Principles of Construction Management

1. INTRODUCTION
1.1 The Construction Industry

The construction industry is an enormously important part of any economy. Economic growth
depends on the physical infrastructure that is delivered by the construction industry and its key
participants. Construction, responsible for creating, defining and maintaining the built
environment within which most other social and economic activities take place, is by far the
most important way in which societies create new value. It provides a society with delivery
mechanisms for many aspects of its needs such as economic, social, political, environmental,
public sector reform. The industry’s products are essential to mankind’s physical and social day-
to-day existence.

With many other industries such as manufacturing (steel industry), material industry, etc
intertwined with the works being undertaken as construction, the sector is said to be one of the
major sectors on which many of society’s (especially in developing nations) progress is based
on.

CHARACTERISTICS OF THE CONSTRUCTION INDUSTRY

Generally the construction industry is labeled as a ‘conservative industry’ which adopts new
technologies and practices at a slower rate as compared to other industries such as the IT,
manufacturing and the automotive and invests very little in capital, research & development and
training (Egan 1998). Moreover, construction is overwhelmingly known for following a
fragmented and sequential project delivery system where by projects are incepted by clients,
designed by consultants and implemented by contractors mainly in a very fragmented manner.

The strategy of the conventional processes of sequential project delivery system is meant to
minimize risks and changes through thorough descriptions of specifications and contracts. This
sequential separate system of project delivery, however, is believed to be an effective barrier to
using the skills and knowledge of contractors and suppliers in design and planning of the projects
(Latham 1994).

The conventional procurement system, which assumes that clients benefit from choosing a new
set of project team selected competitively for every project they engage on, is also believed to be
a major obstacle for the advancement of the industry. This aggressive separate procurement
system inhibits learning, innovation and development of skill. It prevents parties from
developing a synergy on past relationships and also leads to the adversary and confrontational
supply chain relation that the industry is known for as the fierce competition on price forces
parties to lower their quoting to win the project with a believe that they will compromise through
change requests-hence destabilizing the industry (Egan 1998).

‘UNIQUE’ CHARACTERISTICS OF CONSTRUCTION AND THEIR EFFECTS IN

THE INDUSTRY

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Aside from major characteristics that have defining effects on its functioning, the construction
industry is espoused to have a number of characteristics that sets it as ‘unique’ from most other
industries. These characteristics embrace a number of political, social and economic aspects and
are believed to have a telling effect in the way the industry is functioning; including the problems
mentioned above.
Nature of Production

In most cases, except for the minor cases of pre-fabricated constructions, the place of production
of construction has to be necessarily the place where the product is going to be used. Thus the
working place is changing regularly with workers constantly moving from one site to another,
cooperating with different partners and in different chains. Besides because the site of
production is the site of product which has to be built yet, work in construction industry is mostly
exposed to inclement weather, and therefore, to seasonal cycles and disruption.

Because the character of work is of temporary duration, labor contracts are very often of a fixed
term nature. Hence, insecurity of employment and earnings is significantly higher than in other
industries. Due to instability of the production process, its exposition to weather, and variable
working environment, the incidence of accidents is significantly higher than in most other
industry (perhaps only less than mining).

For these reasons of peculiarity regarding the sector’s production process including work
organization (and others) there are some peculiarities in the construction industry’s labor
relations, with very often lower wages, particular vocational training systems, social funds to
compensate disadvantages caused by health and safety risks, disruption of earnings, and
fluctuation with negative effects on earnings, vacation, and pensions.

Nature of the product

The outputs of construction are generally large, heavy, durable, expensive, heterogeneous, and
immobile in addition to being required over a wide geographical area.
Due to the identity of location of production and location of products, with products immobile,
the construction market is mostly restricted to be local. Thus the construction market is
dominated by small enterprises that perfectly meet the low-size scale of most sites or the
specialization of trade respectively and the geographic market.

Demand for the industry’s products

Unlike most consumer products that are readily produced in bulk, the demand for the product of
the construction industry is generally only produced upon the initiation of, and to the
requirements of the clients. With the exception of the sometimes-speculative building, clients
must first define their requirements in terms of what product that they want and only then can the
construction industry build it.

Moreover, the level and type of demand cannot be controlled, manipulated or easily created by
the industry itself. Hence unlike most industries where a considerable proportion of effective

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demand for their products is created and managed by the producers themselves through extensive
marketing and application of new technologies, demand for construction products is mainly
secondary or derive. Hence the demand is determined by the demand and output of other goods
and services such as investment goods for which the ultimate use is either as a means to further
production an addition to or improvement of the infrastructure of the economy a social
investment or an investment good for direct enjoyment, which it creates or helps create.

The implication of this is that it is much more difficult for the construction industry to create or
manipulate demand for its products since such factors are not under the control of the industry.
However, the inability of the industry to manipulate demand could also be partly attributed to the
overall structure of the industry, as will be discussed below.

The structure of the industry

The product and production characteristics stated above largely determine the structure of the
industry including the proliferation of many small firms, each forming temporary alliances upon
project basis for the duration of the project. Further, the construction industry is highly
fragmented with the planning, design and procurement of a building being separated from its
construction process.

The industry is characterized by high levels of uncertainty. The demand is so variable and the
environment so competitive for work that creates low levels of profitability. Researchers (for
example, Flanagan et al. 1998) argue that profits in construction will remain low for as long as
construction is seen as a low-technology industry and while many firms are prepared to win
work with low-profit margins.

The construction industry is large, its activities are fragmented and include a wide range of types
and sizes of construction works to enable it meet a variety of client needs. Generally, the vast
majority of works are small and although in value terms, each is insignificant, combined, they
represent a large part of the construction industry’s total output. Time lags in the construction
process tend to be long and variable and there are large fluctuations in the demand for
construction over time. Because of this, it is only logical that the industry has to respond to the
character and pattern of demand as it arises.

Because of all the above reasons and ‘peculiarities’, it is claimed that it is difficult for
construction industry to adopt manufacturing industry-style supply chain management and
delivery of projects Cartlidge (2002). On the other hand, the construction industry which is
typically associated with late delivery, over budget, low profitability, poor returns and slow up
take of new technology and management philosophies is challenged to discontinue disguising its
inefficiency behind the idea of the industry being so different from others (Flanagan et al. 1998;
Egan 1998). It is suggested that as the construction industry evolves, it can and will start to learn
and benchmark ideas from outside industries, such as manufacturing and the IT (Egan 1998).
The Workforce

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Although some inputs can be manufactured off-site, construction activities take place on site.
This also means that inclement weather could or does affect the progress of the work on site. The
industry is, by its very nature, an overwhelmingly domestic and labour-intensive industry despite
the advancement in modern technologies. This situation is perpetuated by the fact that because
most firms are small, there is no single organization or ‘champion’ to spearhead change in the
industry particularly as it relates to technology. Typically, 90% of construction workers in both
developed and developing countries are employed in micro firms with fewer than ten people and
small and medium sized firms constitute 97% of all construction firms globally (CSIR, 2003). It
therefore follows that the skills and commitment and effective organization of the work force are
crucial in determining whether or not the industry can produce a high quality of output at a fair
price. It has also become apparent that there is need to change working patterns and challenge
existing attitudes, which calls for a need for effective communication, education, training,
participation and involvement (Flanagan et al 1998).

The common working practices, namely self-employment and labor-only sub-contracting,

differentiates the construction industry from most other industries. These practices also
contribute heavily to the many disadvantages for which the construction industry has been
criticized including, the temporary nature of the work, poor site safety record, lower wages and
lower social status of its labour force, inadequacy of training and consequent skills shortage.

CONSTRUCTION IN ETHIOPIA AND MAJOR SECTORS OF

CONSTRUCTION WORKS

Construction and the ability to build things has transcend from the most ancient human skills of
the Primary age to the modern ages of Industrialization and Information. During the whole of
Primary age, the construction industry has largely related to talents of human beings on how to
construct shelters and small roads and river improvements. Generally speaking, the focus during
this age is largely on fulfilling humans’ basic needs and major figurative and monumental ones.

As the number of humans’ enlarge and their demands become more, a need to fulfill such
demands amass and in short period of time pressed human beings to search for alternatives in
order to live peacefully for their co-existence. This leads to creating appropriate technology that
develop progressively in line with increasing productivity. This brought the development of
society into the Industrialization age where mass production for assembly is becoming possible.
This brought different approaches to construction methods and their completion times.

This period has mainly created conscious way of technology improvements for first mass
production followed by quality enhancement and productivity issues. Subsequently, the concept
of competition such that time, quality and cost values were starting to govern. The development
of technology and the concepts of competitions opened a considerable role for management
functions such as planning, implementing and controlling cycles.

The information age which made most cumbersome mathematical calculations simple and that
brought and revealed many more complex factors involved in construction processes enhanced
the way how construction activities need to be managed. As a result, Management functions have

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enlarged and become more important for the construction industry competitiveness and
development.

Construction works in Ethiopia can be dated back to the Shaba era during which time the famous
queen built her palaces. Ranges of glamorous constructions, such as the Axum Oblisques, the
Lalibela Rock Hewn Churches, the Gondar Palaces, the Harar Walls, the Sof Umar caves, etc
have been curved and erected in a widely spaced times since then. However, the Ethiopian
construction industry has only been organized in modern ways during the Imperial Majesty’s era.
With the establishment of the then Ministry of Works, and later such authorities as Imperial
Highway Authority, Building and Transport Construction and Design Authority (BaTCoDA), the
industry took shape and establishment of government divisions to promote progress &
developments. Since then, various readjustments and proclamations have been made to suite the
authorities to the needs and ideologies of the governments in power. Under the tutelage of the
current government, series of proclamations have been made to re-arrange and re-establish
various sections of the industry.

Under the current setup, the Ministry of Works and Urban Development is mandated to look
after the various issues and aspects surrounding construction with other ministries and authorities
such as the Ministry of Water Resources, Ministry of Infrastructure, also playing a prominent
role in the industry.

Construction works can generally be classified in to two: The building sector overlooks many of
the building and related works while the civil works (infrastructure), sector looks over other
usually huge and machine intensive works associated to infrastructure delivery such as highways
or power supply. In Ethiopian context, such works are usually further divided as the building
sector works, road (transportations) sector works, civil works in the power and water sector
developments and to some extent the communication sector programmes.

IMPORTANCE OF THE CONSTRUCTION INDUSTRY TO THE NATION’S ECONOMY

The construction industry has a significant multiplier effect on a given economy. There is a
relationship between output, employment, income and demand. It is generally argued that, due to
its multiplier effect, for every job in the construction two other jobs will be created in other
sectors as a result. In developing countries like ours, the construction industry plays significant
roles not only in defining the built environment where other socio-economic endeavors take
place but also by playing a considerable role in triggering economic development and providing
a huge amount of business and job opportunity to citizens.

The industry provides significant amounts of fixed investment, contributes considerably to the
national output and is a major source of employment; directly and indirectly by its multiplier
effect. Studies show that in most countries construction constitutes more than half of capital
investment, contributes up to 10% of GDP and employs more than one hundred million people
globally which accounts for almost 28% of all industrial employment (CSIR 2003; Winch 2002).
For developing nations like us, these figures are believed to be much higher higher.

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Table 1: 1 Contribution of construction towards overall economy in selected countries (1980

market value)

Countries Value added to GDP Share of Gross Fixed

Capital Formation
France 5 56
UK 6 48
USA 4 55
Kenya 5 48
Ethiopia ? ?

Certain actions, particularly government ones, such as an increase in the interest rate or decrease
in supply of credit affects not only the demand on construction industry but also firms in the
industry. Any change in the level of construction output will also affect employment and hence
incomes, demand and ultimately outputs of other sectors of the economy.

Consequently, the construction industry is often used as a regulator of the general economy. It
has proved a good instrument for transmitting short-term deflation through the economy without
creating widespread political upheaval, economic disruption or closure of productivity capacity.

Under conventional “Keynesian” economic theory, when the economy is in a recess, as output
and employment falls, the government would increase spending to stimulate economic activity,
and when there is a boom, government would reduce its spending. In the same way, low income,
low investment and low levels of productive employment feed into one another. Thus, targets for
construction output and employment should be integrated within macro-economic planning.

Government’s influence coupled with the investment nature of the construction industry’s
product means that demand tends to fluctuate particularly according to the state of the economy
and the social, economic policies of the government, with consequent effects on the industry.
Change in the construction industry is constant and is influenced by many factors including
interest rates, business uncertainty, and government policy, world events, training and changing
expectations of clients. Typically, variations in construction output have little physical short-term
effects particularly because of the durability of most construction products. Time lags in the
construction process tend to be long and variable and there are large fluctuations in the demand
for construction over time. This implies that the amount spent on construction can as a result
vary quite sharply from year to year without significantly affecting the state of the built
environment.

It is therefore, for both economic and administrative reasons, that the reductions and increases in
government spending are often concentrated on construction projects. And it is due to this
monumental importance that government gives a considerable emphasis in shaping the practice
of construction. As part of shaping and defining standard and safe practice of construction,
government sets up laws, regulations and standards along with the responsible bodies to see after
these practices.

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1.2 MAJOR PARTIES/STAKEHOLDERS OF CONSTRUCTION AND THEIR

RESPONSIBILITIES AND CONTRIBUTIONS

By definition, stakeholders are individuals or groups who have a vested interest in a given issue.
In the construction context then, they are parties who will be interested in projects undertaken or
products delivered by the industry. Classified as positive or negative depending on their interest
and direct or indirect (internal or external) depending on their involvement on the project,
stakeholders are parties who could have a telling effect on the success or failure of the project.

In the construction arena, put simply the major stakeholders of the construction industry are the
contractors who implement the projects, the consultants who design and supervise the works, the
client who finance the projects and the regulators who regulate how the industry and its actions
functions. Left in these quartets who usually involve in the actual execution of the projects are
the user who actually use the final product of the project.

Indirect stakeholders’ boundary

Users
(Beneficiaries)

Contractor
Regulatory/Statutory
bodies Suppliers
Client
W o r k e r s
Direct stakeholders’ boundary
Trade Unions Financers
(Financing
Consultants institutions)

The general public

• Client: are the parties (public or private) under whose tutelage the project is executed

Comes up with the investment needs such as project idea, land, capital
etc.

Usually] provides the infrastructure needed

Takes care of some of the legal constraints & permits

Leases the project’s execution

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In public projects, besides the client, government institutions (other than the direct client body)
may also take interest in the project. In Ethiopian context, the major public clients in the
construction industry include, the Integrated Urban Housing Development Programme Office
(IUHDPO) under the Ministry of Works and Urban Development, the Ethiopian Road Authority
(ERA), the Ethiopian Electric Power Corporation (EEPCO), the Ministry of Water Resources
(MoWR), the Defense Force, Ministry of Health, Ministry of Education, etc and their regional
subsidiaries/equivalents. Besides, the private sector also takes a huge stake as a client,
particularly in the housing sector.

• Consultants: are professional bodies who design the project

Change the clients project idea into economic and constructable artifact

Make sure that design satisfies requirements

[Usually] prepare BoQ and contract documents

If assigned to supervise:
 Look after proper execution of project
 Certify payment certificates
 Issue provisional and final acceptance certificate

• Contactors: are the parties that change the drawings and specification made by the
consultants into a physical structure

Prepares a bid document

Provides the resources needed to execute the project

Executes the project according to plan

Monitors project execution

Rectifies defects

• Statutory bodies: are government bodies that looks after the project’s compliance with
the general public’s interest

Prepare a general development scheme and make sure that the project
satisfies that.

Look after the safety, legal, commercial etc issues associated with the
project

Look into the environmental, cultural, social etc effect that the project
induces,
In Ethiopia, the major statutory bodies involved in the construction industry includes:
Municipalities: Bodies who are given the mandate to look after urban housing construction and
its associated legalities; the Ethiopian Road Authority: Besides being a major client of the road
sector by itself, the ERA is the party mandated to look after the road sector construction works;
the Ministry of Water Resources; is the party mandated to overlook water sector development
programs; the Ministry of Works and Urban Development, the party mandated to regulate and
promulgate bylaws, codes, standards, etc meant to promote efficiency, transparency,
accountability as well as growth in the industry; Etc. In addition to the above (mainly national
bodies), the regional regulating bodies also have a huge stake in shaping how the industry is
performing in each state.

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• Suppliers: are parties that supply the varies materials, equipments and services needed
for the project
• Financers (Financial institutions): are donating or loaning agencies or institutions like
banks, insurances, pension agencies etc who could provide loan services for the project
• Works in the industry: are professionals, occupational or unskilled laborers who earn
their living from working in the industry or its supply chain.
• Trade Unions: Though not much visible in Ethiopian context, are unions of the working
class that look after unfair treatment of workers (like payment issues, firing issues) as
well as issues related to occupational health and safety.
• Project product users: are parties who may be using the end product of the project
• The general public: are communities of the locality, the general society of a country or
even the globe who may have a vested interest in the project.
• Other sectors: are sectors which could have interest in the process or product on the
construction project

Major challenges of the industry

Perhaps related to its inefficiencies as manifested by late delivery, over budget, low profitability,
poor returns and slow up take of new technology and management philosophies, the global
construction’s contribution towards the global economy is diminishing (particularly in the
developed nations). It is often being replaced by the service industry, which is quite known for
its continuous improvement and customer focus, especially in developed nations which, more or
less, have already implemented a well functioning infrastructural network. Despite its relative
success in the past few years, the construction industry in Ethiopia has also got multifaceted
problems and challenges. Some of major ones are:

Lack of capable local firms.

Considerable proportions of the above programs were/are being implemented by

international companies (contractors, suppliers, consultants etc). This creates a huge
problem/challenge for the local firms to build their capacity. Besides, it results in lose in
business and job opportunities, siphoning of hard currency, etc

The major reason why local firms don’t take large proportion of the industry’s share is lack
of capacity. As things stand, the majority of the local firms don’t satisfy the screening
requirements the international financing bodies demand. The major evaluation criteria set by
these bodies are:
• Average/total value of work over the past (5 years)
• Experience in work of similar nature and size in the past (five years), details of
similar work underway (at least 70% complete), (all as a prime contractor)
references
• Major items of Contractor’s Equipment proposed for carrying out the Works

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• Qualifications and experience of key personnel proposed for administration and

execution of the Contract;
• Financial reports for the last five years and evidence of access to financial
resources to meet the qualification requirements, etc

Major stakeholders (contractors & consultants) lack capital (equipment and machineries),
financial, institutional (managerial, experience, reputation, etc), human (competency and
capability), etc resources to satisfy the above requirements. Besides, financial and loaning
system and other industries (which supply the construction industry such as the material and
manufacturing industry) are not well developed to supply construction with what it needs and
support the local firms.

Poor project delivery success rate

Most of the projects delivered in recent years in the country have failed under the
conventional project success criteria of being delivered on time, on budget and to the
standard and quality required. These results in huge impact on the country’s already
constrained resource as it means loss of extra resource to initially implement the projects,
necessity to maintain infrastructure before their due period, etc.

Various reasons can be sited for these. But the most prominent reason has to be the industry’s
inability to embrace professionalism. As things stand, projects are incepted, planned and
executed outside the realms of professional project management principles and practices.
This is bound to result in inefficiencies and ineffectiveness.

Others

There are of course many other causes which render the industry inefficient. Among these:
very weak industry stakeholders link ( eg. Industry Vs training institutions, designers vs
implementers, etc), not supportive and up to scratch laws, codes procedures and standards,
bureaucratic working systems (not only confound to the construction industry but related to
the whole supply chain), various problems in procuring and contract administration
processes, non motivated, non committed and incapable (especially when it comes to
decision making) work force, almost non visible professional associations to set standards
and implement professionalism, etc

1.3 Projects and project Management

What is project?
A project is a temporary endeavor undertaken to create a unique product or service. Temporary
means that every project has a definite beginning and a definite end. Unique means that the
product or service is different in some distinguishing way from all other products or services. For
many organizations, projects are a means to respond to those requests that cannot be addressed
within the organization’s normal operational limits.
Projects are undertaken at all levels of the organization. They may involve a single person or
many thousands. Their duration ranges from a few weeks to more than five years. Projects may
involve a single unit of one organization or may cross organizational boundaries, as in joint

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ventures and partnering. Projects are critical to the realization of the performing organization’s
business strategy because projects are a means by which strategy is implemented. Examples of
projects include:

Developing a new product or service.

Effecting a change in structure, staffing, or style of an organization.

Designing a new transportation vehicle.

Developing or acquiring a new or modified information system.

Constructing a building or facility.

Building a water system for a community in a developing country.

Running a campaign for political office.

Construction projects do not produce a product as such; but rather a facility that will make or
house the means to make a product or provide service facilities such as dams, highways and
parks. They deal with geographical differences and natural events in every case and may have a
significant effect on the environment. Often, if not usually, they involve a team of hired
specialists in design and construction disciplines. In today's world they have to involve many
stakeholders, particularly, environmental and community groups that many other types of
projects do not. Construction projects often require large amounts of materials and physical tools
to move or modify those materials.
Temporary nature of the projects
Temporary means that every project has a definite beginning and a definite end. The end is
reached when the project’s objectives have been achieved, or when it becomes clear that the
project objectives will not or cannot be met, or the need for the project no longer exists and the
project is terminated. Temporary does not necessarily mean short in duration; many projects last
for several years. In every case, however, the duration of a project is finite; projects are not
ongoing efforts.

