periods are shorter than that of fault development, these faults can
be detected by condition monitoring. However, if the failure development
period is short, continuous monitoring may be used on important
components; and
 Non-observable random failures, which have no development period and it is
not possible to predict them by condition monitoring. As these occur
randomly (i.e. randomly distributed in time), they cannot be prevented by
programmed replacements. The only thing that can be done is to record the
failure, analyze the cause(s) and use the information as the guide in making a
choice of components (design and installation).
Time-dependent failures generally exhibit a known or discoverable development

process. These are also illustrated in Figure 10.10 and include:
 Observable time-dependent failures, which can be detected by condition
checking, for example, wearing of tyres. However, these failures may not
have steady development as they are also affected by environmental factors,

handling lubrication, loading, etc.
 Non-observable time-dependent failures that need a programmed
replacements or repairs for prevention.
Preventive maintenance systems can take different forms, but all have basic essential
requirements.
10.2.4.4 Routine and special planning
Preventive maintenance systems should constitute plan operations (e.g. leakage

check). Some type of preventive maintenance may necessitate the plant to be shut
down. The planning may be implemented by means of the cards, work orders, etc.
Preventive maintenance is a cyclic process, which consists of:

 Planning: Normal management techniques of planning, organizing,
controlling the quality and quantity of maintenance work and budgeting of
maintenance costs;
 Implementation: If preventive maintenance is to be carried out, it is important
to have work knowledge of the components, their function, construction etc.
Some of the information may be obtained from reference materials, manuals,
drawings, etc.;
 Recording; and
 Analysis and evaluation: This provides a feedback to the preventive
maintenance system regarding the work that has been carried out and the cost
implications.
Preventive maintenance system has a number of advantages:

 Maintenance convenience: Time during production when maintenance work
can be done as well as the convenience in terms of the availability of
materials, equipment and personnel;
 Ability to contract maintenance;
 Less down time;

 Minimum spare parts inventory: If properly done there should be no need for
emergency maintenance in which case a number of spared needs to be stored;
 Less disruption through emergency maintenance;
 Less standby equipment needed: When maintenance is planned for the
convenience of the time, there would be no need of standby equipment;
 Less overtime needed: Planning and scheduling maintenance jobs with
greater decrease and accuracy reduces the need for overtime;
 Increased safety: Safety rules can be applied better to the anticipated work
than to emergency work; and
 Less pollution: Through preventive maintenance emergency problems that
result in smoke production are eliminated.
Preparation of preventive maintenance schedules and their implementation require

documents such as:
 Machine data forms;
 Machine manuals and guides;
 Daily note check lists; and
 Work order forms.
It would be desirable for preventive maintenance to be carried out based mainly on

condition monitoring and then on programmed replacements, repairs and / or
overhauls. Condition monitoring is a process of continuous assessment of the state of
the machine to determine its function and the possible maintenance needs. Condition
monitoring is of two types:
 Subjective condition monitoring: This assessment involves the use of the
human senses namely looking, hearing, smelling and feeling. Interpretations
of the results in this method of assessment depend on the experience of the
person doing the assessment;
 Objective condition monitoring: This type of assessment involves the use of
some measurements like the measurement of temperatures, vibrations,
tension, levels, and wear and tear.
Note that, it is important that the measuring instruments must be properly calibrated
and regularly checked and the measured results must be compared with the machine
specifications to determine any deviations.
Maintenance activities in preventive maintenance system include:

 Daily service and superficial inspection performed roughly half an hour
before and after the working hours (normally during working time of the
equipment);
 Regular full maintenance and inspection (including specific mechanical
checks);
 Replacement a repair of components / parts with a working period based on
the expected duties and conditions; and
 The most common/basic preventive maintenance activities commonly carried
out by the operator include:
o Lubrication-which is a process of applying oil or greases to the machine
in order to reduce the friction between the moving parts – fast
deterioration of the moving parts of the machine which has not been
lubricated is due to the excessive heat generated by friction and corrosion
when the parts (not necessarily moving) or exposed to moisture;
o Parts of the machine that need lubrication include spindles, bearing,
chains, gear, boxes etc.;
o Clearing: Effective lubrication of the machine requires cleanliness;
o Tyre air pressure - Air pressure affects the wearing and tearing of the
tyres and the efficient moving of the machine;
o Fluid levels: Different fluids are used in some systems of the machine
they include batteries, brakes, clutch, cooling.
Fluids in these systems have to be kept at correct levels otherwise the engines or the
machine (as a whole) can be damaged.
10.2.4.5 Basic hand tools

Availability of adequate assortment of hand tools is key to the maintenance work of

any size to plant. Lack of hand tools may lead to an unnecessary and unwanted
expense. It is also true that availability of proper tools for the work is key to the
reduction of costs and rate of accidents for the maintenances work. Unavailability of
proper tools lead to:
 Costly abuse;
 Excessive wear;
 Pre-mature tool failure;
 Additional time spent to accomplish a task; and
 Costly rates of accidents.
Tools, like fingers, are the extensions of the hand. Being expensive but very essential
to any craft, the owner has to strive for cost reduction in the investment he makes on
hand tool by careful selection of quality tools. Though price is an important issue
when selecting a product, its value is the real determining factor. The best quality
hand tool has a higher price, but is the least costly in the long run. The best/top
quality tools forestall:
 Breakage;
 Excessive wear; and
 Premature failure.
Adequate range-tools should be selected so as to cover the whole range of work
components to be encountered. It is advisable to organize (and in fact it is a good
practice) tools in sets and this saves time that can be lost in getting forgotten tools.
Note that a right tool is to be used / purchased for the right job.
Safe and economical operation is a result of proper use of the tools. Incorrect use of
tools lead to accidents, for example, the use of pliers as substitute for wrenches or
screwdrivers being used as levers can result not only in the damage of the tool and
/or equipment, but it can also lead to accidents.
Another very important aspect is care of hand tools. Longer usages of hand tools
require safekeeping and a good state of repair. This will require:
 A good storage place (room, building, container or other space used for
storing and issuing tools);
 Regular inspection to assess the tools (working condition and the state of
corrosion and wear for the moving parts);
 Cleanliness;
 Lubrication: When properly done, lubrication gives the following advantages:
o Reduced loss of energy by friction;
o Raises the efficiency of the tools or equipment;
o Reduction of wear and tear;
o Increased serviceable life;
o Maintains accuracy; and
o Ensures smooth and efficient operation.
 Proper handling and packing, for example, tools that need sharpening should
be properly sharpened.
Examples of the common hand tools for maintenance works are:

 Feeler (or thickness) gauge;
 Screw drivers and Allan keys;
 Pliers;
 Hammers;
 Chisels; punches, tool bits;
 Clamps (e.g. C - clamps); and
 Wrenches:
o Chain wrenches;
o Open wrenches (they totally enclose the nut);
o Combination wrenches (one end is open –up the other being box-end);
o Adjustable wrenches;
o Torque wrenches;
o Torque multipliers;
o Socket wrenches, devices tools (multipliers) and accessories; and
o Other types of wrenches e.g. Spanner wrenches, bulldog wrenches, T-
handle socket wrenches etc.
10.2.4.6 Maintenance monitoring
If the maintenance is to be efficient, a good recording and costing system need to be

introduced. A proper recording system also simplifies the evaluation and analysis of
the system as well as the machines. Such recording and costing system will include
the following documents:
 Tools and equipment register which indicates/controls the movement of the
tools and equipment on the daily basis;
 Asset register: This will comprise an inventory of each plant item in the fleet
with the information regarding the date of purchase, registration or code
number, purchase price, current value, location, hours operated etc.;
 Maintenance schedule: This will indicate the type of maintenance and
servicing on each plant item and the time intervals between each plant
maintenance operation;
 Job cards: This is filled out each time the maintenance work is performed (by
the fitter) giving the description of the work done, materials used, time taken,
receiving defects etc.;
 History records: This is prepared for each individual machine by transferring
the information on the job card together with the hours operated and the fuel
used. The monthly records are used to prepare costs for comparison with the
budgeted values. The variances are used in controlling maintenance adjusting
time rates and making decisions on replacement a sale of the plant item; and
 Checklist: This is a simple form prepared with the intention to be used when
making inspection. The form lists down the items/components to be checked
for each type of machine and the person and date of inspection. An example
of such checklist is shown on Table 10.5.
Table 10.5 Checklist for machine inspection.

Inspect and check off the following items and show all defective items with ‘x’ mark
and a ‘’ to those that are not defective:
ITEM TO DEF OK DEF OK DEF OK DEF OK DEF OK

CHECK
Bearings X  
Clutch  X 
Brake(s)   X
Motor   
Rolls  X 
INSPECTED
BY: C.T. C.T C.T
DATE: 6/1/2005 6/2/2005 6/3/2005
KEY:
DE – Defective;
OK – Okay.
Where the item is found defective, a separate record should be kept to indicate the
type of defect.
Chapter 11
Procurement and Management of Construction
Professional Services Contracts
11.1 Introduction
A construction project is normally undertaken through various stages. In a

conventional arrangement, there are three parties involved in a construction project.
A client who is responsible for the promotion of the project and normally pays for it,
a consultant who provides professional services for the project and the contractor
who undertakes the construction. The feasibility, design and supervision of
construction are normally undertaken by consultants. There may be a number of
reasons for engaging a consultant in a construction project. These may include the
following:
• Limited in-house the expertise to provide the service;
• Lack of capacity even when expertise exist – there could be more jobs than
the available in-house capacity;
• To derive benefits from expertise from outside the clients organization
through increased value for money;
• There may be donor imposed conditions; and
• To gain specific long term benefits aimed at building internal capacity
through on the assignment training by an external consultant.
The term “Consultant” as applied in the construction industry means a company,

corporation, organization, partnership or individual person registered or capable of
being registered by the relevant professional regulatory body, where such registration
is legally necessary, engaged in or able to be engaged in the business of providing
services in architecture, engineering, surveying, management or any other relevant
field of professional activity including technical assistance, and who is according to

the context, a potential party of the party to a contract with a client.
This is the definition adopted in this chapter that also draws heavily from the
guidelines in Consulting Services Manual published by the World Bank in 2006. The
philosophy, terminologies and procedures presented in this chapter are those
presented in the manual.
11.2 Principles of Procurement of Construction Professional Services

Contracts
The main principles guiding the procurement of consulting services are as follows:
 Transparency – the procedure for advertising, receipt of proposals from
prospective consultants, evaluation and award of the contract should be clearly
known to the consultants and should be followed in the process;
 Fairness – all eligible consultants should be given opportunity to participate in

the process with consideration to the economy. In other words, if it is a large
project, sufficient effort and resources should be used to ensure that, as many
consultants as possible are aware of the opportunity. However, for a small
project, or where it is known that only a few consultants are capable of providing
the required services, resources used to reach consultants should not be
excessive;
 Value for money: value for money can be obtained where the best services are
obtained at least cost. This is assumed to take place where there is wide
competition. It is therefore necessary to ensure that there is indeed competition
and that where consultants are selected after intensive competition, the value for
money is obtained. It has to be stated here the this principle assumes market
forces in play; and
 Accountability: Because public officials are entrusted with the implementation of

the procurement procedures, they must be held accountable for their actions
Procurement and Management of Construction Professional Services Contracts 344
especially where there are clear procedures.
In the following sections, the different procedures that will be discussed will revolve
around these principles.
11.3 Procedures for Selection of Consultants
11.3.1 Types of procurement of construction professional services
Consultants are mainly selected on the basis of first, the quality of their services and
secondly, their costs. The main reason for this approach is that technical decisions
made by consultants early in the project life would have significant cost implications
later in the life of the project. If wrong decisions are made, this may have disastrous
consequences later in the project. If sound decisions are made during preliminary and
detailed design stage, the client is likely to save money not only during the
construction stage but also during the operation and maintenance stage. It is therefore
logical to give priority to quality rather than cost at the design stage.
There are several methods for the selection of consultants each suitable for a specific
situation. In this chapter four methods will be discussed in detail. These are:
 Quality and Cost Based Selection (QCBS);
 Quality Based Selection (QBS);
 Selection under a Fixed Budget (SFB); and
 Least Cost Selection (LCS).
The choice of the appropriate method of selection is related to the nature, size,
complexity, likely impact of the assignment, technical and financial considerations,
and on the particular circumstances of the client. It is therefore necessary to carefully
define the consulting assignment, in particular the objective and the scope of the
services, before deciding on the selection method.
11.3.2 Quality and Cost Based Selection (QCBS)

Quality and Cost Based Selection (QCBS) is a method based on the quality of the
proposals and the cost of the services to be provided. It is the method most frequently
used to select consultants in public projects. Since under QCBS the cost of the
proposed services is a factor of selection, this method is appropriate when:
 The scope of work of the project can be precisely defined and the terms of
reference (or tasks to be performed by the consultant) are well specified and
clear; and
 The client and the consultants can estimate with reasonable precision the staff
time as well as the other inputs and costs required of the consultants.
QCBS is appropriate for projects such as:

 feasibility studies and designs where the nature of the investment is clear and
well defined, known technical solutions are being considered, and the
evaluation of the impacts from the project are not uncertain or too difficult to
estimate;
 preparation of bidding documents and detailed designs;
supervision of construction of works and installation of equipment;
 technical assistance services and institutional development of client agencies;
and
 procurement and inspection services.
Under QCBS the technical and financial proposals are submitted at the same time in
separate sealed envelopes (two-envelope system). Proposals received after the
submission deadline are rejected. Evaluation of proposals is carried out in two stages:
first quality, and then cost. The technical envelopes are opened by a committee of
officials of the Client immediately after the closing time for submission of proposals;
the financial proposals remain sealed until the technical evaluation and the evaluation
report are completed. The financial envelopes of those consultants who submitted
responsive technical proposals meeting the minimum qualifying mark are opened in
the presence of the consultants or their representatives. The proposals are then
evaluated. Once the financial proposals are evaluated, a combined evaluation of the
technical and financial proposals is carried out by weighting and adding the quality
and the cost scores, and the consultant obtaining the highest combined score is
invited for negotiations. The principles of negotiation are presented later in this
chapter.
QCBS permits the client to select a preferred trade-off between cost and quality and
to benefit from price competition, even if only to a limited extent. Transparency is
increased under QCBS with public opening of the financial proposals. Another
advantage is the possibility that contract negotiations will be easier because of the
limited scope for financial negotiations.
QCBS may be inappropriately used for complex or specialized assignments in which

the scope of work is not precisely defined and staff-months are difficult to estimate.
When this occurs, since price is a factor of selection under QCBS, competitors will
tend to propose more conventional approaches and tested methodologies to keep the
cost of services low, rather than making full use of their capabilities to propose the
most effective or innovative way to carry out the assignment. This may ultimately
affect the quality of the project, especially where the downstream impacts are
complex, large, or unknown.
11.3.3 Quality Based Selection (QBS)
QBS is based on an evaluation of the quality of the proposals and the subsequent
negotiation of the financial proposal and the contract with the consultant who
submitted the highest ranked technical proposal. QBS is appropriate if:
 the quality of the services becomes of overriding importance for the outcome
of the project;
 the scope of work of the assignment and TOR are difficult to define because
of the complexity of the assignment, or the need to select among innovative
solutions, or due to particular physical, social, or political conditions;
 the assignment can be carried out in substantially different ways, such that
cost proposals may not easily be comparable; and
 The introduction of cost as a factor of selection renders competition unfair.
QBS should be adopted for assignments such as:

 master plans, complex pre feasibility and feasibility studies, and design of
complex projects; and
 technical investigations whose procedure cannot be predicated with accuracy.
For example failure analysis.
In some cases the choice between QBS and QCBS may be difficult. In situations of
strong uncertainty and/or risk for the project, QBS should be adopted because quality
is the key element.
A possibility under QBS is for the client to request submission of the technical
proposals only. After receiving the technical evaluation report, the consultant with
the highest-ranking technical proposal is invited to present its financial proposal.
However, the client may wish the financial proposals to be submitted at the same
time as the technical proposals but in separate envelopes (two-envelope system). In
that case, the financial proposals should be kept safely until the technical evaluation
is received. Only the financial proposal of the winning consultant is opened; the
others are returned unopened after negotiations with the winning firm are
successfully concluded.
Since the TOR of assignments under QBS are generally less defined and relatively
more complex than under QCBS, contract negotiations with the winning consultants
may be lengthy and complicated and should be handled very carefully.
Occasionally, the public projects, such as hospitals, schools and colleges and
research centres which have an aesthetic component that has to be taken into account
at the moment the consultant or architect is selected. Design Contest (DC) is a
selection procedure very similar to QBS under which a client invites consultants to
present a plan or design for a project on the basis of a concept provided by the client.
The winner is selected on the basis of quality, with or without prize award, by an
evaluation committee. DC procedures are a tool for selecting the best available
architects, engineers, and planners for specific projects with important aesthetic
contents.
Consulting assignments for major projects that can be implemented through DC are:
 terminals of airports, and railway stations;
 public buildings such as hospitals, theatres, concert halls, university
campuses, art and sport centres, exposition and fair complexes, and
government buildings; and
 Rehabilitation of large obsolete structures, to create multipurpose centres for
public use.
11.3.4 Selection under a Fixed Budget (SFB)
Selection under fixed budget (SBF) is based on disclosing the available budget to
invited consultants in the RFP and selecting the consultant with the highest-ranking
technical proposal within the budget. Because consultants are subject to a cost
constraint, they will adapt the scope and quality of their services to that budget. The
client must therefore ensure that the budget is compatible with the terms of reference
and that consultants will be able to perform the tasks within the budget. SBF is
appropriate only when:
 the budget is fixed and cannot be exceeded;

 the TOR are precisely defined;
 The time and staff-month effort required from the consultants can be assessed
with precision; and
 SFB is used for well-defined and simple assignments with a low financial risk
for the consultants and where there is lack of flexibility in funds allocation
when funding is available only in fixed amounts from donor grants and from
trust funds. Such approach can be used for simple feasibility studies and
review of existing studies, review of existing technical designs and bidding
documents, simple designs and supervision of small simple projects.
Under SFB, consultants are requested to submit their technical and financial
proposals in separate envelopes. Technical proposals are evaluated first, using the
same procedure followed for QCBS and QBS, and then the financial envelopes are
opened in public. The consultant who has submitted the highest ranked technical
proposal among the remaining proposals is selected.
Since the budget is predetermined, the consultant’s TOR cannot change substantially,
and technical negotiations shall cover minor aspects. SFB allows clients to plan a
budget early on, rather than wait for the uncertain outcome of negotiations.
Furthermore, it allows clients to receive better quality proposals than under QCBS
because it is easier for consultants to maximize quality under a fixed budget. SFB
also requires a shorter time for negotiations than QBS. SFB is also convenient for
consultants because the pre-established budget allows them to determine in advance
whether they are interested in competing for the proposed assignment, and to develop
the best proposal consistent with that budget.
More than with QBS and QCBS, the SFB method requires the TOR to be consistent
with the established budget and to contain a well-specified scope of work in order for
consultants to present clear and responsive proposals. One risk of using the SFB is
under budgeting the TOR and by doing so discourage good consultants from
participating, and receive poor performances from the awarded consultants.
11.3.5 Least Cost Selection (LCS)
Under this method a minimum qualifying mark for quality is established and
indicated in the RFP. Short listed consultants have to submit their proposals in two
envelopes. The technical proposals are opened first and evaluated. Proposals scoring
less than the minimum technical qualifying mark are rejected, and the financial
envelops of the rest are opened in public. The consultant with the lowest evaluated
price is selected.
The LCS method is more appropriate for small assignments of a standard or routine
nature where well-established practices and standards exist and from which a specific
and well-defined outcome is expected, which can be executed at different costs, for
example:
 engineering designs and/or supervision of simple projects;
 repetitive operations and maintenance work and routine inspections; and
 simple surveys.
Clients may adopt this selection method when they wish to capture cost benefits from
mature technologies or new methods for which quality risks for the final output are
considered negligible.
11.3.6 Other methods of selection
Other methods include selection based on consultants qualification (SBCQ) method

applies to very small assignments for which the cost of a full-fledged selection
process would not be justified. In this method, qualification information on the
consultants’ experience and competence relevant to the assignment; establishes a
shortlist; and selects the firm with the best qualifications and references to submit a
combined technical and financial proposal. The other method is Single Source
Selection (SSS) procedure under which the Client asks a specific consultant to
prepare technical and financial proposals, which are then negotiated. Since there is
no competition, this method is acceptable in exceptional cases and made on the basis
of strong and convincing justifications where it offers clear advantages over the
competition, because:
 the assignment represents a natural or direct continuation of a previous one
awarded competitively, and the performance of the incumbent consultant has
been satisfactory; or
 a quick selection of the consultant is essential, e.g., in emergency operations
such as natural disasters and financial crisis; or
 the contract is very small in value; or
 only one consulting organization has the qualifications or has experience of
exceptional worth to carry out the assignment.
Normally, it is not agreeable to award a continuation contract on a SSS basis if the

initial assignment was not awarded competitively, or was awarded under tied
financing or reserved procurement, or the downstream assignment is substantially
larger in value. In these cases, a competitive process acceptable should be adopted
and normally the incumbent should not be excluded from consideration if he or she
expresses interest.
11.4 Procedures of Procurement of Construction Professional Services
11.4.1 Steps in the selection process
Once a project is identified, the Client decides on the nature and scope of consulting
services needed, taking into consideration the institutional strength, and technical
knowledge of the executing agency. Prior to issuance of any request for proposal, the
proposed plan for the selection of consultants under the project shall be furnished for
its review and approval. Depending on the selection method adopted, the selection
process carried out by the Client includes the following steps:
 Preparation of the terms of reference (TOR) of the assignment;
 Preparation of the cost estimate to determine the budget of the assignment;
 Advertising to invite expressions of interest from consultants;
 Short listing to identify consultants qualified for the assignment;
 Preparation and issuance of the request for proposal (RFP);
 Preparation and submission of proposals by the consultants;
 Evaluation of technical proposals, i.e., quality evaluation;
 Evaluation of financial proposals, i.e., cost evaluation;
 Final combined quality and cost evaluation to select the winning proposal
specifically where QCBS is used; and
 Negotiations and signing of contract between the client and the consultants.
Each step is discussed hereunder.