In addition, temporary does not generally apply to the product or service created by the project.
Projects may often have intended and unintended social, economic, and environmental impacts
that far outlast the projects themselves. Most projects are undertaken to create a lasting result.
For example, a project to erect a national monument will create a result expected to last
centuries. A series of projects and/or complementary projects in parallel may be required to
achieve a strategic objective.

Projects are fundamentally different because the project ceases when its declared objectives have
been attained, while nonproject undertakings adopt a new set of objectives and continue to work.
The temporary nature of projects may apply to other aspects of the endeavor as well:
 The opportunity or market window is usually temporary_most projects have a limited
time frame in which to produce their product or service.
 The project team, as a team, seldom outlives the project_ most projects are performed
by a team created for the sole purpose of performing the project, and the team is
disbanded when the project is completed.

Uniqueness of the projects

Projects involve doing something that has not been done before and which is, therefore, unique.
A product or service may be unique even if the category to which it belongs is large. For

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example, many thousands of office buildings have been developed, but each individual facility
is unique _different owner, different design, different location, different contractors, and so on.
The presence of repetitive elements does not change the fundamental uniqueness of the project
work.
For example:
A project to develop a new commercial airliner may require multiple prototypes.
A project to bring a new drug to market may require thousands of doses of the drug to
support clinical trials.
A real estate development project may include hundreds of individual units.
A development project (e.g., water and sanitation) may be implemented in five
geographic areas.

What is project Management?

The management of construction projects requires knowledge of modern management as well as
an understanding of the design and construction process. Construction projects have a specific
set of objectives and constraints such as a required time frame for completion. While the relevant
technology, institutional arrangements or processes will differ, the management of such projects
has much in common with the management of similar types of projects in other specialty or
technology domains such as aerospace, pharmaceutical and energy developments.
Generally, project management is distinguished from the general management of corporations by
the mission-oriented nature of a project. A project organization will generally be terminated
when the mission is accomplished. According to the Project Management Institute, the discipline
of project management can be defined as follows:
Project management is the art of directing and coordinating human and material resources
throughout the life of a project by using modern management techniques to achieve
predetermined objectives of scope, cost, time and quality.
By contrast, the general management of business and industrial corporations assumes a broader
outlook with greater continuity of operations. Nevertheless, there are sufficient similarities as
well as differences between the two so that modern management techniques developed for
general management may be adapted for project management.
A working knowledge of general management and familiarity with the special knowledge
domain related to the project are indispensable. Supporting disciplines such as computer science
and decision science may also play an important role. In fact, modern management practices and
various special knowledge domains have absorbed various techniques or tools which were once
identified only with the supporting disciplines. For example, computer based information
systems and decision support systems are now common place tools for general management.
Similarly, many operations research techniques such as linear programming and network
analysis are now widely used in many knowledge or application domains.
Specifically, project management in construction encompasses a set of objectives which may be
accomplished by implementing a series of operations subject to resource constraints.
There are potential conflicts between the stated objectives with regard to scope, cost, time and
quality, and the constraints imposed on human material and financial resources. These conflicts
should be resolved at the onset of a project by making the necessary tradeoffs or creating new
alternatives. Subsequently, the functions of project management for construction generally
include the following:

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1. Specification of project objectives and plans including delineation of scope, budgeting,

scheduling, setting performance requirements, and selecting project participants.
2. Maximization of efficient resource utilization through procurement of labor, materials
and equipment according to the prescribed schedule and plan.
3. Implementation of various operations through proper coordination and control of
planning, design, estimating, contracting and construction in the entire process.
4. Development of effective communications and mechanisms for resolving conflicts
among the various participants.
The Project Management Institute focuses on nine distinct areas requiring project manager
knowledge and attention:
1. Project integration management to ensure that the various project elements are effectively
coordinated.
2. Project scope management to ensure that all the work required (and only the required
work) is included.
3. Project time management to provide an effective project schedule.
4. Project cost management to identify needed resources and maintain budget control.
5. Project quality management to ensure functional requirements are met.
6. Project human resource management to development and effectively employ project
personnel.
7. Project communications management to ensure effective internal and external
communications.
8. Project risk management to analyze and mitigate potential risks.
9. Project procurement management to obtain necessary resources from external sources.
These nine areas form the basis of the Project Management Institute's certification program for
project managers in any industry.
Project Phases and the Project Life Cycle
Because projects are unique undertakings, they involve a degree of uncertainty. Organizations
performing projects will usually divide each project into several project phases to improve
management control and provide for links to the ongoing operations of the performing
organization. Collectively, the project phases are known as the project life cycle.

Characteristics of Project Phases

Each project phase is marked by completion of one or more deliverables. A deliverable is a
tangible, verifiable work product such as a feasibility study, a detail design, or a working
prototype. The deliverables, and hence the phases, are part of a generally sequential logic
designed to ensure proper definition of the product of the project.

The conclusion of a project phase is generally marked by a review of both key deliverables and
project performance to date, to
a) Determine if the project should continue into its next phase and
b) Detect and correct errors cost effectively. These phase-end reviews are often called phase
exits, stage gates, or kill points.

Characteristics of the Project Life Cycle

The project life cycle serves to define the beginning and the end of a project. For example, when
an organization identifies an opportunity to which it would like to respond, it will often authorize

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a needs assessment and/or a feasibility study to decide if it should undertake a project. The
project life-cycle definition will determine whether the feasibility study is treated as the first
project phase or as
a separate, standalone project.

The project life-cycle definition will also determine which transitional actions at the beginning
and the end of the project are included and which are not. In this manner, the project life-cycle
definition can be used to link the project to the ongoing operations of the performing
organization.

The phase sequence defined by most project life cycles generally involves some form of
technology transfer or handoff such as requirements to design, construction to operations, or
design to manufacturing. Deliverables from the preceding phase are usually approved before
work starts on the next phase. However, a subsequent phase is sometimes begun prior to
approval of the previous phase deliverables when the risks involved are deemed acceptable. This
practice of overlapping phases is often called fast tracking.
Project life cycles generally define:
o What technical work should be done in each phase (e.g., is the work of the architect part
of the definition phase or part of the execution phase?).
o Who should be involved in each phase (e.g., implementers who need to be involved with
requirements and design).
Most project life-cycle descriptions share a number of common characteristics:
• Cost and staffing levels are low at the start, higher toward the end, and drop rapidly as
the project draws to a conclusion. This pattern is illustrated in Figure 1.
• The probability of successfully completing the project is lowest, and hence risk and
uncertainty are highest, at the start of the project. The probability of successful
completion generally gets progressively higher as the project continues.
• The ability of the stakeholders to influence the final characteristics of the project’s
product and the final cost of the project is highest at the start and gets progressively
lower as the project continues. A major contributor to this phenomenon is that the cost
of changes and error correction generally increases as the project continues.

Cost and
Staffing level
Intermediate phases
Final phase

Initial phase

Start time finish

Fig 1 Sample Generic Project life cycle

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 Principles of Construction Management

Representative Project Life Cycles

The acquisition of a constructed facility usually represents a major capital investment, whether
its owner happens to be an individual, a private corporation or a public agency. Since the
commitment of resources for such an investment is motivated by market demands or perceived
needs, the facility is expected to satisfy certain objectives within the constraints specified by the
owner and relevant regulations. With the exception of the speculative housing market, where the
residential units may be sold as built by the real estate developer, most constructed facilities are
custom made in consultation with the owners. A real estate developer may be regarded as the
sponsor of building projects, as much as a government agency may be the sponsor of a public
project and turns it over to another government unit upon its completion. From the viewpoint of
project management, the terms "owner" and "sponsor" are synonymous because both have the
ultimate authority to make all important decisions. Since an owner is essentially acquiring a
facility on a promise in some form of agreement, it will be wise for any owner to have a clear
understanding of the acquisition process in order to maintain firm control of the quality,
timeliness and cost of the completed facility.
From the perspective of an owner, the project life cycle for a constructed facility may be
illustrated schematically in Figure 2. Essentially, a project is conceived to meet market demands
or needs in a timely fashion. Various possibilities may be considered in the conceptual planning
stage, and the technological and economic feasibility of each alternative will be assessed and
compared in order to select the best possible project. The financing schemes for the proposed
alternatives must also be examined, and the project will be programmed with respect to the
timing for its completion and for available cash flows. After the scope of the project is clearly
defined, detailed engineering design will provide the blueprint for construction, and the
definitive cost estimate will serve as the baseline for cost control. In the procurement and
construction stage, the delivery of materials and the erection of the project on site must be
carefully planned and controlled. After the construction is completed, there is usually a brief
period of start-up or shake-down of the constructed facility when it is first occupied. Finally, the
management of the facility is turned over to the owner for full occupancy until the facility lives
out its useful life and is designated for demolition or conversion.

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 Principles of Construction Management

Figure 2: The Project Life Cycle of a Constructed Facility

Of course, the stages of development in Figure 2 may not be strictly sequential. Some of the
stages require iteration, and others may be carried out in parallel or with overlapping time
frames, depending on the nature, size and urgency of the project. Furthermore, an owner may
have in-house capacities to handle the work in every stage of the entire process, or it may seek
professional advice and services for the work in all stages. Understandably, most owners choose
to handle some of the work in-house and to contract outside professional services for other
components of the work as needed. By examining the project life cycle from an owner's
perspective we can focus on the proper roles of various activities and participants in all stages
regardless of the contractual arrangements for different types of work.

The project life cycle may be viewed as a process through which a project is implemented from
cradle to grave. This process is often very complex; however, it can be decomposed into several
stages as indicated by the general outline in Figure 2. The solutions at various stages are then
integrated to obtain the final outcome. Although each stage requires different expertise, it usually
includes both technical and managerial activities in the knowledge domain of the specialist.
The owner may choose to decompose the entire process into more or less stages based on the
size and nature of the project, and thus obtain the most efficient result in implementation. Very
often, the owner retains direct control of work in the planning and programming stages, but
increasingly outside planners and financial experts are used as consultants because of the
complexities of projects. Since operation and maintenance of a facility will go on long after the

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 Principles of Construction Management

completion and acceptance of a project, it is usually treated as a separate problem except in the
consideration of the life cycle cost of a facility. All stages from conceptual planning and
feasibility studies to the acceptance of a facility for occupancy may be broadly lumped together
and referred to as the Design/Construct process, while the procurement and construction alone
are traditionally regarded as the province of the construction industry.
Owners must recognize that there is no single best approach in organizing project management
throughout a project's life cycle. All organizational approaches have advantages and
disadvantages, depending on the knowledge of the owner in construction management as well as
the type, size and location of the project. It is important for the owner to be aware of the
approach which is most appropriate and beneficial for a particular project.
In making choices, owners should be concerned with the life cycle costs of constructed facilities
rather than simply the initial construction costs. Saving small amounts of money during
construction may not be worthwhile if the result is much larger operating costs or not meeting
the functional requirements for the new facility satisfactorily. Thus, owners must be very
concerned with the quality of the finished product as well as the cost of construction itself. Since
facility operation and maintenance is a part of the project life cycle, the owners' expectation to
satisfy investment objectives during the project life cycle will require consideration of the cost of
operation and maintenance. Therefore, the facility's operating management should also be
considered as early as possible, just as the construction process should be kept in mind at the
early stages of planning and programming.
The construction life cycle typically involves three main players; the owner, the designer and the
constructor (contractor). Each plays a major role in a construction project although their
responsibilities may vary widely depending on the type of project plan and contract form
selected.

Commonly, the owner determines the need for a new facility or improvement and then performs,
or has performed, a further study (often called a feasibility study) to more clearly define the
viability and form of the project that will produce the best or most profitable result. The study
usually involves a review of alternates that may satisfy the need (value management) and the
desired form of financing (financial management). The owner may perform this study "in house"
if the capability exists; or, more typically, may employ the services of an engineer(s) or an
engineer/contractor to do most of the work. While this pre-project activity can utilize some input
from a contractor; often it does not. It may be performed by an engineer/contractor firm that
possesses both design and construction capability.

The successful completion of the feasibility study marks the first of several transition milestones
and probably the most important. This is the starting point of the chosen project by the owner if
the project is approved. Sometimes the project is not approved or the feasibility study shows that
the chosen project does not meet the financial criteria, and the project is cancelled. It is better to
cancel the project at an early stage rather than spend more money on an ultimately failed project.

Most projects can be viewed in five phases, although they are sometimes shortened to four; each
one of these phases can be treated like a project in themselves with all of the process groups
operating as they do for the overall project. These phases are Concept, Planning &Development,
Detailed Design, Construction, and Start-up and Turnover. The concept phase is essentially the
feasibility study, which ends with its completion and approval of the project. In the planning and

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 Principles of Construction Management

development phase, the concept is defined further, the project criteria are established and basic
drawings are produced along with a schedule, budget and work plan of how the detailed design,
construction and start-up are to be performed.

It is customary, and often critical, that the client or owner approve these basic drawings, criteria
and work plan, which then become the baseline configuration for the project. In the detailed
design phase, all design details are completed and drawings and specifications are issued for
construction.
This can be done one of two ways;
 The first is the more traditional design-bid-build project delivery method and results in
completing all of the design work and then calling for competitive construction bids.
 The second method, called design-build or phased design has design and construction
proceeding largely in parallel. This method, although not new, is seeing a current surge in
popularity. Design is performed in sequential packages, which are then bid or constructed
in the order released. Design-build's main advantage is an earlier completion date.

When construction is complete, the project is ready for final testing and start-up operations
followed by turnover to the owner. For major and usually industrial projects, the start-up phase is
often done in sequential segments following the process flow and culminates in finally running
the plant or project as it was designed.

1.4 Organization of Project Participants

The top management of the owner sets the overall policy and selects the appropriate organization
to take charge of a proposed project. Its policy will dictate how the project life cycle is divided
among organizations and which professionals should be engaged. Decisions by the top
management of the owner will also influence the organization to be adopted for project
management. In general, there are many ways to decompose a project into stages. The most
typical ways are:
• Sequential processing whereby the project is divided into separate stages and each stage
is carried out successively in sequence.
• Parallel processing whereby the project is divided into independent parts such that all
stages are carried out simultaneously.
• Staggered processing whereby the stages may be overlapping, such as the use of phased
design-construct procedures for fast track operation.
It should be pointed out that some decomposition may work out better than others, depending
on the circumstances. In any case, the prevalence of decomposition makes the subsequent
integration particularly important. The critical issues involved in organization for project
management are:
• How many organizations are involved?
• What are the relationships among the organizations?
• When are the various organizations brought into the project?
There are two basic approaches to organize for project implementation, even though many
variations may exist as a result of different contractual relationships adopted by the owner and
builder. These basic approaches are divided along the following lines:

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 Principles of Construction Management

1. Separation of organizations. Numerous organizations serve as consultants or

contractors to the owner, with different organizations handling design and construction
functions. Typical examples which involve different degrees of separation are:
o Traditional sequence of design and construction
o Professional construction management
2. Integration of organizations. A single or joint venture consisting of a number of
organizations with a single command undertakes both design and construction functions.
Two extremes may be cited as examples:
o Owner-builder operation in which all work will be handled in house by force
account.
o Turnkey operation in which all work is contracted to a vendor which is
responsible for delivering the completed project
Since construction projects may be managed by a spectrum of participants in a variety of
combinations, the organization for the management of such projects may vary from case to case.
On one extreme, each project may be staffed by existing personnel in the functional divisions of
the organization on an ad-hoc basis as shown in Figure 3 until the project is completed. This
arrangement is referred to as the matrix organization as each project manager must negotiate all
resources for the project from the existing organizational framework.
On the other hand, the organization may consist of a small central functional staff for the
exclusive purpose of supporting various projects, each of which has its functional divisions as
shown in Figure 4. This decentralized set-up is referred to as the project oriented organization as
each project manager has autonomy in managing the project. There are many variations of
management style between these two extremes, depending on the objectives of the organization
and the nature of the construction project. For example, a large chemical company with in-house
staff for planning, design and construction of facilities for new product lines will naturally adopt
the matrix organization. On the other hand, a construction company whose existence depends
entirely on the management of certain types of construction projects may find the project-
oriented organization particularly attractive. While organizations may differ, the same basic
principles of management structure are applicable to most situations.

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 Principles of Construction Management

Figure 3: A Matrix Organization

Figure 4: A Project-Oriented Organization

To illustrate various types of organizations for project management, we shall consider two
examples, the first one representing an owner organization while the second one representing the
organization of a construction management consultant under the direct supervision of the owner.

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 Principles of Construction Management

Example 1: Matrix Organization of an Engineering Division

The Engineering Division of an Electric Power and Light Company has functional departments
as shown in Figure 5. When small scale projects such as the addition of a transmission tower or a
sub-station are authorized, a matrix organization is used to carry out such projects. For example,
in the design of a transmission tower, the professional skill of a structural engineer is most
important. Consequently, the leader of the project team will be selected from the Structural
Engineering Department while the remaining team members are selected from all departments as
dictated by the manpower requirements. On the other hand, in the design of a new sub-station,
the professional skill of an electrical engineer is most important. Hence, the leader of the project
team will be selected from the Electrical Engineering Department.

Figure 5: The Matrix Organization in an Engineering Division

Example 2: Example of Construction Management Consultant Organization

When the same Electric Power and Light Company in the previous example decided to build a
new nuclear power plant, it engaged a construction management consultant to take charge of the
design and construction completely. However, the company also assigned a project team to
coordinate with the construction management consultant as shown in Figure 6.

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 Principles of Construction Management

Figure 6: Coordination between Owner and Consultant

Since the company eventually will operate the power plant upon its completion, it is highly
important for its staff to monitor the design and construction of the plant. Such coordination
allows the owner not only to assure the quality of construction but also to be familiar with the
design to facilitate future operation and maintenance. Note the close direct relationships of
various departments of the owner and the consultant. Since the project will last for many years
before its completion, the staff members assigned to the project team are not expected to rejoin
the Engineering Department but will probably be involved in the future operation of the new
plant. Thus, the project team can act independently toward its designated mission.

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 Principles of Construction Management

2. Resources Management

For any construction Industry to be efficiently operating and be successful the elements or the
resources should be well known, planned and made available. For most of the construction projects,
the resources to look into are the following;
1. Human Resources / Labor or Workmen
2. Financial Resources / Fund
3. Information Resources
4. Physical Resources such as Materials, Equipment and Other Assets
5. Services and Management.

2.1 Human Resources / Workmen/ Labor

All works involved, including the operation of equipment cannot be executed without human labor.
Labor in the form of technical and managerial personnel and work forces in various trades and
professions are essential to carryout projects efficiently and effectively. All other resources are
coordinated and generally the work itself is executed by labor. Therefore careful planning,
organizing and monitoring of workmen are mandatory.

These resources are very much necessary and for the successful accomplishment of a project, the
availability of workmen from the top management including project manager to the daily laborer
staff level is very vital. These include professional, skilled, semi skilled and unskilled laborers.
Human resources can be understood in two values: Capacity and Capability. While the first refers to
the quantity of labor for the scope defined; the second covers knowledge, technology know-how
and skill as per the demands of the scopes ability.

Human resources need to be attracted, selected, developed, motivated and retained if an

organization needs to successfully accomplish project objectives. They do need also be capable of:

Communication – Inter - personal, group interaction - skills

Problem solving / Conflict resolution / Negotiation Skills

Facilitating / Decision – making Skills

Writing skills for Proposals / Reports / ToRs / MoUs; and

Hard Skills – Planning, Implementing, Leading and monitoring tools.

2.2 Financial Resources / Fund

It is obvious that one of the basic resources in the construction industry is Fund, which should be
arranged before starting any project. The project to be conceived shall be within the fund available
for it. Usually funds are available from among Governmental institution, Private institutions and
Donors in the form of loan or assistance.

In the case of Governmental entities, since budgetary resources are scarce it is advisable and in
almost all cases that a priority shall be given to projects which are very useful and necessary to the
society. However, in the case of private organizations it is the business what mater.

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 Principles of Construction Management

The objective and goal of the project is achieved successfully if and only if the fund is sufficiently
flowing to carry out the project as planned. That is, it is the regular supply of fund that keeps
projects moving progressively.
It is necessary to ensure financial planning for smooth cash inflow and outflow to avoid delays in
project activities. Financial resources shall be planned and managed with special care due to the fact
that all other resources very much depend on the availability of funds.

2.3 Information Resources

Information can be understood in two terms: data whether processed or not; and its technology.
Both are vital for the successful implementation of projects. Contextual information, data useful for
estimating duration and costs; etc are some of informational resources used in projects.

Information technology both the hard and soft wares have brought the processing and management
of such information becomes important and helpful in facilitating the comparison of several
alternatives. This helps in optimization or maximization of uses of project resources. As a result,
informational resources need to be managed. PMIS, MProject, Think tool, etc are some of the soft
wares developed in managing information resources.