11.4.2 Preparation of the Terms of Reference
The Terms of Reference (TOR) explains the objectives, scope of work, activities
and/or tasks to be performed, the respective responsibilities of the client and the
consultant, and expected results and deliverables of the assignment. They help reduce
the risk of unnecessary extra work, delays, and additional expenses for the client. In
addition, they help reduce the risk of ambiguities during the preparation of consultant
proposals, contract negotiation, and execution of services.
Preparation of the TOR requires expertise with the type of assignment and the
needed resources. If the needed qualifications to produce the TOR are not available in-
house, the client can hire a specialized independent consultant. TOR has to be written
by experts who have only the interest of the client in mind.
Drafting the Terms of Reference

The following considerations must guide the preparation of the TOR:
 TOR should contain sufficient background information on the project to enable
consultants to present responsive proposals;
 TOR, in particular the scope of work, should be consistent with the available
budget; and
 TOR should take into account the organization of the client, its level of
technical expertise and institutional strength.
The level of detail and quality of information that can be contained in the TOR
influence the selection method to be adopted. The authors of the TOR should be
familiar with local natural and social conditions such as climate, topography,
institutions, people, customs, holidays, remuneration levels, and transportation
systems. Seasonal variations, together with the peculiarities of the region where the
assignment will take place, should be considered if they can affect the execution of
fieldwork. Both project and logistic related aspects of the project should be
researched.
The TOR should clearly define the output and deliverables required of the
consultants, e.g., reports, maps, drawings, or software, and should list information
that the client will furnish to the consultants. This information may include past
studies, aerial photographs, maps, or records of surveys carried out in the assignment
area. The TOR also should identify the client’s executing agency and clarify
institutional arrangements for the supervision of consulting work. Additionally, the
TOR should specify the facilities and counterpart staff to be provided or designated
by the client.
Contents of the Terms of Reference

The TOR normally consists of the following sections:
 background of the project - the background summarizes the main features of
the project and describes the objectives and general purpose of the
assignment;
 objectives of the assignment - the TOR should precisely describe the
objectives and expected results of the assignment to avoid misleading
consultants;
 scope of work - This section of the TOR describes in detail all main activities
(or tasks) to be conducted by consultants and the expected results. The TOR
should describe only the activities and not the approach or the methodology
by which the results are to be achieved since these would be the task of the
proponents;
 capacity building for the client’s staff (if needed) - if transfer of knowledge is
an objective of the assignment, the TOR should provide specific details on
the characteristics of the required services and ask consultants to propose
training approaches and methods;
 list of reports, schedule of deliveries, period of performance – the TOR
should indicate the estimated duration of the assignment, from the date of
commencement to the date the client receives and accepts the consultant’s
final report or a specified completion date;
 data, local services, personnel, and facilities to be provided by the client - this
section should list in detail all the information and services that will be made
available by the client for use by the prospective consultant. The TOR also
should describe the client’s available software and computer models to be
used by the consultants. Facilities to be provided by the client may include
office space, vehicles, survey equipment, office and computer equipment, and
telecommunication systems; and
 Institutional arrangements - the TOR should define the institutional setup
surrounding the assignment, indicate the role and responsibilities of
everybody involved, and specify the type, timing, and relevance of
everyone’s participation, including the Client’s. The TOR should define the
hierarchy and level of authority of counterpart personnel as well as the
requested level of experience of the Client’s personnel who will be integrated
into the consultants’ team.
The TOR will then form the backbone of the request for proposal sent to prospective
consultants to prepare their proposals.
11.4.3 Preparation of the cost estimate and budget for the assignment
The cost estimate of an assignment is prepared by adding the remuneration of

consultant staff and the direct expenses to be incurred by consultants during the
execution of their duties based on the scope of work as described in the TOR.
Preparing a cost estimate is an interactive process necessary to clarify to the client
that the assignment will be carried out in a manner compatible with the project
objectives and the resources available. The preparation of the cost estimate can lead
to the revision of the TOR.
In general, a cost estimate includes expenses relating to:

 consultant staff remuneration;
 travel and transport;
 mobilization and demobilization;
 staff allowances;
 communications;
 office rent, supplies, equipment, shipping, and insurance;
 surveys and training programs;

 report translation and printing;
 taxes and duties; and
 contingencies.
The cost estimate is based on an estimate of the man power (expert per month)
required for carrying out the services, taking into account the time required by each
expert needed, and then making estimates for each of the related cost components. It
is important to define these inputs as well as possible.
11.4.4 Advertising for expression of interest
The main objective of advertising is to inform all eligible consultants about

consulting opportunities. Advertising promotes transparency, enhances competition
and facilitates the participation of smaller firms which otherwise might not have easy
access to information or to local contacts. In order for the consultants to appreciate
the work that might be involved to enable them to decide on whether or not to submit
a proposal, the client must include a brief description of the consulting services
needed for a project in the advertisement to consultants to submit expressions of
interest.
Clients may also advertise these assignments in international newspapers or technical

magazines. For unusual or very large assignments, a request for expressions of
interest may also be sent to consulting and professional associations, embassies, or
firms that are known or are registered. The request for expression of interest should
request sufficient information for the client to judge the consultants’ capabilities in
the field of the assignment. The response might include, for example, descriptions of
similar assignments conducted, experience in similar conditions, and availability of
appropriate staff.
11.4.5 Preparation of shortlists
The client prepares a shortlist comprising normally three to six firms. The client
reviews the credentials of those who submitted expressions of interest and give first
consideration to those that possess the relevant qualifications. Additional reliable
consultants can be added to the list if there is insufficient number who submitted
their expressions of interest.
Since preparation of the shortlist should be the exclusive responsibility of the client.
The client carries out a diligent review of key aspects such as:
 qualifications in the field of the assignment;
 technical and managerial capabilities of the firm;
 core business and years in business;
 qualifications of key staff;
 client references; and
 administrative and financial strength.
In principle, short-listed consultants can be allowed to associate with each other, only
with the permission of the Client but this should not override the principle of
competitiveness.
11.4.6 Request for proposals
The request for proposal for a specific assignment provides all the information
necessary for the short listed consultants to prepare their proposals. It identifies the
evaluation criteria, selection method, and procedures that will be used to evaluate
them. The RFP also contains the TOR and the draft contract for the assignment. The
RFP can be adapted for any of the selection methods described in section 11.3. A
typical RFP includes the following sections:
Section 1: Letter of Invitation (LOI) - the LOI states the intention of the client to
enter into a contract for a given assignment and informs the short listed
consultants that they are invited to submit a proposal for the assignment.
It provides basic information regarding:
 the name of the client and the sources of funds to finance the
consulting services;
 the names of the short listed consultants;
 a brief description of the objectives and scope of the assignment;
 the method of selection; and
 the date, time and address for submission of proposals.
Section 2: Information to Consultants (ITC) - The ITC section contains all

information consultants need to prepare responsive proposals. Among
other things, it informs consultants about the evaluation process,
including the evaluation criteria and sub criteria, their respective weights
and the minimum qualifying mark, in order to provide for fair and
transparent selection process. It also provides specific information related
to the project and the assignment.
Section 3: Technical Proposal – In this section, the consultant is normally expected

to present the methodology that is proposed for the assignment. It is
normal to use standard forms to allow the requested information to be
presented in a clear and readily comparable manner and to allow Clients
to easily understand and evaluate proposals in accordance with the
established criteria.
Section 4: Financial Proposal – In this section, a clear breakdown of the financial

implications of the proposal are presented. Again the use of standard
forms is normal.
Section 5: Terms of Reference – as described in Section 11.4.2.
Section 6: Standard Form of Contract (including General Conditions of Contract,

Special Conditions of Contract, and Appendices) - includes standard
forms of contract: one for complex time-based consulting assignments
and the other for assignments remunerated on a lump-sum basis. The
SRFP also includes two samples that may be used for smaller contracts
under time-based or lump-sum remuneration.
11.4.7 Preparation of proposals
The Client should give consultants enough time to prepare their proposals.
Depending on the type and size of the assignment, a period of time of four weeks for
simple assignments and up to three months for complex assignments is normally
allowed. These periods refer to actual preparation time, and additional time
(sometimes not negligible) should be allowed to include deliveries of the RFP and
the proposals. During this period consultants may seek clarifications on the
information or provisions contained in the RFP. Clarifications may help consultants
submit responsive proposals. Consultants must submit their requests for clarification
to the Client in writing, by facsimile or e-mail. Clients must respond promptly, also
in writing, and send a copy of the query and its response to all short listed consultants
who have confirmed their intention to submit proposals. The Client should not
identify the source of the inquiry. When the clarification results in important changes
to any part or provision of the original RFP, the Client extends the deadline for the
submission of proposals to enable the consultants to take into account the responses
to their questions.
11.4.8 Receipt and opening of proposals
Under QCBS, SFB, LCS, SBCQ, and SSS, both technical and financial proposals
must be submitted at the same time. Under QBS, although financial proposals may
be submitted together with technical proposals, the practice is to require submission
of the technical proposal first, followed by submission of the financial proposal by
the consultant whose technical proposal is ranked the highest (two envelope system).
Proposals must be submitted at the designated place (exact address, office, and room
number to avoid any ambiguity), no later than the date and time indicated in the RFP.
Under QCBS, SFB, and LCS, since price is a factor of selection, proposals received
after the deadline for submission are disqualified and must be returned to the
consultants unopened (any delay by a specific firm in submitting its proposal could
be used to tamper with other proposals or to allow the firm to modify its proposal
price). Under SBCQ and SSS, where technical and financial proposals are requested
from only one consultant, a certain degree of flexibility is acceptable when a minor
delay for reasons beyond the control of the applicant occurs.
When submission of both technical and financial proposals is required, officials

appointed by the Client open the technical proposals immediately after the deadline.
They verify that the financial envelopes are sealed and that they are deposited in a safe
place under the custody of a designated officer (auditor, legal counsel, etc.). The Client
should keep a record of the date and time each technical proposal was received and the
date on which they were made available to the evaluation committee. Minutes of the
technical proposal - opening event are kept, including a list of the firms that presented
proposals and a list of the documents that were submitted. The technical proposals are
handed over to the evaluation committee for evaluation.
11.4.9 Evaluation procedure for proposals
11.4.9.1 Technical proposals
After the proposals have been received and opened, the evaluation process begins.
Each evaluation is normally carried out individually. Each member of the evaluation
committee establishes, as part of the evaluation process, whether the proposals are
substantially responsive, that is, if there are no important omissions or deviations
from the stated objectives, TOR, or other key requirements of the RFP. The
evaluation also establishes whether a proposal passes the minimum qualifying mark
provided in the RFP.
By applying the criteria and sub criteria specified in the RFP, committee members
should establish the absolute, not the relative, quality of the proposals. In fact, even in
a set of poor proposals one is the best; a relative evaluation singles out the best
proposal on a relative scale and still leaves the Client with a poor choice. On the
contrary, the evaluation should single out the proposal with the best objective quality.
The way to establish such quality is to define the grades of the rating system as
clearly as possible.
After each committee member has independently completed the evaluation, the
committee should meet to review and if necessary discuss the merits of individual
evaluations and scores. For each proposal, the Evaluation Committee calculates the
average of the scores allocated by all members under each criterion, establish the
technical ranking of the proposals, and identify the best. The evaluation report must
include the joint as well as the individual evaluations. The evaluation process should
include comments on the strengths and weaknesses of all proposals that have passed
the minimum technical qualifying mark indicated in the RFP. This will help identify
any issues in the winning proposal that need to be clarified during negotiations. The
report of the outcome of the evaluation is then submitted to the relevant authority for
further decisions.
11.4.9.2 Financial proposals
The opening the financial proposals, is open in public after verifying that they have
remained sealed until then. The name of the consultant, the quality scores, and the
proposed prices are read aloud and recorded as each financial proposal is opened. No
modifications to the financial proposals are permitted.
The evaluation committee should first review the proposals for arithmetical errors
and consistency between the financial and technical proposals (e.g., omissions of
items included in the technical proposals). Arithmetical errors should be corrected,
omitted items evaluated, and the corresponding adjustments made to the offered
prices to obtain the final evaluated prices. For the purpose of comparing proposals,
evaluated prices should be converted to a single currency using the exchange rate,
date, and source indicated by the Client in the RFP. The scores of the evaluated
prices should then be calculated according to the formula provided in the RFP.
11.4.9.3 Combined evaluation and final score

If QCBS is the method of selection, the evaluation committee combines the scores of
the technical and financial proposals to obtain a final ranking of the proposals and
recommendation for award. Those data are recorded in the Financial and Final
Evaluation Report, which is delivered to the decision-making authority. The
authority revises the report, confirms the recommendation for award, and obtains any
additional clearance that may be required under local regulations.
After Final Report to determine if the evaluation is consistent with the provisions of
the RFP, the Client invites the top-ranked consultant to negotiations. The Client then
informs the other consultants of the name of the selected firm and that negotiations
with that firm will begin. If the Client believes that negotiations could fail or could
go beyond the proposal validity period, he should ask the consultants to extend the
validity of their proposals.
Once the contract is awarded, firms may want to learn the reasons why they were not
selected. The Client should provide reasonable, prompt, and satisfactory replies to all
such requests. The Client should not discuss the details of any other proposals.
Briefing losing firms helps them to understand why they lost, encourages them to
continue submit proposals in the future and to improve their quality.
11.5 Criteria for Evaluation of Proposals
The project objectives and the underlying TOR determine the qualifications and
experience required from the consultants who will carry out the assignment. In
adopting evaluation criteria, the Client seeks to ensure that the proposal selected will
offer the best quality for the services required. The following criteria shall be used as
a basis for evaluation of technical proposals:
 specific experience of the consultants relevant to the assignment;
 adequacy of the proposed methodology and work plan in responding to the
TOR;
 Qualifications and competence of key staff for the assignment; and
 Other criteria specific for a particular situation.
Table 11.1 shows a range of points that may be allocated to each criterion on a scale
from 1 to 100. The weights may be adjusted for specific circumstances. The actual
distribution should depend on the type of assignment and the relative importance
each criterion has for the success of the assignment. A good practice is to have those
who prepared the TOR advice in the selection of sub criteria and relative weights.
Table 11.1 Evaluation criteria
Evaluation criteria for technical proposals Points (weights)
Specific experience of the consultants 5 to 10

Adequacy of the proposed methodology and work plan 20 to 50
Qualifications and competence of key staff 30 to 60
Suitability of the transfer of knowledge program (training) – Normally

optional not to exceed 10
National participation (nationals among key staff) – optional Not to exceed 10
Total 100
Each of the criterion may be subdivided further into sub-criteria. For example, the
criterion “Qualifications and competence of key staff” is divided into the following
three sub criteria:
 General qualifications;
 Adequacy for the assignment; and
 Experience in region.
In any case all the sub criteria should be clearly stated in the request for proposal.
Since sub criteria and their weighting determine the outcome of the evaluation, they
should be chosen considering the aspects that are critical to the success of the
assignment. Evaluation criteria and sub criteria, associated points, and the rating
system form an arithmetic model to assess the technical merit of the proposals. The
more reliable the model, the more accurate the evaluation, and the greater the
possibility that the Client will select the proposal of the consultants who are best
suitable for the assignment.
11.6 Negotiation and Award of Contract
The objective of negotiations is to arrive at a mutually satisfactory contract between

the Client and the selected consultants. The parties discuss the technical proposal
submitted, agree on the detailed scope of work, negotiate financial terms, and discuss
and finalize contract conditions. A good contract should protect the interests of both
parties adequately. After the final evaluation report and the recommendation for
award, the Client notifies the winning consultant in writing and invites that firm for
negotiations. The Client indicates in the notification the date and time set for
negotiations, and any issues or comments on the consultants’ proposal to enable them
to prepare a response and make any necessary arrangements. The Client also informs
consultants whose proposals were not chosen which firm was selected and that
negotiations with that firm will begin.
The client appoints a negotiating team whose members should be fully familiar with
the TOR, the consultant’s proposal, the comments and suggestions of the evaluation
committee relating to the technical and financial evaluation reports, and
recommendations of the decision-making authority. Negotiations are based on a
mutually agreed upon agenda composed of the main items to be negotiated, that is,
methodology, work plan, proposed staff, inputs, financial terms, and special
conditions of the contract.
Depending on the selection method and proposed type of contract, technical and
financial items that may be negotiated, within the limits, include:
 scope of work;
 technical approach and methodology;
 work plan and activity schedule;
 organization and staffing, and time schedule for key staff;
 deliverables;
 counterpart staff;
 counterpart facilities and equipment;
 contract special conditions;
 staff unit rates;
 reimbursable expenses; and
 Proposed contract price.
Contract negotiations for small assignments are usually completed within one or two
days. However, for large assignments at least one full week should be allowed.
Negotiations may even be carried out in phases when decisions are needed from
other authorities. The client should keep the minutes of the negotiations. If the issues
to be negotiated are many and complex, significant points can be initialed by the
counterparts as negotiations progress as these may form part of the contract in case
negotiations are completed successfully.
Because the quality of the technical proposal of the selected consultants is either the
main or the predominant factor in ranking the consultants, the discussion shall not
substantially alter the original TOR or terms of the contract to reduce the proposed
price. The limit of the negotiated proposal is no change in the initial ranking of the
evaluated proposals. There are also limits to financial negotiations. They should be
used by the client to achieve consistency between the quality and the price of the
offered services, and not just a price reduction at all costs. For instance, if staff rates
proposed by a consultant are consistent with market rates for similar services, the
only negotiable item would be the fee component of the rate, and this cannot be cut
unreasonably. Details of technical issues in negotiations are beyond the cope of this
book.
11.7 Management of Construction Professional Services Contracts
11.7.1 General principles
Consulting assignments are generally of intellectual nature. Contracts that govern the
execution of such assignments are designed as such. It is also assumed that
consultants are professionals of respectable standing in their areas of expertise.

Besides agreeing on the deliverables, their quality and their timing, most of the other
issues are left to the consultant. Unlike, construction contracts where day to day
supervision of contractors is advocated in the standard contracts, consultancy
contracts leave the implementation to the consultant with little or interference from
the client except where the primary responsibility and rights are violated. Various
standard contracts are available for consulting assignments.
11.7.2 Supervising consultants
11.7.2.1 Contract effectiveness
Consultants can seldom begin work immediately after signing the contract. A signed
contract, which has received approval by higher authorities, or compliance with
certain prerequisites (e.g., funding requirements) are met. To enable consultants to
begin work promptly, the Client should make arrangements for supervision of the
assignment, in particular:
 appoint the counterpart staff;
 prepare for provision of items to be provided by client as per contract;
 inform all concerned institutional parties;
 effectuate advance payments; and
 obtain authorizations, data, and background material.
11.7.2.2 Execution of the assignment
Supervision by the Client

The Client is responsible for supervising consultant assignments. The Client must
monitor the progress of work, the timely completion of deliverables, the staff months
and money expended (for time-based contracts), and determine where, within the
contract, changes in the scope of work might be appropriate. The contract usually
requires that the consultants submit regular progress reports and that the Client
provides comments in a timely manner.
The Client should designate a counterpart project manager with adequate technical
qualifications, managerial experience, and power of authority. In certain instances,
for large and politically complex projects, a project steering committee composed of
high-level representatives of the Client and the consultants may be formed to
exercise arm’s length supervision over the assignment through the counterpart
project manager and the consultants’ team leader. The steering committee can be
particularly useful when the Client’s executing agency and the consultants have to
coordinate their work with other agencies of the Client. The opportunity to report on
a regular basis to such a committee can facilitate collaboration and understanding
between the Client and consultants on disputes over important technical and
contractual issues. The steering committee should convene for specific purposes and
at important assignment or contractual deadlines.
Amendments
The Client or the consultants may propose amendments to the contract when either
unforeseen events or the Client’s decisions make it necessary to modify the TOR or
the consultants’ scope of work. Such amendments should be approved by appropriate
bodies in the client’s organization.
Disputes
During execution of the assignment, disputes may arise between the client and
consultants. The parties involved should attend to such disputes promptly and
constructively. Unresolved disputes relating to technical and administrative matters,
such as interpretation of the contract, payment of services, or replacement of
personnel, should be treated in accordance with the provisions of the contract.
Unsatisfactory Performance
Poor performance may involve one or more particular staff of the consultants’ team,
or the whole team. Based on the provisions of the contract, the Client will advise the
consultants to take the necessary measures. Poor performance should not be
tolerated, and the consultants should act quickly to comply with a reasonable request
to improve the performance of the team or to replace any particular staff member
who is not performing adequately. If the consultants fail to take adequate corrective
actions, the Client may terminate the contract in accordance with the provisions of
the contract.
Delays
Consulting services may be delayed for a variety of reasons. The consultants should
notify the Client of such delays and explain the causes of the delay. If corrective
action requires extra work, and the delay cannot be attributed to the consultants, the
extra work should be reimbursed in accordance with the contract.
Completing the Assignment

The draft final report contains the conclusions of the consultants’ work and their
recommendations. Given the delay in publishing the formal final report, the draft
final report is often the document used by the Client for decision-making. This final
report is distributed, as indicated in the official distribution list, for review to all
counterparts, relevant government departments, local authorities who could be
affected by the project.
The consultants collect and review the comments made by all parties and, in
agreement with the Client, address these comments in the final report. If additional
work is necessary to address important comments, such work may have to be
financed with or without a contract amendment, out of the contingencies provided for
in the contract, by government funds, or additional financing.
Any mistake or incomplete work on the part of the consultants should be remedied at
no cost to the Client. Furthermore, the consultants are responsible for the technical
integrity and objectivity of their findings and recommendations. The preferred way
to handle significant disagreements on technical matters is to substantiate dissenting
views in the report. Prior to the final payment, the consultants must have completed
the services, and the Client must have acknowledged completion of the assignment.
11.8 Performance evaluation
The Client is responsible for ensuring that funds used to finance consulting services
are properly spent. Consultants’ performance should be monitored during the
assignment, but a final opinion should be formally expressed only upon its
completion. Official comments by Client staff should pertain only to the assignment
and take into consideration the views of the Client. The following procedures are
recommended to assess performance during the assignment:
 Closely monitor consultants’ performance during supervision missions and
report on performance in the supervision reports; and
 If the consultants’ performance is found to be unsatisfactory during execution
of the assignment, the Client should inform the consultants in writing and give
them the opportunity to comment.
Upon completion of an assignment, the Implementation Completion Report (ICR)

prepared by the Client should be the main vehicle for commenting on the consultants’
performance. When evaluating a particular consultant in the ICR, consider the
following:
 Criticism must be restricted to facts related to the assignment (e.g., the
assignment was completed six months later than contractually agreed) and
should not include subjective judgments (e.g., the assignment was completed
six months later than agreed upon because of the incompetence of the
consultants);
 Criticism on performance must be supported by evidence; and
 Consultants must be given the opportunity to respond in writing and their
comments included in the ICR.
Successful conclusion of the contract occurs when each party to a contract has
completed his/her obligations and received his/her rights. Likewise in any consulting
contract, a contract can only be deemed to be successfully concluded if the
consultant has completed all the tasks in the terms of reference in accordance with
the contract or its amendment and he has received all payments as per contract.
Chapter 12
Selection of Contractors and
Management of Works Contracts
12.1 Introduction
This chapter will present the procedure used for selection of contractors for works
using the traditional project delivery approach. However, it is first necessary to
consider the alternative ways in which a construction project can be organized, which
vary from doing everything in-house to handing the total responsibility to a
contractor who will finance, design, build and operate the project. However,
whatever the method of project organization is adopted, two things are essential:
 A sound contractual relationship between the owner and each of his consultants
and contractors; and
 Cooperation and trust between the people from different organizations and
professions who are working together on the project.
Any project starts when someone decides that they need something that must be
constructed.
This may be a village deciding that they need a new water borehole, the Ministry of
Works deciding that a new road is needed, or a company decides to build a new high
rise building. They will start by considering:
 Where they will obtain the money to pay for the project; and
 How they will procure the project.
Selection of Contractors and Management of Works Contracts 371
The finance may already be available, in which case the Owner can proceed to
decide on his procurement method. Alternatively, if the finance needs to be raised or
borrowed then the necessary arrangement must be put in place, which may mean
negotiating with a bank or international funding agency.
If finance must be borrowed, the lending agency will probably impose restrictions on
the project and the method of procurement. For example, The World Bank normally
insist that the project is constructed using the International Federation of Consulting
Engineers (Fédération Internationale des Ingénieurs-Conseils – FIDIC), Conditions
of Contract – commonly referred to as FIDIC Conditions of Contract, modified to
include some standard World Bank Clauses. For government-financed projects, it
may be necessary to use standard tender documents adopted to suit certain specific
political and economic conditions in the respective country.
The project owner will need to decide how much of the work he will do himself in-
house and how much he will contract out to consultants and contractors. The range of
options includes:
 All work in-house;
 Design in-house and construction by a contractor;
 Initial design brief in-house, design by a consultant and construction by main
contractors who will use subcontractors as necessary. This is the traditional
method which used with FIDIC Conditions of Contract;
 Initial design by a consultant, with detail design and construction by a contractor
– this method is also commonly known as the traditional approach;
 All design and management by a project manager, using several trade contractors
whom work directly for the owner; or
 Raising the finance, design, construction and operation by a single contractor,
who employs consultants and subcontractors as necessary.
The choice of which procurement method to use will depend partly on the facilities
which the Owner has available in-house, but also on the size and type of the project.
A large organization, which requires a succession of projects, may employ a team of
construction professionals who can establish the requirements and supervise

consultants and contractors. Other organizations, which only occasionally need to
construct a project, will need to employ a consultant to advise him on his
requirements and the best method of procurement for the project.
For any system of procurement, the Owner must decide what he wants. This may be
a very broad requirement, such as a hospital with 400 beds and all the usual
departments, or it may be a detailed requirement for a building to be occupied by the
Owner himself.
It is essential that the Owner establishes his requirements right at the start of the
project. The detailed requirements may develop as the design develops, but changes
of mind must be avoided. Any changes to the requirements, after instructions have
been given to a consultant or contractor, will result in additional work, which means
delay and additional costs. These costs will eventually be paid by the Owner. In
principle, the extent to which the Owner wishes to influence the detailed design and
the way in which he sees the design developing will influence the choice of method
of procurement.
One of the commonest methods of procurement is the traditional approach. Although

this method has its drawbacks, it is still being used mainly due to the experience of
using it. In this chapter, the traditional method will form the basis for presenting the
selection of contractors and the subsequent contract management.
12.2 Construction Project Procurement Using the Traditional Approach
12.2.1 Construction project stages
Construction projects, like many other types of projects, pass through various typical
stages right from inception to commissioning stage. Typically, the stages include:
 Conception stage – at this stage it is realized that there is a problem that requires
a constructed facility to solve it. This may be a road, water supply project, an
office building, a hospital, a bridge, a tunnel etc. Before embarking on the

implementation of the project, it is necessary to be satisfied that:
o the problem can be solved through an engineering solution; and
o the solution is economically viable, that is it is worthwhile to undertake the
project;
 Briefing Stage – the promoter of the project converts the concept into a project
description that he thinks will meet the expected needs. This description would
form the basis for the next stage of the project;
 Preliminary design stage – during this stage a range of technically feasible

solutions are analyzed using engineering design methods to arrive at one general
solution with key design parameters. This stage includes also a full economic
appraisal to ensure that the engineering solution selected is still worthwhile;
 Design or definition stage – this stage involves the generation of construction

information for the intended construction stage. Information generated includes
tender documents; such as drawings, bill of quantities and the conditions of
contract;
 Tendering stage – this involves the selection of a contractor who will undertake
the construction. At the end of the tender stage a contract is entered into with the
contractors selected for the construction of the project;
 Implementation stage – this is the actual construction of the facility in accordance

with the construction drawings and specifications governed by the respective
conditions of contract. delivery of the intended product;
 Commissioning stage – this involves checking whether the finished project is in

accordance with the specifications and drawings; and
 Use and maintenance for the constructed facility is the last stage of the project.
In this chapter, we are only concerned with the tendering stage.
12.2.2 Selection of a contractor
12.2.2.1 Objective
The procedure used to select a Contractor who will execute a particular construction
project is in many cases referred to as TENDERING PROCEDURES. The aim of
this procedure is to select a Contractor who will complete the project at the required
TIME, to achieve the right QUALITY and optimum COST thus providing value for
the employer's money.
In special cases, it is possible to select only one contractor to undertake the project
without the need for advertising. This is known as single source selection. This can
be used where there are unlikely advantages for tendering or there is only one
contractor who can undertake the project. In this section, only those projects where a
clear need for tendering has been justified.
This procedure for selection of contractors will be discussed in three parts:

 Invitation to tender;
 Procedure before submission of tenders; and
 Procedure from submission to signing of contract.
12.2.2.2 Invitation to tender
Invitation of tenders is normally done through advertisement in local newspapers for

local projects. In case of international contracts, this can be done in international
magazines and/or through embassies of eligible countries. Whichever approach is
used, enough publicity according to particular circumstances of the project should be
given. The notice to be published in newspapers should include the following
information to prospective tenderers:
 Client’s name;
 Title of the project;
 The name of the Engineer/Architect;
 An outline of the project, scope and scale of work;
 Location of the work;
 Anticipated programme (i.e. award of contract, completion and any other key
dates);
 Tender reference and title;
 Expected date of issue and submission of tenders; and
 Any other eligibility conditions such as class of contractors.
Two approaches can be used for the selection of contractors:

 Open tendering; and
 Selective tendering.
Open tendering
This procedure offers the advantage of full competition in terms of price and
completion period from all interested contractors. It can however, result in the
submission of a large number of tenders with much abortive tendering and waste of
resources. It could also result in tenders being awarded to contractors who are not
adequately equipped financially or technically to undertake the work. Except in small
projects where there are few tenderers expected to respond, this method is not
recommended.
Selective tendering
Selective tendering ensures that only few contractors are invited to tender for the
works. It tries to balance the level of competition for the works and the cost involved
in the whole tendering process. The Client can use any of the following two
approaches:
 Choosing from a small number of firms known and trusted by him; or

 Preparation of a list of companies who are interested in the project by advertising

for pre-qualification. In this case, only those tenderers who have been pre-
qualified would be permitted to submit tenders.
This approach is not open enough to give equal opportunity to all contractors and
selecting one who is best for a particular project. It limits the range of contractors
who are considered for the project. It therefore excludes contractors who are not
known to the employer, or who are new to the business.
Selective tendering based on approved list of pre-qualified contractors is strongly

recommended. It eliminates the submission of tenders from incompetent contractors,
and affords maximum efficiency and economic advantage. With this approach,
contractors who show interest to bid for the job are invited to submit details of their
experience relevant to the particular type of the project. The contractors should
therefore be generally assessed under the following headings:
 Financial standing;
 Technical and organisational ability;
 General experience and performance record, and on increasingly trend; and
 Environmental, safety and health record.
Various types of information will therefore be required from Contractors to enable

the above assessment to be made. The extent of information that is required will vary
dependent on the particular employer and project. Typically it will include details of:
 Previous projects, with references from Employers and Consultants;
 Size of company and resources of equipment and manpower, including
subcontractors;
 Company structure, any parent or group organisation or joint venture
proposals;
 Financial strength, references and bonding capability;
 Project proposal, local agent or partner, joint venture, subcontractors; and
 Policy on quality assurance, health and safety.
Having received the replies to the pre-qualification questionnaire, the Client must
study and check the information. This may be a lengthy process, particularly if the
project includes manufactured items and a visit to the factory is considered to be
necessary. The Client will also take up references and visit other projects.
Large, well-established companies that are already well known in a particular

country or location may be able to satisfy the Client relatively easily. Smaller, less
well-known companies may find it more difficult to gain approval. After evaluating
the information, the Client will prepare a list of qualified contractors for the project.
The employer will notify the companies and indicate the dates when tender
documents are expected to be issued and returned. Unsuccessful contractors should
also be informed.
12.2.2.3 Procedure before submission of tenders
Having established the list of companies who will be asked to submit tenders, the
Client sends them the “Tender documents” and may require payment. The tender
documents will comprise of:
 A covering letter and invitation to tender;
 The instruction to tenderers;
 The form of tender and appendix;
 The proposed contract documents;
 Information data; and
 Schedule of additional information;
The covering letter and invitation to tender
The covering letter should only comprise the invitation to submit a tender, with a list
of documents that are enclosed. All other information should be given in the tender
documents. For practical reasons, certain facts, such as the date for the return of
tenders, may not have been known when the other tender documents were printed
and so are stated in the letter.
Instruction to tenderers
The instruction to tenders are normally issued with the tender documents for the
purpose of drawing attention to the conditions applying to the invitation to tender and
the procedures to be followed/ complied with by contractors when compiling and
submitting their tenders. They also convey information and instructions that will
apply during the tender preparation and evaluation periods.
The instructions would normally draw attention to the following points:

 The inclusion of a contract price fluctuations clause;
 The list of forms to be completed and submitted with tenders;
 Insurance and other security requirements or procedures;
 Method of dealing with queries;
 The acceptability or otherwise of qualified tenders;
 The acceptability or otherwise of alternative proposals;
 How errors will be dealt with during tender evaluation;
 The procedure for publishing the tender results;
 Requirements for presenting rates and prices in the bill of quantities
 Procedure to be adopted in presenting and submitting tenders;
 Venue times and date of return of tenders and application for an extension of
time for tendering;
 Approximate commencement date envisaged and completion times;
 Tender validity period; and
 Arrangements for inspecting the site during the tender period.
The form of tender and appendix

Most Standard Conditions of Contract include a Standard Form of Tender. The
information about the project and the time for which the tender must remain open
must be completed by the Client before issuing the Tender Documents.
The Appendix to the Form of Tender includes facts and figures relating to certain
clauses in the Condition of Contract, which must also be completed by the Client
before the documents are issued to tenderers.
The proposed tender documents

In many Standard Contracts, these will normally comprise of:
 The Conditions of Contract;
 The Specifications;
 The Drawings; and
 The Bill of Quantities.
Incompleteness and ambiguities in these documents are often a source of problems

later during the execution of the contract. It is therefore important that the contents of
these documents are clear and sufficiently detailed to avoid any misunderstandings
and future disputes during contract execution. However, to deal with the problem of
conflicting information in the contract documents, priority of documents is stated. A
typical priority of contract documents is as follows:
 Agreement;
 Letter of Acceptance;
 Contractor’s Bid;
 Contract Data;
 Conditions of Contract;
 Specifications;
 Drawings;
 Bill of Quantities; and
 Any other document listed in the Contract Data as forming part of the Contract.
Information and other data

All factual information relating to the site and ground conditions obtained by the
engineer should be included in the tender documents or otherwise made available for
inspection by tenderers e.g. borehole logs, rainfall records, river levels etc.
Amendments to tender documents

Any amendment to the tender documents made by the Client after their issue is
disruptive to the tendering processes and imposes a substantial additional burden
upon the tenderers. Amendments should be issued only if the Client is convinced that
the pricing of the tenders will be so seriously affected as to distort the balance
between the tenderers. Unless significant changes have to be made, amendments are
best withheld and dealt with either as post tender clarification or as part of the
administration of the contract after acceptance.
Tenderers must be notified immediately of any amendments to the documents.

Where the amendments are other than minor ones an extension to the tender period,
appropriate to the situation thereby created, should be granted.
Amendments made to the documents should be sent out by means of addenda letters
or notices that must be numbered consecutively and accompanied by an
acknowledgement slip. Tenderers should be instructed to return counter-signed
copies of each letter or notice with their tender, so as to confirm that the addenda
were received and acted upon as part of the tender and the contract documents.
Tender period
Tender periods must be sufficient to allow tenderers to familiarize themselves with
the documents and sites, obtain quotations, decide the best construction methods and
price the items. Tendering period is the busiest for contractors and it is in the best
interest of Clients to allow adequate time from the outset.
Short tendering periods have a disadvantage in that, tenderers will have insufficient
time to plan the work properly and economically and price it in a realistic manner.
Unreasonable tender times may also contribute to the receipt of unreasonable tenders
that would not have considered substantial foreseeable risks and have not allowed
tenders to plan their operations with sufficient flexibility.
During this period, the following issues should be cleared-out or arranged:
Queries
Tenderers should endeavour to clear up all points of doubt before submitting

their tenders, this will enable them submit unqualified tenders. Where queries
concern possible ambiguities, need for more information, or errors in the
documents, any verbal replies must be recorded and then confirmed in
writing by way of addenda notices or amendments issued to all tenderers.
Site Visits
The Client should arrange for site visits for the tenderers. Preferably this
should be done at once with all tenderers, perhaps at the same time as a pre-
tender meeting. If tenderers make separate visits then the Client must ensure
that the same information and facilities are given to all the tenderers.
Pre-tender meetings
Pre-tender meetings are arranged to clarify points of doubt and uncertainty
that may have arisen during the tender period. These meetings and/or site
visits are best arranged in the form of group meeting of all tenderers. All
information provided on such occasions must be properly recorded and
confirmed in writing to all tenderers.
Where this information has contractual significance it must be incorporated

into the contract documentation
Submission and receipt of tenders

It is the responsibility of tenderers to ensure that their tenders are delivered to
the Client by the due submission date and time, properly signed by authorized
signatories. The Client must mark all tenders with the time and date of receipt
and ensure that they kept secure and unopened until the date and time
appointed for the official opening.
Tenders can be sent by registered post, or recorded delivery service, or

delivered by hand in plain sealed envelope entitled as directed but not bearing
the name of the tenderer. Tenders received after the appointed time should be
immediately returned, unopened to tenderers accompanied by an explanatory

letter giving the details of the date and time of receipt.
Tenderers have the right to modify their tenders in writing at any stage before
the appointed submission time.
12.2.2.4 Procedure after the submission of tenders
Opening of tenders
Tenders are opened officially by the Client at the fixed date and time. The Client
should check and display the sealed condition of each tender before it is opened.
After each tender envelope is opened, the Chairman of the meeting should announce:
 Tenderers name;
 Date and time of receipt;
 Tender price (and completion time where applicable); and
 Price of alternative tender, if appropriate.
This information should be recorded on a suitable form and signed by the Chairman
and appropriate witnesses. Following this, the names of any Tenderers disqualified
due to late or non-receipt of tenders should be announced.
Evaluation of tenders
After tenders are opened, they are passed on to the Engineer or selected Client’s
technical staff or committee for detailed evaluation and recommendation of the
tenderer to be selected.
Tenders are best evaluated under the following three components:

a) Technical evaluation
 Conformity with specifications and drawings;

 Comparison of any proposed alternatives;
 Method of construction and temporary works;
 Programme of work and completion time;
 Sub-contracted work; and
 Construction plant and equipment.
b) Financial evaluation
 Capital cost;
 Programme/method of payments;
 Financing arrangements;
 Payment currencies;
 Bonds/guarantees;
 Down payments and retention monies;
 Day work rates; and
 Contract price adjustment proposals.
c) General contractual and administrative arrangement
 Conformity with instruction to tenderers;
 Completeness of tenders;
 Validity of tenders;
 Any qualifications – stated or implied;
 Insurance;
 Administrative expertise;
 Shipping, customs and transport; and
 Working hours, labour build-up etc.
The Engineer or evaluation committee should complete the evaluation by submitting
an assessment report to the Client setting out all the actions taken to scrutinize, check
and correct the tenders and giving his conclusions and recommendations to the Client
regarding which tender to accept. The evaluation report should include the following:
 The salient features of all the tenders received e.g. qualifying condition made by
tenderers;
 Any arithmetical errors discovered and their resulting effects on the tender sum;
 A summary of the examination and analysis of each tender;

 A tabular comparison of the rates quoted for the main items of work with
comments on any rates which appear exceptionally high or low and effects on the
contract sum;
 A comparison of the recommended tender sum with the Engineer’s estimates;
and
 Recommendation of the most acceptable tender.
The tender with the lowest evaluated cost should be recommended as the most
advantageous offer financially, when other factors are satisfactory such as technical
competence.
Tender negotiation
There is generally a need for some pre-contract negotiation, for whatever reason,
particularly with the lowest tenderers. This will involve meetings and an exchange of
letters and other information. The Client may want further information about the
Contractor’s proposal and the Contractor may want to suggest alternatives to the
contract requirements.
To maintain the principles of the tender process, it is essential that any negotiations
are only to clarify the tender. If major changes are being negotiated then it may be
necessary to give other tenderers the opportunity to re-submit their tenders or even to
re-tender the project.
Award of contract
The successful tenderer should be notified immediately if a decision has been made
to accept his offer. The successful tenderer should also be advised of the action to be
taken.
Letter of intent
If it is not possible immediately to issue a formal Letter of Acceptance, then a

letter of intent to enter into a contract may be issued. This letter should
contain the following statements:
 A statement that it is intended to accept the tender;
 Instructions to proceed (or not to proceed) with certain works e.g.
mobilization, ordering of materials, letting of sub-contracts etc.;
 The basis of payment for work authorized and a limit to the financial
liability which may be incurred before formal acceptance of the tender;
 A statement that when the tender is formally accepted by a Letter of
Acceptance the provisions of the Letter of Intent will become void; and
 A request to the Contractor to acknowledge the receipt of the Letter of
Intent and to confirm his acceptance of its conditions.
Letter of acceptance
A legally binding contract is established when the tender is formally accepted
by or on behalf of the Client. The Engineer will proceed to prepare a Letter
of Acceptance of the tender setting out any agreed conditions during tender
period. This letter should be issued by the Client.
Once the contract has been let, all unsuccessful tenderers should be
individually notified of results, including the amount of the successful bid.
Once the Letter of Acceptance has been issued, it is the Engineer’s duty to
instruct the Contractor to proceed with the works and to declare the starting
date. The Form of Agreement can now be drawn and signed and sealed by the
Client and the Contractor at this stage.
12.3 Construction Contracts
12.3.1 General principles on formation of contract
12.3.1.1 Introduction
Before we discuss construction contracts, it is essential that the basic principles of

formation of a legal contract are presented. A contract is made where parties have
reached agreement or where they are deemed to have reached agreement, and the law
recognises rights and obligations arising from the agreement. The law of contract is
based on the concept of bargain, in that each side to the Contract must contribute
something to the agreement to make it binding. The only exception to this principle
is a contract made under seal, such a contract binds its maker without need of any
bargain. All contracts other than those under seal are called simple contracts and
construction contracts are not exception.
In general, parties to a contract are free to make any terms they choose, but the law
or the norms of society in which they live may place certain limits upon them. Apart
from such limits courts of law will attempt to implement contracts according to the
terms agreed. However unjust the terms might be or become the courts have no
power to rewrite them. Thus if a Contractor has contracted to carry out works at
such prices that he is bound to make a loss, he must still carry out the works or pay
damages for breach of contract. There is no other way out.
12.3.1.2 Formation of contract
The essentials of fundamental elements in any simple contract are:

a) Agreement: The parties must have reached or be deemed to have reached
agreement.
b) Intention: The parties must have intended or be deemed to have intended to
create legal relations.
c) Consideration: According to the terms of the agreement, some advantage
moves from one party to the other. The giving of mutual advantages by the
parties is the essence of a bargain. The advantage or benefit moving from one
party to another is known as consideration.
In any transaction where one of these elements is missing there is no contract. An

agreement may be oral (by word of mouth) or in writing. It can also be inferred from
the conduct of the parties or a combination of all these. The intention of the parties
is gathered from the express terms of the agreement.
In order to discover whether agreement was reached between the parties, the
negotiations are analysed into offer and acceptance.
12.3.1.3 Offer and acceptance
An offer is an undertaking by the offeror to be contractually bound in the event that a

proper acceptance is made. The offer must be definite, clear, complete and final.
The invitation to tender, whether public or to an individual builder is no more than an
offer to negotiate. It is the contractor's tender, which constitutes an offer, which the
client may accept or reject, and once accepted it forms a binding contract. Strictly,
acceptance must be unqualified and must correspond exactly with the terms of the
offer. Where an offeree makes a counter-offer, the original offer is deemed to have
been rejected and cannot be subsequently accepted. Acceptance must be
communicated to the offeror as a general rule.
Termination of an offer can be by revocation, lapse or rejection and legally then

becomes incapable of acceptance. The offeror generally can withdraw his offer at
any time before it is accepted. In submission of tenders contractors take an
undertaking binding them to stand by their tenders for a specified period. However
this is not legally binding unless the client gives consideration to keep the offer open
for that period, in which case this is a separate contract. Revocation in this instance
would be a breach and the client entitled to recover. A tender as an offer lapses once
the validity period comes to pass and is impliedly rejected when any of the other
tenders has been accepted or where in client makes a counter offer as previously
mentioned.
12.3.1.4 Consideration
Each party in a simple contract must give consideration if the contract is to be

binding. Consideration in general must be real, not illegal or vague. It need not be
adequate. Most common forms of consideration are payment of money, provision of
goods or performance of work.
12.3.1.5 Intention to create legal relations
Even where offer, acceptance and consideration exist, the contract might not be
binding if the parties had intended not to create legal relations. This is not
uncommon say in family arrangements where it is presumed that domestic
agreements are not intended to create legal relations. In commercial agreements the
parties concerned normally intend to be legally bound. Construction contracts will
invariably include a clause specifying the Country or State the law of which is to
apply to the interpretation of the Contract.
12.3.1.6 Terms of a contract
The final step in the formation of a contract is the identification of the terms and their
effects. These are in essence its contents and determine the extent to which the
parties are in agreement. Accordingly, the terms of the contract define rights and
obligations arising from the contract. Contractual terms may be expressed or
implied. Express terms being material statements made by the parties by which they
intend to be bound while implied terms are those which have been implied by law
either according to the provisions of a statute or to give effect to the presumed
intentions of the parties. In building and engineering contracts express provisions in
the contract documents often cover most of the terms so that there may be no case for
further implication.
12.3.1.7 Discharge of contract
Discharge of contract is the general terms used to denote the bringing to an end of a
contract and the release of all contractual obligations. Contracts do not cease
automatically and must be brought to an end by some of the parties to the contract.
There are four ways whereby discharge can be effected and these are by: -
 performance;
 frustration;
 acceptance of breach; or
 or agreement.
a) Performance: A contractual obligation is discharged by a complete performance
of an undertaking. In construction it is when the contractor has completed the
work including his obligations as to maintenance, the architect or engineer has
issued all the requisite certificates and the client has paid all sums due.
b) Frustration: General contractual obligations are absolute and a party to a
contract is not discharged from his obligations merely because performance has
become more onerous, expensive or impossible due to some unforeseen
circumstances. There are however exceptions to this general rule of absolute
contractual liability in certain events of supervising impossibility. Frustration
will apply where due to some event outside the control of the parties; the
fundamental purpose of the contract is rendered impossible to perform so that
any attempted performance would amount to something quite different from
what was originally contemplated by the parties. Examples in construction are
very are and terms within the contract take care of this eventuality as regard
payments.
c) Breach of Contract: Occurs where a party fails to perform his obligations or
where he expressly or impliedly repudiates his obligations without justification.
The other party not in breach is entitled to sue for damages and if the breach is
sufficiently serious it gives the option of treating the other party in breach as
having repudiated the whole contract. The innocent party may then bring the
contract to an end by accepting the repudiation and refusing further
performance.
d) Discharge by Agreement: There is no reason why parties to a contract should
not agree mutually to release each other from their obligations at any time
during the currency of the contract. This can occur by either entering into
another contract to bring the existing contract to an end or by the operation of a

term within the contract itself.
For the traditional approach of project delivery, there are essentially two major
contracts that the client enters into:
 Supervision contract with the consultant/engineer/project manager: This
is entered into for purposes of supervision of construction of the works.
This could be already incorporated in the design contract, if the same
consultant who carried out the design would also undertake the
supervision. Otherwise, the contract is signed for purposes of supervision
only. On the other hand, the main consultant may also enter into
supervision sub-contracts with specialist consultations.
 Construction contract with the contractor: This contract governs the
construction of the works. The contract, although signed between the
client and the contractor, it gives powers to the engineer or project
manager to supervise the works in accordance with the conditions of
contract. It should be noted that the engineer has no contract with the
contractor. The contractor may also enter into subcontracts with general
and specialised subcontractors.
This relationship is depicted in Figure 12.1.
Client
Supervision Construction
Contract Contract
Project Manager/ Contractor

Engineer
Working
relationship
Figure 12.1 Contractual relations in traditional construction project arrangements.

12.3.2 Contract documents and their interpretation
12.3.2.1 Introduction
For efficient administration of a contract a thorough knowledge and interpretation of

contract documents is required. Construction contracts invariably use standard
formats that spell out the terms of the contract. Documents generally describe what is
to be done and how it is to be done. Right at the inception of a construction contract
the client through his consultants invites tenders (offers) from contractors in which it
is spelled out exactly what the client wants done and how he wants it done.
Information to enable a contractor make his offer without ambiguity should be made
available and clarified. Usually at this stage the pertinent documents and terms of the
intended contract are made known.
Thus, the contractor's tender is an offer to client for executing whatever the clients
wants on the terms offered by the client. The documents necessary to define the
scope of contract will in most cases include the following:
 instruction to tenderers;
 form of tender and its appendix;
 bill of quantities;
 tender drawings;
 conditions of contract both general and specific;
 Specifications; and
 form of agreement.
These are discussed in detail in the following sections.
12.3.2.2 Instruction to tenderers

The purpose of the instructions to tenderers is to assist the tenderers in the

preparation of their tenders and to ensure that they are presented in the form required
by the Employer and the Engineer. These instructions will vary on every project, the
more common ones have been discussed in section 12.2.2.2 above.
In case where pre-qualification of contractors has already been done, the particulars
of the legal, financial status and technical experience of the tenderer may not be
required.
12.3.2.3 Form of tender
The Form of Tender is the tenderer's written offer to execute the work in accordance
with the other contract documents, and states the total tender sum, the time for
completion and other salient particulars of the offer. Normally the tenderer must
submit a tender complying fully with the Specification, but in some cases he may
also offer alternatives.
12.3.2.4 Conditions of contract
The Conditions of Contract define the terms under which the work is to be carried
out, the relationship between the client and the contractor, the powers of the Engineer
and the terms of payment. The conditions of contract fulfil two separate functions,
they allocate the risks and liabilities between the parties and set up the administrative
framework for the contract.
12.3.2.5 Specifications
The Specifications describes in detail the work to be executed, the character and
quality of the materials and workmanship, and any special responsibilities of the
Contractor that are not covered by the Conditions of Contract. It may also lay down
the order in which various portions of the work are to be executed, the methods to be
adopted, and particulars of any facilities to be afforded to other contractors. The
Specification should require the Contractor to submit a programme and a description

of proposed methods and temporary works. Care must be exercised when drafting
the Specifications to avoid conflict with any of the provisions of the Conditions of
Contract.
12.3.2.6 Bill of quantities
The Bill of Quantities is a list of items giving brief identifying descriptions and
estimated quantities of the work comprised in a Contract. Its objectives are:
a) to provide such information of the quantities of work as to enable tenders to be
prepared efficiently and accurately; and
b) when a contract has been entered into, to provide for use of the priced Bills of
Quantities in the valuation of the work.
Clearly such an important document requires to be complied in accordance with

some well defined rules so that the engineers and contractors using it both understand
what is to be included in the various items to be measured. The standard measuring
system is used for such purpose.
12.3.2.7 Drawings
Ideally drawings should detail all the contract work. For many reasons this is not
always practicable, but tenderers must be given sufficient information to enable them
to understand what is required and thus submit considered tenders. All available
information on the topography of the site and the nature of the ground should be
made accessible to tenderers, preferably by being shown on the drawings.
The drawings included in the tender documents should be as comprehensive as

possible. The more detail the contractor has at the time of tender, the less he has to
deduce from the documents, and the less likely it is that he will be able to put
forward claims for increased rates during the contract. It is in the interest of both
Employer and Contractor that as much detail as possible should be made available to
the contractor for him to price his tender.
12.3.2.8 Form of agreement
The form of Agreement is a legal undertaking entered into between the Promoter and
the Contractor for the execution of the work in accordance with the other Contract
Documents.
The form of tender and acceptance of it are all that is necessary to form a binding
contract. The Form of Tender actually provides for this. To complete the
formalities, a contract is normally signed after the contract has been entered into.
12.3.3 Conditions of Contract
12.4.3.1 General
In this manuscript, we will discuss the latest addition of the FIDIC Conditions of
Contract (commonly referred as FIDEC 1999). The reason for choosing these
conditions of contract is based on the fact that there are the conditions of contract
used in most of the internationally tendered projects. However, before we discuss the
FIDIC Conditions of contract, it is necessary to examine briefly the history of FIDIC.
FIDIC (Fédération Interriationale des Ingénieurs-Conseils or the International