2.4 Physical Resources

MATERIALS: The very large portion of a project cost is gone to material cost. As the material
cost component of the construction industry covers between 55-70% of the total construction
cost, proper consideration shall be given in the planning stage to design with easily available
material without compromising the quality for the intended purpose and for proper flow and
storage of materials.
Care shall be provided for materials easily spoiled by climatic and expiry conditions. This
undoubtedly will affect the project if not properly managed.

EQUIPMENT: These days various plants, equipment, tools etc., are used very often in
construction activities. Provision of equipment replace the hard work that can be made by
human labor taking much time within reasonable period of time. Therefore it increases
efficiency and economy. Its initial cost though high, it works for long period of time under
adverse conditions with less manpower than working in its absence which will result to be
economical for long term investment. Depending on the types and nature of construction,
machinery at site includes batching plant, mixers, trucks, tractors, excavators, dampers, cranes,
vibrators, pumps etc.

OTHER ASSETS: Physical Infrastructures and Owned Land are assets which can be collaterals
for capital base enhancement and credit facilities and are useful to develop the scarce financial
resources and getting into business access.

2.5 Services and Management

SERVICES: Services such as acquisition of land, provisions of water supply, electric power,
communication systems, etc., are very much necessary in the construction industry. Without

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 Principles of Construction Management

acquiring such services, it is too hard to implement construction activities successfully.

Therefore, well thought and due consideration shall be given to services and shall be considered
as one of the resources required for civil works projects.

MANAGEMENT: Management has come to employ a disciplined approach to the use of
available resources. To coordinate these resources and achieve the required goal, a system shall
be devised to plan, organize, execute, and control the project. Such system which helps to
achieve the necessary goal is called Construction Management, without which it will be a
catastrophe both in cost and completion time to the project.

2.6 Labor and Material Utilization

1.1 2.6.1 Labor Productivity

Productivity in construction is often broadly defined as output per labor hour. Since labor
constitutes a large part of the construction cost and the quantity of labor hours in performing a
task in construction is more susceptible to the influence of management than are materials or
capital, this productivity measure is often referred to as labor productivity. However, it is
important to note that labor productivity is a measure of the overall effectiveness of an operating
system in utilizing labor, equipment and capital to convert labor efforts into useful output, and is
not a measure of the capabilities of labor alone. For example, by investing in a piece of new
equipment to perform certain tasks in construction, output may be increased for the same number
of labor hours, thus resulting in higher labor productivity.

Construction output may be expressed in terms of functional units or constant dollars. In the
former case, labor productivity is associated with units of product per labor hour, such as cubic
meters of concrete placed per hour or Kilometers of highway paved per hour. In the latter case,
labor productivity is identified with value of construction (in constant dollars) per labor hour.
The value of construction in this regard is not measured by the benefit of constructed facilities,
but by construction cost. Labor productivity measured in this way requires considerable care in
interpretation. For example, wage rates in construction have been declining in the US during the
period 1970 to 1990, and since wages are an important component in construction costs, the
value of construction put in place per hour of work will decline as a result, suggesting lower
productivity.

1.1.1 Productivity at the Job Site

Contractors and owners are often concerned with the labor activity at job sites. For this purpose,
it is convenient to express labor productivity as functional units per labor hour for each type of
construction task. However, even for such specific purposes, different levels of measure may be
used. For example, a cubic meter of concrete placed per hour is a lower level of measure than
kilometers of highway paved per hour. Lower-level measures are more useful for monitoring
individual activities, while higher-level measures may be more convenient for developing
industry-wide standards of performance.

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 Principles of Construction Management

While each contractor or owner is free to use its own system to measure labor productivity at a
site, it is a good practice to set up a system which can be used to track productivity trends over
time and in varied locations. Considerable efforts are required to collect information regionally
or nationally over a number of years to produce such results. The productivity indices compiled
from statistical data should include parameters such as the performance of major crafts, effects of
project size, type and location, and other major project influences.

In order to develop industry-wide standards of performance, there must be a general agreement

on the measures to be useful for compiling data. Then, the job site productivity data collected by
various contractors and owners can be correlated and analyzed to develop certain measures for
each of the major segment of the construction industry. Thus, a contractor or owner can compare
its performance with that of the industry average.

1.1.2

1.1.3

1.1.4 Productivity in the Construction Industry

Because of the diversity of the construction industry, a single index for the entire industry is
neither meaningful nor reliable. Productivity indices may be developed for major segments of the
construction industry nationwide if reliable statistical data can be obtained for separate industrial
segments. For this general type of productivity measure, it is more convenient to express labor
productivity as constant dollars per labor hours since dollar values are more easily aggregated
from a large amount of data collected from different sources. The use of constant dollars allows
meaningful approximations of the changes in construction output from one year to another when
price deflators are applied to current dollars to obtain the corresponding values in constant
dollars. However, since most construction price deflators are obtained from a combination of
price indices for material and labor inputs, they reflect only the change of price levels and do not
capture any savings arising from improved labor productivity. Such deflators tend to overstate
increases in construction costs over a long period of time, and consequently understate the
physical volume or value of construction work in years subsequent to the base year for the
indices.

1.1.5 2.6.2 Factors Affecting Job-Site Productivity

Job-site productivity is influenced by many factors which can be characterized either as labor
characteristics, project work conditions or as non-productive activities. The labor characteristics
include:

• age, skill and experience of workforce

• leadership and motivation of workforce

The project work conditions include among other factors:

• Job size and complexity.

• Job site accessibility.

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 Principles of Construction Management

• Labor availability.
• Equipment utilization.
• Contractual agreements.
• Local climate.
• Local cultural characteristics, particularly in foreign operations.

The non-productive activities associated with a project may or may not be paid by the owner, but
they nevertheless take up potential labor resources which can otherwise be directed to the
project. The non-productive activities include among other factors:

• Indirect labor required to maintain the progress of the project

• Rework for correcting unsatisfactory work
• Temporary work stoppage due to inclement weather or material shortage
• Time off for union activities
• Absentee time, including late start and early quits
• Non-working holidays
• Strikes

Each category of factors affects the productive labor available to a project as well as the on-site
labor efficiency.

1.1.6 Labor Characteristics

Performance analysis is a common tool for assessing worker quality and contribution. Factors
that might be evaluated include:

• Quality of Work - caliber of work produced or accomplished.

• Quantity of Work - volume of acceptable work
• Job Knowledge - demonstrated knowledge of requirements, methods, techniques and
skills involved in doing the job and in applying these to increase productivity.
• Related Work Knowledge - knowledge of effects of work upon other areas and
knowledge of related areas which have influence on assigned work.
• Judgment - soundness of conclusions, decisions and actions.
• Initiative - ability to take effective action without being told.
• Resource Utilization - ability to delineate project needs and locate, plan and effectively
use all resources available.
• Dependability - reliability in assuming and carrying out commitments and obligations.
• Analytical Ability - effectiveness in thinking through a problem and reaching sound
conclusions.
• Communicative Ability - effectiveness in using oral and written communications and in
keeping subordinates, associates, superiors and others adequately informed.
• Interpersonal Skills - effectiveness in relating in an appropriate and productive manner to
others.
• Ability to Work under Pressure - ability to meet tight deadlines and adapt to changes.
• Security Sensitivity - ability to handle confidential information appropriately and to
exercise care in safeguarding sensitive information.

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 Principles of Construction Management

• Safety Consciousness - has knowledge of good safety practices and demonstrates

awareness of own personal safety and the safety of others.
• Profit and Cost Sensitivity - ability to seek out, generate and implement profit-making
ideas.
• Planning Effectiveness - ability to anticipate needs, forecast conditions, set goals and
standards, plan and schedule work and measure results.
• Leadership - ability to develop in others the willingness and desire to work towards
common objectives.
• Delegating - effectiveness in delegating work appropriately.
• Development People - ability to select, train and appraise personnel, set standards of
performance, and provide motivation to grow in their capacity. Diversity (Equal
Employment Opportunity) - ability to be sensitive to the needs of minorities, females and
other protected groups and to demonstrate affirmative action in responding to these
needs.

These different factors could each be assessed on a three point scale: (1) recognized strength, (2)
meets expectations, (3) area needing improvement. Examples of work performance in these areas
might also be provided.

1.1.7

1.1.8 Project Work Conditions

Job-site labor productivity can be estimated either for each craft (carpenter, bricklayer, etc.) or
each type of construction (residential housing, processing plant, etc.) under a specific set of work
conditions. A base labor productivity may be defined for a set of work conditions specified by
the owner or contractor who wishes to observe and measure the labor performance over a period
of time under such conditions.

A labor productivity index may then be defined as the ratio of the job-site labor productivity
under a different set of work conditions to the base labor productivity, and is a measure of the
relative labor efficiency of a project under this new set of work conditions.

The effects of various factors related to work conditions on a new project can be estimated in
advance, some more accurately than others. For example, for very large construction projects,
the labor productivity index tends to decrease as the project size and/or complexity increase
because of logistic problems and the "learning" that the work force must undergo before
adjusting to the new environment. Job-site accessibility often may reduce the labor productivity
index if the workers must perform their jobs in round about ways, such as avoiding traffic in
repaving the highway surface or maintaining the operation of a plant during renovation. Labor
availability in the local market is another factor. Shortage of local labor will force the contractor
to bring in non-local labor or schedule overtime work or both. In either case, the labor efficiency

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 Principles of Construction Management

will be reduced in addition to incurring additional expenses. The degree of equipment utilization
and mechanization of a construction project clearly will have direct bearing on job-site labor
productivity. The contractual agreements play an important role in the utilization of union or
non-union labor, the use of subcontractors and the degree of field supervision, all of which will
impact job-site labor productivity. Since on-site construction essentially involves outdoor
activities, the local climate will influence the efficiency of workers directly. In foreign
operations, the cultural characteristics of the host country should be observed in assessing the
labor efficiency.

1.1.9 Non-Productive Activities

The non-productive activities associated with a project should also be examined in order to
examine the productive labor yield, which is defined as the ratio of direct labor hours devoted to
the completion of a project to the potential labor hours. The direct labor hours are estimated on
the basis of the best possible conditions at a job site by excluding all factors which may reduce
the productive labor yield. For example, in the repaving of highway surface, the flagmen
required to divert traffic represent indirect labor which does not contribute to the labor efficiency
of the paving crew if the highway is closed to the traffic. Similarly, for large projects in remote
areas, indirect labor may be used to provide housing and infrastructure for the workers hired to
supply the direct labor for a project. The labor hours spent on rework to correct unsatisfactory
original work represent extra time taken away from potential labor hours. The labor hours related
to such activities must be deducted from the potential labor hours in order to obtain the actual
productive labor yield.

Example 1: Effects of job size on productivity

A contractor has established that under a set of "standard" work conditions for building
construction, a job requiring 500,000 labor hours is considered standard in determining the base
labor productivity.

All other factors being the same, the labor productivity index will increase to 1.1 or 110% for a
job requiring only 400,000 labor-hours. Assuming that a linear relation exists for the range
between jobs requiring 300,000 to 700,000 labor hours as shown in Figure 4-1, determine the
labor productivity index for a new job requiring 650,000 labor hours under otherwise the same
set of work conditions.

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 Principles of Construction Management

Figure 1: Illustrative Relationship between Productivity Index and Job Size

The labor productivity index I for the new job can be obtained by linear interpolation of the
available data as follows:

This implies that labor is 15% less productive on the large job than on the standard project.

Example 2: Productive labor yield;

In the construction of an off--shore

shore oil drilling platform, the potential labor hours were found to
be L = 7.5 million hours. Of this total, the nonnon-productive
productive activities expressed in thousand
labor hours were as follows:

• A = 417 for holidays aand strikes

• B = 1,415 for absentees (i.e. vacation, sick time, etc.)
• C = 1,141 for temporary stoppage (i.e. weather, waiting, union activities, etc.)
• D = 1,431 for indirect labor (i.e. building temporary facilities, cleaning up the site,
rework to correctt errors, etc.)

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 Principles of Construction Management

Determine the productive labor yield after the above factors are taken into consideration. The
percentages of time allocated to various non-productive
non productive activities, A, B, C and D are:

The total percentage of time X for all non-productive

non activities is:

The productive labor yield, Y, when the given factors for A, B, C and D are considered, is as
follows:

As a result, only 41% of the budgeted labor time was devoted directly to work on the facility.

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 Principles of Construction Management

1.2 2.7 Materials Management

Materials management is an important element in project planning and control. Materials

represent a major expense in construction, so minimizing procurement or purchase costs
presents important opportunities for reducing costs. Poor materials management can also result
in large and avoidable costs during construction. First, if materials are purchased early, capital
may be tied up and interest charges incurred on the excess inventory of materials. Even worse,
materials may deteriorate during storage or be stolen unless special care is taken. For example,
electrical equipment often must be stored in waterproof locations. Second, delays and extra
expenses may be incurred if materials required for particular activities are not available.
Accordingly, insuring a timely flow of material is an important concern of project managers.

Materials management is not just a concern during the monitoring stage in which construction is
taking place. Decisions about material procurement may also be required during the initial
planning and scheduling stages. For example, activities can be inserted in the project schedule to
represent purchasing of major items such as elevators for buildings.

The availability of materials may greatly influence the schedule in projects with a fast track or
very tight time schedule: sufficient time for obtaining the necessary materials must be allowed.
In some case, more expensive suppliers or shippers may be employed to save time.

Materials management is also a problem at the organization level if central purchasing and
inventory control is used for standard items. In this case, the various projects undertaken by the
organization would present requests to the central purchasing group. In turn, this group would
maintain inventories of standard items to reduce the delay in providing material or to obtain
lower costs due to bulk purchasing. This organizational materials management problem is
analogous to inventory control in any organization facing continuing demand for particular
items.

Materials ordering problems lend themselves particularly well to computer based systems to
insure the consistency and completeness of the purchasing process. In the manufacturing realm,
the use of automated materials requirements planning systems is common. In these systems, the
master production schedule, inventory records and product component lists are merged to
determine what items must be ordered, when they should be ordered, and how much of each item
should be ordered in each time period. The heart of these calculations is simple arithmetic: the
projected demand for each material item in each period is subtracted from the available
inventory. When the inventory becomes too low, a new order is recommended. For items that are
non-standard or not kept in inventory, the calculation is even simpler since no inventory must be
considered. With a materials requirement system, much of the detailed record keeping is
automated and project managers are alerted to purchasing requirements.

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 Principles of Construction Management

1.3 2.7.1 Material Procurement and Delivery

The main sources of information for feedback and control of material procurement are
requisitions, bids and quotations, purchase orders and subcontracts, shipping and receiving
documents, and invoices. For projects involving the large scale use of critical resources, the
owner may initiate the procurement procedure even before the selection of a constructor in order
to avoid shortages and delays. Under ordinary circumstances, the constructor will handle the
procurement to shop for materials with the best price/performance characteristics specified by
the designer. Some overlapping and rehandling in the procurement process is unavoidable, but it
should be minimized to insure timely delivery of the materials in good condition.

The materials for delivery to and from a construction site may be broadly classified as: (1) bulk
materials, (2) standard off-the-shelf materials, and (3) fabricated members or units. The process
of delivery, including transportation, field storage and installation will be different for these
classes of materials. The equipment needed to handle and haul these classes of materials will also
be different.

Bulk materials refer to materials in their natural or semi-processed state, such as earthwork to be
excavated, wet concrete mix, etc. which are usually encountered in large quantities in
construction. Some bulk materials such as earthwork or gravels may be measured in bank (solid
in situ) volume. Obviously, the quantities of materials for delivery may be substantially different
when expressed in different measures of volume, depending on the characteristics of such
materials.

Standard piping and valves are typical examples of standard off-the-shelf materials which are
used extensively in the chemical processing industry. Since standard off-the-shelf materials can
easily be stockpiled, the delivery process is relatively simple.

Fabricated members such as steel beams and columns for buildings are pre-processed in a shop
to simplify the field erection procedures. Welded or bolted connections are attached partially to
the members which are cut to precise dimensions for adequate fit. Similarly, steel tanks and
pressure vessels are often partly or fully fabricated before shipping to the field. In general, if the
work can be done in the shop where working conditions can better be controlled, it is advisable
to do so, provided that the fabricated members or units can be shipped to the construction site in
a satisfactory manner at a reasonable cost.

As a further step to simplify field assembly, an entire wall panel including plumbing and wiring
or even an entire room may be prefabricated and shipped to the site. While the field labor is
greatly reduced in such cases, "materials" for delivery are in fact manufactured products with
value added by another type of labor. With modern means of transporting construction materials
and fabricated units, the percentages of costs on direct labor and materials for a project may
change if more prefabricated units are introduced in the construction process.

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 Principles of Construction Management

In the construction industry, materials used by a specific craft are generally handled by
craftsmen, not by general labor. Thus, electricians handle electrical materials, pipefitters handle
pipe materials, etc. This multiple handling diverts scarce skilled craftsmen and contractor
supervision into activities which do not directly contribute to construction. Since contractors are
not normally in the freight business, they do not perform the tasks of freight delivery efficiently.
All these factors tend to exacerbate the problems of freight delivery for very large projects.

1.4 2.7.2 Inventory Control

Once goods are purchased, they represent an inventory used during the construction process. The
general objective of inventory control is to minimize the total cost of keeping the inventory while
making tradeoffs among the major categories of costs: (1) purchase costs, (2) order cost, (3)
holding costs, and (4) unavailable cost. These cost categories are interrelated since reducing cost
in one category may increase cost in others. The costs in all categories generally are subject to
considerable uncertainty.

1.4.1 Purchase Costs

The purchase cost of an item is the unit purchase price from an external source including
transportation and freight costs. For construction materials, it is common to receive discounts for
bulk purchases, so the unit purchase cost declines as quantity increases. These reductions may
reflect manufacturers' marketing policies, economies of scale in the material production, or scale
economies in transportation. There are also advantages in having homogeneous materials. For
example, a bulk order to insure the same color or size of items such as bricks may be desirable.
Accordingly, it is usually desirable to make a limited number of large purchases for materials. In
some cases, organizations may consolidate small orders from a number of different projects to
capture such bulk discounts; this is a basic saving to be derived from a central purchasing office.

The cost of materials is based on prices obtained through effective bargaining. Unit prices of
materials depend on bargaining leverage, quantities and delivery time. Organizations with
potential for long-term purchase volume can command better bargaining leverage. While orders
in large quantities may result in lower unit prices, they may also increase holding costs and thus
cause problems in cash flow. Requirements of short delivery time can also adversely affect unit
prices. Furthermore, design characteristics which include items of odd sizes or shapes should be
avoided. Since such items normally are not available in the standard stockpile, purchasing them
causes higher prices.

The transportation costs are affected by shipment sizes and other factors. Shipment by the full
load of a carrier often reduces prices and assures quicker delivery, as the carrier can travel from
the origin to the destination of the full load without having to stop for delivering part of the cargo
at other stations. Avoiding transshipment is another consideration in reducing shipping cost.
While the reduction in shipping costs is a major objective, the requirements of delicate handling
of some items may favor a more expensive mode of transportation to avoid breakage and
replacement costs.

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 Principles of Construction Management

1.4.2 Order Cost

The order cost reflects the administrative expense of issuing a purchase order to an outside
supplier. Order costs include expenses of making requisitions, analyzing alternative vendors,
writing purchase orders, receiving materials, inspecting materials, checking on orders, and
maintaining records of the entire process. Order costs are usually only a small portion of total
costs for material management in construction projects, although ordering may require
substantial time.

1.4.3 Holding Costs

The holding costs or carrying costs are primarily the result of capital costs, handling, storage,
obsolescence, shrinkage and deterioration. Capital cost results from the opportunity cost or
financial expense of capital tied up in inventory. Once payment for goods is made, borrowing
costs are incurred or capital must be diverted from other productive uses. Consequently, a capital
carrying cost is incurred equal to the value of the inventory during a period multiplied by the
interest rate obtainable or paid during that period. Note that capital costs only accumulate when
payment for materials actually occurs; many organizations attempt to delay payments as long as
possible to minimize such costs. Handling and storage represent the movement and protection
charges incurred for materials. Storage costs also include the disruption caused to other project
activities by large inventories of materials that get in the way. Obsolescence is the risk that an
item will lose value because of changes in specifications. Shrinkage is the decrease in inventory
over time due to theft or loss. Deterioration reflects a change in material quality due to age or
environmental degradation. Many of these holding cost components are difficult to predict in
advance; a project manager knows only that there is some chance that specific categories of cost
will occur. In addition to these major categories of cost, there may be ancillary costs of
additional insurance, taxes (many states treat inventories as taxable property), or additional fire
hazards. As a general rule, holding costs will typically represent 20 to 40% of the average
inventory value over the course of a year; thus if the average material inventory on a project is $
1 million over a year, the holding cost might be expected to be $200,000 to $400,000.

1.4.4 Unavailability Cost

The unavailability cost is incurred when a desired material is not available at the desired time. In
manufacturing industries, this cost is often called the stockout or depletion cost. Shortages may
delay work, thereby wasting labor resources or delaying the completion of the entire project.
Again, it may be difficult to forecast in advance exactly when an item may be required or when a
shipment will be received. While the project schedule gives one estimate, deviations from the
schedule may occur during construction. Moreover, the cost associated with a shortage may also
be difficult to assess; if the material used for one activity is not available, it may be possible to
assign workers to other activities and, depending upon which activities are critical, the project
may not be delayed.