Federation of Consulting Engineers) was founded in Belgium in 1913. The original
founding countries were France, Belgium and Switzerland. FIDIC had a chequered
history in its early years aggravated by the two world wars and until the period
immediately following the Second World War, it remained essentially a continental
European organization.
The first edition of the Red Book for civil engineering works, was published in 1957.
The fourth edition was published in 1987 and this edition has been reprinted twice, in
1988 and in 1992, with editorial amendments. The latest FIDIC conditions of
contract, on which the rest of the presentation in this chapter is based, was published
in 1999.
The essential feature of this contract, unlike the so-called lumpsum contracts is that it
creates a re-measurement or measure and value contract. The Contractor is paid at
the rates for the actual quantities of work executed.
The FIDIC conditions of contract are divided in two parts:

 Part I: General Conditions, cover those aspects of a civil engineering project
which are considered to be similar in most of the construction projects of civil
nature irrespective of the country or location where the project is being carried
out. They cover the entire obligation and rights of both parties to the contract,
Employer and Contractor, and also the role to be played by the Engineer in the
administration of the contract. They also cover terms under which the work is to
be carried out.
 Part II: Conditions of Particular Application, covers those aspects of the
project, which are particular about the project itself and the location and the
country in which the project is being executed. These serve to amplify the
generality of Part I.
In discussing the FIDIC Conditions we will divide the discussions in eight areas,
namely:
a) The parties to the contract; their obligations and rights.
b) The role of the Engineer;
c) Certificates and payments;
d) Claims and variations;
e) Extension of time;
f) Termination of contract; and
g) Settlement of disputes.
12.4.3.2 The parties to the contract

Under FIDIC Conditions parties involved in the contract are the Employer and the
Contractor. They are supported by the Engineer on the administration of the contract.
The Employer
The Employer gives all authority for the administration of the contract to the
Engineer. The Employer's functions are restricted to paying the Contractor sums of
money certified by the Engineer, and agreeing to matters that require a change to
contract itself.
Employers specific rights and obligations are the following:

 The Employer appoints the Contractor;
 The Employer appoints the Engineer by notifying the Contractor in writing. The
Engineer has no power until such notice has been received by the Contractor;
 The Employer may appoint Engineer's Representative or Assistants or Clerk of
Works, but such appointment do not take effect until the Engineer notifies the
Contractor of:
i) their names; and
ii) their functions.
 Until such notification is received by the Contractor neither the Engineer's
Representative nor any of his Assistants has the power to give instructions;
 The Employer consents to the assignment of contract;
 The Employer approves both the bond and surety;
 The Employer is responsible for work carried out by his own workmen;
 The Employer is responsible for the negligence of his own servants or agents.
This will include the Engineer and his staff;
 The Employer has remedy on Contractor's failure to insure. If the Contractor is in
breach of the insurance requirements, instead of suing for damages, the remedy is
for the Employer to obtain cover and charge the Contractor for it;
 The Employer is entitled to take over goods and materials bought by the
Contractor if the Contractor fails to complete the works. He may also take over
such goods at subcontractor's works;
 The Employer is required to pay all certificates as approved by the Engineer to

the Contractor; and
 The Employer has the power to terminate the Contractor's employment. However
the right to terminate the employment is restricted to:
- contractor going bankrupt;
- the issuance of a certificate by the Engineer that the Contractor is
failing to perform; and
- the Employer has the right to determine the contract. This is when the
contract is frustrated (that is impossible of completion) or if war
occurs.
Generally, as discussed above, it will be seen that the powers of the Employer are
very limited. He pays and leaves everything to the Engineer.
The Contractor
General obligation
The Contractor is the person whose tender has been accepted, and is the second party
to the contract. The Contractor is fully responsible for the construction of the works
and their security until they are taken over by the employer. The Contractor general
obligation is to construct, complete and maintain the works, and to supply everything
that is required for their completion.
Construction to Engineer's Satisfaction

The works have to be constructed to the satisfaction of the Engineer, who is the only
person empowered to give instructions to the Contractor. It is emphasised in the
FIDIC Contract that the Contractor shall take instructions and directions only from
the Engineer. This means that the Employer is not empowered to instruct the
Contractor to do anything.
Safety of people
The Contractor is responsible for the safety of all people on the site and for the care
of the works until the issue of the certificate of completion. He is responsible for
seeing that the works are no danger to anyone. He must supply lights, fences,
warning signs and, if necessary watching.
Contractor's Superintendence
The Contractor is required to provide all necessary superintendence, which means
site management, and is required to appoint competent and authorised agents.
Other Administrative Obligations

 the provision of the requisite bonds, insurances and indemnities;
 acquit himself with all the conditions, physical and otherwise pertaining to the
site of the works;
 comply with all instructions and orders given by the engineer under the contract
provisions;
 furnish programme of the works and any detail thereto as may be required by the
engineer;
 provide all supervision and competent labour for execution of works to the
satisfaction of the engineer;
 the correct citing and proper setting out of the works;
 security and care of the works;
 compliance with all laws, and regulations;
 afford opportunities for other contractors employed by the employer to carry out
their work; and
 keep clear the site during construction and leave the site and works clear and in a
workmanlike condition.
Contractor's Rights
Having mentioned the above list of obligations that the Contractor has towards the
contract and therefore to the Employer, let us briefly summarize some of his rights: -
 The Contractor has right to prompt and full payment of certificates from the
Employer;
 The Contractor has right to prompt and full provision of all construction details
from the Engineer;
 The Contractor has the right to prompt inspection and approval of the works by
the Engineer;
 The Contractor has the right to claim from the Engineer for delays causing loss
and expense; and
 The Contractor has the right to claim from the Engineer for extension of time.
12.4.3.3 The role of the Engineer
As stated earlier, the Engineer is not a party to the Contract, but derives all his
powers to control the Contractor from it. Sometimes he is described as 'a creature of
the Contract'. This is because the Contractor agrees in the contract to accept
decisions and directions from the Engineer. It follows therefore that the Engineer is
only able to instruct the Contractor provided one of the clauses in the contract gives
him that power.
The Engineer derives his power to act as agent for the Employer from his contract
with the Employer for the design and supervision of works.
Engineer’s general powers to instruct include:
 obligation to issue further drawings to the Contractor which he thinks in his
opinion are necessary for proper execution of the works;
 obligation to ensure that the works are executed by the Contractor to his
satisfaction;
 it is important to note that the Contractor is required to take instructions only
from the Engineer and not from the Employer;
 in addition to general powers discussed above, there are other specific powers
given to the Engineer. These include:-
- Appointing of Engineer's Representative;
- Appoint assistants to the Engineer's Representative;
- Delegate powers to the Engineer's Representative;
- Consent to sub-letting;
- Correct ambiguities in the documents;
- Issue instructions to the Contractor for dealing with unforeseen

physical conditions and artificial obstructions;
- Approve the programme;
- Demand revised programme;
- Consent on Contractors method of construction;
- Approve Contractor's Agent;
- Request the Contractor to remove personnel from site;
- Instruct the Contractor to make boreholes or exploratory excavations;
- Instruct the Contractor to provide safety precautions;
- Instruct the Contractor to give facilities to other contractors;
- Instruct the Contractor on disposal of fossils and antiques;
- Instruct tests on materials and workmanship;
- Order:
- removal of materials not to specification;
- the substitution of proper materials; and
- the removal and re-execution of work not in accordance with
the specification;
- Suspend the works;
- Order the commencement of the works;
- Award of extensions of time;
- Order the Contractor to take steps to expedite the work;
- Issue a certificate of completion;
- Order searches and tests for defects;
- Order variation to the works;
- Value all variations;
- Fix rates;
- Value claims;
- Order day works;
- Correct errors in the Bills of Quantities;
- Measure and value the works;
- Order work to be carried out under Provisional sums;
- Instruct the Contractor to employ nominated sub-contractors;
- Certify payments to the Contractor;

- Issue the Final Account;
- Omit from certificates the value of work with which he is dissatisfied;
- Issue the maintenance certificate;
- Certify that the Contractor is in default; and
- Make a determination on disputes between the Employer and the
Contractor.
Extent of Engineer's Powers

It should be noted that there is nothing absolute about an Engineer's opinion. The
further drawings are not necessary or unnecessary just because he says so. All
Engineer’s opinions and directions are subject to reference to the Dispute
Adjudication Board (DAB) who will determine if the Engineer was correct in his
opinion.
Engineer's Representative
The Engineer's Representative, can be appointed by either the Engineer or the
Employer, but it is the Engineer who in either case, has to notify the Contractor in
writing of the name of the Engineer's Representative and the functions he is to
perform. Until the Contractor has been notified in writing, the Engineer's
Representative has no powers under the contract.
Without delegated powers from the Engineer, the Engineer's Representative may
only inspect the works, and see that they are carried out in accordance with
specification and the contract. However the Engineer may delegate to the Engineer's
Representative most of the powers vested in the Engineer under the contract. If he
does delegate his powers, such delegation has no effect until the Contractor has been
notified in writing of the matters delegated. It is important that the Contractor also be
informed of any restrictions placed upon the Engineer's Representative in respect of
such delegation.
There are however specific limitations on what may be delegated. The Engineer may
not delegate under the following:
 valuation of costs of delay for artificial obstructions and adverse physical
conditions;
 award of extension of time;
 issue of the completion certificate;
 the certification of the final certificate;
 the issue of maintenance certificate;
 certification of the Contractor's default; and
 settlement of disputes.
12.4.3.4 Certificates and payments
Most of the details on payment procedures are normally given in specific conditions
for Particular Application. The details include matters concerning advance
payments. How and when they should be made together with method to be adopted
for repayments.
It is the responsibility of the Engineer to make deduction of any agreed repayment or

advance payment in the certificate of payment he issues to the Employer Although it
is the duty of the Engineer to measure the work executed; normally it is the
contractor who submit to the Engineer an evaluation of the works on a monthly basis.
This is his application for payment.
Interim Certificates
A contractor is entitled to monthly account payments for work carried out. The work
is valued at the rates in the Bills of Quantities. The Contractor makes out his monthly
statement and sends it to the Engineer, who then checks it and certifies the money
due.
Please note the following:

 The estimated contract value is valued at Bill rates;

 An allowance is made for goods on site;
 The Contractor is obliged to put into each monthly statement sums that he
considers himself entitled as a result of claims under various clauses of the
contract; and
 There is a minimum amount for the interim certificate below which the Engineer
need not issue a certificate.
After the receipt of the monthly statement, the Engineer must certify and the
Employer pay within a fixed period, or else the Contractor is entitled to interest.
Final Account and Final Certificate

The contractor prepares the statement of final account. This lists all the monies that
the Contractor considers himself entitled to under the contract. The Engineer then
checks the final statement and issues the final certificate for the sum that he thinks is
due. The issuance of the final certificate is the last act of the Engineer under the
contract. Thereafter, the Contractor may not put in any further claims. He may of
course dispute the final certificate issued by the Engineer under the Arbitration
clause.
12.4. 3.5 Termination of contract
The Employer can terminate the services of the Contractor upon giving 14 days'
notice in writing without voiding the contract when the contractor becomes bankrupt
or when the Engineer shall certify that the contractor has defaulted in any of the
following items:-
 has abandoned the contract, or

 without reasonable excuse has failed to commence the works or has suspended
the progress of the works for twenty eight days after receiving from the Engineer
written notice to proceed, or
 has failed to remove materials from the site or to pull down and replace work for
twenty eight days after receiving from the Engineer written notice that the said
materials or work has been condemned and rejected by the Engineer, or
 despite previous warnings by the Engineer, in writing, is not executing the works
in accordance with the contract, or is persistently or flagrantly neglecting to carry
out his obligations under the contract, or
 has, to the detriment of good workmanship, or in defiance of the Engineer's
instructions to the contrary, sub-let any part of the contract.
Termination of the services of the Contractor does not terminate the contract and the
parties are still bound by its terms. Procedures for valuation and payments forfeiture
are set out but all the foregoing does not relieve the Contractor of his obligations
under the contract. Where Employer cannot fully recover from the Contractor, the
Performance Bond affords additional security. To cover for the continued use of
plant and materials brought on site by the Contractor in such eventuality provision
for vesting the Employer's interest in the said plant, temporary works and materials.
The Contractor can similarly terminate his employment after giving 14 days notice to
the Employer with a copy to the Engineer should the Employer be in breach of
contract in the stated events mentioned below: -
 fails to pay the Contractor the amount due under any certificate of the Engineer
within thirty days after the same shall have become due under the term of the
contract, subject to any deductions that the Employer is entitled to make under
the contract, or
 interferes with or obstructs or refuses any required approval to issue of any such
certificate, or
 becomes bankrupt or, being a company, goes into liquidation, other than for the
purpose of a scheme of reconstruction or amalgamation, or
 gives formal notice to the Contractor that for unforeseen reasons, due to
economic dislocation, it is impossible for him to meet his contractual obligations.
Such termination will not relieve the employer from his obligations to pay the
contractor nor prejudice the right of the contractor to exercise any other rights or
remedies he may be entitled to either in lieu of or in additional to the rights and
remedies.
After the determination the contractor must promptly remove huts, plant, tools and
materials that have not been paid for by the employer. Cost of such removal,
including demobilisation of personnel as well as direct loss or damage to the
contractor and/or any terminated subcontractor is recoverable.
The right to determination should be exercised with care. A determination which

does not comply with the requirements of the contract is likely to constitute
repudiation entitling the other party to damages. It is normal that determination will
involve substantial loss and will frequently lead to disputes. A mechanism for
resolving disputes is incorporated in most contracts. Where either party rejects the
decision the matter should be refereed to arbitration. Disputes or differences are no
grounds for termination of contract.
12.4.3.6 Variations
Engineer's power to order variations

Construction contracts usually contain wide provision for variations. Variations are
changes in the detailed requirements of the works on both quality and method of
construction.
Variations are particularly common in civil engineering work, because of the

uncertainties that are inherent in the variable nature of the ground and sub-soil, and
the complexity of the works entailed. The FIDIC Conditions permit the Engineer to
instruct the Contractor to undertake a wide range of variations, and the contractor is
obliged to carry them out.
It is however important to note that:

 The Engineer can order a variation to the works. He may not order variations to
the contract, which can only be done by agreement between the Employer and
the Contractor;
 The Engineer "shall" order variations that are necessary for the completion of the
works. Such a requirement is mandatory; and
 It must be remembered that the power to order variations is restricted to
variations in the works. The works are defined in the contract and are usually
described in brief description at the beginning of specification, or Bills of
Quantities.
The Engineer therefore cannot order work that is not defined within the scope of the
contract. If he does, he is acting outside his powers, and two things follow:
 The Contractor need not carry out the instructions, and
 The Employer need not pay. The Contractor's only right then would be to sue the
Engineer personally for the cost of the work. Alternatively, the Employer might
be able to sue the Engineer for the cost to him of such works.
Variations must be issued in writing, and the contractor has the right to confirm
verbal instructions from the Engineer. Such confirmation is itself defined as an
Engineer's Instruction
Other important issues to note on variations: -

 the Contractor may not make any variation without an order from the Engineer;
 such order must be in writing;
 the contractor must carry out an oral order;
 the Contractor may confirm an oral order, and if he does so, the Engineer must
contradict it forthwith if he does not agree with it; and
 contractors should always as a matter of routine confirm any oral instruction
given by the Engineer or his staff.
12.4.3.7 Time for Completion and Extension of Time

Normally at the time the Contractor submits his tender he is very conscious of the
time available within which he required to complete works. If he fails to complete
the Employer is entitled to deduct liquidated damages at the agreed amount in the
appendix of tender.
However there are provisions enabling the contractual completion date to be

extended on happening of certain events whether they are in relation to Employer's
defaults or neutral events or Contractor's defaults. When such events occur the
Contractor is entitled to extension of time, which will automatically extend the
completion date to another fixed date.
There are three categories of delays that may happen in a construction project:
a) Delays that are the Employer's fault, for example, delays in respect of variations
ordered by the Employer, late instructions by the Engineer etc.;
b) Delays that are no one's fault, for example, exceptionally adverse weather
conditions, strikes, lockouts, riots etc.; or
c) Delays are Contractor's fault, for example, brought by inefficiency or bad
planning or programming.
The FIDIC Contract does not allow for extensions of time where the delay is the
direct fault of the Contractor.
The FIDIC Contract gives events, which, if they occur, and cause delay, may entitle
the Contractor to an extension of time. The events referred to are the following: -
 The amount or nature of extra or additional work;
 any cause of delay referred to in the conditions e.g.:
- adverse physical obstructions or conditions;
- discovery of fossils etc;
- contractor carrying out tests which show the work is in accordance
with contract;
- engineer suspending the works;
- employer failing to give possession of the site
 exceptionally adverse climatic conditions;

 any delay, impediment or prevention by the Employer.
 other special circumstances which may occur, other than through a default or
breach of contract by the Contractor or for which he is responsible.
If any of the above occur and are such as to fairly entitle the Contractor to an
extension of time, the Engineer after due consultation with the Employer and the
Contractor shall determine the amount of such extension and notify the Contractor
accordingly.
However, the Engineer is not bound to determine an extension of time unless the
Contractor has:
 within twenty eight days after the event having first arisen notified the Engineer
with a copy to the Employer; and
 within twenty eight days or such other reasonable time as may be agreed by the
Engineer, the Contractor must submit detailed particulars of any extension of
time to which he may consider himself entitled in order that such submission can
be investigated at the time.
Interim extensions
There is a further provision that where the event has a continuing effect so that it is
not practicable for the Contractor to submit detailed particulars within twenty eight
days he shall nevertheless still be entitled to an extension of time provided he has
submitted interim particulars at intervals of not more than twenty eight days and the
final particulars within twenty eight days of the end of the effects resulting from the
event. When the event has ceased to operate, the Engineer carries out a final review
which cannot however result in a decrease of any extension of time already given.
12.4.3.8 Settlement of Disputes under FIDIC Conditions
Normally an Arbitration clause is included in FIDIC contract. The settlement of

dispute is a two-tier system under this contract. Briefly if there is any dispute or
difference between the Employer and the Contractor then they must refer their
dispute or difference to the Engineer to make a decision. The reference to the
Engineer could well of course and often is the result of the Engineer’s owns decision
contained in an instruction or opinion etc. In this case the Engineer will have to
review his own decisions and if he agrees with it he must say so and similarly if he,
upon reflection, changes his mind and disagrees with his earlier instruction or
opinion or decision then he must say so.
It is in this relation that the independent role of the Engineer is absolutely vital and it
is exactly this situation that the Employer in practice brings great pressure to bear
upon the Engineer who of course he pays.
If either part is dissatisfied with the decision of the Engineer then they can give
notice of arbitration and provided this is done within seventy days of the decision
being given they can take the matter before an Arbitrator. If they miss the time limit
they may find themselves completely time barred.
Chapter 13
Insurance Requirements in
Construction Industry
13.1 Introduction
According to Hansell (1974), insurance may be defined as a social device

providing financial compensation for the effects of misfortune, the payments
being made from the accumulated contributions of all parties participating in the
scheme. It may be seen as a kind of fund, into which all who are insured will pay
an assessed contribution called premium. In return, those insured will have the
right to call on the fund for any appropriate payment should the insured events
occur. Based on the above definition, it may be seen that insurance exists to
combat the adverse effect of risk in day-to-day activities.
It has been recognised that construction industry is one of the micro sectors of an
economy of a country, which accounts for not less than 15% of the GNP of both
developed and developing countries. It is hardly possible to site any economic
venture that does not pre-require construction investment. Construction work by
nature is hazardous, and accidents are frequent and often severe. The annual toll
of deaths, personal injuries and property damage in the world construction
industry is extremely high. The potential severity of accidents and the frequency
with which they occur require that consultants and contractors protect themselves
with a variety of complex and expensive insurance coverage. Without adequate
insurance protection, the contractor would be continuously faced with the
momentary possibility of serious or even ruinous financial loss.
Insurance Requirements in Construction Industry 411
It is understood that construction projects usually have in force several

simultaneous contractual arrangements: between the client and consultant,
between the client/consultant and general contractor and between the general
contractor and his several sub-contractors and suppliers. These contracts can
establish a complicated structure of responsibility for damages arising out of
construction operations. Presently, in some developing African countries
relatively an extensive program of infrastructure development is taking place. The
construction of new regional and international airfields, roads, high raised
buildings and factory buildings are among the construction investments to be
cited. The quality and standards of the design and construction of these
investments play a significant role in the success of these investments. When the
quality of design and construction works is considered the risk that is involved in
construction works come into picture. In the developed world, unlike in
developing countries, it is almost impossible nowadays to go for construction
business without sufficient cover of insurance.
13.2 Historical Background
A history of the earliest civilizations reveals that mankind has an early instinct to
develop and perfect codes of conduct. The valley between Tigris and Euphrates
rivers in present day Iraq is considered as the cradle of civilization, and some of
the earliest codes of conduct were developed there. These codes covered all forms
of activity, including exchange rates, wages, rules of behaviour, physical and
monetary penalties, and even specifications for materials. As far back as 2000
BC, the Laws of Eshnunna decreed:
58: If a wall is threatening to fall and the authorities have brought the
fact to the knowledge of its owner, (if nevertheless) he does not
strengthen his wall, the wall collapses and causes a free man’s death,
then it is a capital offence; jurisdiction of the king.
The Code of Hammurabi, circa 1700 BC, also contained punitive construction
codes:
229: If a builder constructed a house for a seignior1, but did not make
his work strong, with the result that the house that he built collapsed
and so has caused the death of the owner of the house, that builder
shall be put to death.
230: If it has caused the death of a son of the owner of the house, they
shall put the son of the builder to death.
231: If it has caused the death of a son of a slave of the owner of the
house, he shall give slave for slave to the owner of the house.
232: If it has destroyed goods, he shall make good whatever it

destroyed; also, because he did not make the house strong which he
built and it collapsed, he shall reconstruct the house, which he
collapsed at his own expense.
The present day construction codes are basically derived form the past codes
of conduct, but enriched with experience and modern scientific research
outputs. The development of insurance has also its own part in history. For
instance, Marine insurance is considered to be the oldest known type of
insurance. Something similar to it was practiced at least 1000 years before the
Christian era while the present day form of marine insurance probably began
around the eleventh or twelfth century. The early development of life
insurance was closely linked with that of marine insurance. The industrial
revolution in Europe necessitated the development of fire and accident
insurances. Then came motor, engineering and aviation insurances (Hansell,
1974). In all cases, community based activity is considered as the origin of
modern age insurance which grew as a huge commercial sector covering a
wide range of policies in all spheres of engagement. Despite the advancement
1
A man of rank or authority.
of insurance as a commercial business, it is little understood and exercised in

the less developed African countries construction industry.
13.3 Principles of Insurance
The primary function of insurance is to spread the financial losses of insured

members over the whole of the insuring community, by compensating the
unfortunate few from the fund built up from the contributions of all members.
Obviously, if insurance is to function equitably, the contributions to the fund by
the individual must be commensurate with the likelihood of his claiming upon it
and the possible extent of such a claim. For instance, the owner of a thatched-roof
building of largely wooden construction should pay more into the fire insurance
fund than the owner of a concrete building of equal value.
Whilst insurance exists, in principle to combat risk, there are certain legal,
commercial and moral considerations which make it impossible to insure every
conceivable kinds of risk. In addition to the common law of contract, the
following rules in particular are considered to be the basic principles of insurance:
a) Utmost good faith (Uberrimae fidei): In an insurance contract the principle
of Utmost good faith applies. The proposer must disclose all material facts
to the insurer;
b) Insurable interest: The insured must have an insurable interest in the subject
matter of the insurance. The subject matter of the insurance can be property,
life, potential liability, etc.;
c) Subrogation: This means that the insurer after paying a claim has the right
of standing in the place of the insured and availing himself of all the rights
and remedies of the insured whether already enforced or not, but only up to
the amount of the insurer’s payment to the insured;
d) Indemnity: Most policies are indemnity policies. This means that the object
of these insurance’s is to place the insured as nearly as possible in the same
position after a loss as he was immediately before the happening of the
insured event;
e) Condition: Condition of the insurance may be specified. Policies can be

separated into All Risk Policies and Specified Perils Policies.
When looking at an insurance policy look first at: Who is insured? What risk is
insured against? What period is the policy effective over? These are vital since a
person cannot claim under a policy unless,
a) he/she is insured by it (or some other reason is entitled to enforce the
policy);
b) the loss was covered by the insured risk; and
c) the policy was effective at the time of the occurrence of the event leading to
the loss.
Only when these points have been checked is it worth going on to the small print
which will include other important details such as: limitation of time for notice of
a claim; amount of cover available and whether an excess payment by the insured
is applicable.
Since civil engineering can be a risky and hazardous business, insurance is

regarded as an important facet of civil engineering practices. Risks to be covered
include, among other things, the collapse or damage of the contract works on
neighbouring properties belonging to the third parties; the loss or damage to
materials or plant and the injury or death of employees or members of the public.
Typical risks associated with civil engineering constructions are schematically
shown in Figure 13.1.
Due to the fact that different bodies are involved in a typical civil engineering
project (clients, consultants, contractors, sub-contractors, suppliers, employees,
financiers, member of the public, etc.), it is important for every body to be sure
that insurance is given proper attention and covers the expected risks
satisfactorily without paying for unnecessary cover or duplication of cover. It
reflects obviously on the professional competence of the insurer to discover after
the occurrence of some disastrous event that the insurance premium one has been
paying did not cover the incidence.
In the developed world, if somebody or some organization does not have

insurance cover or has difficulty in obtaining insurance cover then it is almost
certainly because the insurance companies consider him as a bad risk. Hence,
when selecting a firm to carry out construction works, it is wise to take account
of the insurance company’s opinion of the firm.
RISKS ASSOCIATED WITH CONSTRUCTION
Selection of Professional Team Selection of Contractor
Design
Construction Maintenance
A B C D E F G H
I J K
L M N O P Q R S T U V
Figure 13.1 Summary of risks associated with Civil Engineering constructions.
RISKS ASSOCIATED WITH CONSTRUCTION
A: Risks through mistakes. N: Third parties