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 Principles of Construction Management

1.5 2.7.3
.7.3 Tradeoffs of Costs in Materials Management

To illustrate the type of trade-offs

trade offs encountered in materials management, suppose that a
particular item is to be ordered for a project. The amount of time required for processing the
order and shipping the item is uncertain. Consequently, the project manager must decide how
much lead time to provide in ordering the item. Ordering early and thereby providing a long lead
time will increase the chance that the item is available when needed, but it increases the costs of
inventory and the chance of spoilage on site.

Let T be the time for the delivery of a particular item, R be the time required for process the
order, and S be the shipping time. Then, the minimum amount of time for the delivery of the
item is T = R + S. In general, both R and S are random variables; hence T is also a random
variable. For the sake of simplicity, we shall consider only the case of instant processing for an
order, i.e. R = 0. Then, the
he delivery time T equals the shipping time S.

Since T is a random variable, the chance that an item will be delivered on day t is represented by
the probability p (t). Then, the probability that the item will be delivered on or before t day is
given by:

If a and b are the lower and upper bounds of possible delivery dates, the expected delivery time
is then given by:

The lead time L for ordering an item is the time period ahead of the delivery time, and will
depend on the tradeoff between holding costs and unavailability costs. A project manager may
want to avoid the unavailable cost by requiring delivery on the scheduled
scheduled date of use, or may be
to lower the holding cost by adopting a more flexible lead time based on the expected delivery
time. For example, the manager may make the tradeoff by specifying the lead time to be D days
more than the expected delivery time, i.e.
i.

Where D may vary from 0 to the number of additional days required to produce certain delivery
on the desired date.

In a more realistic situation, the project manager would also contend with the uncertainty of
exactly when the item might be require
required. Even if the item is scheduled for use on a particular

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 Principles of Construction Management

date, the work progress might vary so that the desired date would differ. In many cases, greater
than expected work progress may result in no savings because materials for future activities are
unavailable.

Example: Lead time for ordering with no processing time

Table 1; summarizes the probability of different delivery times for an item. In this table, the first
column lists the possible shipping times (ranging from 10 to 16 days), the second column lists
the probability or chance that this shipping time will occur and the third column summarizes the
chance that the item arrives on or before a particular date. This table can be used to indicate the
chance that the item will arrive on a desired date for different lead times. For example, if the
order is placed 12 days in advance of the desired date (so the lead time is 12 days), then there is a
15% chance that the item will arrive exactly on the desired day and a 35% chance that the item
will arrive
ive on or before the desired date. Note that this implies that there is a 1 - 0.35 = 0.65 or
65% chance that the item will not arrive by the desired date with a lead time of 12 days. Given
the information in Table 1, when should the item order be placed?

Table 1 Delivery Date on Orders and Probability of Delivery.

Probability of Cumulative probability

Delivery
delivery on of delivery by day t
Date
date t
t Pr{T t}
p(t)

10 0.10 0.10
11 0.10 0.20
12 0.15 0.35
13 0.20 0.55
14 0.30 0.85
15 0.10 0.95
16 0.05 1.00

Suppose that the scheduled date of use for the item is in 16 days. To be completely certain to
have delivery by the desired day, the order should be placed 16 days in advance. However, the
expected delivery date with a 16 day lead time would be:

= (10) (0.1) + (11)(0.1) + (12)(0.15) + (13)(0.20) + (14)(0.30) + (15)(0.10) + (16)(0.05) = 13.0

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 Principles of Construction Management

Thus, the actual delivery date may be 16-13 = 3 days early, and this early delivery might involve
significant holding costs. A project manager might then decide to provide a lead time so that the
expected delivery date was equal to the desired assembly date as long as the availability of the
item was not critical. Alternatively, the project manager might negotiate a more certain delivery
date from the supplier.

3. Project Time Management

In construction all projects are time bound. The project time objective specifies the project completion time.
Time delays results to penalties while early completion might earn rewards. However, in spite of one’s best
efforts to complete a project on time, changes from the original estimated project time plan do occur
sometimes. There may be many reasons both foreseeable and unforeseeable, for non-completion of a
project time. However, the absence of a project time plan almost makes certain that a project cannot be
completed on schedule without incurring extra costs. A plan prepared well before the commencement of
construction in a project can be instrumental in formulating directions, coordinating functions, setting
targets, forecasting resources, budgeting costs, controlling performance and motivating people. It is for this
reasons that the project planning starts with time planning as the first step.
Planning is the devising of a workable scheme of operations to accomplish an established objective when
put into action. It requires an intimate knowledge of construction methods combined with the ability to
visualize discrete work elements and to establish their mutual interdependencies.
Construction planning is a fundamental and challenging activity in the management and execution of
construction projects. It involves the choice of technology, the definition of work tasks, the estimation of the
required resources and durations for individual tasks, and the identification of any interactions among the
different work tasks. A good construction plan is the basis for developing the budget and the schedule for
work. Developing the construction plan is a critical task in the management of construction, even if the plan
is not written or otherwise formally recorded. In addition to these technical aspects of construction planning,
it may also be necessary to make organizational decisions about the relationships between project
participants and even which organizations to include in a project. For example, the extent to which sub-
contractors will be used on a project is often determined during construction planning.
Construction planning as well as scheduling must be done by people who are experienced in and
thoroughly familiar with the type of field work involved. It is especially important that those who will be
expected to implement the plan in the field have an opportunity to participate in its development. The
project network and the management data obtained from it will be realistic and useful only if the job plan is
produced and updated by those who understand the job to be done, the ways in which it can be
accomplished, and the job site conditions.
The construction planning may be said to consist of the following steps:
• Choice of technology and construction method,
• Determination of the job steps or ‘activities’ that must be performed to construct the project,

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 Principles of Construction Management

• Ascertainment of the sequential relationships among these activities,

• The presentation of this planning information in the form of a network,

3.1 Choice of Technology & Construction Method

In the development of appropriate alternatives for construction planning, choices of appropriate technology
and methods for construction are often ill-structured yet critical ingredients in the success of the project. For
example, a decision whether to pump or to transport concrete in buckets will directly affect the cost and
duration of tasks involved in building construction. A decision between these two alternatives should
consider the relative costs, reliabilities, and availability of equipment for the two transport methods.
Unfortunately, the exact implications of different methods depend upon numerous considerations for which
information may be sketchy during the planning phase, such as the experience and expertise of workers or
the particular underground condition at a site.

In selecting among alternative methods and technologies, it may be necessary to formulate a number of
construction plans based on alternative methods or assumptions. Once the full plan is available, then the
cost, time and reliability impacts of the alternative approaches can be reviewed. This examination of
several alternatives is often made explicit in bidding competitions in which several alternative designs may
be proposed or value engineering for alternative construction methods may be permitted. In this case,
potential constructors may wish to prepare plans for each alternative design using the suggested
construction method as well as to prepare plans for alternative construction methods which would be
proposed as part of the value engineering process.

In forming a construction plan, a useful approach is to simulate the construction process either in the
imagination of the planner or with a formal computer based simulation technique. By observing the result,
comparisons among different plans or problems with the existing plan can be identified. For example, a
decision to use a particular piece of equipment for an operation immediately leads to the question of
whether or not there is sufficient access space for the equipment. Three dimensional geometric models in a
computer aided design (CAD) system may be helpful in simulating space requirements for operations and
for identifying any interference. Similarly, problems in resource availability identified during the simulation of
the construction process might be effectively forestalled by providing additional resources as part of the
construction plan.

3.2 Defining Work Tasks

At the same time that the choice of technology and general method are considered, a parallel step in the
planning process is to define the various work tasks that must be accomplished. These work tasks
represent the necessary framework to permit scheduling of construction activities, along with estimating the
resources required by the individual work tasks, and any necessary precedences or required sequence
among the tasks. The terms work "tasks" or "activities" are often used interchangeably in construction plans

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 Principles of Construction Management

to refer to specific, defined items of work. In job shop or manufacturing terminology, a project would be
called a "job" and an activity called an "operation", but the sense of the terms is equivalent. The scheduling
problem is to determine an appropriate set of activity start time, resource allocations and completion times
that will result in completion of the project in a timely and efficient fashion. Construction planning is the
necessary for-runner to scheduling. In this planning, defining work tasks, technology and construction
method is typically done either simultaneously or in a series of iterations.
The definition of appropriate work tasks can be a laborious and tedious process, yet it represents the
necessary information for application of formal scheduling procedures. Since construction projects can
involve thousands of individual work tasks, this definition phase can also be expensive and time
consuming. Fortunately, many tasks may be repeated in different parts of the facility or past facility
construction plans can be used as general models for new projects. For example, the tasks involved in the
construction of a building floor may be repeated with only minor differences for each of the floors in the
building. Also, standard definitions and nomenclatures for most tasks exist. As a result, the individual
planner defining work tasks does not have to approach each facet of the project entirely from scratch.

While repetition of activities in different locations or reproduction of activities from past projects reduces the
work involved, there are very few computer aids for the process of defining activities. Databases and
information systems can assist in the storage and recall of the activities associated with past projects. For
the scheduling process itself, numerous computer programs are available. But for the important task of
defining activities, reliance on the skill, judgment and experience of the construction planner is likely to
continue.

More formally, an activity is any subdivision of project tasks. The set of activities defined for a project
should be comprehensive or completely exhaustive so that all necessary work tasks are included in one or
more activities. Typically, each design element in the planned facility will have one or more associated
project activities. Execution of an activity requires time and resources, including manpower and equipment,
as described in the next section. The time required to perform an activity is called the duration of the
activity. The beginning and the end of activities are signposts or milestones, indicating the progress of the
project. Occasionally, it is useful to define activities which have no duration to mark important events. For
example, receipt of equipment on the construction site may be defined as an activity since other activities
would depend upon the equipment availability and the project manager might appreciate formal notice of
the arrival. Similarly, receipt of regulatory approvals would also be specially marked in the project plan.

An activity is a single work step that has a recognizable beginning and end and requires time for its
accomplishment. The following are suggested as guidelines for use when activities are being identified.

• By category of work as distinguished by materials such as concrete, timber, steel etc,

• By category of work as distinguished by craft or crew requirements (formworks slab, formwork
footings)

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 Principles of Construction Management

• By category of work as distinguished by equipment requirements,

• By area of responsibility. Work items done by the general contractor and each of his sub-contractor
should be separated,
• By distinct structural elements such as footings, walls, beams, columns and slabs, etc
• With regard to owner’s breakdown of the work for bidding or payment purposes,
• With regard to contractor’s breakdown for estimating and cost accounting purposes.
The extent of work involved in any one activity can vary tremendously in construction project plans. Indeed,
it is common to begin with fairly coarse definitions of activities and then to further sub-divide tasks as the
plan becomes better defined. As a result, the definition of activities evolves during the preparation of the
plan. A result of this process is a natural hierarchy of activities with large, abstract functional activities
repeatedly sub-divided into more and more specific sub-tasks. For example, the problem of placing
concrete on site would have sub-activities associated with placing forms, installing reinforcing steel, pouring
concrete, finishing the concrete, removing forms and others. Even more specifically, sub-tasks such as
removal and cleaning of forms after concrete placement can be defined. Even further, the sub-task "clean
concrete forms" could be subdivided into the various operations:

• Transport forms from on-site storage and unload onto the cleaning station.
• Position forms on the cleaning station.
• Wash forms with water.
• Clean concrete debris from the form's surface.
• Coat the form surface with an oil release agent for the next use.
• Unload the form from the cleaning station and transport to the storage location.

It is generally advantageous to introduce an explicit hierarchy of work activities for the purpose of
simplifying the presentation and development of a schedule. For example, the initial plan might define a
single activity associated with "site clearance." Later, this single activity might be sub-divided into "re-
locating utilities," "removing vegetation," "grading", etc. However, these activities could continue to be
identified as sub-activities under the general activity of "site clearance." This hierarchical structure also
facilitates the preparation of summary charts and reports in which detailed operations are combined into
aggregate or "super"-activities.

More formally, a hierarchical approach to work task definition decomposes the work activity into component
parts in the form of a tree. Higher levels in the tree represent decision nodes or summary activities, while
branches in the tree lead to smaller components and work activities. A variety of constraints among the
various nodes may be defined or imposed, including precedence relationships among different tasks as
defined below. Technology choices may be decomposed to decisions made at particular nodes in the tree.
For example, choices on plumbing technology might be made without reference to choices for other
functional activities.

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 Principles of Construction Management

Of course, numerous different activity hierarchies can be defined for each construction plan. For example,
upper level activities might be related to facility components such as foundation elements, and then lower
level activity divisions into the required construction operations might be made. Alternatively, upper level
divisions might represent general types of activities such as electrical work, while lower work divisions
represent the application of these operations to specific facility components. As a third alternative, initial
divisions might represent different spatial locations in the planned facility. The choice of a hierarchy
depends upon the desired scheme for summarizing work information and on the convenience of the
planner. In computerized databases, multiple hierarchies can be stored so that different aggregations or
views of the work breakdown structure can be obtained.

The number and detail of the activities in a construction plan is a matter of judgment or convention.
Construction plans can easily range between less than a hundred to many thousand defined tasks,
depending on the planner's decisions and the scope of the project. If subdivided activities are too refined,
the size of the network becomes unwieldy and the cost of planning excessive. Sub-division yields no
benefit if reasonably accurate estimates of activity durations and the required resources cannot be made at
the detailed work breakdown level. On the other hand, if the specified activities are too coarse, it is
impossible to develop realistic schedules and details of resource requirements during the project. More
detailed task definitions permit better control and more realistic scheduling. It is useful to define separate
work tasks for:

• Those activities which involve different resources, or

• Those activities which do not require continuous performance.

For example, the activity "prepare and check shop drawings" should be divided into a task for preparation
and a task for checking since different individuals are involved in the two tasks and there may be a time lag
between preparation and checking.

In practice, the proper level of detail will depend upon the size, importance and difficulty of the project as
well as the specific scheduling and accounting procedures which are adopted. However, it is generally the
case that most schedules are prepared with too little detail than too much. It is important to keep in mind
that task definition will serve as the basis for scheduling, for communicating the construction plan and for
construction monitoring. Completion of tasks will also often serve as a basis for progress payments from
the owner. Thus, more detailed task definitions can be quite useful. But more detailed task breakdowns are
only valuable to the extent that the resources required, durations and activity relationships are realistically
estimated for each activity. Providing detailed work task breakdowns is not helpful without a commensurate
effort to provide realistic resource requirement estimates. As more powerful, computer-based scheduling
and monitoring procedures are introduced, the ease of defining and manipulating tasks will increase, and
the number of work tasks can reasonably be expected to expand.

Example 3-1: Task Definition for a Road Construction Project

As an example of construction planning, suppose that we wish to develop a plan for a road construction
project including two culverts. Initially, we divide project activities into three categories as shown in Figure
3-1: structures, roadway, and general. This division is based on the major types of design elements to be
constructed. Within the roadway work, a further sub-division is into earthwork and pavement. Within these
subdivisions, we identify clearing, excavation, filling and finishing (including seeding and sodding)

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 Principles of Construction Management

associated with earthwork, and we define watering, compaction and paving sub-activities associated with
pavement. Finally, we note that the roadway segment is fairly long, and so individual activities can be
defined for different physical segments along the roadway path. In Figure 3-1, we divide each paving and
earthwork activity into activities specific to each of two roadway segments. For the culvert construction, we
define the sub-divisions of structural excavation, concreting, and reinforcing. Even more specifically,
structural excavation is divided into excavation itself and the required backfill and compaction. Similarly,
concreting is divided into placing concrete forms, pouring concrete, stripping forms, and curing the
concrete. As a final step in the structural planning, detailed activities are defined for reinforcing each of the
two culverts. General work activities are defined for move in, general supervision, and clean up. As a result
of this planning, over thirty different detailed activities have been defined.

At the option of the planner, additional activities might also be defined for this project. For example,
materials ordering or lane striping might be included as separate activities. It might also be the case that a
planner would define a different hierarchy of work breakdowns than that shown in Figure 3-1. For example,
placing reinforcing might have been a sub-activity under concreting for culverts.

One reason for separating reinforcement placement might be to emphasize the different material and
resources required for this activity.

Also, the division into separate roadway segments and culverts might have been introduced early in the
hierarchy. With all these potential differences, the important aspect is to insure that all necessary activities
are included somewhere in the final plan.

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 Principles of Construction Management

Figure 3-1 Illustrative Hierarchical Activity Divisions for a Roadway Project

1.6 3.3 Defining Precedence Relationships among Activities

Once work activities have been defined, the relationships among the activities can be specified.
Precedence relations between activities signify that the activities must take place in a particular sequence.
Numerous natural sequences exist for construction activities due to requirements for structural integrity,
regulations, and other technical requirements. For example, design drawings cannot be checked before
they are drawn. Diagrammatically, precedence relationships can be illustrated by a network or graph in
which the activities are represented by arrows .The arrows in Figure 2-2 are called branches or links in the
activity network, while the circles marking the beginning or end of each arrow are called nodes or events. In
this figure, links represent particular activities, while the nodes represent milestone events.

Figure 3-2 Illustrative Set of Four Activities with Precedence

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 Principles of Construction Management

More complicated precedence relationships can also be specified. For example, one activity might not be
able to start for several days after the completion of another activity. As a common example, concrete
might have to cure (or set) for several days before formwork is removed. This restriction on the removal of
forms activity is called a lag between the completion of one activity (i.e., pouring concrete in this case) and
the start of another activity (i.e., removing formwork in this case). Many computer based scheduling
programs permit the use of a variety of precedence relationships.

Three mistakes should be avoided in specifying predecessor relationships for construction plans. First, a
circle of activity precedences will result in an impossible plan. For example, if activity A precedes activity B,
activity B precedes activity C, and activity C precedes activity A, then the project can never be started or
completed! Figure 2-3 illustrates the resulting activity network. Fortunately, formal scheduling methods and
good computer scheduling programs will find any such errors in the logic of the construction plan.

Figure 3-3 Example of an Impossible Work Plan

Forgetting a necessary precedence relationship can be more insidious. For example, suppose that
installation of dry wall should be done prior to floor finishing. Ignoring this precedence relationship may
result in both activities being scheduled at the same time. Corrections on the spot may result in increased
costs or problems of quality in the completed project. Unfortunately, there are few ways in which
precedence omissions can be found other than with checks by knowledgeable managers or by comparison
to comparable projects. One other possible but little used mechanism for checking precedences is to
conduct a physical or computer based simulation of the construction process and observe any problems.

Finally, it is important to realize that different types of precedence relationships can be defined and that
each has different implications for the schedule of activities:

• Some activities have a necessary technical or physical relationship that cannot be superseded. For
example, concrete pours cannot proceed before formwork and reinforcement are in place.
• Some activities have a necessary precedence relationship over a continuous space rather than as
discrete work task relationships. For example, formwork may be placed in the first part of an
excavation trench even as the excavation equipment continues to work further along in the trench.

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 Principles of Construction Management

Formwork placement cannot proceed further than the excavation, but the two activities can be
started and stopped independently within this constraint.
• Some "precedence relationships" are not technically necessary but are imposed due to implicit
decisions within the construction plan. For example, two activities may require the same piece of
equipment so a precedence relationship might be defined between the two to insure that they are
not scheduled for the same time period. Which activity is scheduled first is arbitrary. As a second
example, reversing the sequence of two activities may be technically possible but more expensive.
In this case, the precedence relationship is not physically necessary but only applied to reduce
costs as perceived at the time of scheduling.

In revising schedules as work proceeds, it is important to realize that different types of precedence
relationships have quite different implications for the flexibility and cost of changing the construction plan.
Unfortunately, many formal scheduling systems do not possess the capability of indicating this type of
flexibility. As a result, the burden is placed upon the manager of making such decisions and insuring
realistic and effective schedules. With all the other responsibilities of a project manager, it is no surprise
that preparing or revising the formal, computer based construction plan is a low priority to a manager in
such cases. Nevertheless, formal construction plans may be essential for good management of
complicated projects.

Example 3-2: Precedence Definition for Site Preparation and Foundation Work

Suppose that a site preparation and concrete slab foundation construction project consists of nine different
activities:
A. Site clearing (of brush and minor debris),
B. Removal of trees,
C. General excavation,
D. Grading general area,
E. Excavation for utility trenches,
F. Placing formwork and reinforcement for concrete,
G. Installing sewer lines,
H. Installing other utilities,
I. Pouring concrete.

Activities A (site clearing) and B (tree removal) do not have preceding activities since they depend on none
of the other activities. We assume that activities C (general excavation) and D (general grading) are
preceded by activity A (site clearing). It might also be the case that the planner wished to delay any
excavation until trees were removed, so that B (tree removal) would be a precedent activity to C (general
excavation) and D (general grading). Activities E (trench excavation) and F (concrete preparation) cannot
begin until the completion of general excavation and grading, since they involve subsequent excavation
and trench preparation. Activities G (install lines) and H (install utilities) represents installation in the utility
trenches and cannot be attempted until the trenches are prepared, so that activity E (trench excavation) is a
preceding activity. We also assume that the utilities should not be installed until grading is completed to
avoid equipment conflicts, so activity D (general grading) is also preceding activities G (install sewers) and
H (install utilities). Finally, activity I (pour concrete) cannot begin until the sewer line is installed and
formwork and reinforcement are ready, so activities F and G are proceeding. Other utilities may be routed

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 Principles of Construction Management

over the slab foundation, so activity H (install utilities) is not necessarily a preceding activity for activity I
(pour concrete). The results of our planning are the immediate precedence shown in Table 3-1.

TABLE 3-1 Precedence Relations for a Nine-Activity Project Example

Activity Description Predecessors
A Site clearing ---
B Removal of trees ---
C General excavation A
D Grading general area A
E Excavation for utility trenches B,C
F Placing formwork and reinforcement for concrete B,C
G Installing sewer lines D,E
H Installing other utilities D,E
I Pouring concrete F,G

With this information, the next problem is to represent the activities in a network diagram and to determine
all the precedence relationships among the activities. One network representation of these nine activities is
shown in Figure 3-4, in which the activities appear as branches or links between nodes. The nodes
represent milestones of possible beginning and starting times. This representation is called an activity-on-
branch diagram. Note that an initial event beginning activity is defined (Node 0 in Figure 3-4), while node 5
represents the completion of all activities.

Figure 3-4 Activity-on-Branch Representation of a Nine Activity Project

Alternatively, the nine activities could be represented by nodes and predecessor relationships by branches
or links, as in Figure 3-5. The result is an activity-on-node diagram. In Figure 3-5, new activity nodes
representing the beginning and the end of construction have been added to mark these important
milestones.

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 Principles of Construction Management

Figure 3-5 Activity-on-Node Representation of a Nine Activity Project

3.4 Estimating Activity Duration:

All formal scheduling procedures rely upon estimates of the durations of the various project activities as
well as the definitions of the predecessor relationships among tasks. The variability of an activity's duration
may also be considered. Formally, the probability distribution of an activity's duration as well as the
expected or most likely duration may be used in scheduling. A probability distribution indicates the chance
that particular activity duration will occur. In advance of actually doing a particular task, we cannot be
certain exactly how long the task will require.

A straightforward approach to the estimation of activity durations is to keep historical records of particular
activities and rely on the average durations from this experience in making new duration estimates. Since
the scopes of activities are unlikely to be identical between different projects, unit productivity rates are
typically employed for this purpose. For example, the duration of an activity Dij such as concrete formwork
assembly might be estimated as:
Dij = Aij / (Pij * Nij)

Where Aij is the required formwork area to assemble (in square meter), Pij is the average productivity of a
standard crew in this task (measured in square meter per hour), and Nij is the number of crews assigned to
the task
The following important rules apply to the estimation of activity durations:
i) Evaluate activities one at a time, independently of all others. For a given activity, assume that
materials, labor, equipment and other needs will be available when required,
ii) For each activity assume a normal level of manpower and/or equipment. Compute the estimate
duration by applying a crew or equipment production rate to the total number of units of work to
done.
Ex. Activity duration to pour 230 m2 of slab formwork, assuming a production rate of 1.5m2/hr/crew can be
established as follows:
Duration = quantity/productivity
= 230 m2/ 12 m2/day = 17.5 days
iii) If time units of working days are being used, assume a normal working day. Do not consider
overtime or multiple shifts unless this is a usual procedure or a part of the standard work day.

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 Principles of Construction Management

2 3.5 Scheduling Techniques

3
In addition to assigning dates to project activities, project scheduling is intended to match the resources of
equipment, materials and labor with project work tasks over time. Good scheduling can eliminate problems
due to production bottlenecks, facilitate the timely procurement of necessary materials, and otherwise
insure the completion of a project as soon as possible. In contrast, poor scheduling can result in
considerable waste as laborers and equipment wait for the availability of needed resources or the
completion of preceding tasks. Delays in the completion of an entire project due to poor scheduling can
also create havoc for owners who are eager to start using the constructed facilities.

Attitudes toward the formal scheduling of projects are often extreme. Many owners require detailed
construction schedules to be submitted by contractors as a means of monitoring the work progress. The
actual work performed is commonly compared to the schedule to determine if construction is proceeding
satisfactorily. After the completion of construction, similar comparisons between the planned schedule and
the actual accomplishments may be performed to allocate the liability for project delays due to changes
requested by the owner, worker strikes or other unforeseen circumstances.

In contrast to these instances of reliance upon formal schedules, many field supervisors disdain and dislike
formal scheduling procedures. In particular, the critical path method of scheduling is commonly required by
owners and has been taught in universities for over two decades, but is often regarded in the field as
irrelevant to actual operations and a time consuming distraction. Progressive construction firms use formal
scheduling procedures whenever the complexity of work tasks is high and the coordination of different
workers is required.

Formal scheduling procedures have become much more common with the advent of personal computers
on construction sites and easy-to-use software programs. Sharing schedule information via the Internet has
also provided a greater incentive to use formal scheduling methods. Savvy construction supervisors often
carry schedule and budget information around with wearable or handheld computers. As a result, the
continued development of easy to use computer programs and improved methods of presenting schedules
have overcome the practical problems associated with formal scheduling mechanisms. But problems with
the use of scheduling techniques will continue until managers understand their proper use and limitations.

A basic distinction exists between resource oriented and time oriented scheduling techniques. For resource
oriented scheduling, the focus is on using and scheduling particular resources in an effective fashion. For
example, the project manager's main concern on a high-rise building site might be to insure that cranes are
used effectively for moving materials; without effective scheduling in this case, delivery trucks might queue
on the ground and workers wait for deliveries on upper floors. For time oriented scheduling, the emphasis is
on determining the completion time of the project given the necessary precedence relationships among
activities. Hybrid techniques for resource leveling or resource constrained scheduling in the presence of
precedence relationships also exist. Most scheduling software is time-oriented, although virtually all of the
programs have the capability to introduce resource constraints.

A variety of planning techniques are available of which only three are to be outlined indicating the
advantages and disadvantages and the most application in practice.

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 Principles of Construction Management

• The Networking Schedule Technique

The Critical Path Method (CPM),
The Performance Evaluation & Review Technique (PERT)
• The Bar Charts
• Line of Balance Chart

3.5.1 The Networking Scheduling Technique

The Critical Path Method

The most widely used scheduling technique is the critical path method (CPM) for scheduling, often referred
to as critical path scheduling. This method calculates the minimum completion time for a project along with
the possible start and finish times for the project activities. Indeed, many texts and managers regard critical
path scheduling as the only usable and practical scheduling procedure. Computer programs and algorithms
for critical path scheduling are widely available and can efficiently handle projects with thousands of
activities.

The critical path itself represents the set or sequence of predecessor/successor activities which will take
the longest time to complete. The duration of the critical path is the sum of the activities' durations along the
path. Thus, the critical path can be defined as the longest possible path through the "network" of project
activities. The duration of the critical path represents the minimum time required to complete a project. Any
delays along the critical path would imply that additional time would be required to complete the project.

There may be more than one critical path among all the project activities, so completion of the entire project
could be delayed by delaying activities along any one of the critical paths. For example, a project consisting
of two activities performed in parallel that each requires three days would have each activity critical for a
completion in three days.

Formally, critical path scheduling assumes that a project has been divided into activities of fixed duration
and well defined predecessor relationships. A predecessor relationship implies that one activity must come
before another in the schedule. No resource constraints other than those implied by precedence
relationships are recognized in the simplest form of critical path scheduling.

To use critical path scheduling in practice, construction planners often represent a resource constraint by a
precedence relation. A constraint is simply a restriction on the options available to a manager, and a
resource constraint is a constraint deriving from the limited availability of some resource of equipment,
material, space or labor. For example, one of two activities requiring the same piece of equipment might be
arbitrarily assumed to precede the other activity. This artificial precedence constraint insures that the two
activities requiring the same resource will not be scheduled at the same time. Also, most critical path
scheduling algorithms impose restrictions on the generality of the activity relationships or network
geometries which are used. In essence, these restrictions imply that the construction plan can be
represented by a network plan in which activities appear as nodes in a network, as in Figure 3-5. Nodes are
numbered, and no two nodes can have the same number or designation. Two nodes are introduced to
represent the start and completion of the project itself.

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 Principles of Construction Management

Graphical network representations rather than a list are helpful for visualization of the plan and to insure
that mathematical requirements are met.

With an activity-on-branch network, dummy activities may be introduced for the purposes of providing
unique activity designations and maintaining the correct sequence of activities. A dummy activity is
assumed to have no time duration and can be graphically represented by a dashed line in a network.
Several cases in which dummy activities are useful are illustrated in Fig. 3-6. In Fig. 3-6(a), the elimination
of activity C would mean that both activities B and D would be identified as being between nodes 1 and 3.
However, if a dummy activity X is introduced, as shown in part (b) of the figure, the unique designations for
activity B (node 1 to 2) and D (node 1 to 3) will be preserved. Furthermore, if the problem in part (a) is
changed so that activity E cannot start until both C and D are completed but that F can start after D alone is
completed, the order in the new sequence can be indicated by the addition of a dummy activity Y, as shown
in part (c).

Figure 3-6 Dummy Activities in a Project Network

Example 3-3: Formulating a network diagram

Suppose that we wish to form an activity network for a seven-activity network with the following
precedences:
Activity Predecessors
A ---
B ---

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C A,B
D C
E C
F D
G D,E

Forming an activity-on-branch network for this set of activities might begin be drawing activities A, B and C
as shown in Figure 3-7(a). At this point, we note that two activities (A and B) lie between the same two
events nodes; for clarity, we insert a dummy activity X and continue to place other activities as in Figure 3-
7(b). Placing activity G in the figure presents a problem, however, since we wish both activity D and activity
E to be predecessors. Inserting an additional dummy activity Y along with activity G completes the activity
network, as shown in Figure 3-7(c). A comparable activity-on-node representation is shown in Figure 3-7,
including project start and finish nodes. Note that dummy activities are not required for expressing
precedence relationships in activity-on-node networks.

Figure 3-7 an Activity-on-Branch Network for Critical Path Scheduling

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 Principles of Construction Management

Figure 3-8 an Activity

Activity-on-Node
Node Network for Critical Path Scheduling

3.1 Calculations for Critical Path Scheduling

With the background provided by the previous sections, we can formulate the critical path scheduling
mathematically. We shall present an algorithm or set of instructions for critical path scheduling assuming an
activity-on-branch
branch project network. We also assume that all precedences are of a finish-to-start
finish nature, so
that a succeeding activity cannot start until the completion of a preceding activity. In a later section, we
present a comparable algorithm for activity-on-node
activity node representations with multiple precedence types.

Suppose that our

ur project network has n+ 1 node, the initial event being 0 and the last event being n. Let the
time at which node events occur be x1, x2,...., xn, respectively.

The start of the project at x0 will be defined as time 0. Nodal event times must be consistent with activity
durations, so that an activity's successor node event time must be larger than an activity's predecessor
node event time plus its duration. For an activity defined as starting from
from event i and ending at event j, this
relationship can be expressed as the inequality constraint, xj xi + Dij where Dij is the duration of activity
(i,j). This same expression can be written for every activity and must hold true in any feasible schedule.
schedule
Mathematically, then, the critical path scheduling problem is to minimize the time of project completion (xn)
subject to the constraints that each node completion event cannot occur until each of the predecessor
activities have been completed:

Minimize

Subject to

This is a linear programming problem since the objective value to be minimized and each of the constraints
is a linear equation.

An efficient solution process for critical path scheduling based upon node labeling is shown in Table 2-2.
2
Three algorithms appear in the table. The event numbering algorithm numbers the nodes (or events) of the

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 Principles of Construction Management

project such that the beginning event has a lower number than the ending event for each activity.
Technically, this algorithm accomplishes a "topological sort" of the activities. The project start node is given
number 0. As long as the project activities fulfill the conditions for an activity-on-branch network, this type of
numbering system is always possible.

TABLE 3-2 Critical Path Scheduling Algorithms (Activity-on-Branch Representation)

Event Numbering Algorithm
Step 1: Give the starting event number 0.
Step 2: Give the next number to any unnumbered event whose predecessor events
are each already numbered.
Repeat Step 2 until all events are numbered.
Earliest Event Time Algorithm
Step 1: Let E(0) = 0.
Step 2: For j = 1,2,3,...,n (where n is the last event), let
E(j) = maximum {E(i) + Dij}
where the maximum is computed over all activities (i,j) that have j as the ending event.
Latest Event Time Algorithm
Step 1: Let L(n) equal the required completion time of the project.
Note: L(n) must equal or exceed E(n).
Step 2: For i = n-1, n-2, ..., 0, let
L(i) = minimum {L(j) - Dij}
where the minimum is computed over all activities (i,j) that have i as the starting event.

The earliest event time algorithm computes the earliest possible time, E(i), at which each event, i, in the
network can occur. Earliest event times are computed as the maximum of the earliest start times plus
activity durations for each of the activities immediately preceding an event. The earliest start time for each
activity (i,j) is equal to the earliest possible time for the preceding event E(i):

(2.2)

The earliest finish time of each activity (i,j) can be calculated by:

(3.3)

Activities are identified in this algorithm by the predecessor node (or event) i and the successor node j. The
algorithm simply requires that each event in the network should be examined in turn beginning with the
project start (node 0).

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The latest event time algorithm computes the latest possible time, L(j), at which each event j in the network
can occur, given the desired completion time of the project, L(n) for the last event n. Usually, the desired
completion time will be equal to the earliest possible completion time, so that E(n) = L(n) for the final node
n. The procedure for finding the latest event time is analogous to that for the earliest event time except that
the procedure begins with the final event and works backwards through the project activities. Thus, the
earliest event time algorithm is often called a forward pass through the network, whereas the latest event
time algorithm is the the backward pass through the network. The latest finish time consistent with
completion of the project in the desired time frame of L(n) for each activity (i,j) is equal to the latest possible
time L(j) for the succeeding event:

(3.4)

The latest start time of each activity (i,j) can be calculated by:

(3.5)

The earliest start and latest finish times for each event are useful pieces of information in developing a
project schedule. Events which have equal earliest and latest times, E(i) = L(i), lie on the critical path or
paths. An activity (i,j) is a critical activity if it satisfies all of the following conditions:

(3.6)

(3.7)

(3.8)

Hence, activities between critical events are also on a critical path as long as the activity's earliest start time
equals its latest start time, ES(i,j) = LS(i,j). To avoid delaying the project, all the activities on a critical path
should begin as soon as possible, so each critical activity (i,j) must be scheduled to begin at the earliest
possible start time, E(i).

Example 3-4: Critical path scheduling calculations

Consider the network shown in Figure 3-8 in which the project start is given number 0. Then, the only event
that has each predecessor numbered is the successor to activity A, so it receives number 1. After this, the
only event that has each predecessor numbered is the successor to the two activities B and C, so it
receives number 2. The other event numbers resulting from the algorithm are also shown in the figure. For
this simple project network, each stage in the numbering process found only one possible event to number
at any time.

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 Principles of Construction Management

With more than one feasible event to number, the choice of which to number next is arbitrary. For example,
if activity C did not exist in the project for Figure 3-8, the successor event for activity A or for activity B could
have been numbered 1.

Figure 3-8 A Nine-Activity Project Network

Once the node numbers are established, a good aid for manual scheduling is to draw a small rectangle
near each node with two possible entries. The left hand side would contain the earliest time the event could
occur, whereas the right hand side would contain the latest time the event could occur without delaying the
entire project. Figure 3-9 illustrates a typical box.

Figure 3-9 E(i) and L(i) Display for Hand Calculation of Critical Path for Activity-on-Branch Representation

TABLE 3-3 Precedence Relations and Durations for a Nine Activity Project Example
Activity Description Predecessors Duration
A Site clearing --- 4
B Removal of trees --- 3
C General excavation A 8
D Grading general area A 7
E Excavation for trenches B, C 9
F Placing formwork and reinforcement for concrete B, C 12
G Installing sewer lines D, E 2
H Installing other utilities D, E 5
I Pouring concrete F, G 6

For the network in Figure 3-8 with activity durations in Table 3-3, the earliest event time calculations
proceed as follows:

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Step 1 E(0) = 0
Step 2
j=1 E(1) = Max{E(0) + D01} = Max{ 0 + 4 } = 4
j=2 E(2) = Max{E(0) + D02; E(1) + D12} = Max{0 + 3; 4 + 8} = 12
j=3 E(3) = Max{E(1) + D13; E(2) + D23} = Max{4 + 7; 12 + 9} = 21
j=4 E(4) = Max{E(2) + D24; E(3) + D34} = Max{12 + 12; 21 + 2} = 24
j=5 E(5) = Max{E(3) + D35; E(4) + D45} = Max{21 + 5; 24 + 6} = 30

Thus, the minimum time required to complete the project is 30 since E(5) = 30. In this case, each event had
at most two predecessors.

For the "backward pass," the latest event time calculations are:

Step 1 L(5) = E(5) = 30

Step 2
j=4 L(4) = Min {L(5) - D45} = Min {30 - 6} = 24
j=3 L(3) = Min {L(5) - D35; L(4) - D34} = Min {30 -5; 24 - 2} = 22
j=2 L(2) = Min {L(4) - D24; L(3) - D23} = Min {24 - 12; 22 - 9} = 12
j=1 L(1) = Min {L(3)
{ - D13; L(2) - D12} = Min {22 - 7; 12 - 8} = 4
j=0 L(0) = Min {L(2) - D02; L(1) - D01} = Min {12 - 3; 4 - 4} = 0
In this example, E(0) = L(0), E(1) = L(1), E(2) = L(2), E(4) = L(4),and E(5) = L(5). As a result, all nodes but
node 3 are in the critical path. Activities on the critical path include A (0,1), C (1,2), F (2,4) and I (4,5) as
shown in Table 3-4.
TABLE 3-4 Identification of Activities on the Critical Path for a Nine
Nine-Activity
Activity Project
Latest
start
Duration Earliest start time Latest finish time time
Activity Dij E(i)=ES
E(i)=ES(i,j) L(j)=LF(i,j) LS(i,j)
A(0,1) 4 0* 4* 0
B(0,2) 3 0 12 9
C(1,2) 8 4* 12* 4
D(1,3) 7 4 22 15
E(2,3) 9 12 22 13
F(2,4) 12 12* 24* 12
G(3,4) 2 21 24 22
H(3,5) 5 21 30 25
I (4,5) 6 24 30* 24

*Activity on a critical path since E(i) + DiJ = L(j).

Activity Float and Schedules

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A number of different activity schedules can be developed from the critical path scheduling procedure
described in the previous section. An earliest time schedule would be developed by starting each activity as
soon as possible, at ES(i,j). Similarly, a latest time schedule would delay the start of each activity as long
as possible but still finish the project in the minimum possible time. This late schedule can be developed by
setting each activity's start time to LS(i,j).

Activities that have different early and late start times (i.e., ES(i,j) < LS(i,j)) can be scheduled to start
anytime between ES(i,j) and LS(i,j) as shown in Figure 3-10. The concept of float is to use part or all of this
allowable range to schedule an activity without delaying the completion of the project. An activity that has
the earliest time for its predecessor and successor nodes differing by more than its duration possesses a
window in which it can be scheduled. That is, if E(i) + Dij < L(j), then some float is available in which to
schedule this activity.

Figure 3-10 Illustration of Activity Float

Float is a very valuable concept since it represents the scheduling flexibility or "maneuvering room"
available to complete particular tasks. Activities on the critical path do not provide any flexibility for
scheduling nor leeway in case of problems. For activities with some float, the actual starting time might be
chosen to balance workloads over time, to correspond with material deliveries, or to improve the project's
cash flow.

Of course, if one activity is allowed to float or change in the schedule, then the amount of float available for
other activities may decrease. Three separate categories of float are defined in critical path scheduling:

1. Free float is the amount of delay which can be assigned to any one activity without delaying
subsequent activities. The free float, FF(i,j), associated with activity (i,j) is:

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 Principles of Construction Management

2. Independent float is the amount of delay which can be assigned to any one activity without
delaying subsequent activities or restricting the scheduling of preceding activities. Independent
float, IF(i,j), for activity (i,j) is calculated as:

3. Total float is the maximum amount of delay which can be assigned to any activity without delaying
the entire project. The total float, TF(i,j), for any activity (i,j) is calculated as:

Each of these "floats" indicates an amount of flexibility associated with an activity. In all cases, total float
equals or exceeds free float, while independent float is always less than or equal to free float. Also, any
activity on a critical path has all three values of float equal to zero. The converse of this statement is also
true, so any activity which has zero total float can be recognized as being on a critical path.

The various categories of activity float are illustrated in Figure 3-10 in which the activity is represented by a
bar which can move back and forth in time depending upon its scheduling start. Three possible scheduled
starts are shown, corresponding to the cases of starting each activity at the earliest event time, E(i), the
latest activity start time LS(i,j), and at the latest event time L(i). The three categories of float can be found
directly from this figure.