B: Risks through negligence and lack of care. O: Permanent and temporary works.
C: Risks associated with the Site of the project. P: Plant and machinery.
D: Risks associated with the Technical aspects of the project. Q: Property of the employer.
E: Risks associated with Acts of Man. R: Property of others associated with projects.
F: Design risks. S: Property of third parties.
G: Construction risks. T: Employer.
H: Usage Risks. U: Contractor and Sub-contractor.
I: Loss of Life and Personal Injury. V: Professional Team.
J: Material Damage. W: Responsibilities and Liabilities of the
K: Loss of time and consequential Losses. Contracting parties should be defined and agreed.
L: Employer X: Indemnity Through Insurance by
M: Others associated with the project. Professional Team, contractor, individually or
collectively.
13.4 Insurance Policy
An insurance policy is a conditional contract, under which the insurer promises,

for a consideration, to assume financial responsibility for a specified loss or
liability. The policy itself is a legal document containing many provisions
pertaining to the loss against which it affords protection. Basically, the law of
insurance is identical with the law of contracts. However, because of its intimate
association with public welfare, the insurance field shall be closely controlled and
strictly regulated by concerned government body. Usually, it is required to
establish an insurance regulatory agency which administers insurance code, a set
of statutory provisions that impose regulations on insurance companies concerning
investments, annual financial statements, periodic examination, etc. To protect the
interest of the users, insurance companies should be controlled as to their
organizational structures, financial affairs and business methods.
A loss suffered by a contractor as a result of his own deliberate action cannot be

recovered by the contractor under the insurance policy. However, negligence or
oversight on the part of the contractor will not generally invalidate the insurance
contract. The contractor must pay a premium as the consideration for the
insurance company’s promise of protection against the designated loss. In the
event of a loss covered by an insurance policy, the contractor cannot recover
more than his loss; that means, he cannot make a profit at the expense of the
insurance policy.
13.5 Major Types of Insurance Policy
The normal types of insurance policy in Construction Industry include, among

other things, the following: professional indemnity insurance, contractor's all
risks policy, contractors third party liability policy and contractors employers
liability policy.
13.5.1 Professional indemnity insurance (PI)

It is taken out by the designers/consultants as cover against their liability for

acting negligently. Thus in the event of a structure collapsing during construction
because of faulty design, the client would sue the designer for negligence.
Provided the client could prove negligence, and provided the PI insurance was
valid and adequate then the client would be reimbursed for the designer's
negligence and all the resulting costs of the damage etc. A client is, therefore,
advised to see evidence of the designer’s PI insurance before commissioning a
job.
One weakness in the system is that the client has usually to prove negligence. A
more important weakness in this system is that the PI insurance may be valid and
adequate but might be discontinued after construction was completed. Thus a
latent design fault, which was discovered after completion of construction and
after the PI insurance policy had been allowed to lapse, would not of course be
covered. The designer would still be liable. Most consultants in the developed
countries do of course keep this PI insurance policy continuously running.
13.5.2 Contractor’s all risks policy
This policy covers loss or damage from what so ever cause to the contract works
or materials whilst on the contract site(s) and in use in connection with the
contract during the performance of the contract and the period of maintenance.
The FIDIC (Fédération Internals des Ingénieurs Conseils: International Federation
of Consulting Engineers) Conditions of Contract require the Contractor to take
out such a policy in the joint name of the client and the contractor. The policy is
“All Risk” and is therefore all-inclusive, with the exception of what are called the
“Excepted Risks”, meaning not accepted.
13.5.3 Contractors third party liability policy
This policy covers loss or damage to third party persons or property arising out of
the construction or maintenance of the works. As the name indicates, third party
means anyone who is not a part of the insurance contract. The FIDIC Conditions
of Contract require the contractor to take out such a policy.
13.5.4 Contractors employers liability policy
This policy covers damages in respect of injuries to workmen in their employment,

or employment of any sub-contractor. As this insurance cover is required by
Statute Law for any employer in most developed countries, it is not therefore
specified as required by the conditions of contract.
13.6 Insurance Requirements in African Construction Sector: Discussion

and Summary
It is generally understood that insurance in the construction industry is taken out

for the following four major reasons:
a) compulsion by legislation;
b) required by the contract;
c) self protection; and
d) requirements by financiers.
The Authority responsible for licensing construction firms in some African

countries like in Ethiopia, does not consider insurance as a criteria for issuing
licenses. This being the case, construction firms, both consulting and contracting
firms, are not fully aware of insurance and they do not want to purchase policies
unless they are forced to by legislation or contract conditions. A study conducted
on this issue confirmed this fact by saying that the concerned government
authority should make insurance mandatory.
Generally, conditions of contract of any country require contractors to take

responsibility for the care of works from the commencement day of the project to
its completion. This means, contractors are required to buy relevant insurance
policies after proper risk assessments have been made. Nevertheless, most of the
contractual agreement between client and consultant; client and contractor;
contractor and sub-contractors have been observed without adequate insurance

coverage in many of the developing countries.
Consultants shall be liable for any damage that could arise due to their failure in
design works. They should be insured or indemnified by insurance should claims
arise against their work for professional duty (self protection). Unfortunately,
most consulting firms are not willing to shoulder this responsibility and are not
ready to buy Professional Indemnity insurance policy. Some of them even
consider insurance as a redundant act and not as a part and parcel of their
business. In the Ethiopian context, contractors are required to have at least a
Performance Bond. Though lasts usually for only one year, contractors
performance bond acts primarily for the protection of the owner to check whether
his structure is built in accordance with the terms of the contract.
Since most of the time clients do not have the proper knowledge of insurance they
do not ask for adequate insurance coverage from the construction firms they
select for their projects. Clients should keep in mind that it is absolutely essential
to check for sufficient insurance coverage of the professionals involved in their
project, in case they have to be indemnified. There were numerous cases
worldwide where consultants and/or mainly contractors have no money to pay
during indemnity. Consultants, who act on behalf of clients are responsible to
help their clients by giving them technical and managerial assistance. It has now
become normal, especially in the developed world, to appoint Management
Consultants, who act on behalf of the client and help in selecting competent
consultant and contractor, and administer the project without involving
themselves directly in the design and construction works.
The above points reveal that the major parties in the construction industry, i.e.
clients, consultants; contractors, concerned local and federal government
authorities; law makers, financiers, etc. share responsibility for the non-existence
of appropriate insurance guidelines in the construction sector of a nation.
Moreover, systematic efforts have to be made by insurance companies to
advertise and impress upon the public and the concerned parties on the need for a
relevant insurance cover in the construction industry.
It has thus become clear that the need for suitable insurance policy is, therefore,
unquestionable to satisfy the interest of the client; to achieve the required quality
and standard; to provide safety of the workers and the general public during and
after construction, and for proper utilization of the nations resource. A study made
in the Ethiopian construction sector indicates that most of the construction firms
are making their business with no or without adequate insurance coverage. Some
of the reasons for not having the required insurance policies are summarized as
follows:
a) Lack of proper understanding on the importance of relevant insurance
policies by construction firms and their clients; lawmakers; legal
professionals and the society in general;
b) A tendency to underestimate the risks associated with construction projects
by all parties involved in a construction project;
c) Construction firms are not required by their clients/consultants or by the
concerned authority to provide adequate insurance coverage;
d) Most construction firms do not have a well-organized management system
that can evaluate the risk involved in a particular project;
e) Contractors are reserved to buy insurance policy(ies) unless they are
required to procure one or more policies;
f) Some important policies, like the Professional Indemnity insurance policy,
are not understood by the society in general, by designers/consultants and
even by some insurance companies in particular;
g) Premiums of some insurance policies are very expensive; and
h) Insurance companies are not efficient in responding to client’s claims.
Based on the results of the study, made in the Ethiopian construction sector the
following recommendations are forwarded to ensure a better appreciation for the
risks associated with the construction of civil works:
a) Prior to finalization of tender documents, clients should appoint duly
qualified advisers to check the procurement of relevant insurance policies as

the condition of award of a tender;
b) Insurance companies must find ways to demonstrate more clearly to clients

and buyers the importance of various insurance policies;
c) Efforts should be made to inform members of the construction industry

about matters of liability and insurance;
d) All parties in a construction project should accept that some risk is attached
in their activity;
e) As usually done in the developed world, local financing organizations,

before giving funds for construction activities should make sure that the
designers and contractors had adequate insurance coverage;
f) Competent and independent controlling mechanism should be established

by the concerned authority to protect the interest of the client, the public and
preserve the nation’s resource;
g) The duty and functions of consultant and contractors in realizing the interest
of the client should be properly defined;
h) The relationship between client and consultant; client and contractor,

consultant and contractor; contractor and sub-contractors should be clearly
understood; and
i) Professional associations and engineering education institutions should play
a leading role in protecting the profession and increasing awareness of the
professional ethics. This may include, for instance, recognizing the best
design and construction projects; organizing seminars on relevant topics;
etc.
Chapter 14
Claims and Dispute Resolution Mechanisms
In the Construction Industry
14.1 Introduction
Claims are an inevitable fact of life in the construction industry. Whether in local or
international contract projects, the issue of claims remains the same. In the context of
civil engineering projects, claims are requests or demands for payment of money or
request for time extension or both to which a contractor believes, rightly or wrongly,
he/she is entitled. They result as a consequence of various factors. Some of them are
due to incomplete information in the initial tendering documents, unforeseen
circumstances, and inadequate contract administration. There have been significant
occurrences of claim cases in major international construction contracts in Africa.
Some have been handled by international arbitration, while the rest are settled locally.
The nature of civil engineering projects makes them unique in that they are site
specific and custom built. No standardized approach can be utilized in all cases. This
makes it difficult to tell ahead of time exactly how a project will turn out or how much
it will cost. Upon execution of the contract, many unforeseen circumstances and
problems arise that necessitate revision of the work progress and rectification, usually
at a given cost. Hence, the issue of claims arises.
In less developed countries, specialty skills in undertaking large projects do not

normally exist, and therefore must rely on foreign contractors. In addition to
importing these contractors the country must also find the necessary finances to
implement the project. The two important factors that give projects an international
feature are: the procurement of services from foreign companies; and the financing of
such ventures from foreign financing agencies. Hence, the term, “International
Projects” is used.
14.2 International Projects
The current trends of globalization and the free trade agreements being ratified by
many nations have encouraged the participation of many contractors in the
international construction industry. Han et.al. (2001) argued that “International
construction markets have changed dramatically during the last decade. Agreements
such as the Uruguay Round in the General Agreement on Tariffs and Trade (GATT)
system have fundamentally changed the structure of the construction industry.
Signatories to the GATT system have to open their domestic markets to foreign
competition
In addition to this, the standardization of products and services such as the

International Standards Organization (ISO) has promoted product acceptance and
approval in international trade. As a result, construction firms are able to market
standardized products in different countries. Therefore international construction
projects involve a multitude of trade and expertise; possibly from many different
countries where the work is executed on the site belonging to the employer (Cox,
1991).
The basic features of a project may remain the same regardless of the geographic
location. The elements of culture, governmental issues (such as importation, taxation,
foreign currency transfer policies etc.), financial (exchange rates) requirements,
Claims and Dispute Resolution Mechanisms in Construction Industry 425
mobilization, and in general political or economic and related issues, however,

complicate the planning and execution of a project. These factors affect all the
activities and influence the execution of a project and they give international projects
their unique characteristic [Heisler, 1994].
Projects will also be located in different places with varying conditions of accessibility
and availability of data related to the projects. These factors will also play a crucial
part in the implementation of the project. In addition to this, major civil engineering
projects require the participation of many trades and specialties adding to the
complexity and the involvement of many specialist companies. In major international
projects, financers usually require that loans be disbursed according to their
requirements and international contractors also prefer to be administered on
internationally recognized and accepted legal documents.
Many major civil engineering projects in most of African countries are financed
through loans with bilateral or multilateral financial arrangements whereby the
financing agencies cover a major portion of the financial requirements whilst the
respective government normally covers a small portion of the total project cost, in the
range of 10-20 %. One of the most important steps in the implementation of a civil
engineering project is the selection of a suitable contractor, with the requisite financial
and technical expertise to accomplish the project objective. In many cases, financing
agencies require competition as an aid to selecting competent contractors and many
construction contracts are awarded on the basis of competitive bidding. Among the
major financing institutions of the world, the World Bank the International Monetary
Fund, (IMF) and the African Development Bank (ADB) occupy a central role.
14.3 International Contracts
A contract is called international if the parties concerned have their places of business
or habitual residence in different states (Bunny, 1991). This may mean that a
contractor residing in yet another country may build a project financed by an agency
whose official residence is outside the home country of the client. Few international
construction projects, therefore, take place today without bilateral or multilateral
financing and often both are utilized (Jaynes, 1991). Bilateral agreements involve the
agreement of two governments; whereas multi lateral agreements involve more than
two governments. Whenever such financing is available, the lending institution
normally requires some procedures to be carried out in the implementation of the
works.
In addition to the requirements of the funding institutions, it is normal practice in the

construction industry to utilize a form of internationally recognized contract
documents that are acceptable to both parties. In this regard, the FIDIC form of
contract has been widely accepted and is currently a widely used form of contract
administration document in the international projects.
14.4 Definition of Contract
The basic document in a project is the contract document, where, requirements of the
work, the duties and responsibilities of the parties concerned are set out in detail. The
type of the implementation of the project dictates the form of the contract. For
instance, Article 1675 of the Ethiopian civil code, for example, defines contracts as “A
contract is an agreement whereby two or more persons as between themselves create,
vary or extinguish obligations of a propriety nature”.
Article 1678 further states that “No valid contract shall exist unless,
(a) the parties are capable of contracting and give their consent sustainable at law;
(b) the object of the contract is sufficiently defined and is possible and lawful; and
(c) the contract is made in the form prescribed by law, if any.”
Furthermore, Article 1679 stipulates “A contract shall depend on the consent of the
parties who defined the object of their undertaking and agree to be bound thereby”.
Hence the law defines it as an agreement. That means two parties agree voluntarily to
define an agreement between them, with full consent. Such consent is also to be
documented in written form. The provisions of the Ethiopian law are based on such a
stipulation. As in Ethiopian law, forms of international contracts basically follow the
same principle. This is very much the same in countries in the East, Central and
South African region. Fundamental to the contract is the principle that it is a binding
legal document. This means that, all activities agreed upon by the parties must be
carried out. It is not possible to dismiss terms or requirements merely because they are
onerous or overlooked (Heisler, 1994).
In international projects the same principles apply. The form of agreement or contract
takes more or less the same form. Whilst the basis of voluntary agreement (consent of
both parties and capability of contracting parties to carry out their agreement) is valid,
the form of contract and the settlement of disputes, if any, are to be carried out in
international terms and conditions. There are a number of international contract forms
specifically designed for international construction contracts to be carried out outside
the home country of the main contracting company. This is done to mediate the
variability of the laws of the home country of each partner in the construction contract,
as well as to give a fairly broad coverage so that both parties know their obligations.
Some of the currently available forms of construction contracts include, the FIDIC
form, the ICE and the AIA conditions of contract.
In normal circumstances copies of the proposed contract documents are issued as part
of the tender documents to the tenderer so that they are aware of the provisions of the
contract. This is further updated or amended as required during the tendering and
negotiation period. A contract in itself, however, does not achieve anything without a
qualified contract administration expertise.
After contract provisions have been completely discussed, agreed
upon, and reduced to mutually acceptable written terms, and the

contract has been duly signed by both parties then only upon the
diligent follow-through of capable contract administration can the
owner realistically expect to fully realize the benefits offered by the
contract. (O’Leary, 1992, pp 4).
The basic contract documents will normally contain the agreement between the owner
and the contractor, conditions of contract, construction drawings, and specifications.
Also included in the contract documents are addenda issued prior to implementation of
the contract and other documents, which may be listed in the agreement, and any
modifications, issued after execution of the contract.
14.5 Types of Contracts
There are many types of contract forms in the administration of civil engineering
projects the most common ones and those widely used in the African construction
industry include: measurement form of contract, Build-Operate-Transfer (BOT),
Turnkey, Lump sum form of contract.
14.5.1 Re-Measurement form of contract
In this form of contract, the contractor is paid based on the amount of work he does, as
compared to the prices detailed in the Bills of quantities (BOQ). This is the most
widely used form of contract for both local and international contracts in most of
African countries.
14.5.2 BOT form of contract
This is a form of contract where the contractor builds, operates and transfers (BOT)
the project to the client for a fee. This type of contract is also widely used in the
developed world where the capacity of contractors in executing projects on their own
finance is very high.
14.5.3 Turnkey Projects
This form of contract, also called EPC-contract (Engineer, Procure, Construct-

Contracts) is a form of contract where the contractor is responsible for the design and
building of the project. Such forms of contract are particularly suitable for electro-
mechanical contracts.
14.5.4 Lump sum form of contract
In this form of contract, the contractor agrees to do the job for a fixed sum. In this
case the contractor is responsible for the preparation of all details.
14.6 Forms of Contract Administration
Depending on the execution form of a project various arrangements of contract

administration are carried out. In some cases the employer may directly enter into a
contract with the contractor and may supervise the activities through its own
professionals. In other instances, it may hire the services of a third person, more or
less independent of one or the other party to execute the contract. The FIDIC form of
contract is based on this second option. (Cox, 1991).
14.6.1 International forms of contract administration
In order to streamline the diverse activities in the construction sector there have been a
number of attempts to produce a standard form of contract for civil engineering works.
These standard forms of contract were initially drawn up by independent professional
organizations (Bunny, 1991) In Europe, and more particularly in the United Kingdom
and in Ireland such forms were produced as early as the nineteenth century. A standard
form for building contracts was used under the aegis of the Royal Institute of British
Architects (RIBA), some time towards the end of the nineteenth century. This led to
what became known as the 'RIBA Form’, which was published in successive editions
between 1909 and 1957. It later developed into what became known as the JCT form
(Joint Contracts Tribunal).
In civil engineering contracts, various forms were used by different employers prior to
the Second World War. These were combined by the Institution of Civil Engineers
(ICE), and the Federation of Civil engineering Contractors in the United Kingdom into
an agreed standard document. This was published in December 1945, and the
document was thereafter known as the General Conditions of Contract and Forms of
Tender, Agreement and Bond for Use in Connection with Works of Civil engineering
Construction, in short the ICE form. In January 1950 it was revised and issued with
the added agreement of the Association of Consulting Engineers, UK. Other revisions
followed later (Bunny, 1991).
To the credit of those responsible for drafting the ICE form, many professional
Institutions all over the world modelled their own conditions of contract on its text,
making only minor amendments to accommodate differences in local matters of law
and nomenclature. The ICE form was, however, drawn up mainly for the domestic
scene in the UK, and so in August 1956 the Association of Consulting Engineers in the
United Kingdom, jointly with the Expert Group for the Constructional Industries in the
UK, and with the approval of the Institution of Civil Engineers, prepared a document
for use outside the UK which became commonly known as the Overseas (Civil)
Conditions of Contract (The ACE form). Although in text and format this latter form
differed only slightly from the ICE form, there were some minor changes in forty
clauses as well as a small number of major alterations (Bunny 1991).
The ACE form as published in 1956 included a standard form of Tender, an Appendix,
and a standard form of Agreement. It was published in a blue cover, which helped to
distinguish it from the ICE form. It was perhaps the first standard form of international
conditions of Contract for civil engineering works. In concept and style, however, it
remained faithful to the original domestic form.
It had only been used for a short period of time when the Conditions of Contract
(International) for Works of Civil engineering Construction was published in August
1957. This was based on the ACE form described above, and was also published in
two parts. Perhaps because of its long title, in a very short time it became popularly
known as the 'Red Book' (its cover was printed in red). It was prepared by the
Federation Internationale des Ingenieurs Conseils (the International Federation of
Consulting Engineers, FIDIC) and the Federation Internationale du Batiment et des
Travaux Publics (the International Federation of Building and Public Works, now
known as the International European Construction Federation, FIEC).
14.6.2 The FIDIC form of contract
As discussed above, and because of the concepts included in the FIDIC form of
contract, as a result of the many years of experience and input from different
professional organizations the FIDIC or “Federation Internationale des Ingenieurs
Conseils” has become a form of engineering contract that is becoming popular for
international projects. Prepared initially in 1958 it is now in its fourth edition, and
continues to be updated. The FIDIC form of contract is a development of the ICE form
of contract and in this form of contract, the Engineer plays a central role in the
administration of the contract and dispute settlement. As a widely used form of
contract in the international contracts in Ethiopia, the FIDIC form of contract endows
the Engineer to settle differences, or in some cases to give decisions on disputes that
may arise. Therefore as a primary administrator of the contract the Engineer is the
mediator between the owner and the contractor, which form the parties to the contract.
14.7 Claims in International Projects
It has been repetitively stated that claims are inevitable in construction projects. They
may occur when the terms and conditions of the contract change in such a way that the
contractor is unable to recover expenses and profits. In other cases, when the
provisions of the contract documents and specifications lack clarity, a correct
interpretation of the documents may result in extra expenditure, which a contractor is
forced to cover through claims.
In some cases, where the form of contract transfers the risks to the employer rather
than to the contractor, the contractor may be tempted to claim. Such occurrences
happen depending on the form of procurement of the services. In the traditional form
of procurement of services, where the employer provides the designs and
specifications (prepared through a consultant) to the tenderers, the successful tenderer
may not assume the responsibility for the completeness of the documents and hence
may tend to claim for extra time and money, depending on the discrepancies that he
may discover in the contract documents. Being cognizant of this, the FIDIC form of
contract provides a number of clauses that entitle the contractor to claim for extra time
and money.
In the other form of contract, such as the BOT, and fixed fee forms of contract, the
design and construction of the projects is largely the responsibility of the contractor.
The risk is then transferred from the employer to the contractor, with the result being
lesser likelihood of the occurrence of claims.
The traditional form of procurement of services has an inherent tendency to be claim

prone. Being a widely used form of procurement of services in Ethiopia, claims tend
to occur rather frequently in the traditional procurement of services form of contract.
These can be avoided where the consultant takes the primary role of preparing a clear
design and tender documents, and a fair contract administration based on partnership,
rather than an antagonistic approach. Even then claims will still be unavoidable, but
such a step will go a long way into reducing them. The causes of claims are many and
varied. Depending on the particularities of site and geographic location they may have
differing causes and impacts.
It is a widely known fact in the construction industry that no civil engineering project
is completely designed so as to make any design changes unnecessary. So many
unknown factors make the execution of civil engineering projects at best
unpredictable. The contractor is, therefore, forced to cover himself against any
possible risks in his initial bid and later on to cover any financial losses through
claims. These facts are widely known such that current construction contract
documents make provisions for claim submission and resolution of such disputes.
Recognizing the inevitability of claims many international civil engineering projects
provide means of handling claims. In order to avoid ambiguity in the handling of
claims, the FIDIC form of contract sets out detailed procedures for claims. These
include:
 that the contractor give his intention to claim within 28 days after the event
giving rise to the claim has first arisen, keeps contemporary records on the
claim issue, that the Engineer examines such contemporary records, That the
contractor submit detailed particulars of the amount claimed and the grounds
upon which the claim is based and finally the Engineer to make determination
based on the available contemporary records. It can also be noted that whilst
there is a definite time limitation for the submission of claims the contractor
may nevertheless withdraw his claims at any time.
14.8 Classification of Claims