Finally, a fourth bar is included in the figure to illustrate the possibility that an activity might start, be
temporarily halted, and then re-start. In this case, the temporary halt was sufficiently short that it was less
than the independent float time and thus would not interfere with other activities. Whether or not such work
splitting is possible or economical depends upon the nature of the activity.

As shown in Table 3-4, activity D (1, 3) has free and independent floats of 10 for the project shown in
Figure 3-10. Thus, the start of this activity could be scheduled anytime between time 4 and 14 after the
project began without interfering with the schedule of other activities or with the earliest completion time of
the project. As the total float of 11 units indicates, the start of activity D could also be delayed until time 15,
but this would require that the schedule of other activities be restricted. For example, starting activity D at
time 15 would require that activity G would begin as soon as activity D was completed. However, if this
schedule was maintained, the overall completion date of the project would not be changed.

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Exercise: Develop a network diagram for a factory project with the following information and determine
completion time and floating times of activities.

Notation Activity Preceded by Followed by Durations

(days)
A Boiler house foundation --- B,C 1
B Boiler house walls A D 1
C Chimney foundation A E 2
D Boiler house flooring B F 2
E Chimney base construction C G 6
F Boiler house roof work D H 2
G Erect chimney E I 4
H Boiler house finishing F I 4
I Install boilers H,G J 4
J Test boilers I T 2
K Set up site clearing -- L 1
L Factory foundation K M,N 2
M External brick wall L O 4
N Erect steel frame L P 1
O Ground floor slab M Q 4
P Roof cladding N R 2
Q Service ducts O S 2
R Wall cladding P S 2
S Building services (Elect, water ) Q,R T 1
T External works S,J --- 4

Program Evaluation & Review Technique (PERT)

The two commonly used network methods for project planning and scheduling are the program evaluation
and review technique (PERT) and the critical path method (CPM). Both PERT and CPM are termed critical
path methods because both use the critical path to complete expected project duration, early and late
times, and slack. The two are frequently described under one term, PERT/CPM. Despite their similarities,
PERT and CPM were developed independently in different problem environments and industries.

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PERT was developed for application in projects where there is uncertainty associated with the nature and
duration of activities. It originated in the late 1950s during the U.S. Navy’s Polaris Missile System Program.
In complex research and development programs, there are questions about the kind of research to be
done, how long it will take, what stages of development are necessary, and how fast they can be
completed- largely because of the uncertainty about the exact nature of the final outcomes. Such projects
are contracted as new developments unfold and before problems in technology, materials, and processes
can be identified and resolved. Thus, the duration of the project is uncertain and there is considerable risk
that the project will overrun the target completion time.
Three Time Estimates:
PERT addresses uncertainty in the duration by using three time estimates: Optimistic, most likely, and
pessimistic. These estimates then are used to calculate the expected time for an activity. The range
between the estimates provides a measure of variability, which permits statistical inferences to be made
about the likelihood of project events happening at particular times. As seen in the figure, the optimistic
time ‘a’ is the minimum time an activity could take- the situation where everything goes well; there will be
little hope of finishing earlier. The most likely time ‘m’ is the normal time to complete the activity. It is the
time that would occur most frequently if the activity could be repeated. Finally, the pessimistic time ‘b’ is the
maximum time an activity could take- the situation where bad luck is encountered at every step. The
pessimistic time includes likely internal problems in development, but not force majors such as strikes,
power shortages, and bankruptcy, fire or naturals disasters. The three estimates are obtained from the
people most knowledgeable about difficulties likely to be encountered and about the potential variability in
time- expert estimators or those who will actually perform or manage the activity.
The three estimates are related in the form of a Beta Probability distribution with parameters ‘a’ and ‘b’ as
the end points, and ‘m’ the modal, or most frequent value. The PERT originates chose the Beta distribution
because it is not necessarily symmetrical- properties that seem desirable for a distribution of activity times.

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 Principles of Construction Management

a m te b

Beta and Normally Distributed Activity Durations

Based on this distribution, the mean or expected time, te, and the variance, V, of each activity are computed
with the three time estimates using the following formulas.

a + 4m + b
te =
6
b−a
2

V = 
 6 
The expected time, te, represents the point in the normal distribution where there is 50-50 chance that the
activity will be completed earlier or later than it.
The variance ’V ‘ is a measure of variability in the activity completion time. The larger V, the less reliability,
te,, and the higher the likelihood that the activity will be completed much earlier or much later than the

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 Principles of Construction Management

expected time. This simply mean that the farther apart a and b, the more dispersed the distribution and the
greater the chance that the actual time will be significantly different from the expected time, te .If a and b
are close to each other, V is small and the expected time is more reliable.
Probability of Finishing a Project by a Target Completion Date:
Statistically the expected time of a sequence of independent activities is the sum of their individual
expected times. Hence the expected time of the project, Te, is the sum of the expected activity times along
the critical path.

Te = ∑ te
CP

Where, te, are expected times of the activities along the critical path.
In PERT, the project duration is not considered a single point estimate contrary to CPM, but an estimate
subject to uncertainty owing to the uncertainties of the activity times along the critical path. Because the
project duration; Te, is computed as the sum of average activity times along the critical path, it follows that,
Te, is an average time. Thus the project duration can be thought of as a probability distribution with an
average of Te. So the probability of completing the project prior to Te is 50 percent, and the probability of
completing it later than Te is 50 percent.
The variation in the project duration distribution is computed as the sum of the variances of the activity
durations along the critical path.

V p = ∑V
CP

Where, V, are variances of activities on the critical path.

The distribution of project durations is approximated using the familiar bell shaped, normal distribution.
Given this assumption, the probability of meeting any targeted project completion date, Ts, different from ,
Te, can be determined.

As examples, consider the following questions about the project shown in the network.
i) What is the probability of completing the project in 27 days?
ii) What is the latest ( 95% probable) likely date by which the project will be completed?

Both questions can be answered using the standard normal distribution curve (Z-values) given ina separate
table.
i) Given , Ts= 27 days
Te = 29 days; Vp = 6.0 ; Find F(Z)

According to the Z values of normal distribution,

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 Principles of Construction Management

TS − TE
Z= ; Z = -0.82
VP
The probability of completing the project within 27 days is equal to the area under the normal curve to the
left of Z =-0.82. Referring to the table,
F(-Z) = 1- F(Z);
= 1- F (0.82)
= 1-0.7939
= 21%
ii) Given , F(Z) = 0.95, Te= 29 days, Vp= 6.0
Find, Ts
From the normal distribution table, the Z values for 95% probability is approximately 1.645
Ts − 29
1.645 =
6.0
Ts =33.03 days
In other words, it is highly likely (95% probability) that the project will be completed within 33 days.
Advantages of network scheduling:
• Requires and promotes the planner to think logically,
• Activities upon which the contractor must concentrate high efforts during the project are identified
in the process of planning,
• Non critical activities are also identified and resource leveling is facilitated,
• Arguments in support of claims can be developed where some action on the part of the Client or
his adverse delays a critical activity.
• Crash times –alternative durations based on increased gang sizes may be introduced in order to
recover lost ground.

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 Principles of Construction Management

Disadvantages of the network scheduling:

• Not readily understood as a graphical statement of the contract duration,
• Updating calls for a redrafted network from the date concerned. Frequent updating entails
continuous redrafting in a situation of uncertainty and becomes remote from managerial decision
making,
• A thorough knowledge of the construction process and of practical sequences is required prior to
preparing the network: This will involve liaison between site management and the planner
preparing the network. This liaison facility is rarely available.

2) The Bar Charts

Bar charts present the project schedule plotted to a horizontal line scale. The bar lines represent the time
period allocated to each operation and the relationship between the commencement and completion of
each can be readily observed. The bar chart has been the traditional management device for planning and
scheduling construction projects. Bar charts are particularly helpful for communicating the current state and
schedule of activities on a project. As such, they have found wide acceptance as a project representation

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 Principles of Construction Management

tool in the field. For planning purposes, bar charts are not as useful since they do not indicate the
precedence relationships among activities. Thus, a planner must remember or record separately that a
change in one activity's schedule may require changes to successor activities. There have been various
schemes for mechanically linking activity bars to represent precedence, but it is now easier to use
computer based tools to represent such relationships.
Example of schedule using bar chart:

Advantages of Bar chart:

• Useful to report information to people who are concerned about a project but may not be involved in
day-today management.
• A simple format and readily understood at all levels of management,
• It can provide a quick, visual overview of a project in convenient way to monitor job progresses,
schedule equipment and crews and record project advancement.
Disadvantages:
• Interdependencies among activities are difficult to show. The bar chart itself doesn’t provide a basis
for ascertaining which activities are critical and which are floaters.
• It is not an adequate planning and scheduling tool because it doesn’t portray a detailed, integrated
and complete plan of operations.

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 Principles of Construction Management

3) The Line of Balance Scheduling Technique

The Line of Balance schedules are a series of inclined bar lines, one for each activity. The difference
between Line of Balance Schedules and a traditional bar chart is the balance lines are inclined at different
slopes to denote the rate of working of the various operations.

In developing the schedule, one is required to determine the number of crew to be availed for each activity
with the productivity rate on daily basis. The respective activities will be indicated with an inclined bar on a
diagram scaled contract time versus project units or segments subdivided for planning purposes. If the bars
intersect on the diagram, this will be a clear indication that resource has not been properly allocated.
Intersection of the bars shows that the crew assigned for a particular activity would stay idle until the
preceding activity is progressed a bit far from the following activity.
Application:
The planning system is suitable for housing contract, roads construction, pipe laying work and the erection
of prefabricated buildings of repetitive nature. The process may be applied to any sequence involving the
coordination of a number of repetitive activities.
Advantages of the Line of Balance scheduling:
• Clearly displays the rate of working of one activity against another,
• Relates the requirement of specified resources to the achievement of a planned completion date,
• The schedule clearly indicates the number of units to be completed by a specific date,
• The principles of planning system are readily understood at site management level. The schedule
is easily updated. Actual performance can be compared with planned requirements at any date.
Disadvantages:
• Only applicable to repetitive forms of construction,
• Summarizes many considerations, this short of detail and hence explanations.

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 Principles of Construction Management

4. Project Cost Management

4.1 Cost Estimating

Cost estimating involves developing an approximation (estimate) of the costs of the resources
needed to complete project activities. In approximating cost, the estimator considers the causes
of variation of the final estimate for purposes of better managing the project. When a project is
performed under contract, care should be taken to distinguish cost estimating from pricing. Cost
estimating involves developing an assessment of the likely quantitative result how much will it
cost the performing organization to provide the product or service involved? Pricing is a business
decision how much will the performing organization charge for the product or service that uses
the cost estimate as but one consideration of many.

Cost estimating includes identifying and considering various costing alternatives. For example,
in most application areas, additional work during a design phase is widely held to have the
potential for reducing the cost of the production phase. The cost-estimating process must
consider whether the cost of the additional design work will be offset by the expected savings.

Inputs to Cost Estimating

1. Work breakdown structure. It is used to organize the cost estimates and to ensure that all
identified work has been estimated.
2. Resource requirements. The output of the resource planning process is a description of what
types of resources are required and in what quantities for each element at the lowest level of the
WBS. Resource requirements for higher levels within the WBS can be calculated based on the
lower-level values.
3. Resource rates. The individual or group preparing the estimates must know the unit rates
(e.g., staff cost per hour, bulk material cost per cubic yard) for each resource to calculate project
costs. If actual rates are not known, the rates themselves may have to be estimated.
4. Activity duration estimates. Activity duration estimates will affect cost estimates on any
project where the project budget includes an allowance for the cost of financing (i.e., interest
charges).
5. Estimating publications. Commercially available data on cost estimating.
6. Historical information. Information on the cost of many categories of resources is often
available from one or more of the following sources:
• Project files:-one or more of the organizations involved in the project may maintain records of
previous project results that are detailed enough to aid in developing cost estimates. In some
application areas, individual team members may maintain such records.
• Commercial cost-estimating databases:-historical information is often available commercially.
• Project team knowledge:-the individual members of the project team may remember previous
actuals or estimates. While such recollections may be useful, they
are generally far less reliable than documented results

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 Principles of Construction Management

Outputs from Cost Estimating

Cost estimates: Cost estimates are quantitative assessments of the likely costs of the resources
required to complete project activities. They may be presented in summary or in detail.
Costs must be estimated for all resources that will be charged to the project. This includes, but is
not limited to, labor, materials, supplies, and special categories such as an inflation allowance or
cost reserve. Cost estimates are generally expressed in units of currency (dollars, Euros, Birr,
etc.) to facilitate comparisons both within and across projects. In some cases, the estimator may
use units of measure to estimate cost, such as staff hours or staff days, along with their cost
estimates to facilitate appropriate management control. Cost estimating generally includes
considering appropriate risk response planning, such as contingency plans.

Cost estimates may benefit from being refined during the course of the project to reflect the
additional detail available. In some application areas, there are guidelines for when such
refinements should be made and what degree of accuracy is expected.
Inputs to Cost Estimating
1. Work breakdown structure. It is used to organize the cost estimates and to ensure that all
identified work has been estimated.

2. Resource requirements. The output of the resource planning process is a description of

what types of resources are required and in what quantities for each element at the lowest
level of the WBS. Resource requirements for higher levels within the WBS can be
calculated based on the lower-level values.

3. Resource rates. The individual or group preparing the estimates must know the unit rates
(e.g., staff cost per hour, bulk material cost per cubic yard) for each resource to calculate
project costs. If actual rates are not known, the rates themselves may have to be estimated.

4. Activity duration estimates. Activity duration estimates will affect cost estimates on any
project where the project budget includes an allowance for the cost of financing (i.e.,
interest charges).

5. Estimating publications. Commercially available data on cost estimating.

6. Historical information. Information on the cost of many categories of resources is often

available from one or more of the following sources:

• Project files:-one or more of the organizations involved in the project may

maintain records of previous project results that are detailed enough to aid in
developing cost estimates. In some application areas, individual team members may
maintain such records.
• Commercial cost-estimating databases:-historical information is often available
commercially.
• Project team knowledge:-the individual members of the project team may
remember previous actuals or estimates. While such recollections may be useful, they
are generally far less reliable than documented results.

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 Principles of Construction Management

Supporting detail: Supporting detail for the cost estimates should include:

A description of the scope of work estimated. This is often provided by a reference to

the WBS.
Documentation of the basis for the estimate; i.e., how it was developed.
Documentation of any assumptions made.
An indication of the range of possible results; for example, $10,000 ± $1,000 to indicate
that the item is expected to cost between $9,000 and $11,000.
The amount and type of additional details vary by application area. Retaining even rough notes
may prove valuable by providing a better understanding of how the estimate was developed.

Cost management plan: The cost management plan describes how cost variances will be
managed (e.g., different responses to major problems than to minor ones). A cost management
plan may be formal or informal, highly detailed or broadly framed, based on the needs of the
project stakeholders.

4.2 Cost Budgeting

Cost budgeting involves allocating the overall cost estimates to individual activities or work
packages to establish a cost baseline for measuring project performance. Reality may dictate that
estimates are done after budgetary approval is provided, but estimates should be done prior to
budget request wherever possible.

For cost control on a project, the construction plan and the associated cash flow estimates can
provide the baseline reference for subsequent project monitoring and control. For schedules,
progress on individual activities and the achievement of milestone completions can be compared
with the project schedule to monitor the progress of activities. Contract and job specifications
provide the criteria by which to assess and assure the required quality of construction. The final
or detailed cost estimate provides a baseline for the assessment of financial performance during
the project. To the extent that costs are within the detailed cost estimate, then the project is
thought to be under financial control. Overruns in particular cost categories signal the possibility
of problems and give an indication of exactly what problems are being encountered. Expense
oriented construction planning and control focuses upon the categories included in the final cost
estimation. This focus is particular relevant for projects with few activities and considerable
repetition such as grading and paving roadways.

For control and monitoring purposes, the original detailed cost estimate is typically converted to
a project budget, and the project budget is used subsequently as a guide for management.
Specific items in the detailed cost estimate become job cost elements. Expenses incurred during
the course of a project are recorded in specific job cost accounts to be compared with the original
cost estimates in each category. Thus, individual job cost accounts generally represent the basic
unit for cost control. Alternatively, job cost accounts may be disaggregated or divided into work
elements which are related both to particular scheduled activities and to particular cost accounts.

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 Principles of Construction Management

Cost controlling processes

Inputs Tools & Techniques Outputs

Revised cost
Cost baseline Cost change control system estimates
Performance reports Performance measurement Budget updates
Change requests Earned value management Corrective action
Cost management (EVM) Estimate at
plan Additional planning completion
Project closeout
Lessons learned

In addition to cost amounts, information on material quantities and labor inputs within each job
account is also typically retained in the project budget. With this information, actual materials
usage and labor employed can be compared to the expected requirements. As a result, cost
overruns or savings on particular items can be
identified as due to changes in unit prices, laborInputs Tools & Techniques Outputs
productivity or in the amount of material consumed.

4.3 Cost Control

Cost control is concerned with Inputs Tools & Techniques Outputs

a) Influencing the factors that create changes to the cost baseline to ensure that changes are
agreed upon,
b) Determining that the cost baseline has changed, and
c) Managing the actual changes when and as they occur. Cost control includes:
 Monitoring cost performance to detect and understand variances from plan.
 Ensuring that all appropriate changes are recorded accurately in the cost baseline.
 Preventing incorrect, inappropriate, or unauthorized changes from being included in the
cost baseline.
 Informing appropriate stakeholders of authorized changes.
 Acting to bring expected costs within acceptable limits.

Cost control includes searching out the whys of both positive and negative variances. It must be
thoroughly integrated with the other control processes (scope change control, schedule control,
quality control, and others). For example, inappropriate responses to cost variances can cause
quality or schedule problems, or produce an unacceptable level of risk later in the project.

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 Principles of Construction Management

Earned value analysis: Earned value analysis in its various forms is the most commonly used
method of performance measurement. It integrates scope, cost (or resource), and schedule
measures to help the project management team assess project performance. Earned value (EV)
involves calculating three key values for each activity:
1. The Planned Value (PV), which is also called the budgeted cost of work
scheduled (BCWS), is that portion of the approved cost estimate planned to be
spent on the activity during a given period.

2. The Actual Cost (AC), previously called the actual cost of work performed
(ACWP), is the total of costs incurred in accomplishing work on the activity
during a given period. This Actual Cost must correspond to whatever was
budgeted for the PV and the EV (example: direct hours only, direct costs only or
all costs including indirect costs).

3. The EV, previously called the budgeted cost of work performed (BCWP), is the
value of the work actually completed.

These three values are used in combination to provide measures of whether or not work is being
accomplished as planned.

Variance thresholds can be established that define the level at which reports must be sent to
various levels of management within an organization.

Cost Variance = BCWP − ACWP

Schedule Variance = BCWP − BCWS
Variance: Any deviation from plan

By combining cost and schedule variances, an integrated cost/schedule reporting system can be
developed.
The cost performance index (CPI = EV/AC) is the most commonly used cost-efficiency
indicator. The cumulative CPI (the sum of all individual EV budgets divided by the sum of all
individual ACs) is widely used to forecast project costs at completion. Also, the schedule
performance index
(SPI = EV/PV) is sometimes used in conjunction with the CPI to forecast the project completion
estimates.

The Comparison between planned and earned values provides work accomplishment or project
performance in terms of cost and time variances (Figure 4.1).

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 Principles of Construction Management

Schedule Cost Performance

Performance Index Index R
A
T
I
O

BCWS BCWP ACWP

V
A
R
I
Schedule Cost A
Variance Variance N
C
E
Fig 4.1 earned value analysis

Besides, Performance Indices (SPI & CPI) and estimated completion of the project (EAC and ETC) can
be computed using the three information and the total Budget at Completion (BAC). Accordingly, the
following expressions can be used for computations (See the following box).

Cost Variance (CV) = BCWP - ACWP

Schedule Variance (SV) = BCWP - BCWS
Cost Performance Index (CPI) = BCWP / ACWP
Schedule Performance Index (SPI) = BCWP / BCWS
Estimate to Completion (ETC) = (BAC -BCWP) / CPI
Estimate at Completion (EAC) = ACWP + ETC

Expressions in Earned Value Analysis

The expression used for computations based on EVD Analysis can also be shown clearly using three S-
Curves (S-Curves for BCWS, BCWP and ACWP – see Figure 3.2).

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 Principles of Construction Management

Current Planned
Situation Completion
EAC

Forecast Cost
C Overrun
ETC
O
S Planned
Budget BCWS
T
ACWP CV
Forecast Time
Overrun
BCWP

TIME
SV

Figure4.2 Earned Value Computations

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 Principles of Construction Management

5. Project Quality Management

Project Quality Management includes the processes required to ensure that the project will
satisfy the needs for which it was undertaken. It includes all activities of the overall management
function that determine the quality policy, objectives, and responsibilities and implements them
by means such as quality planning, quality assurance, quality control, and quality improvement,
within the quality system. The following are the major project quality management processes:
 Quality planning: identifying which quality standards are relevant to the project and
determining how to satisfy them.

 Quality Assurance: evaluating overall project performance on a regular basis to provide

confidence that the project will satisfy the relevant quality standards.

 Quality Control: monitoring specific project results to determine if they comply with
relevant quality standards and identifying ways to eliminate causes of unsatisfactory
performance.

These processes interact with each other and with the processes in the other knowledge areas as
well. Each process may involve effort from one or more individuals or groups of individuals,
based on the needs of the project. Each process generally occurs at least once in every project
phase.

The basic approach to quality management described in this section is intended to be compatible
with that of the International Organization for Standardization (ISO), as detailed in the ISO 9000
and 10000 series of standards and guidelines. This generalized approach should also be
compatible with a) proprietary approaches to quality management such as those recommended
by Deming, Juran, Crosby, and others, and
b) Nonproprietary approaches such as Total Quality Management (TQM), Continuous
Improvement, and others.
Project quality management must address both the management of the project and the product of
the project. The generic term product is occasionally used, in literature regarding quality, to refer
to both goods and services. Failure to meet quality requirements in either dimension can have
serious negative consequences for any or all of the project stakeholders. For example:
 Meeting customer requirements by overworking the project team may produce negative
consequences in the form of increased employee attrition.
 Meeting project schedule objectives by rushing planned quality inspections may produce
negative consequences when errors go undetected.

The project management team must be careful not to confuse quality with grade. Grade is a
category or rank given to entities having the same functional use but different technical
characteristics. Low quality is always a problem; low grade may not be. For example, a software
product may be of high quality (no obvious bugs, readable manual) and low grade (a limited
number of features), or of low quality (many bugs, poorly organized user documentation) and
high grade (numerous features). Determining and delivering the required levels of both quality
and grade are the responsibilities of the project manager and the project management team.

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 Principles of Construction Management

5.1 Quality Planning

Quality planning involves identifying which quality standards are relevant to the project and
determining how to satisfy them. It is one of the key facilitating processes during project
planning and should be performed regularly and in parallel with the other project planning
processes.
For example, the changes in the product of the project required to meet identified quality
standards may require cost or schedule adjustments, or the desired product quality may require a
detailed risk analysis of an identified problem.
The quality planning techniques discussed here are those most frequently used on projects. There
are many others that may be useful on certain projects or in some application areas. The project
team should also be aware of one of the fundamental tenets of modern quality management
quality is planned in, not inspected in.

5.2 Quality Assurance

Quality assurance is all the planned and systematic activities implemented within the quality
system to provide confidence that the project will satisfy the relevant quality standards. It should
be performed throughout the project. Prior to development of the ISO 9000 Series, the activities
described under quality planning were widely included as part of quality assurance. Quality
assurance is often provided by a Quality Assurance Department or similarly titled organizational
unit, but it does not have to be. Assurance may be provided to the project management team and
to the management of the performing organization (internal quality assurance), or it may be
provided to the customer and others not actively involved in the work of the project (external
quality assurance).

Quality Assurance System: ISO 9000

Quality assurance is concerned with developing a formal structure, organization and operational
procedures to ensure specified quality throughout the total construction process. Quality
assurance:
 is concerned with planning and developing the technical and managerial competence
needed to achieve the host organization’s desired objectives,
 is concerned with the management of people, addressing the roles, duties and
responsibilities of individuals within the organizations
 is primarily the responsibility of management; its structure and implementation as part of
the total organizational framework,
 is also an important aspect of the marketing and promotional strategy of the organization.

In 1987, the International Organization for Standardization, a federation of the national standards
organizations of over 90 countries, published ISO 9000 International Standards for quality
management and quality assurance. These standards which have been adopted by many countries
throughout the world provide quality management guidance and identify generic quality system
elements necessary for quality assurance. They provide direction regarding what needs to be
done but do not prescribe how quality is to be accomplished.

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 Principles of Construction Management

ISO 9000 series quality systems constitute four parts as shown hereunder:

ISO 9000

Guidelines for Application Quality Assurance Models

ISO 9004 ISO 9001 ISO 9002 ISO 9003

Structure of ISO 9000 Standards

ISO 9001:
The most stringent level of application and contains all 20 clauses of the quality system and are
therefore the most comprehensive system available for certification. Organizations involved in
the design process and seeking certification need to comply with ISO 9001 requirements. For
example this specification would apply to design consultants, architects, and design and build
companies.

ISO 9002:
This is applicable to manufacturing and/or installation companies that do not undertake design
activities. ISO 9002 requires process and inspection control during production and/or service
delivery. This standard applies to most construction organizations, where evidence of inspection
and tests, during a construction process, has to be provided to clients.

ISO 9003:
This applies to organizations where quality assurance systems can be based upon final inspection
of product or service only. This part of the standard has limited application in the construction
industry.

Any company wishing to become registered for quality assurance must satisfy the requirements
of a certification body. Certification is conducted by a third party which has no contractual
relationship with the client and/or the contractor to provide confidence that products or services
supplied comply with the specified requirements. The certification process can be represented in
the following three aspects of implementation:
• Examination of Documentation: applicants must submit evidence that proves they have a
documented quality system complying with the requirements of the standard.
Documentation will normally consist of a quality manual, a procedural manual and if
required a set of work instructions,
• Assessment: Once the documentation has been accepted by the certifying body, it will
perform an on spot investigation in order to verify that the documents system is being
implemented as described. If everything is satisfactory, a certificate will be awarded.

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 Principles of Construction Management

• Monitoring: After the initial assessment, regular visits are made to ensure that standards
are being maintained. If standards are not being maintained, the ultimate sanction would
be the withdrawal of the certification.

Table of ISO 9000 series quality system elements:

Corresponding Applicability
Title ISO 9001 ISO 9002 ISO 9003
Management Responsibility x x x
Quality System x x x
Contract Review x x
Design Control x
Document Control x x x
Purchasing x x
Purchaser Supplied Product x X
Product Identification and Traceability x x x
Process Control x x
Inspection Testing x x x
Inspection, Measuring and Test Equipment x x x
Inspection Status x x x
Control of Non-Conforming Product x x x
Corrective Action x x
Handling, Storage, Packaging and Delivery x x x
Quality Records x x X
Internal Quality Audits x X
Training x x x
Servicing X
Statistical Techniques x x x

5.3 Quality Control

Quality control involves monitoring specific project results to determine if they comply with
relevant quality standards, and identifying ways to eliminate causes of unsatisfactory results. It
should be performed throughout the project. Project results include both product results, such as
deliverables, and project management results, such as cost and schedule performance.

Quality control represents increasingly important concerns for project managers. Defects or
failures in constructed facilities can result in very large costs. Even with minor defects, re-
construction may be required and facility operations impaired. Increased costs and delays are the
result.

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 Principles of Construction Management

As with cost control, the most important decisions regarding the quality of a completed facility
are made during the design and planning stages rather than during construction. It is during these
preliminary stages that component configurations, material specifications and functional
performance are decided. Quality control during construction consists largely of insuring
conformance to these original designs and planning decisions.

While conformance to existing design decisions is the primary focus of quality control, there are
exceptions to this rule. First, unforeseen circumstances, incorrect design decisions or changes
desired by an owner in the facility function may require re-evaluation of design decisions during
the course of construction. While these changes may be motivated by the concern for quality,
they represent occasions for re-design with all the attendant objectives and constraints. As a
second case, some designs rely upon informed and appropriate decision making during the
construction process itself. For example, some tunneling methods make decisions about the
amount of shoring required at different locations based upon observation of soil conditions
during the tunneling process. Since such decisions are based on better information concerning
actual site conditions, the facility design may be more cost effective as a result.

With the attention to conformance as the measure of quality during the construction process, the
specification of quality requirements in the design and contract documentation becomes
extremely important. Quality requirements should be clear and verifiable, so that all parties in the
project can understand the requirements for conformance.

Work and Material Specifications

Specifications of work quality are an important feature of facility designs. Specifications of

required quality and components represent part of the necessary documentation to describe a
facility. Typically, this documentation includes any special provisions of the facility design as
well as references to generally accepted specifications to be used during construction.

General specifications of work quality are available in numerous fields and are issued in
publications of organizations such as the American Society for Testing and Materials (ASTM),
the American National Standards Institute (ANSI), or the Construction Specifications Institute
(CSI). Distinct specifications are formalized for particular types of construction activities, such
as welding standards issued by the American Welding Society, or for particular facility types,
such as the Standard Specifications for Highway Bridges issued by the American Association of
State Highway and Transportation Officials. These general specifications must be modified to
reflect local conditions, policies, available materials, local regulations and other special
circumstances.

Quality Control by Statistical Methods

An ideal quality control program might test all materials and work on a particular facility. For
example, non-destructive techniques such as x-ray inspection of welds can be used throughout a
facility. An on-site inspector can witness the appropriateness and adequacy of construction
methods at all times. Even better, individual craftsmen can perform continuing inspection of
materials and their own work. Exhaustive or 100% testing of all materials and work by

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inspectors can be exceedingly expensive, however. In many instances, testing requires the
destruction of a material sample, so exhaustive testing is not even possible. As a result, small
samples are used to establish the basis of accepting or rejecting a particular work item or
shipment of materials. Statistical methods are used to interpret the results of test on a small
sample to reach a conclusion concerning the acceptability of an entire lot or batch of materials or
work products.

The use of statistics is essential in interpreting the results of testing on a small sample. Without
adequate interpretation, small sample testing results can be quite misleading. As an example,
suppose that there are ten defective pieces of material in a lot of one hundred. In taking a sample
of five pieces, the inspector might not find any defective pieces or might have all sample pieces
defective. Drawing a direct inference that none or all pieces in the population are defective on
the basis of these samples would be incorrect. Due to this random nature of the sample selection
process, testing results can vary substantially. It is only with statistical methods that issues such
as the chance of different levels of defective items in the full lot can be fully analyzed from a
small sample test.

There are two types of statistical sampling which are commonly used for the purpose of quality
control in batches of work or materials:

1. The acceptance or rejection of a lot is based on the number of defective (bad) or

nondefective (good) items in the sample. This is referred to as sampling by attributes.
2. Instead of using defective and nondefective classifications for an item, a quantitative
quality measure or the value of a measured variable is used as a quality indicator. This
testing procedure is referred to as sampling by variables.

Whatever sampling plan is used in testing, it is always assumed that the samples are
representative of the entire population under consideration. Samples are expected to be chosen
randomly so that each member of the population is equally likely to be chosen. Convenient
sampling plans such as sampling every twentieth piece, choosing a sample every two hours, or
picking the top piece on a delivery truck may be adequate to insure a random sample if pieces are
randomly mixed in a stack or in use. However, some convenient sampling plans can be
inappropriate. For example, checking only easily accessible joints in a building component is
inappropriate since joints that are hard to reach may be more likely to have erection or
fabrication problems.

Another assumption implicit in statistical quality control procedures are that the quality of
materials or work is expected to vary from one piece to another. This is certainly true in the field
of construction. While a designer may assume that all concrete is exactly the same in a building,
the variations in material properties, manufacturing, handling, pouring, and temperature during
setting insure that concrete is actually heterogeneous in quality. Reducing such variations to a
minimum is one aspect of quality construction. Insuring that the materials actually placed
achieve some minimum quality level with respect to average properties or fraction of defectives
is the task of quality control.

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Statistical Quality Control with Sampling by Attributes

Attribut

Sampling by attributes is a widely applied quality control method. The procedure is intended to
determine whether or not a particular group of materials or work products is acceptable. In the
literature of statistical quality control, a group of materials
materials or work items to be tested is called a
lot or batch.. An assumption in the procedure is that each item in a batch can be tested and
classified as either acceptable or deficient based upon mutually acceptable testing procedures and
acceptance criteria. Each ch lot is tested to determine if it satisfies a minimum acceptable quality
level (AQL) expressed as the maximum percentage of defective items in a lot or process.

In its basic form, sampling by attributes is applied by testing a pre

pre-defined
defined number of samp
sample
items from a lot. If the number of defective items is greater than a trigger level, then the lot is
rejected as being likely to be of unacceptable quality. Otherwise, the lot is accepted. Developing
this type of sampling plan requires consideration of pprobability,
robability, statistics and acceptable risk
levels on the part of the supplier and consumer of the lot. Refinements to this basic application
procedure are also possible. For example, if the number of defectives is greater than some pre-pre
defined number, then additional sampling may be started rather than immediate rejection of the
lot.

In many cases, the trigger level is a single defective item in the sample. In the remainder of this
section, the mathematical basis for interpreting this type of sampling plan is developed.

More formally, a lot is defined as acceptable if it contains a fraction p1 or less defective items.
Similarly, a lot is defined as unacceptable if it contains a fraction p2 or more defective units.
Generally, the acceptance fraction is less than or equal to the rejection fraction, p1 p2, and the
two fractions are often equal so that there is no ambiguous range of lot acceptability between p1
and p2. Given a sample size and a trigger level for lot rejection or acceptance, we would like to
determine
termine the probabilities that acceptable lots might be incorrectly rejected (termed producer's
risk)) or that deficient lots might be incorrectly accepted (termed consumer's risk
risk).

Consider a lot of finite number N, in which m items are defective (bad) and
an the remaining (N-m)
items, are non-defective
defective (good). If a random sample of n items is taken from this lot, then we can
determine the probability of having different numbers of defective items in the sample. With a
pre-defined
defined acceptable number of defecti
defective
ve items, we can then develop the probability of
accepting a lot as a function of the sample size, the allowable number of defective items, and the
actual fraction of defective items. This derivation appears below.

The number of different samples of size n that can be selected from a finite population N is
termed a mathematical combination and is computed as:

(5.1)

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where a factorial, n! is n*(n-1)*(n-2)... (1) and zero factorial (0!) is one by convention. The
number of possible samples with exactly x defectives is the combination associated with
obtaining x defectives from m possible defective items and n-x good items from N-m good
items:

(5.2)

Given these possible numbers of samples, the probability of having exactly x defective items in
the sample are given by the ratio as the hyper geometric series:

(5.3)

With this function, we can calculate the probability of obtaining different numbers of defectives
in a sample of a given size.

Suppose that the actual fraction of defectives in the lot is p and the actual fraction of
nondefectives is q, then p plus q is one, resulting in m = Np, and N - m = Nq. Then, a function
g(p) representing the probability of having r or less defective items in a sample of size n is
obtained by substituting m and N into Eq. (4.3) and summing over the acceptable defective
number of items:

(5.4)

If the number of items in the lot, N, is large in comparison with the sample size n, then the
function g(p) can be approximated by the binomial distribution:

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(5.5)

Or

(5.6)

The function g(p) indicates the probability of accepting a lot, given the sample size n and the
number of allowable defective items in the sample r. The function g(p) can be represented
graphically for each combination of sample size n and number of allowable defective items r, as
shown in Figure 4-1. Each curve is referred to as the operating characteristic curve (OC curve) in
this graph. For the special case of a single sample (n=1), the function g(p) can be simplified:

(5.7)

so that the probability of accepting a lot is equal to the fraction of acceptable items in the lot. For
example, there is a probability of 0.5 that the lot may be accepted from a single sample test even
if fifty percent of the lot is defective.

Figure 5-1 Example Operating Characteristic Curves Indicating Probability of Lot Acceptance

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For any combination of n and r, we can read off the value of g(p) for a given p from the
corresponding OC curve. For example, n = 15 is specified in Figure 44-1.
1. Then, for va
various values
of r, we find:

r=0 p=24% g(p) 2%

r=0 p=4% g(p) 54%
r=1 p=24% g(p) 10%
r=1 p=4% g(p) 88%

The producer's and consumer's risk can be related to various points on an operating characteristic
curve. Producer's risk is the chance that otherwise acceptable lots fail the sampling plan (i.e.
have more than the allowable number of defective items in th thee sample) solely due to random
fluctuations in the selection of the sample. In contrast, consumer's risk is the chance that an
unacceptable lot is acceptable (i.e. has less than the allowable number of defective items in the
sample) due to a better than average
average quality in the sample. For example, suppose that a sample
size of 15 is chosen with a trigger level for rejection of one item. With a four percent acceptable
level and a greater than four percent defective fraction, the consumer's risk is at most eighty-
eig
eight percent. In contrast, with a four percent acceptable level and a four percent defective
fraction, the producer's risk is at most 1 - 0.88 = 0.12 or twelve percent.

In specifying the sampling plan implicit in the operating characteristic curve, the
th supplier and
consumer of materials or work must agree on the levels of risk acceptable to themselves. If the
lot is of acceptable quality, the supplier would like to minimize the chance or risk that a lot is
rejected solely on the basis of a lower than aaverage
verage quality sample. Similarly, the consumer
would like to minimize the risk of accepting under the sampling plan a deficient lot. In addition,
both parties presumably would like to minimize the costs and delays associated with testing.
Devising an acceptable
table sampling plan requires trade off the objectives of risk minimization
among the parties involved and the cost of testing.

Example 5-1:
1: Acceptance probability calculation

Suppose that the sample size is five (n=5) from a lot of one hundred items (N=100). The lot of
materials is to be rejected if any of the five samples is defective (r = 0). In this case, the
probability of acceptance as a function of the actual number of defective
defective items can be computed
by noting that for r = 0, only one term (x = 0) need be considered in Eq. (4.4). Thus, for N = 100
and n = 5:

For a two percent defective fraction (p = 0.02), the resulting acceptance value is:

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Using the binomial approximation in Eq. (4.5), the comparable calculation would be:

This is a difference of 0.0019, or 0.21 percent from the actual value of 0.9020 found above.

If the acceptable defective proportion was two percent (so p1 = p2 = 0.02), then the chance of an
incorrect rejection (or producer's risk) is 1 - g(0.02) = 1 - 0.9 = 0.1 or ten percent. Note that a
prudent producer should insure better than minimum quality products to reduce the probability or
chance of rejection under this sampling plan. If the actual proportion of defectives was one
percent, then the producer's risk would be only five percent with this sampling plan.

Example 5-2: Designing a Sampling Plan

Suppose that an owner (or product "consumer" in the terminology of quality control) wishes to
have zero defective items in a facility with 5,000 items of a particular kind. What would be the
different amounts of consumer's risk for different sampling plans?

With an acceptable quality level of no defective items (so p1 = 0), the allowable defective items
in the sample is zero (so r = 0) in the sampling plan. Using the binomial approximation, the
probability of accepting the 5,000 items as a function of the fraction of actual defective items and
the sample size is:

To insure a ninety percent chance of rejecting a lot with an actual percentage defective of one
percent (p = 0.01), the required sample size would be calculated as:

Then,

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As can be seen, large sample sizes are required to insure relatively large probabilities of zero
defective items.

stical Quality Control with Sampling by Variables

Statistical

As described in the previous section, sampling by attributes is based on a classification of items

as good or defective.. Many work and material attributes possess continuous properties, such as
strength, density
nsity or length. With the sampling by attributes procedure, a particular level of a
variable quantity must be defined as acceptable quality. More generally, two items classified as
good might have quite different strengths or other attributes. Intuitively, it seems reasonable that
some "credit" should be provided for exceptionally good items in a sample. Sampling by
variables was developed for application to continuously measurable quantities of this type.
type The
procedure uses measured values of an attribute in a sample to determine the overall acceptability
of a batch or lot. Sampling by variables has the advantage of using more information from tests
since it is based on actual measured values rather than a simple classification. As a result,
acceptance sampling
ling by variables can be more efficient than sampling by attributes in the sense
that fewer samples are required to obtain a desired level of quality control.

In applying sampling by variables, an acceptable lot quality can be defined with respect to an
upper
pper limit U, a lower limit L, or both. With these boundary conditions, an acceptable quality
level can be defined as a maximum allowable fraction of defective items, M. In Figure 44-2, the
probability distribution of item attribute x is illustrated. With an
an upper limit U, the fraction of
defective items is equal to the area under the distribution function to the right of U (so that x
U).

This fraction of defective items would be compared to the allowable fraction M to determine the
acceptability of a lot. With both a lower and an upper limit on acceptable quality, the fraction
defective would be the fraction of items greater than the upper limit or less than the lower limit.
Alternatively, the limits could be imposed upon the acceptable average level of the
th variable

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Figure 5-2 Variable Probability Distributions and Acceptance Regions

In sampling by variables, the fraction of defective items is estimated by using measured values
from a sample of items. As with sampling by attributes, the procedure assumes a random sample
of a given size is obtained from a lot or batch. In the applicatio
application
n of sampling by variables plans,
the measured characteristic is virtually always assumed to be normally distributed as illustrated
in Figure 4-2.
2. The normal distribution is likely to be a reasonably good assumption for many
measured characteristics such asas material density or degree of soil compaction. The Central
Limit Theorem provides a general support for the assumption: if the source of variations is a
large number of small and independent random effects, then the resulting distribution of values
will approximate the normal distribution. If the distribution of measured values is not likely to be
approximately normal, then sampling by attributes should be adopted. Deviations from normal
distributions may appear as skewed or non-symmetric distributions, orr as distributions with fixed
upper and lower limits.