Although there are many types of claims some of them may be classified and
discussed as follows.
14.8.1 Claims within the provisions of the contract
These are Claims made under the expressed provisions of a contract fall under this
category. They arise and dealt with under the provisions of the contract. Such types of
claims form the largest part of claims and the terms of the contract define the
situations in which they may be made and how they may be handled. For instance the
employer may institute a design change, and if such an unforeseen event occurs there
is a procedure set out in the contract where the contractor may claim restitution by
submitting a straightforward contractual claim. Certain common breaches of contract,
such as denied access or late information are also covered by claims procedures
included within the claim clauses of the contract.
14.8.2 Claims outside the provisions of the contract
These claims are those which are either not made under the conditions of contract or
are those allegedly made under them but considered legally unenforceable by the
employer on the basis that they do not fall within their provisions Haswell et al.
(1989). Such claims are invariably concerned with the recovery of damages and even
though they may be outside the scope of the contract, they are nevertheless subject to
resolution within it.
14.8.3 Claims in sort
The law of tort (from Tortum-latin for wrong) is concerned with civil duties and
relationships. Tort is a legal term used to describe the various wrongs, which may
give rise to civil proceedings, mainly in the form of an action for damages. Although
the law of tort regulates a wide variety of unlawful behaviour, those related to
construction include, nuisance, slander, libel, trespasses and negligence. For example,
excessive dust, noise, vibration, fumes, seepage, gasses, smoke etc. produced by
someone may expose him to liability for nuisance. The court may order the nuisance
to be stopped by an injunction or may award damages or both (Bunny, 1991).
14.8.4 Quantum meruit (“as much as it is worth”) claims
Quantum Meruit claims are claims where work has been done but no contract or price
has been agreed. Then it may be claimed that the work should be valued and paid for
what it is worth. A quantum meruit claim may also arise, for example where work is
done on the basis of a letter of intent and there is no contractual liability.
14.8.5 Ex-Gratia claims
These are claims made with no foundation in the contract or at law but only in a sense
of “fairness” or equity. Such claims depend upon ‘ex-gratia’ or 'kindness payments'
by the employer made in the particular circumstances; sometimes-such payments are
made to avoid or to terminate claims negotiations or a dispute. An ‘Ex-gratia’ claim
might be made to recover cost incurred by the contractor, the expenditure of which
gave benefit to the employer, but for which there are no grounds for recovery under
the contract.
14.8.6 Claims concerning disruption and delay
One of the most common causes of claims in international contracts has been the late
issue of information and drawings by the consultant to the contractor. Most contracts
are carried out on the principle that the bidding documents include fairly adequate
details of drawings to enable the contractor to carry out the works but that working
drawings necessary for the implementation of the works be prepared on site by the
contractor. These drawings are then checked, approved and then returned to the
contractor for implementation. In the event that the contractor suffers delays due to
the late issue/approval of the drawings, then he may claim for it. Design changes may
also fall under this category.
In principle, fundamental changes in the overall design of a project should not occur,
unless there was a major oversight in the initial design preparation stage of the works.
In spite of this, however, there have been observations in numerous projects that
claims could result from the change in the design of the work. This type of claim can
be mitigated by investing adequate time and money in the pre-tendering and design
stages of the work. Such effort, among other things, will have to focus on obtaining
adequate site investigation reports and other pertinent data.
14.8.7 Claims concerning delay on site handover rights of way
One of the major causes of claims in the developing countries construction industry,
particularly in international projects has been the late handing over, or rights of way
related issues. As indicated in the FIDIC, the contract documents do make a provision
in the event that the Client/Engineer fails to exercise his obligation in handing over of
the site, and thus causes the contractor to incur additional costs, the contractor is then
entitled to claim costs of delay. In such an event the contractor must produce evidence
that the costs that he claims due to the delay can be substantiated by an accurate
programming. In most cases, it may not be easy to accurately describe the delay
caused by programming. On the other hand, the actual delay due to the fault of the
Client/Engineer or that due to the contractor's own fault must also be clearly
differentiated.
In most international projects in developing countries, this has been the most common
form of cause of claims. It stems partly from a wrong understanding of the provisions
of the contract, and the desire to start the work as soon as possible. Whilst the
provisions of the contract demand that the site be handed over in a reasonable time,
most clients do not seem to understand the depth of the problem that a late handover
may cause. This apparent contradiction has been the cause of claims in some projects.
14.8.8 Claims concerning the execution of works
14.8.8.1 Constructive Changes
Such changes are changes, which arise from acts that are directly attributable to the
owner. Such acts result in more work or more time on the work and for which the
owner may not grant a formal variation order.
14.8.8.2 Acceleration of works
A contractor may be required to accelerate the works, when the owner requires that the
works be completed sooner than is required by the contract or orders a work to be
finished on the original completion date but fails to grant time extension, despite
entitlement.
14.8.8.3 Claims concerning unforeseen circumstances
Perhaps the most extensively used clause for the submission of claims in the civil
engineering industry relates to the clause referring to unforeseen site circumstances.
The intention of this clause is that a contractor is not asked to price for unforeseen
risks and the client is also protected from high bid values that a contractor may submit
to protect himself. In essence therefore the inclusion of this clause contributes to a fair
administration of a contract.
The most common application of this clause is found in relation to physical

obstructions, subsurface or latent physical conditions differing materially from those
indicated in the contract documents, particularly subsoil investigation reports.
14.8.8.4 Claims concerning the payment certification
In addition to claims concerning the certification of payments by the resident engineer,

delays in disbursement of fees by financing agencies normally cause claims.
14.8.8.5 Claims concerning breach or termination
The employer may for some reason, suspend the work, or terminate the contract. This
may be due to bad work or failure to perform, on the side of the contractor. If the
contractor can prove that the termination benefited the employer, then he may claim
profits on work completed and cost of demobilization.
14.8.8.6 Claims concerning change of legislation
Subsequent to the enforcing of a contract, legislation may be instituted that may cause
an extra financial burden on the contractor. In such a case he may argue that since he
was not aware of such legislation nor could he have been able to foresee its
implementation during the preparation of his tender, he has incurred additional
expenses for which he is requiring reimbursement. In many instances, contracts make
provision for certain items that may by legislation be varied during the course of the
contract execution. Such items include the costs of fuels and lubricants, which may
vary during the course of the contract and have a direct impact on the costs that a
contractor may incur for the execution of the works.
14.8.8.7 Claims concerning weather conditions

The FIDIC form of contract stipulates that in the event of exceptionally adverse
climatic conditions, the Engineer may (after due consultation with the employer and
the contractor) determine the amount of any extensions that may be granted to the
contractor.
14.8.9 Claims concerning variations
14.8.9.1 Additions
Directed variations are variations resulting from the Engineer’s directions changing
the quantity, quality of work or the time of execution and sequence of the works.
Traditional forms of contract in the construction industry are based on a re-
measurement type of contract. This means that all the parties to a contract agree that
the quantities are estimates only and that the actual money to be paid will be based on
the site measurement of quantities.
As a favoured form of contract administration, this has now come into picture in most
international contracts in Eastern and Central Africa. Whilst it gives a measure of
control on payment certification, in that the actual money paid out reflects that of the
actual work done, nevertheless, there is a negative side to it that the quantities in the
initial (tendering period) bills of quantities may not reflect the actual site quantities.
In such an event, should the actual quantities exceed those of the bills of quantities by
a substantial amount or by a certain percentage (15% in the case of FIDIC) most
contracts provide a means whereby the contractor is reimbursed for his additional
costs through the suitable adjustment of the contract rates. This is done on the
assumption that the rates that the contractor assumed in the preparation of the tender
are no longer applicable since the quantities have significantly changed. This is
usually done through the revision of applicable bill rates.
14.8.9.2 Omissions
Whilst it is understandable that the addition of a significant volume of work may give
rise to claims on the grounds that the contractor demand that the previously agreed
rates be revised to reflect the change of the volume of work, there is also another case
in which the omission of a significant volume of work will give rise to claims on the
basis that the contractor is forced to scale down or keep idle equipment and manpower
which may cause extra cost.
14.8.10 Claims concerning importation issues
One of the characters of international projects in developing countries is that most of

the building materials must be imported from abroad. This fact influences the
mobilization time, costs, start up and duration of a project. In addition to the
mobilization process being time bound, the start up of a project will be greatly
influenced by the time of clearing of imported items, special goods handling capacity,
level and standard of port facilities and roads, import bonds, re-export, and sale of
used materials, depreciation rates and availability of clearing agents. Any regulations
pertaining to customs clearing of goods will also have an impact.
14.9 Assessment of Claims by the Engineer
The Engineer decides on the validity of claims. He may accept the claim in full, or part
or reject it totally. If the contractor does not accept the Engineer’s ruling on a claim,
then he is always able to take the matter to arbitration if contractual or to arbitration or
litigation if extra contractual. Once a claim is settled it ceases to be a claim. There are
two distinct stages in the assessment of claims:
i) Is the claim valid in principle?

If yes, then
ii) Is the evaluation and quantification correct?

Contractual claims must be based on contract document. It is important to see what the
contract says – not what you think it ought to say or what you would have liked it to
say, or even what you think is fair. The contract was agreed between both parties to
the contract and it is taken to be a statement of the terms of the contract. If the contract
states that the contractor is to be responsible for something, then the contractor is
responsible however unfair it may seem later.
Claims are usually requested for:
i) an extension in time for completion of the work, or

ii) extra payment, or
iii) an extension in time and extra payment
The majority of claims involve delay of some form. Time is particularly important
since a contractor is bound by the contract to construct the works in a specified time
and is liable to pay liquidated damages for late completion. Acceptance by the
engineer of the validity of a claim for extension of time means that the contract
completion date is extended.
14.9.1 Delays for which the client is responsible
If delay occurs for which the client is responsible, then the contractor will be entitled
to an extension of time. If, as a consequence, the contractor incurs extra costs then he
will be entitled, in general, to reimbursement of those extra costs.
14. 9.2 Delays for which the client is not responsible
If delay occurs for which the client is not responsible, then the contractor will not be
entitled to compensation although he may be entitled to an extension of time. He may
be entitled to an extension of time in cases of strikes, bad weather, etc. He would not
be entitled to an extension of time because of his own incompetence, or breakdown of
his plant since these are supposed to be within his control.
Once the validity of the claim has been accepted then consideration can be given to the
valuation of claim. If costs cannot be claimed there may be little point in calculating
them.
14.9.3 Evaluating a claim for costs
This is a matter of assessing what were the actual costs incurred and how much did
these exceed those that would have been payable if there had been no reason for the
claim. If, as an example, 200m3 of concrete Grade C-30 were specified and if the
engineer instructed the contractor to use Grade C-40 instead, then the quantification
would consists of the extra cost of the Grade C-40 concrete over the Grade C-30 for
the 200m3.
14.9.4 Evaluating a claim for delay
Delays may be caused by the client (eg. Changing his requirement, late delivery of
drawings, etc.) or by the contractor (eg. Inadequate resources, use of unsuitable
methods, etc.) or be partially or totally outside the control of either party (eg. Political
change, weather, national strike, etc.). The contract, as previously stated, classifies
them into those for which the client is responsible and those for which he is not.
If a single cause makes a whole project stop, then it is reasonably easy to assess all the
costs unavoidably incurred as a result. Costs might include standing time of labour,
plant, including sub-contractors, actual cost of site overheads, staff, depreciation on
site items, maintenance, etc.
If a single cause stops only some operations, then it is more difficult to assess the costs
and/or delay attributable. Was the operation on the critical path or did it come on to it?
Standing time of labour, plant, etc. could be claimed but only insofar that they could
not be employed on other work. It is the duty of an injured party to mitigate the
damage so far as possible. Hence the contractor should try and use his idle plant and
labour elsewhere.
If an operation is stopped, there is not only the actual period of delay but there may
well be some allowance for regaining the tempo of the work. If an operation is slowed
down rather than stopped it may be convenient to assess an equivalent delay.
Calculation of the total period of delay and equivalent delay are shown schematically
in Figure 14.1 and Figure 14.2, respectively.
Expenditure
Plan Actual
A B
Time
Period of delay = A+B
A = Duration of cause
B = Allowance for regaining tempo of work.
Figure 14.1 Schematic representation of the total delay calculation.
Expenditure
A
Time
A = Duration of cause - during which work able to continue

but at a reduced output.
B = Equivalent delay
Figure 14.2 Schematic representation of equivalent delay.
14.9.5 Concurrent delay
Frequently, there are different causes of delay, which overlap, and there is a problem
in assessing the different delays and costs attributable to each cause. A fundamental
principle is that if a job is totally stopped by one cause it cannot be any more stopped
by another cause – unless and until the original cause is removed or overcome. Table
14.1 shows the position for concurrent delays and whether a claim for extension in
time and/or extra costs would be allowable. It is to be noted that under different
circumstances, time and cost claims assessment can have alternative possibilities. The
schematic concurrent delays shown in Table 14.1, however, describe cases under
normal hypothetical conditions.
Table 14.1 Schematic concurrent delays
INITIAL DELAY CAUSED BY CONTRACTOR

a) C.
E.
I.
Time: No extension of time claim
Cost: No claim for extra costs incurred.
b) C.
E.
I.
Time:
Cost: No claim for extra costs incurred.
c) C.
E.
I.
Time:
Cost: No Claim for extra costs incurred.
d) C.
E.
I.
Time:
Cost:
INITIAL DELAY CAUSED BY EMPLOYER

e) C.
E.
I.
Time:
Cost:
f) C.
E.
I.
Time:
Cost:
g) C.
E.
I.
Time:
Cost:
h) C.
E.
I.
Time:
Cost:
INITIAL DELAY CAUSED BY INDEPENDENT
i) C.
E.
I.
Time:
Cost: No Claim for extra cost incurred.
j) C.
E.
I.
Time:
Cost: No Claim for extra cost incurred.
k) C.
E.
I.
Time:
Cost:
l) C.
E.
I.
Time:
Cost:
It is to be noted that in the table above, C stands for the Contractor; E for the Employer
and I for independent. In the event that financial claims are to be paid, costs of claims
can be generally classified as follows:
i) Labour: Total amount actually paid to the men including bonus, travel expenses,
lodging allowance, insurance, etc.;
ii) Plant: Depreciation rate, or cost of sending away and bringing back;
iii) Materials: Deterioration, storage;
iv) Sub-contracts: As i) to iii) above;
v) Site overheads: Actual costs – staff, depreciation of site huts, telephone, etc.;
vi) Head Office overheads: Actual costs; and
vii) Financing costs
14.10 Dispute Resolution Mechanisms
In general the purpose of claims by contractors is to seek additional money over and
above the contract prices. For the Client, however, it means additional costs, which in
the end may make the project commercially unviable. Such a differing interest in the
execution of a project will inevitably lead to disputes. Considering the unavoidability
of such problems, dispute resolution mechanisms are placed in many forms of
contracts. Current dispute resolution mechanisms stipulated in the FIDIC forms of
contract place the Engineer as the central element in the dispute resolution mechanism.
Prior to an amicably negotiated settlement, the contract documents usually require the
contractor to place his claim demands at the jurisdiction of the Engineer. The
Engineer is also required to act impartially. Should both parties consider the decision
of the Engineer to be fair then the parties will agree to settle the issue. If one or both
parties, however, do not accept the decision of the Engineer, then an alternative
dispute resolution mechanism is instituted. This usually leads to negotiating amicable
settlement or finally to arbitration.
Such occurrences of claims are the source of disagreements and may sometimes result
in disputes that could lead to arbitration proceedings. In case a dispute occurs, forms
of contract, such as the FIDIC form, set out details of the submission and resolution of
claims. These can be summarized as follows:
a) Submission of claims by contractor;
b) Review of claims by the Engineer;
c) Decision by the engineer;
d) Negotiation and/or amicable settlement;
e) Disputes review expert/board; and
f) Arbitration.
The above stages of formulation and/or submission, assessment, repudiation,
negotiation of claims is in itself a complicated process. In order to avoid a
complicated costly and time consuming arbitration proceedings, parties to a contract
may institute an Alternative Dispute Resolution (ADR) as an option of claim
settlement mechanism, which may include (Bunny 1991): direct negotiation,
mediation, conciliation, mini-trail procedure, claims review board (CRB); and pre-
arbitral review board. In the event the above options fail, then, arbitration proceedings
may follow.
14.10.1 Direct negotiation
Settlement of disputes through arbitration is a very costly process. Before the case is
even heard in court, the parties to a dispute may spend a substantial amount of money
in legal fees. Besides the substantial amount of money spent in pursing legal ground
to the claim relations at work may be strained.
Being cognizant of such an effect on the overall project implementation, the FIDIC
form of contract provides for room for an attempt for negotiation to be implemented in
an attempt to carry out an amicable settlement. This is also a form of an out-of-court
settlement, and may maintain a conducive working atmosphere between all parties.
This form of negotiation or amicable settlement is carried out between the parties to a
claim, normally without a third party. In case the parties jointly agree to the
involvement of a third party, however, then this process is called mediation.
14.10.2 Mediation
In the event that direct negotiations fail, then a third party is involved as a mediator
between the parties to a claim and help in the settlement of the claim. A mediator
engages in the task of persuading the disputants to change their respective positions in
the hope of reaching a point where these positions coincide (Bunny, 1991).
14.10.3 Conciliation
Conciliation is a dispute resolution procedure where the parties sit together in the
presence of a third party to discuss the way out. Usually the conciliator will draw up
and propose a solution, which represents what, he believes, is a fair and reasonable
compromise of the dispute, after having discussed the case with the parties concerned.
14.10.4 Mini-trial
In this option of dispute resolution process, the parties to a claim appoint a neutral
person (such as a retired judge) who will give a non-binding decision.
14.10.5 Claims review board
The dispute review board usually consists of a three-member board, who are
independent of the contracting parties. The board is formed as soon as the contract is
signed. Each of the parties appoints one person and the two jointly assign a third
person. In times of disputes, the board gives recommendations as to their resolution.
A government owned organization in Ethiopia, Ethiopian Roads Authority, for

instance, has recently instituted a procedure of assigning a “Dispute Review Expert”
with an international experience of dispute resolution, to be agreed prior to the signing
of the contract with the international contractor. Such step will most likely minimize
the development of claims into arbitration case, in the event that both parties agree to
take the decision of the expert as fair and just. However, such a step falls short of
identifying the root causes, frequency and incidence of claims.
14.10.6 Pre-arbitral review board
This is a relatively new procedure developed by the international chamber of

commerce in Paris. The rules, which were published in 1990, were designed to
provide a procedure for recourse at very short notice to a third person, the “referee”,
who is empowered to order provisional measures needed as a matter of urgency. In
the event that amicable settlement as enumerated in the above alternative procedures
fails, most civil engineering contracts make provisions for the settlement of disputes
through arbitration. This is enumerated through what is called the arbitration clause.
14.10.7 Arbitration
Whenever a dispute arose in a civil engineering contract, it was assumed that the
technical disputes require the involvement of technically qualified arbitrators. The
arbitration process was initially designed to give a speedy and inexpensive alternative
to the court system, which tends to become lengthy and expensive. Many disputes
that arise in contracts tend to contain substantial legal issues rather than technical
issues, necessitating the involvement of lawyers. In reference to this fact current forms
of the FIDIC contract contain what is called an arbitration clause. Such arbitration is
carried out under the rules of conciliation and arbitration of the International Chamber
of Commerce.
Arbitration is a method of dispute resolution, which is voluntarily selected by the

parties and agreed to in a contract as an alternative to using the court system (Leary,
1992). In this regard an international court of arbitration has been established since
1923, under the International Chamber of Commerce in Paris as a means of resolving
international commercial disputes. Since its establishment the court has handled over
10,000 arbitration issues (Rules of Arbitration, pp. 6). In order to set out the rules and
requirements clearly, the court publishes from time to time what it calls, the ”ICC
Rules of Arbitration”.
Every ICC arbitration is conducted by an arbitral tribunal with responsibility for
examining the merits of the case and rendering a final award. Each year, ICC
arbitrations are held in some 40 countries in several languages and with arbitrators of
some 60 different nationalities (Rules of Arbitration, pp. 6-7). The function of the
court is to provide for the settlement by arbitration of business disputes of an
international character in accordance with the Rules of Arbitration of the International
Chamber of Commerce.
The FIDIC form of contract provides arbitration as a form of dispute resolution, and
unless otherwise specified in the contract, under the “Rules of Conciliation and
Arbitration of the International Chamber of Commerce by one or more arbitrators
appointed under such Rules”.
This provision does specify international arbitrators but does not rule out an alternative
dispute resolution arrangement in the host country. As an alternative therefore
building up a council of domestic arbitrators, will not only reduce the expenses
involved in the resolution of the dispute but will also contribute to the enhancement of
domestic expertise and speedy resolution of disputes.
The domestic law also needs to be enhanced to take into consideration provisions
related to administration of international contracts and resolution of related disputes.
This will also contribute to a healthy understanding of claims and create confidence in
their handling by avoiding the aversion to international arbitration and the tendency to
go for amicable settlement for fear of such an action.
14.11 Impact of Claims
At best claims are undesirable. They are not, however, avoidable. Besides incurring
unwanted legal expenses, they strain the relationship between all parties and affect the
working atmosphere. Each party sees the other as an enemy, which affects the future
of the works, and can result in the parties being defensive. In such an atmosphere
more claims may be inevitable.
14.11.1 Financial impact of claims
The most significant effect of claims in international projects is the financial impact on
projects that have been a subject of such claims. Many cases can be cited where the
final project cost is over 50% more than the previously agreed sum. For instance, the
contractor for a large road project in the region has demanded about 40% of the project
cost. This will significantly increase final project cost.
14.11.2 Effect of claims on project completion time
In addition to the financial effects of claims on the total cost of a project, a significant
portion of claims focuses on the extension of time on project completion. In the
various international projects being carried out in region, there appears to be a
common perception of accepting time extensions more favourably than increased
financial expenses.
A study made in Ethiopia indicated that the majority of construction works carried out
by international construction companies have not been completed on time. Rather all
of them have been granted a time extension. Whilst time extensions may appear to be
necessary in some cases, few, if any, professionals view the issue of time extensions as
a serious claim case. In this aspect it is necessary to instil in the minds of the
practicing engineers and consultants that time extensions do also mean money. The
more a project is delayed the more costly it is and the income or revenue that may
have been obtained from a timely completed project is lost.
14.11.3 Other effects of claims
Another significant effect of the claim process is the effect it may have on the project
execution itself. Once the claim issues are referred to arbitration, the parties begin to
see each other as enemies and that will have a far greater impact, probably more
severe than the financial impact that will have on the total project life. Therefore
whilst maintaining a firm stand in the handling of possible claim cases, responsible
bodies should endeavour to maintain an atmosphere of good working relationship in
the interest of the project.
14.12 Observations in Selected Road Projects
Kahsay (2003) studied selected major road project reports and consulted relevant
professionals and observed the following main points, which need to be given
adequate attention in all stages of construction:
1. One of the most critical and frequently appearing problems seems to be those
related to late handing over of site /rights of way problems. It appeared that
contracts are awarded to tenderers with out first of all clarifying the rights of
way problems. This has caused a number of disputes time extension and
financial claims, and has affected the time of completion of projects;
2. Difficulties associated with late issue of drawings and related information is a
frequent occurrence in many of the projects;
3. Delayed response to contractor’s claim, or related technical issues has been one
factor observed in the analysis;
4. Great differences between the actual site conditions and the conditions that the
contractor expected while referring to the bidding documents during tender
preparation. This may be indicative of incomplete bidding document
preparation;
5. The involvement of the Client in settling or giving a final decision in the issues
of claims, although it may not be advisable, on the basis of the FIDIC form of
contract;
6. The lack of sufficient trained manpower in the contract administration of the
projects has been a key problem. Not only has this contributed to the lack of a
proper administration of the claims but also contributed indirectly to
encouraging contractor’s to claim more;
7. Professionals involved in the contract administration sector lack proper training
in the areas of construction law. This has also contributed to delegating the
handling of the claim issues to the legal department. Has this been jointly
handled with the legal department in cooperation with the engineering
professionals with adequate training in construction law it would have
contributed to minimizing claim related inconveniences;

8. Most financing agencies require that the prepared bid documents be reviewed by
an international consultant. Such a requirement although recommended with the
good motive of minimizing cost and revising the project to make it more
“viable” may not in reality achieve the objective of reducing cost. What happens
in reality is that competing consulting agencies know that there will be a design
document already prepared by the former firms and hence will tend to cut their
cost related to design review. Such a step will encourage the successful
consultant to simply endorse the previous designs with out really reviewing the
designs/specifications and hence contribute to some claim issues later;
9. The concept of professional indemnity insurance to cover consultancy risks or
design errors is not widely exercised. This encourages consulting firms to
transfer the costs related to claims involving design or contract administration
errors to the Client;
10. Unnecessarily strict contract administration contributes towards a hostile
environment whereby the contractor has no desire to settle issues amicably but
prefer arbitration instead;
11. Late issuance of instructions as well as under certification of interim payment
certificates has also contributed to the incidence of claims.
12. Delay in importation of explosives, for the exploitation of quarries for road
works and that of communication radios has also contributed toward claims in
projects;
13. Delays due to customs clearing of goods at the port have been a major claim
issue. The contractors claim that unreasonably long clearing time for imported
goods was a cause of delays and associated expenses;
14. Lack of appropriate transport facilities for moving imported items from ports
inland has been a cause of claims;
15. Rights of way problems have contributed significantly to the incidence of
claims. Unclear obstruction where such belong to different government agencies
(for instance; removal of electric poles which belong to the Electric Power
Company, while telecommunication cable belongs to Telecommunication

Company) and the coordination of the removal of such obstruction has
significantly increased the risk of delays and associated claims;
16. Inadequate and inaccurate soil investigation reports and survey data’s have
contributed towards the incidence of claims; and
17. Design changes in the middle of the construction work have resulted in the
incidence of claims. Not only is this an undesirable action but also indicative of
the level of incompleteness of design documents.
14.13 Proposed Changes to the FIDIC Forms of Contract
The FIDIC form of contract is prepared in light of international contracts held in the
developed world. In the context of developing countries, the documents need to be
slightly modified to take account of the local conditions. Although the FIDIC form of
contract takes this into account by providing a section for “conditions of particular
application” this section is normally prepared by the consulting Engineers, which are
in most cases foreign consulting firms and may not have detailed information in
respect of prevailing local conditions. This calls for possible modifications in certain
sections of the FIDIC form of contract. Accordingly, the following sections of FIDIC
deserves further considerations:
14.13.1 Instruction to tenderers
A unified instruction to tenderers document needs to be prepared for all projects. In

case of variability, such a document may be prepared by sector, say for road works, for
water works etc. Such a document also needs to include details in respect of, for
instance, validity of tenders, currency regulations, rates of exchange, expatriate and
local staff taxation requirements, tender security, performance bond sources,
importation issues etc. Besides, tender evaluation criteria need to be defined clearly
and form a part of the tender documents, so that transparency is maintained and that all
participating tenderers know the evaluation parameters.
14.13.2 The FIDIC form of contract – Areas of Potential Improvement
Duties of the Engineer: the duties of the Engineer in the authorizing of variation
orders or settlement of claims need to be limited to a given percentage of the total
project cost. Otherwise such decisions need to be carried out following the approval
of the Client.
Responsibility for contractor prepared drawings: this obligation needs to be

elaborated more clearly specifically with respect to the contractor’s responsibility.
Performance security: the requirements of the performance security as regards to an

acceptable source, the financial strength of the source needs to be clearly spelt out.
Adverse weather conditions: the wording of this clause does not give particulars of
what an adverse weather condition means. It would be better if the particular weather
condition or the amount of rainfall were compared, say with the average amount in the
last 5-10 years. This will avoid subjectivity and address such claim issues properly.
Substantial completion: the wording of this clause is ambiguous and subject to
interpretation differences, therefore the term needs to be described in more clearer
terms so that no ambiguity is created.
Issuing a variation order: the authority of the Engineer to issue variation orders
seems to be open ended. Such a provision gives the Engineer a free hand in the
financial matters and may not be preferable. Therefore a financial limit needs to be
included. In the event that the variation order passes the limit, then the Engineer
should be required to seek the approval of the employer.
Chapter 15
Occupational Health and Safety
in the Construction Industry
15.1 Introduction
The construction industry plays a significant role in the socio-economic development of

a country. The contribution of this industry could be summarized as: direct contribution,
indirect contribution and backward linkages. Directly, this industry contributes to output
and employment through the construction activities and indirectly it enhances the growth
of other industries. Employment generation within the industry and also through its
backward linkages in other industries that produce and distribute building materials and
equipment and provide financial services to the industry is another significance.
Activities of this industry are normally labour intensive even in developed economies,
and the relative ability of this industry to create employment is high. This industry in
many countries employs about 2 to 9 percent of the total national employment with an
estimated average of 4 to 5 per cent.
To date, the construction industry worldwide has contributed significantly to human

development by providing necessities such as shelter, water, power and communication
just to mention a few. However, there has been a price to pay for this continuous growth
and activities. Although it is difficult to obtain accurate statistics in an industry in which
many accidents go undetected and unreported, normally known fatal accidents, and
those involving loss of working time, frequently exceed those in any other industry. This
industry has a high proportion of work related accidents and enormous proportion of
occupational fatalities and is considered to be one of the most hazardous industrial

activities in most countries. As a result, it is notorious for its poor safety record and
statistics show that safety is a critical problem in this industry.
Occupational Health and Safety (OHS) is concerned with ensuring that work, working
environment, working tools/machines, working stations and the workers are in a manner
that will minimize occupational diseases, illness, injuries, accidents and fatalities. OHS
is the responsibility of employers (management), employees (workforce), government
and the general public to ensure that work is carried out in a safe and healthy
environment.
15.2 Principles of Safety Management Systems in the Construction Industry
A safety management system (SMS) is a systematic, explicit and comprehensive process

for managing safety risks. It provides a formal, organized process whereby people plan,
perform, assess and improve the safe conduct of work. Its aim is to intervene in the
causation process that leads to the accidents and incidents. A SMS is more than just a
hazard identification system. It is an overall system for ensuring that the safety activities
are properly planned, effectively implemented and a follow-up system is arranged.
Safety management systems are used to systematically integrate safety into management
and work practices at all levels so that missions are accomplished while protecting the
public, workers and the environment. SMS emerge from safety regulations of a
particular country and therefore implementation of any SMS must conform to the
existing laws and regulations related with health and safety. These regulations vary from
country to country depending, in many cases, on the stage of development of the
construction industry in a particular country.
For an effective SMS, organizations need to be proactive when it comes to planning

their activities. These activities are the ones that form a SMS. Over the years several
models, guidelines, frameworks, functions and fundamentals have been established.
Occupational Health and Safety in the Construction Industry 459
These include the Booth and Lee (1995) SMS model, attributed by four key functions
which are: Policy and Planning; Organization and communication; Hazard management;
and Monitoring and review. The British Standard BS 8800 (1996) SMS model whose
fundamental elements are Initial and periodic status review, Preparation of the Safety
Policy, Organizing of the activities, Planning and implementation, Measurement of the
performance, and auditing. Figure 15.1 below illustrates this model.
External Internal
Factors Factors
Initial and Periodic

status review
Policy
Audit Organizing
Planning and
Implementing
Measuring
Performance
Information link Control Link
Figure 15.1 Elements of a SMS (BS 8800, 1996).
The most recent SMS model is the one documented by ILO-OSH (2001). The core
elements of this model are; policy; organizing; planning and implementation; evaluation;
action for improvement. Figure 15.2 below illustrates this model.
Figure 15.2 Main Elements of a SMS – ILO-OSH (2001) pp. 17.
The fundamental elements of SMS developed/suggested by Booth and Lee (1995),

BS8800 (1996) and ILO-OSH (2001) are more or less similar to each other. They both
have the following basic activities; Policy development and planning where safety goals
are set, safety objectives and priorities are determined thereafter working programs are
prepared to achieve the objectives set; Organization of activities and procedures and
communication which requires determination of responsibilities and establishment of a
two-way communication system to all organization levels; monitoring and review to
determine performance ensures that policy and planning, organization and
communication and hazard management are in place, in use and work in practice; and
Action for improvement which include preventive, corrective action and continual
improvement. The sections below discuss these activities.
15.2.1 Policy and planning

15.2.1.1 Safety policy
A safety policy is the management’s articulation of the direction to be followed in the

organization. The policy and the activities should be developed specifically according to
the needs of the company. The policy should name the senior executive who is
responsible for seeing that the standards are achieved and who has authority to allocate
responsibilities to management and supervisors at all levels and to see to it that they are
carried out effectively.
15.2.1.2 Safety planning
Effective implementation of safety policy can be achieved through careful planning of

the safety activities. Planning of safety activities involves determination of the safety
objectives and priorities, and preparation of plans and procedures that will enable the set
safety goals to be met. The nature of the construction industry and its organization is
such that many hazards are unique for each organization and for each project. Therefore
planning for safety activities will differ from one organization to the other depending on
its objectives, priorities and nature of the typical hazards. Common elements, which
should be considered while planning for safety activities are as follows:
- appropriate and adequately resourced arrangements, competent personnel who
have defined responsibilities, and effective channels of communication;
- procedures to set objectives, device and implement plans to meet the objectives,
and to monitor both the implementation and effectiveness of the plans;
- description of the hazard identification and assessment activities; and
- methods and techniques for measuring safety performance, and in such a way that
absence of hazardous events is not seen as evidence that all is in order.
15.2.1.3 Hazard identification, analysis, management and risk assessment

According to ILO-OSH (2001), hazard refers to the inherent potential to cause injury or
damage to people’s health. It is therefore a condition with the potential of causing injury
to personnel, damage to equipment or structures, loss of material, or reduction of the
ability to perform a prescribed function. Whereas, risk, is a combination of the
likelihood of an occurrence of a hazardous event and the severity of injury or damage to
the health of people caused by an event. It is thus the chance of injury or loss and it takes
into account the likelihood of a loss and its magnitude.
Hazard identification
Identification of hazards usually is targeted to one or more physical areas of the
company and it can cover several different types of hazards. Depending on the
requirements, the analysis can be general or detailed. Some analysis techniques would
thus require more expertise than others. Checklists are the simplest techniques, which
can be used in simple analysis whereas for complicated analysis such as when potential
major accident hazards are assessed in a process plant, its analysis requires the use of a
systematic method and a group of several professionals, including plant engineers,
chemists and automation system experts. Commonly used methods for hazard
identification include workplace checklists and risk analysis methods.
Risk assessment
Risk Assessment is a method whereby the severities of the identified hazards are
evaluated. BS 8800 (1996) stipulates the basic steps of a risk assessment and these
include:
- identification of hazards;
- estimation of the risk from each hazard; and
- decision if the risk is tolerable.
After the hazards identification step, estimation of the risk from each hazard can be done
using a risk matrix as shown in Table 15.1.
Table 15.1 A Simple Risk Level Indicator (Risk Matrix)

Slightly harmful Harmful Extremely harmful
Highly TRIVIAL RISK TOLERABLE RISK MODERATE RISK
unlikely
Unlikely TOLERABLE RISK MODERATE RISK SUBSTANTIAL
RISK
Likely MODERATE RISK SUBSTANTIAL RISK INTOLERABLE

RISK
Source: BS 8800 (1996)
The last step of making a decision as to whether the risk is tolerable or not is indeed
difficult to define without a basis. Hence it is more practicable to determine which
activities the company should take in connection with each risk level. Appendix D of BS
8800 (1996), presents a table whereby each risk level is given actions and a time-scale.
Table 15.2 Risk Level and Actions for Improvement
Risk Level Actions

Trivial risk No attention
Tolerable risk Monitoring
Moderate risk Efforts should be put in place to reduce the risk
Substantial risk Work should not be started before the risk is reduced
Intolerable risk Work should not be started or continued
Source BS 8800 (1996)
Organization and communication

The framework for safety activities is set by the developed safety policy of an
organization and plans for implementation of the policy. In order to implement the plans,
clear organization of the activities has to be observed. Effective organization of the
activities requires that clear safety tasks, responsibilities and accountability be
determined within the organization to all hierarchical levels i.e., from top management
to all the employees. Communication of all the organizations on safety related plans and
decisions are essential in order to achieve the organizations safety goals.
Monitoring and review

Monitoring involves checking that safety precautions are actually in place and that
safety goal and objectives are met. Besides it necessitates the definition of those
parameters that best describe the different areas of the organization’s performance and
this for large organizations is a complex job. Among other benefits, according to ILO-
OSH (2001) monitoring should provide feedback on safety performance of the
organization; information whether the daily arrangements for hazard and risk assessment
are operational; and act as a basis for decisions about improvement of the system for
hazard identification and risk control and generally the overall safety management
system.
Methods for monitoring include:

 Workplace inspections;
 Examination of safety records;
 Accident investigations; and
 Injury statistics.
Action for improvement

These include preventive and corrective action and continual improvement. Preventive
and corrective actions result from SMS performance monitoring and measurements,
SMS audit and management reviews. For this reason, ILO-OSH (2001) requires
organizations to establish arrangements for identifying and analysing the root causes of
any non-conformity with relevant safety regulations and /or SMS arrangements; and
initiating, planning, implementing, checking the effectiveness of and documenting
corrective and preventive action including changes in the SMS itself. Continual
improvement refers to the efforts put in place to ensure that the relevant elements of the
SMS and the system as a whole are improved perpetually. Organizations should
therefore put in place measures for continual improvement of these elements. According
to ILO-OSH (2001), these measures should take into account the safety objectives of the
organizations; the results of hazard and risk identifications and assessments; the result of
performance monitoring and measurements; the investigation of work-related injuries,
diseases, ill health and incidents, and the results and recommendations of audits; the
outcomes of management review; the recommendations for improvement from all
members of the organization, including the safety committee; changes in national laws
and regulations, voluntary programmes and collective agreements; new relevant
information; and the results of promotion programmes.
As a norm for competitiveness and sustainability, the safety process of organization

should be benchmarked with others in order to improve safety performance.
Safety Legislation
The purpose of safety legislation is to reduce the number of work related accidents and
ill health. Legislation can include state, provincial or national legislation, or the
conventions or recommendations of the International Labour Organization (ILO).
Legislation provides workers with minimum standards of protection in the workplace.

Therefore the stronger the government legislation, the more protective are the minimum
standards. Safety legislation is a principal instrument for regulating the conditions under
which work is carried out.
According to ILO, legislation should consist of Acts; Codes of Practice; and Guides. The
Factories Act comprises legal statements of the general health and safety principles and
responsibilities, made and approved by the government; therefore it is fully supported by
law. Codes of Practice provide general guidance to employers and workers on how to
comply with the minimum standards and objectives that are detailed in the regulations.
The ILO develops codes of practice, which many governments adopt for their
guidelines. While guiding, it provides official technical information and
recommendations to help employers comply with health and safety regulations. ILO
Codes of Practice generally contain practical recommendations intended for all those
with a responsibility for occupational safety and health in both the public and private
sectors. Codes of Practice are not legally binding instruments and are not intended to
replace the provisions of national laws or regulations, or accepted standards. They aim to
serve as practical guidelines for public authorities and services, employers and workers
concerned, specialized protection and prevention bodies, enterprises and safety and
health committees. Examples include Guidelines on Occupational Safety and Health
Management Systems, 2001.
Statutory requirements governing safety and health in the construction industry

Occupational Health and Safety (OHS) in most African countries is multi-disciplinary
and inter-sectoral hence it is addressed by a range of legislation under different
departments or ministries and organizations. In Tanzania for example, OHS is addressed
by:
 Occupational Health and Safety Act, 2003;
 The Workmen’s Compensation Ordinance (1963);
 Accidents and Occupational Diseases (Notification) Ordinance 1953;
 The Contractors Registration Act No. 17 of 1997; and
 The Contractors Registration By-laws (1999).
Among the existing legislation, the Occupational Health and Safety Act, 2003 is the
main legislation making provisions for health, safety and welfare of persons employed in
factories and other workplaces and for matters incidental to, and connected with it. The
Act applies to factories and all other work places as defined under the Act unless
exempted by the relevant authority in accordance with the provisions of the Act. It has
an objective of making better provisions for health, safety and welfare of persons at all
workplaces in the country. While; the general principles remain the same, there are
slight variations from one country to another. It is important for practitioners to be
conversant with specific safety and occupational safety and regulations that apply in
their own countries.
Site Practices – Tools and Procedures
Access to the workplace

More than 50% of the accidents that cause absence of workers from work sites involve
falls, people being hit by moving objects or knocked by vehicles. It is therefore
important that proper access from one place of work to the other is created and kept safe.
This can be achieved by providing:
- Safe access to people and vehicles on site so that they can reach the allotted
workplace;
- Walkways which are free from obstruction;
- Edge protection, or other protective measures to such locations where people or
materials can fall;
- Covering all holes or openings in the floors with securely fixed covers or
alternatively fencing them off;
- Adequate artificial lighting when work has to proceed during night hours;
- Tidy sites and storing materials in safe places and ensuring that all projecting nails
are hammered down flat or removed completely; and
- Proper arrangements for gathering and disposing off waste materials.
Ladders
- Ladders are main means of access on the construction sites. They often cause
accidents because they are misused. When using a ladder one should ensure that:
- it is in good condition and free from obvious defects;
- it is properly secured near the top and bottom, even if it is only in use for a short
period;
- it is set at the correct angle i.e. to be inclined at 1 metre horizontal for every 4
metres in height ( 1 in 4 ).
- it rises at about 1.0m above the landing position;
- it is properly positioned for safe access and it is standing on a firm, level base;
- when landing and using ladders, there are no overhead power lines in the vicinity.
Scaffoldings
- Falling is a major cause of fatal accidents in the construction sites and a large
number of such fatalities are falls from scaffolds. The law requires that scaffolding
work be carried out under the supervision of a competent supervision. Before using
a scaffold one should ensure that:
- it has been inspected and found to be in good condition;
- timber sole plates are used, of adequate dimensions to provide safe bearing;
- metal base plates are used under all standards;
- joints between tubes are staggered vertically and horizontally;
- the correct type of couples are used for all connections;
- scaffold boards are in good condition;
- standards are upright and set out in accordance with the sketches provided;
- alternate pairs of standards are provided with ledger bracing to the full height of
scaffolding. Exceptions may be made for bottom and top lifts where access is
required;
- the scaffold is adequately tied to the structure; and
- working platforms are fully boarded and complete with guard rails and toe boards.
Working on roofs
Working on roofs carries a high risk of accidents unless proper procedures are followed
and precautions taken. Before working on any type of roof one should know the rules
set out below and follow them:
- For work on a roof at a height from which men or materials can fall more than 2m
guardrails and tow boards must be provided along the roof edge. They must be
securely fixed in position and be of adequate strength;
- For work on a sloping roof of more than 30 degrees (or less than 30 degrees, but
which is slippery) crawling ladders or crawling boards must be provided;
- There may be circumstances where the use of a safety harness is the only safe way
of working. Such a decision will be made by management, and one must use the
safety harness in the conditions specified;
- All opening in the roof must be securely covered or suitably guarded by guardrails
and toe boards. Any cover provided should either be securely fixed in position or
clearly marked to indicate its purpose;
- Access provided to the roof must be checked before use to see that it is safe and
sufficient;
- One must not pass across or work on very fragile materials without using ladders
of crawling ladders, or crawling boards or duckboards;
- One must not pass or work near fragile materials unless guardrails or suitable
covering is in position to prevent anyone falling through. It is illegal to walk along
a valley gutter or use the valley as a ladder support with fragile materials on either
side, if these precautions have not been taken; and
- If one has to pass across a sloping roof to get to their workplace, suitable and
sufficient crawling boards or ladders must be provided on the roof and used. All
ladders and crawling boards must be securely fixed in position. The anchorage at
the top of a ladder should not rely on the ridge cap but should whenever possible
bear on the opposite slope of the roof by means of a ridge iron, and, where
necessary and practicable, secured by rope as an extra precaution.
Excavations
- Under adverse conditions, most excavated grounds collapse, unless are temporarily
supported, safely battered back, or are geologically stable rooks. If the sides of an
excavation collapse accidentally while people are in, there may be no escape.
Death by crushing or suffocation, and injuries that cripple pelvis and legs, are
common to consequences of accidents in excavation.
- For excavation work, the following guidelines should be taken into account so as to
achieve and maintain a safe working place:
- Do not enter into an excavation unless it has been supported or inspected and
confirmed safe to do so.
Make sure there is a safe access into the excavation.

a. Beware of slipping when using ladders in excavations, especially in wet or

greasy conditions;
b. Always wear your safety helmet;
c. Never interfere with any support system or barriers in excavations or trenches
unless authorized to do so;
d. Do not stand on the struts;
e. Use proper gangways for crossing trenches - never jump across;
f. If dumpers or Lorries are used to tip back - filling materials into trenches, make
sure that stop blocks have been provided and properly secured;
g. See that spoils heaps from the excavation are kept away from the edge;
h. Ensure that all materials, tools, plant and vehicles are kept away from the edge of
the excavation;
i. If the excavation is taking place in an enclosed space - shaft, tunnels, etc. make
sure that proper monitoring of the atmosphere is being carried our and adequate
ventilation provided; and
j. When working with excavating machinery always face the machine.
Hazardous atmospheres and confined spaces

Every year there are a number of fatal and serious accidents caused by people being
allowed to enter live foul sewers, manholes, bored piles, trenches, tanks and so on,
without the necessary checks for safety being imposed or the correct safety rescue
equipment being provided. Operatives engaged in such operations must be physically
and mentally fit. The following check list is a reminder:
a) In no circumstances should one enter a confined space (trench, manhole, tank,
bore pipe, foul sewer) without proper authorization;
b) Equipment for monitoring the atmosphere at frequent intervals must be provided
and used by competent personnel. One must not enter the confined space until it is
satisfied that entry is safe. Monitoring must continue as operatives are working
inside, and one must leave immediately if told to do so;
c) Dangerous atmospheres can arise when there is a lack of oxygen or when toxic or
flammable gases are present. These may be due to exhaust gases from plant and
transport, chemical reactions in the ground, decomposition of sludge in a sewer,
leaks from gas mains, or the presence of petrol and various kinds of wastes from
factories and trade premised, welding operations and so on;
d) A deficiency of oxygen can render one unconscious, toxic fumes can cause
dizziness and a feeling of sickness, and gases can be flammable or explosive;
e) Adequate fresh air ventilation must be provided in appropriate circumstances;
f) All necessary safety and rescue equipment must be available on site at the actual
location. Check that it is so;
g) It is essential that no less than two persons work on a confined space operation. (it
is important to ensure that accident assistance is readily available);
h) When working at a manhole in the road or public area, ensure that guard stands are
provided and the appropriate traffic signs are displayed;
i) Ensure that assistance is readily available in an emergency (i.e. telephone or two-
way radio); and
j) If proper procedure for rescue in an emergency situation has been laid down with
specific jobs for specific persons, make sure that workers clearly understand what
they are required to do.
15.2.2 Refurbishing contracts
Refurbishing the existing properties has given rise to new health and safety problems. In
some cases the situation is made more difficult by the property remaining occupied
whilst refurbishment is being carried out.
The following guidelines should be followed to ensure safety of all on site:

a. Before starting any activity check that public utility services - gas, water,
electricity and so on, have been disconnected;
b. Much refurbishing work involves a degree of demolition and rebuilding of the

structure. Never assume that the basic structure is sound, and do not attempt any
kind of demolition unless instructed by a competent person;
c. Make sure there is adequate lighting especially in stairwells, both to see what is
been done and to avoid tripping; and
d. At least two people should be present.
When working in occupied premises, the health and safety of the occupants must be
considered as well as that of the workforce. In addition to all the above points the
following should be observed:
a. Do not block fire escape routes or access ways from occupied areas;
b. Do not leave toxic or dangerous materials or sharp tools unattended in places
where children have access;
c. If it is necessary to remove floorboards, warn the occupant and have the
floorboards replaced as soon as possible;
d. In housing, services will have to remain connected for the convenience of the
occupants. Beware of bare live electrical terminals temporarily uncovered;
e. Do not leave ladders in such a way that children can gain access to scaffolds;
f. Never leave work unguarded at the end of the day if it likely to be a danger for the
tenant; for example, holes in floors, missing staircase hand nails, live electric wires
and so on; and
g. At all times treat the occupants and their homes with respect. Clean up as you
leave.
15.2.3 Protection from excessive noise
Excessive noise emitted from plant, processes and tools can cause, over a period of time,
progressive and irreversible loss of hearing. It can cause a ringing or rushing noise in the
ears, which will not disappear. Hearing loss can also make communication difficult,
which in turn may lead to accidents through instructions either not being heard, or being
mis-heard.
Proper precautions should be taken to protect hearing, and before working with noisy
plant or in a noisy environment, the following should be considered:
a. If is necessary to shout to be heard by someone about 1m away, it is likely that
there is a noise problem requiring action;
b. Ask if noise levels have been checked to see if ear protection is needed;
c. Where noise levels are shown to be excessive, personal ear protections must be put
on at all times. Whether earplugs or ear protectors are used, they must fit perfectly
and be treated carefully; and
d. It has been alleged that ear protectors make it more difficult to understand speech
or hear warning signals. Generally speaking, ear protectors reduce both unwanted
noise and any alarm signals equally, the signal can actually be heard more easily.
15.2.4 General tools: safe use and handling
Many accidents occur through hand tools falling from heights, being tripped over, or
placed in such a position that the cutting edges cause injury. When not in use, make sure
that any hand tools are stored in a manner unlikely to be hazardous to others.
a. Make sure all cutting edges, teeth etc. are adequately sheathed and otherwise
protected;
b. Do not lay tools down so that they can fall, roll or be knocked over; and
c. Do not leave tools lying in walkways or any place where they could be tripped
over.
15.2.5 Working with heavy plant
15.2.5.1 Goods Hoists

a. Only authorized person may operate a hoist;

b. The safe working load must be clearly displayed and you must ensure that it is not
exceeded;
c. Make sure that loads are secure on the platform;
d. Passengers MUST NOT be carried on the platform;
e. Do not interfere with any safety devices or bypass them;
f. Make sure you have a clear and distinct communication system with persons using
the hoist;
g. All gates to the hoist way must be kept closed except when access to the stationary
platform is required;
h. You must not move the platform from the base of the hoist way, or landing place;
i. Do not leave a hoist unattended with the motor running or switched on or with the
platform aloft.
15.2.5.2 Cranes
Any work in association with a crane can be a source of hazard. If one has to work in
association with a crane or if one is working within the radius of a crane the following
safety rules should be observed:
a. Keep clear of the tail swing of mobile and crawler cranes. It is easy to forget and
either be struck or crushed between the crane and an adjacent building or
obstruction;
b. Avoid standing under a swinging load;
c. While waiting for materials, concrete skips, formwork etc., to be swung into
position, never turn your back on the load - always keep it in your vision;
d. In windy conditions, beware of formwork or other light but large area items being
spun in the wind; and
e. Never signal to the driver - that is the bank man’s job. It can only confuse and may
cause an accident.
15.2.5.3 Excavators
When carrying out work in association with excavators, one can be subjected to hazards,
which often arise without any warning.
Always observe the following rules:
a. Remember that, with modern hydraulic machines, all motions - dig, slew, raise,
boom, etc are much faster than non- hydraulic equipment;
b. The tall swing and the boom swing cab can be sudden and lethal if you are in the
way. Stand well clear of both the operating boom and the tail swing;
c. Stand well clear of lorries and vehicles being loaded;
d. Always face excavating machinery-never turn your back on it. This is particularly
important if you are in a supported trench and the excavator is removing the loose
material for you;
e. Do not work in an unsupported trench unless a competent and experienced person
declares it safe;
f. Excavators may be used as cranes only when handling of materials is associated
with the trench work. This means support materials, pipes, manhole rings, etc.
when working the excavator as a crane make sure that suitable slings and fixing
points are used and that slinging method has been carried out property. Check that
the specified capacity of the machine is not exceeded;
g. Never stand under the load when using the excavator as a crane; and
h. If more than one of you is working with an excavator, agree with the driver on
who will be responsible for signals and instructions.
15.2.6 Demolitions
Demolition cannot be only one of the most dramatic operations in the construction
industry, it can also, by its very nature, be one of the most dangerous. Demolition work
varies very widely from the controlled collapse of large structures, using explosives, to
the hand demolition of walls. Be aware of the need for shoring or temporary support at
any stage of the work.
The following precautions should be taken into account:

- No part of a structure should be removed unless proper instructions have been
issued;
- Do not enter obstinate parts of a structure, which refuse to collapse-they may do so
unexpectedly;
- Proper authority and adequate precautions should be taken before entering closed
or confined spaces;
- Unforeseen hazard should be reported to the superior immediately and all
workmates warned;
- Safety helmet and safety boots should be worn and any other safety equipment that
may be specified by management; and
- Chances or short cuts should NEVER be taken.
15.2.7 Working near existing services
15.2.7.1 Overhead power lines
Accidental contact with live overhead power lines causes many serious injuries and
some fatalities. Such accidents are particularly related to cranes working or travelling
near or under overhead cables. If you have to work near overhead power lines observe
the following rules:
- Treat all overhead lines as 'live' unless you have been specifically instructed
otherwise; get to know any maximum clearance requirements specified by the
Electricity Authority;
- Do not try to circumvent ‘goalposts’ or barriers or other warnings;
- If work has to be carried out under overhead wires, special precautions must be
observed as laid down by the electricity authority. Make sure you have been
instructed as to what they are; and
- When working near power lines check that crane jibs, for example, cannot
encroach on the safe clearance specified. Barriers should have been provided at an
adequate distance to prevent this.
15.2.7.2 Underground power cables
Damage to underground electric cables is a frequent occurrence, which can result in fatal
or serious injuries. In addition the interruption to supplies may have both damaging and
expensive consequences.
Before commencing any excavation, supervisors should ensure that enquires have been
made from the Electricity Authority to see if any cables are in the vicinity. If so
remember that the location shown on a plan may not necessarily be accurate. You should
always follow the rules given below:
- Seek management and Electricity Authority instructions on whether the cables are'
dead' or have to be maintained 'live';
- Hand-dig trial pits carefully wherever possible along any indicated line and look
for marker tiles above the cable. Finally establish exact location.
- Once exposed, protect cables from damage and support them effectively where
necessary;
- In the event of accidental damage, even if only apparently superficial, all persons
should defer the work until the Electricity Authority has examined and rectify the
damage;
- When backfilling make sure you have been instructed as to the Authority's
requirements.
- Replace marker tapes or tiles in their original positions;
- If hand held power tools are used to break up concrete areas or other paved
surfaces, avoid breaking thick layers at a time. This is one common source of
accidents when cables are buried underneath;
- The use of picks, pins and forks is permissible to free lumps of stone etc. and break
hard ground, but picks should not be used in soft soil where cables are present; and
- Never use exposed cable as steps or handholds and do not attempt to alter the
position of any cable unless instructed to do so.
15.2.7.3 Underground cables (other than electricity)
While electricity cables constitute the majority of cables existing in ground, do not
forget telephone cables as well. Today, apart from telephone cables, there are television
landlines. Television and telephone cables are highly complex and expensive, thus
damage to such cables would have high cost implications for repair works.
When excavating near such cables, follow the rules given for underground electricity
cables. Remember also, that many of such cables will have been laid in earthenware
ducts to allow easy installation and replacement, which need to be protected as well.
15.2.7.4 Gas, water mains and sewers
General
Locating gas and water mains, as well as sewers, needs the same care as locating electric
cables. As with electricity, the particular public utility company should have been
contacted to determine where such services are located on the site. Check with your
supervisor that this has been done. The locations given should only be taken as
approximate and more accurate means should be used to fix their line.
Gas mains
When excavating near a gas main:
- Remember that gas mains have a flammable and explosive content;

- Work with care and do not create a situation where joints may be strained;
- If the pipe has to be supported, ask to be briefed on the Gas Authority's
requirements before starting work;
- At the slightest hint of gas escape, leave the excavation and prevent anyone going
near it. No naked fire shall be allowed;
- Never use a gas main as a hand or foot hold;
- Do not drop tools or weights onto mains as many old main are of cast iron and may
crack if they are in a poor condition;
- Modern smaller diameter house mains are often plastics - do not confuse them with
electric cables; and
- Gas Authorities have precise specifications in relation to backfilling around
mains. Make sure you have been properly instructed in this respect.
Water mains
While a water main does not carry significant risks to life and limb inherent in electricity
and gas services, the fracturing of a small pipe can cause great inconvenience. If a large
high pressure main is breached, the results can be spectacular and very costly. A great
deal of flooding can take place before the water is switched off and perhaps an area may
be left temporarily without water.
If the line of mains has been properly established by trial pits, stop cock locations etc.
and you have to carry out excavations in the vicinity, you should:
- Work adjacent to and around the pipe with care, using hand tools;
- Do not leave a length of pipe unsupported which is more than the unsupported span
specified - even temporarily;
- Do not confuse smaller plastic pipes with plastic sheathed electric cables; and
follow the water authority's backfilling specification with care; if the main is
damaged accidentally in any way - however superficially - have the Water
authority called at once and explain what has happened.
Sewers
All sewers should be located by tracing manhole covers and confirming that the sewer
does, in fact, run between any two. The main risk to employee’s health will be if they
are working in trench and break into a foul sewer. One should leave the trench
immediately to avoid the possibility of asphyxiation and should not return until adequate
ventilation has been provided and the area declared safe for work.
Have any damage reported to the Sewer authority at once. If you break a storm water
sewer and rain is falling, vacate the excavation as it may flood from the sewer at any
time.
15.2.8 Personal protection
15.2.8.1 General
Many accidents occur because people on side do not pay sufficient attention to their own
health and safety. Workers can do a great deal to protect themselves simply by knowing
what is available, wearing the correct clothing and using the protective equipment
appropriate to the job circumstances.
- Employers are obliged by law to provide, without charge the following items of
personal protection, when circumstances demand their use:
- Suitable protective clothing for persons working out of doors in rain, snow, sleet of
hail;
- Suitable protective clothing for persons working with asbestos based materials (if
adequate exhaust ventilation is impracticable);
- Insulating screens, boots and gloves to prevent danger of electric shock;
- Eye protectors or shields, where specified processes are being carried out;
- Respirators - to avoid breathing injuries dust or fumes (required if control measures

are not adequate). For employees exposed to asbestos dust or airborne lead, the
respirators must be “approved”;
- Safety nets, belts, harness, lines, etc. Where it is not practicable to provide
standards working platforms;
- Ear protectors where it is not practicable to reduce noise below an exposure lever
of 90 dB (A) Leg (8hr); and
- Adequate protective clothing for employees liable to be exposed to significant
levels of lead.
At the same time, employees are required by law to wear such clothing and equipment
where the circumstances demand it.
The sections below provide detailed information on the protection of various parts of the
body.
15.2.8.2 Hands
Many of the hand injuries, which occur every year would have been avoided, or would
have been much less serious, if the correct industrial gloves had been worn.
Industrial gloves will also protect the hands from substances, which can damage the skin
such as certain chemicals regularly used on construction sites. The correct type of glove
for the situation is essential as no gloves give protection from all possible hazards.
Suitable gloves should be used, for example when:
- Handling objects with sharp or rough edges bricks, paving slabs, glass etc.;
- Work in dirty or contaminated areas; and
- Using chemicals and other hazardous substances.
15.2.8.3 Eyes
Probably one of the most traumatic accidents that can occur is a person being blinded at
work. Such accident should never happen, as there are specific legal requirements on
employers to issue eye protection for persons involved in certain operations.
Equally, employers are required to use that protection. Either partly, by not fulfilling
their obligations, can be liable to possible legal proceedings.
15.2.8.4 Feet
Injuries to the feet through treading on sharp objects such as nails or having items
dropped on the feet are always high in the construction industry. Safety footwear is
essential on construction sites, and will protect the feet from serious injury in most of the
common types of site accidents. It comes in many different styles from fashionable
shows to heavy-duty boots.
All styles have steel safety toecaps, and spring steel midsoles to protect the sole of the
foot are incorporated if required. Rubber boots are also available with toes cape and
midsoles. Plimsolls and soft shoed should never be worn on site.
Always buy safety footwear to suit the type of work you are involved in. There are many
companies who make the wearing of safety footwear a requirement of their safety
policies, and some will not allow operatives on site in anything but the correct footwear.
15.2.8.5 Ears
Excessive noise at work can cause serious damage to your nearing. In some cases an
employer is required by law to protect operatives from the effects of noise, while other
employers give protection on a voluntary basis. Whichever is the case, one should wear
the hearing protection provided wherever it is considered necessary to safeguard ones
hearing.
15.2.8.6 Backs
One problem which causes a great deal of lost time in the industry is what it generally
referred to as 'backache' - a term which covers a variety of complaints. Many of these
back problems are not caused by lifting heavy loads, as it is often thought, but by
constant exposure to wet and cold. Employers will provide wet weather clothing, but it
is up to the employee to dress correctly with warm clothing in cold weather, with special
consideration being given to protecting the back.
15.2.8.7 Safety helmets
The head is particularly vulnerable to injury, and accidents to the head are often fatal or
involve very serious injuries, such as brain damage or fractured skull. Over the years it
has been proved beyond doubt that many deaths and head injuries could have been
prevented, or their severity reduced, by wearing safety helmets. Site personnel must
wear safety helmets at all times when in the vicinity of construction work, unless
company or site rules or notices make exceptions.
Site management is responsible for seeing that safety helmets, which conform to the
appropriate standard, are made available. The following Working Rule should be for
maximum safety and comfort:
- The headband should be adjusted to suit the head size;
- Check that the outer shell and harness is in good condition, without indentations or
cracks;
- Never paint the shell, as some paints weaken the plastic used;
- Only the recommended harness should be used to ensure proper clearance for
deflection of the shell under impact and for ventilation;
- Chain straps should be used to avoid the possibility of the safety helmet falling off
when bending down, or in high winds;
- Holes must not be punched into the shell or attaching unauthorized equipment.
Various attachments for ear defenders, eye protection or visors are available and
should only be used in accordance with the manufacture's instructions or advice;
and
- Any helmet should be replaced if it sustains a heavy impact, as the shell may be
weakened locally and affect the strength of the helmet.
15.2.9 Working over water
Falling into the water and being drowned or carried away by water current is an ever-
present danger when working over or adjacent to water. Even though workers may be
good swimmers, the following precautions should always be followed:
- Make sure that the working platform is secure and has no tripping hazards (tools,
wire, timber etc.);
- Check that guard rails and toe boards are firmly fixed in position;
- Check that access ladders are securely lashed to prevent movement;
- Life jacket should be worn, and ensure that they are properly fastened up;
- When required, use the safety nets or safety harness provided by management;
- Check that lifebuoys are ready to hand for immediate use, and fitted with lines;
- Make sure that the safety boat is manned while you are working above;
- Ensure that you know the routine for raising the alarm and for rescue drill; and
- Do not work alone over water.
15.2.9.1 Current Developments in Management of Construction Safety
Among the current developments of construction safety is the integration of safety and
quality management. In the world of diminishing resources, integration of similar
aspects is preferred and beneficial to organizations. Programs of quality and programs of
safety have the same components. After all, safety is a dimension of quality, after
everything, the elimination of defects includes the elimination of practices of unsafe
work. If one looks at safety as a consequence of making things well, then the program
will undoubtedly bear quality. When quality management and safety management are
combined, management and employees can usually identify with a much simpler plan.
This is beneficial since for management there is only one system to oversee, one that
fully integrates quality and safety into company operations and continuously improves
performance. For employees it is easier to work within a management framework that
presents a single message about the right way to work. Therefore integrating quality and
safety into a single program streamlines operations and creates synergies that improve
results.
Safety management also has many parallels with other organizational management
activities. These organizational management activities include Total Quality
Management (TQM) and environmental hazard management. BS 8800 (1996), stipulates
links between Safety Management activities and activities in ISO 9001 Quality system.
Safety management can be included in the sphere of quality management if a TQM
approach comprising requirements from all the relevant stakeholders, not only
customers, is adopted.
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conciliation .................................... 452

INDEX concurrent delay ............................ 448
Conditions of Contract . 145, 255, 375,
A 376, 392, 420
consideration ......... 145, 154, 159, 388
accelerate the works.......................440 constant percentage ................... 95, 97
accept or reject situation ................. 76 construction industry 9, 112, 222, 284,
accident investigations .................. 469 287
accounts manager...................... 34, 44 construction manager ...... 48, 156, 216
activity durations................... 185, 211 construction team ........ 3, 14, 145, 252
activity on the arrow ............. 180, 211 consulting engineer ......................... 54
activity variances ...........................210 contract stage................................. 174
additions........................................ 442 contractor's all risks....................... 419
African Development Bank .. 110, 111, contractors third party liability policy
112, 428, 493 .................................................... 419
Appropriate Technology ............... 302 contracts manager............ 41, 149, 156
arbitration, 405...............................411 control officer ............................ 18, 29
arrow diagrams ......................197, 209 control process....................... 174, 179
assessment of resale value .........95, 96 corrective maintenance.................. 335
award of contracts ..........................131 cost control, 39, 224, 307 .............. 311
cost control .................... 183, 223, 224
B costing engineer............................. 265
CPM .............................. 185, 186, 226
backward pass ................189, 210, 211 cranes....................... 95, 160, 301, 480
bar chart .........152, 165, 182, 186, 237 crash cost ....................................... 227
bidding documents .130, 131, 347, 351 crash duration ................................ 227
bill of quantities ...21, 38, 39, 222, 223 critical activity....................... 182, 214
bonus surveyor.....................36, 37, 38 critical path .................................... 185
bonus targets ....................................286
breach of contract...........388, 406, 410 D
briefing stage..................................375
builds, operates and transfers.........432 defects liability period ................... 145
definition stage .............................. 375
C demolition.............................. 477, 481
depreciation ................. 80, 95, 96, 444
Canon of Ethics..................................9 development banks ................ 111, 494
capital expenditure .....................73, 74 development project .............. 108, 119
capitalised cost .................................86 direct costs..................................... 228
charge hands ..............................51, 52 direct negotiation........................... 452
chief estimator................................155 discharge of contract ..................... 391
claims .............................403, 405, 422 dispute Resolution Mechanisms ...426,
client.................................................54 451
Code of Hammurabi...............413, 495 dispute review board ..................... 453
commissioning stage......................374 disputes.................................. 430, 453
competitive tendering ..............38, 254
complex compression ....................227 E
conception stage.............................375
References 492
earliest start.............. 93, 214, 239, 243 heavy plant .....................................479

engineering education........ 5, 6, 7, 425 hire all plant ...................................304
Engineer's Representative..... 398, 402, hire purchase ..................................305
403 human resources planning .............. 262
environmental hazard management491
equipment management................. 299 I
equipment performance ................. 313
equipment productivity.. 301, 311, 321 instructions to tenderers .................394
equipment selection ....................... 306 internal rate of return........................87
equivalent annual Cost .................... 86 International Chamber of Commerce
estimating...... 36, 37, 39, 43, 104, 142, ....................................................454
179, 183, 192, 220, 222, 256 International development agencies
estimation of productivity.............. 331 ....................................................110
estimator .................................. 34, 146 International Monetary Fund .........428
evaluation 74, 121, 130, 133, 208, 342, international projects......428, 495, 496
353, 358, 384, 444, 493 International Standards Organization
evaluation criteria .......................... 359 ....................................................427
evaluation of tenders...................... 384 Invitation to tender .........................376
excavators ............................. 480, 481
excessive noise .............................. 478 K
ex-gratia claims.............................. 438 KfW, 135..............................................
expression of interest ..................... 357
L
F
labour productivity.........................260
FAO ....................................... 124, 127 labour schedule ..............................294
feasibility Study............................... 55 labour intensive construction .......... 301
Federation of Consulting Engineers ladders ............................................472
.................................... 396, 420, 434 latest finish .............................199, 214
FIDIC forms of contract ................ 451 least cost .........................227, 234, 247
final certificate....................... 404, 405 Least Cost Selection...............346, 351
financial evaluation........................ 365 least-cost schedule..........................226
financial incentives ......... 285, 289, 293 Least-cost scheduling .....................232
financial project appraisal.......... 74, 75 Letter of Acceptance ..............381, 387
financial proposals................. 347, 360 letter of intent .................................387
float................ 149, 182, 194, 211, 237 Letter of Invitation .........................359
line of balance ................180, 200, 205
G Linear overhead cost ......................230
linked bar-charts.............................180
ganger .............................................. 51 logic diagram..........................185, 217
general conditions.......................... 397 lump sum form of contract.....431, 432
general foreman ............................... 50
Government budget ....................... 108 M
H management skills............................13
management team ......................34, 48
hazard assessments ........................ 162 Managing Director ...........................34
hazard identification ...................... 467 mediation........................................452
head office overheads .................... 450 method statements..152, 156, 162, 257
method ttudy ....................................36 planning . 107, 262, 306, 409, 463, 493
MIGA.............................................118 planning controls ....................... 19, 29
military engineering .......................4, 5 planning engineer ............................ 34
mini-trial ........................................453 plant manager .................................. 34
monetary terms ................74, 104, 107 plant schedule ........................ 164, 168
monitoring and review ...........464, 469 pre-arbitral review board ............... 452
most likely duration .......................209 precedence diagrams ............. 186, 197
motivation ......................... 38, 274, 324 pre-contract stage .......................... 154
mutually exclusive projects .............92 preliminary design......................... 375
negotiations ....128, 129, 353, 365, 366 Premiums....................................... 424
present value (cost) method............. 83
N pre-tender meeting......................... 174
pre-tender planning ....................... 142
network analysis ............................185 pre-tender programme ........... 146, 179
network schedules..................247, 248 Preventive maintenance................. 335
node diagram..................................210 principles of insurance .................. 415
non-financial incentives...................285 professional indemnity insurance .419,
normal cost.....................................227 459
project cycle ............................ 13, 137
O project duration ..................... 211, 228
project evaluation .......................... 133
Occupational Health and Safety... 463, project expenditure ........................ 111
497 project identification ..................... 121
offer and acceptance ......................389 project preparation......... 124, 125, 134
office manager ...............................157 project ranking................................. 76
omissions ...............................361, 362 project stages ................................. 374
open tendering................................377 promoter ............................ 14, 71, 375
opening of tenders..........................384 public sector .................................... 15
operational planning ..............177, 178
operatives .. 27, 51, 159, 202, 277, 476, Q
488
optimistic duration .........................209 Quality and Cost Based Selection . 347
optimum project duration...............226 Quality Based Selection ................ 348
overhead costs..................38, 227, 247 quality management .............. 490, 491
overhead power lines .............473, 482 quantity surveyors ............................. 2
overheads .......................................151 Quantum Meruit ............................ 438
own all plant...................................304
R
P
Rate of Return Method .............. 75, 80
particular ppplication .............397, 404 real terms ....................................... 104
payback method ...............................75 recipient country.................... 109, 117
performance appraisal......................263 Renaissance ....................................... 4
Performance Bond .................406, 422 resident engineer ..................... 15, 441
performance evaluation..................370 resource aggregation ..... 183, 193, 296
personnel officer ..............................34 resource allocation......................... 216
PERT .....185, 208, 209, 210, 211, 212, resource graph ............................... 243
214, 226 resource levelling .......... 227, 238, 239
pessimistic duration .......................209 resource smoothing ....................... 228
References 494
risk assessments............................. 422 sum of digits.....................................95

roof trusses..................................... 161 supervising consultants ..................367
S T
Safe access..................................... 472 technical proposals .........................348

safety helmets ................................ 489 temporary works ....265, 385, 395, 406
safety legislation ............................ 470 tender documentation .............145, 152
safety management ................ 463, 490 tender method statement ........149, 151
safety officer .................................... 34 Tender negotiation .........................386
safety planning............................... 466 tendering stage ...............................375
safety policy........................... 466, 468 termination of contract ...........398, 405
scaffoldings.................................... 473 terms of reference.............65, 347, 371
schedule compression .................... 232 The Asian Development Bank ......114,
section engineers.................... 264, 265 138
selection under a fixed budget.............. The Inter-American Development
Bank ............................................115
................................................346, 350
selective tendering ................. 377, 378 the World Bank ......116, 373, 493, 494
service engineer ............................... 18 total auality management ...............491
settlement of disputes ............ 398, 452 trades foreman....................48, 52, 175
sewers ............................ 476, 484, 485 turnkey projects..............................432
simple compression ....................... 228
sinking fund ............................. 95, 100 U
site agent ................................. 263, 264
site conditions ........................ 300, 458 underground cables ........................483
site engineer............................... 48, 52 UNDP.............................................124
site layout............................... 154, 158 UNESCO........................................124
site meetings ............................ 49, 172 unsatisfactory performance ............369
site organization........44, 151, 263, 269 utmost good faith ...........................415
site overheads ........................ 143, 446
Site report ...................................... 147 V
site supervision .............................. 290
valuations .......................................225
specialist subcontractors .................. 27
variations ..........19, 186, 225, 397, 472
specifications...3, 18, 51, 71, 253, 321,
vitruvius .............................................1
431, 459, 485
water mains ....................................484
standard form......... 145, 153, 433, 434
work measurement ...........................36
straight cost method......................... 75
work study........................................34
strategic planning........................... 177
workstudy engineer ....................36, 37
structural engineer ........................... 18
Workplace inspections ...................469
sub-contract schedule .................... 165
subcontractors........ 142, 154, 174, 223
subrogation .................................... 415

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Abebe Dinku Ninatubu Lema Alfred Ngowi

2nd Edition, 2015

In the context of the globalization of the construction industry, management of the

Efforts aimed at delivering construction management programmes that are based on

The current textbook communicates the fundamentals of civil engineering

Chapter One introduces the origins of construction engineering as it developed from

Chapter Nine describes human resource management. Basic principles of resource

Chapter Eleven describes procurement and management of construction professional

Chapter Twelve describes the selection of contractors and management of works

Chapter Thirteen describes insurance requirements in construction industry. The

Chapter Fourteen describes claims and dispute resolution in the construction

During the pre-medieval period design of the constructed product proceeded in an

builder obtained his status through personal reputation, completed projects or a

Craftsman Craftsman Craftsman

Figure 1.1 Structure of medieval building team

Master Builder Master Builder Master Builder Master Builder

Figure 1.2 Structure of building industry in the medieval period.

Due to various influences such as the industrial revolution and technological

General Contractor Consultant Consultant

Subcontractor Subcontractor Subcontractor

Figure 1.3 Twentieth century building team.

1.2 Engineering as a Profession

During the seventeenth and eighteenth centuries, architecture and engineering

1.3 The Role of Education

Engineer's struggle to be recognized as an academic discipline and as profession did

efforts of engineering graduate programs is research oriented, even though only

1.4 Engineering Professional Organizations

Developing a formal means of professional education is only one element in the

The development of professional organizations in engineering was a long and

Initially, the engineering professional societies in America met with strong

1.5 The Construction Discipline

Engineering's struggle to be recognized as a profession and academic discipline has

Several distinct requirements for acceptance as an academic discipline and as a

i) Redefinition of the terms Construction/Constructor or the adoption of different

If construction is to be recognized as a profession and as an academic discipline, one

The construction’s process of achieving professional stature can be considerably

Increasingly, general contractors are becoming managers of the construction process.

1.6 Developing an Academic Theory

vii) Ethical Decision-making;

1.7 Cost Implications

As with any action there is a consequence. Before management is accepted as the

2.1 The Promoter

2.1.1 The private sector

The private sector consists of work commissioned or financed by an individual client

2.1.2 The public sector

2.2 The Construction Process

The process of construction is largely dependent upon the contractual relationships of

Service Fire and Construction

2.3 The Construction Team

2.3.1 The consulting engineer (the Engineer)

The consulting engineer (or Engineer) is considered to be the leader of the

(i) Reputation. The past performance of a consulting engineer, sometimes referred

2.3.2 The private quantity surveyor

The private quantity surveyor is often referred to as the “construction economist” or

At the commencement of a project, the private quantity surveyor is presented with an

In conclusion, it is important to stress that the private quantity surveyor is a

2.3.3 The structural engineer

The structural engineer is normally employed as a consultant directly by the client