The fraction of defective items in a sample or the chance that the population average has
different values is estimated from two statistics obtained from the sample: the sample mean and
standard deviation.
ion. Mathematically, let n be the number of items in the sample and xi, i = 1, 2,
3,..., n, be the measured values of the variable characteristic x. Then an estimate of the overall
population mean is the sample mean:

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(5.8)

An estimate of the population standard deviation is s, the square root of the sample variance
statistic:

(5.9)

Based on these two estimated parameters and the desired limits, the various fractions of interest
for the population can be calculated.

The probability that the average value of a population is greater than a particular lower limit is
calculated from the test statistic:

(5.10)

If the population standard deviation is known in advance, then this known value is substituted for
the estimate s and the resulting test statistic would be normally distributed. The t distribution is
similar in appearance to a standard normal distribution, although the spread or variability in the
function decreases as the degrees of freedom parameter increases. As the number of degrees of
freedom becomes very large, the t-distribution coincides with the normal distribution.

With an upper limit, the calculations are similar, and the probability that the average value of a
population is less than a particular upper limit can be calculated from the test statistic:

(5.11)

With both upper and lower limits, the sum of the probabilities of being above the upper limit or
below the lower limit can be calculated.

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The calculations to estimate the fraction of items above an upper limit or below a lower limit are
very similar to those for the population average. The only difference is that the square root of the
number of samples does not appear in the test statistic formulas:

(5.12)

and

(5.13)

Where tAL is the test statistic

istic for all items with a lower limit and tAU is the test statistic for all
items with a upper limit. For example, the test statistic for items above an upper limit of 8.5 with
= 4.0, s = 3.0, and n = 5 is tAU = (8.5 - 4.0)/3.0 = 1.5 with n - 1 = 4 degre
degrees of freedom.

Instead of using sampling plans that specify an allowable fraction of defective items, it saves
computations to simply write specifications in terms of the allowable test statistic values
themselves. This procedure is equivalent to requirin
requiringg that the sample average be at least a pre-
pre
specified number of standard deviations away from an upper or lower limit. For example, with
= 4.0, U = 8.5, s = 3.0 and n = 41, the sample mean is only about (8.5 - 4.0)/3.0 = 1.5 standard
deviations away from the upper limit.

To summarize, the application of sampling by variables requires the specification of a sample

size, the relevant upper or limits, and either (1) the allowable fraction of items falling outside the
designated limits or (2) the allowable probability that the population average falls outside the
designated limit. Random samples are drawn from a pre-defined pre defined population and tested to
obtained measured values of a variable attribute. From these measurements, the sample mean,
standard deviation, and quality control test statistic are calculated. Finally, the test statistic is
compared to the allowable trigger level and the lot is either accepted or rejected. It is also
possible to apply sequential sampling in this procedure, so that a batch may be subjected to
additional
ional sampling and testing to further refine the test statistic values.

With sampling by variables, it is notable that a producer of material or work can adopt two
general strategies for meeting the required specifications. First, a producer may insure ththat the
average quality level is quite high, even if the variability among items is high. This strategy is
illustrated in Figure 5-33 as a "high quality average" strategy. Second, a producer may meet a
desired quality target by reducing the variability withinn each batch. In Figure 5-3,
5 this is labeled
the "low variability" strategy. In either case, a producer should maintain high standards to avoid
rejection of a batch.

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Figure 5-3
5 Testing for Defective Component Strengths

Example 5-3:
3: Testing for defective
defecti component strengths

Suppose that an inspector takes eight strength measurements with the following results:

4.3, 4.8, 4.6, 4.7, 4.4, 4.6, 4.7, 4.6

In this case, the sample mean and standard deviation can be calculated using Equations (4.8) and
(4.9):
= 1/8(4.3 + 4.8 + 4.6 + 4.7 + 4.4 + 4.6 + 4.7 + 4.6) = 4.59
s2=[1/(8-1)][(4.3 - 4.59)2 + (4.8 - 4.59)2 + (4.6 - 4.59)2 + (4.7 - 4.59)2 + (4.4 - 4.59)2 + (4.6 -
4.59)2 + (4.7 - 4.59)2 + (4.6 - 4.59)2] = 0.16
The percentage of items below a lower quality limit of L = 4.3 is estimated from the test statistic
tAL in Equation (5.12):

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6. Project Risk Management

Risk management is the systematic process of identifying, analyzing, and responding to project
risk. It includes maximizing the probability and consequences of positive events and minimizing
the probability and consequences of adverse events to project objectives.
The following are the major processes in risk management:

 Risk Management Planning: deciding how to approach and plan the risk management
activities for a project.
 Risk Identification: determining which risks might affect the project and documenting
their characteristics.
 Qualitative Risk Analysis: performing a qualitative analysis of risks and conditions to
prioritize their effects on project objectives.
 Quantitative Risk Analysis: measuring the probability and consequences of risks and
estimating their implications for project objectives.
 Risk Response Planning: developing procedures and techniques to enhance opportunities
and reduce threats to the project’s objectives.
 Risk Monitoring and Control; monitoring residual risks, identifying new risks, executing
risk reduction plans, and evaluating their effectiveness throughout the project life cycle.

These processes interact with each other and with the processes in the other knowledge areas.
Each process generally occurs at least once in every project. Although processes are presented
here as discrete elements with well-defined interfaces, in practice they may overlap and interact
in ways not detailed here.

Project risk is an uncertain event or condition that, if it occurs, has a positive or a negative effect
on a project objective. A risk has a cause and, if it occurs, a consequence. For example, a cause
may be requiring a permit or having limited personnel assigned to the project. The risk event is
that the permit may take longer than planned, or the personnel may not be adequate for the task.
If either of these uncertain events occurs, there will be a consequence on the project cost,
schedule, or quality. Risk conditions could include aspects of the project environment that may
contribute to project risk such as poor project management practices, or dependency on external
participants that cannot be controlled.

Project risk includes both threats to the project’s objectives and opportunities to improve on
those objectives. It has its origins in the uncertainty that is present in all projects. Known risks
are those that have been identified and analyzed, and it may be possible to plan for them.
Unknown risks cannot be managed, although project managers may address them by applying a
general contingency based on past experience with similar projects.

Organizations perceive risk as it relates to threats to project success. Risks that are threats to the
project may be accepted if they are in balance with the reward that may be gained by taking the
risk. For example, adopting a fast-track schedule that may be overrun is a risk taken to achieve
an earlier completion date. Risks that are opportunities may be pursued to benefit the project’s
objectives.

To be successful, the organization must be committed to addressing risk management throughout

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the project. One measure of the organizational commitment is its dedication to gathering high-
quality data on project risks and their characteristics.

6.1 Risk Management Planning

Outputs from Risk Management Planning

Risk management plan: The risk management plan describes how risk identification,
qualitative and quantitative analysis, response planning, monitoring, and control will be
structured and performed during the project life cycle. The risk management plan does
not address responses to individual risks.
The risk management plan may include the following.
• Methodology. Defines the approaches, tools, and data sources that may be used to perform risk
management on this project. Different types of assessments may be appropriate, depending
upon the project stage, amount of information available, and flexibility remaining in risk
management.
• Roles and responsibilities. Defines the lead, support, and risk management team membership
for each type of action in the risk management plan. Risk management teams organized
outside of the project office may be able to perform more independent, unbiased risk analyses
of project than those from the sponsoring project team.
• Budgeting. Establishes a budget for risk management for the project.
• Timing. Defines how often the risk management process will be performed throughout the
project life cycle. Results should be developed early enough to affect decisions. The decisions
should be revisited periodically during project execution.
• Scoring and interpretation. The scoring and interpretation methods appropriate for the type and
timing of the qualitative and quantitative risk analysis being performed. Methods and scoring
must be determined in advance to ensure consistency.
• Thresholds. The threshold criteria for risks that will be acted upon, by whom, and in what
manner. The project owner, customer, or sponsor may have a different risk threshold. The
acceptable threshold forms the target against which the project team will measure the
effectiveness of the risk response plan execution.
• Reporting formats. Describes the content and format of the risk response plan. Defines how the
results of the risk management processes will be documented, analyzed, and communicated to
the project team, internal and external stakeholders, sponsors, and others.

Risk management planning is the process of deciding how to approach and plan the risk
management activities for a project. It is important to plan for the risk management processes
that follow to ensure that the level, type, and visibility of risk management are commensurate
with both the risk and importance of the project to the organization.

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6.2 Risk Identification

Risk identification involves determining which risks might affect the project and documenting
their characteristics. Participants in risk identification generally includes the following: project
team, risk management team, subject matter experts from other parts of the company, customers,
end users, other project managers, stakeholders, and outside experts.

Risk identification is an iterative process. The first iteration may be performed by a part of the
project team, or by the risk management team. The entire project team and primary stakeholders
may make a second iteration. To achieve an unbiased analysis, persons who are not involved in
the project may perform the final iteration. Often simple and effective risk responses can be
developed and even implemented as soon as the risk is identified.

Tools and Techniques for Risk Identification

1. Documentation reviews: Performing a structured review of project plans and assumptions,

both at the total project and detailed scope levels, prior project files, and other information is
generally the initial step taken by project teams.
2. Information-gathering techniques. Examples of information-gathering techniques used in risk
identification can include brainstorming; Delphi; interviewing; and strengths, weaknesses,
opportunities, and threats (SWOT) analysis.
Brainstorming: Brainstorming is probably the most frequently used risk
identification technique. The goal is to obtain a comprehensive list of risks that
can be addressed later in the qualitative and quantitative risk analysis
processes. The project team usually performs brainstorming, although a
multidisciplinary set of experts can also perform this technique. Under the
leadership of a facilitator, these people generate ideas about project risk.
Sources of risk are identified in broad scope and posted for all to examine
during the meeting. Risks are then categorized by type of risk, and their
definitions are sharpened.
Delphi technique: The Delphi technique is a way to reach a consensus of
experts on a subject such as project risk. Project risk experts are identified but
participate anonymously. A facilitator uses a questionnaire to solicit ideas
about the important project risks. The responses are submitted and are then
circulated to the experts for further comment. Consensus on the main project
risks may be reached in a few rounds of this process. The Delphi technique
helps reduce bias in the data and keeps any person from having undue
influence on the outcome.
Interviewing: Risks can be identified by interviews of experienced project
managers or subject-matter experts. The person responsible for risk
identification identifies the appropriate individuals, briefs them on the project,
and provides information such as the WBS and the list of assumptions. The
interviewees identify risks on the project based on their experience,
project information, and other sources that they find useful.
Strengths, weaknesses, opportunities, and threats (SWOT) analysis. Ensures
examination of the project from each of the SWOT perspectives to increase the
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 Principles of Construction Management

breadth of the risks considered.

3. Checklists. Checklists for risk identification can be developed based on historical information
and knowledge that has been accumulated from previous similar projects and from other sources
of information. One advantage of using a check list is that risk identification is quick and simple.

One disadvantage is that it is impossible to build an exhaustive checklist of risks, and the user
may be effectively limited to the categories in the list. Care should be taken to explore items that
do not appear on a standard checklist if they seem relevant to the specific project. The checklist
should itemize all types of possible risks to the project.

4. Assumptions analysis. Every project is conceived and developed based on a set of hypotheses,
scenarios, or assumptions. Assumptions analysis is a technique that explores the assumptions
validity. It identifies risks to the project from inaccuracy, inconsistency, or incompleteness of
assumptions.

6.3 Risk Analysis

The purpose of risk analysis is to measure the impact of the identified risks on a project.
Depending on the available data, risk analysis can be performed qualitatively or quantitatively.

6.3.1 Qualitative Risk Analysis

Qualitative risk analysis is the process of assessing the impact and likelihood of identified risks.
This process prioritizes risks according to their potential effect on project objectives. Qualitative
risk analysis is one way to determine the importance of addressing specific risks and guiding risk
responses. The time-criticality of risk-related actions may magnify the importance of a risk. An
evaluation of the quality of the available information also helps modify the assessment of the
risk. Qualitative risk analysis requires that the probability and consequences of the risks be
evaluated using established qualitative-analysis methods and tools. Trends in the results when
qualitative analysis is repeated can indicate the need or more or less risk-management action.
Use of these tools helps correct biases that are often present in a project plan.

Tools and Techniques for Qualitative Risk Analysis

1. Risk probability and impact. Risk probability and risk consequences may be described in
qualitative terms such as very high, high, moderate, low, and very low.
Risk probability is the likelihood that a risk will occur.
Risk consequence is the effect on project objectives if the risk event occurs.
These two dimensions of risk are applied to specific risk events, not to the overall project.
Analysis of risks using probability and consequences helps identify those risks that should be
managed aggressively.

2. Probability/impact risk rating matrix. A matrix may be constructed that assigns risk ratings
(very low, low, moderate, high, and very high) to risks or conditions based on combining
probability and impact scales. Risks with high probability and high impact are likely to require
further analysis, including quantification, and aggressive risk management. The risk rating is
accomplished using a matrix and risk scales for each risk.
A risk’s probability scale naturally falls between 0.0 (no probability) and 1.0 (certainty).

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Assessing risk probability may be difficult because expert judgment is used, often without
benefit of historical data. An ordinal scale, representing relative probability values from very
unlikely to almost certain, could be used. Alternatively, specific probabilities could be assigned
by using a general scale (e.g. .1/ .3 / .5 / .7 / .9).
The risk’s impact scale reflects the severity of its effect on the project objective. Impact can be
ordinal or cardinal, depending upon the culture of the organization conducting the analysis.
Ordinal scales are simply rank-ordered values, such as very low, low, moderate, high, and very
high. Cardinal scales assign values to these impacts. These values are usually linear (e.g., .1 / .3 /
.5 / .7 / .9), but are often nonlinear (e.g., .05 / .1 / .2 / .4 / .8), reflecting the organization’s desire
to avoid high impact risks. The intent of both approaches is to assign a relative value to the
impact on project objectives if the risk in question occurs. Well-defined scales, whether ordinal
or cardinal, can be developed using definitions agreed upon by the organization. These
definitions improve the quality of the data and make the process more repeatable.
Figure 5-1 is an example of evaluating risk impacts by project objective. It illustrates its use for
either ordinal or cardinal approach. These scaled descriptors of relative impact should be
prepared by the organization before the project begins.

Evaluating Impact of a Risk on Major Project Objectives (ordinal scale or cardinal, non-linear scale)

Project Objective Very low (0.05) Low (0.1) Moderate (0.2) High (0.4) Very High 0.8)
Insignificant <5% Cost 5_10% Cost 10_20% Cost >20% Cost
Cost Cost Increase Increase Increase Increase Increase

Insignificant Schedule Overall Project Overall Project Overall Project

Schedule Slippage Slippage Slippage Schedule Slips
Schedule Slippage <5% 5_10% 10_20% >20%

Scope Decrease Minor Areas Major Areas of Reduction Project End

Barely of Scope scope Unacceptable Item Is
Scope Are Affected are affected to the Client Effectively
Noticeable
Useless

Only Very Quality Project End

Quality Quality
Quality Demanding Reduction Item Is
Degradation Reduction
Applications Unacceptable Effectively
Barely Requires Client
Are Affected to the Client Unusable
Noticeable Approval

Fig 6.1Rating Impacts for a Risk

The impacts on project objectives can be assessed on a scale from Very Low to Very High or on
a numerical scale. The numerical (cardinal) scale shown here is non-linear, indicating that the
organization wishes specifically to avoid risks with high and very-high impact.
Figure 5-2 is a Probability-Impact (P-I) matrix. It illustrates the simple multiplication of the scale
values assigned to estimates of probability and impact, a common way to combine these two
dimensions, to determine whether a risk is considered low, moderate, or high. This figure
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presents a non-linear scale as an example of aversion to high-impact risks, but linear scales are
often used. Alternatively, the P-I matrix can be developed using ordinal scales. The organization
must determine which combinations of probability and impact result in a risk’s being classified
as high risk (red condition), moderate risk (yellow condition), and low risk (green condition) for
either approach. The risk score helps put the risk into a category that will guide risk response
actions.

Risk Score for a Specific Risk

Probability Risk Score = P × I

0.9 0.05 0.09 0.18 0.36 0.72

0.7 0.04 0.07 0.14 0.28 0.56

0.5 0.03 0.05 0.10 0.20 0.40

0.3 0.02 0.03 0.06 0.12 0.24

0.1 0.01 0.01 0.02 0.04 0.08

0.05 0.10 0.20 0.40 0.80

Impact on an Objective (e.g., cost, time, or scope)

(Ratio Scale)

Figure 6.2 Probability-Impact Matrix

Each risk is rated on its probability of occurring and impact if it does occur. The organization’s
thresholds for low (green), moderate (yellow) or high (red) risk as shown in the matrix determines the
risk’s score.

6.3.2 Quantitative Risk Analysis

The quantitative risk analysis process aims to analyze numerically the probability of each risk
and its consequence on project objectives, as well as the extent of overall project risk. This
process uses techniques such as Monte Carlo simulation and decision analysis to:
Determine the probability of achieving a specific project objective.
Quantify the risk exposure for the project, and determine the size of cost and schedule
contingency reserves that may be needed.
Identify risks requiring the most attention by quantifying their relative contribution to
project risk.
Identify realistic and achievable cost, schedule, or scope targets.
Quantitative risk analysis generally follows qualitative risk analysis. It requires risk
identification. The qualitative and quantitative risk analysis processes can be used separately or
together. Considerations of time and budget availability and the need for qualitative or
quantitative statements about risk and impacts will determine which method(s) to use. Trends in

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the results when quantitative analysis is repeated can indicate the need for more or less risk
management action.

Tools and Techniques for Quantitative Risk Analysis

1. Interviewing. Interviewing techniques are used to quantify the probability and
consequences of risks on project objectives. A risk interview with project stakeholders
and subject-matter experts may be the first step in quantifying risks. The information
needed depends upon the type of probability distributions that will be used. For instance,
information would be gathered on the optimistic (low), pessimistic (high), and the most
likely scenarios if triangular distributions are used, or on mean and standard deviation for
the normal and log normal distributions.
The risk interview determines the three-point estimates for each WBS element. The traditional estimate
of $41, found by summing the most likely costs, is relatively unlikely, as shown in Figure 6.3.

Examples of three-point estimates for a cost estimate are shown in Figure 6-3. Continuous
probability distributions are usually used in quantitative risk analysis. Distributions represent
both probability and consequences of the project component.

Project Cost Estimates and Ranges

WBS Element Low Most Likely High
Design 4 6 10
Build 16 20 35
Test 11 15 23
Total Project 41
Figure 6.3 Cost Estimates and Ranges from the Risk Interview

2. Sensitivity analysis. Sensitivity analysis helps to determine which risks have the most
potential impact on the project. It examines the extent to which the uncertainty of each
project element affects the objective being examined when all other uncertain elements
are held at their baseline values.

3. Decision tree analysis. A decision analysis is usually structured as a decision tree. The
decision tree is a diagram that describes a decision under consideration and the
implications of choosing one or another of the available alternatives. It incorporates
probabilities of risks and the costs or rewards of each logical path of events and future
decisions. Solving the decision tree indicates which decision yields the greatest expected
value to the decision-maker when all the uncertain implications, costs, rewards, and
subsequent decisions are quantified.

4. Simulation. A project simulation uses a model that translates the uncertainties specified at
a detailed level into their potential impact on objectives that are expressed at the level of
the total project. Project simulations are typically performed using the Monte Carlo
technique. For a cost risk analysis, a simulation may use the traditional project WBS as
its model.

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6.4 Risk Response

Risk response is an action or a series of actions designed to deal with the presence of risk. This involves
developing mitigation and treatment strategies, and implementing them. Several risk response
strategies are available. The strategy that is most likely to be effective should be selected for
each risk. Then, specific actions should be developed to implement that strategy. The following
are some of the possible responses to the risk.
1. Avoidance. Risk avoidance is changing the project plan to eliminate the risk or condition
or to protect the project objectives from its impact. Although the project team can never
eliminate all risk events, some specific risks may be avoided. Some risk events that arise
early in the project can be dealt with by clarifying requirements, obtaining information,
improving communication, or acquiring expertise. Reducing scope to avoid high-risk
activities, adding resources or time, adopting a familiar approach instead of an
innovative one, or avoiding an unfamiliar subcontractor may be examples of avoidance.

2. Transference. Risk transfer is seeking to shift the consequence of a risk to a third party
together with ownership of the response. Transferring the risk simply gives another party
responsibility for its management; it does not eliminate it. Transferring liability for risk is
most effective in dealing with financial risk exposure. Risk transfer nearly always
involves payment of a risk premium to the party taking on the risk. It includes the use of
insurance, performance bonds, warranties, and guarantees. Contracts may be used to
transfer liability for specified risks to another party. Use of a fixed-price contract may
transfer risk to the seller if the project’s design is stable. Although a cost-reimbursable
contract leaves more of the risk with the customer or sponsor, it may help reduce cost if
there are mid project changes.

3. Mitigation. Mitigation seeks to reduce the probability and/or consequences of an adverse

risk event to an acceptable threshold. Taking early action to reduce the probability of a
risk’s occurring or its impact on the project is more effective than trying to repair the
consequences after it has occurred. Mitigation costs should be appropriate, given the
likely probability of the risk and its consequences. Risk mitigation may take the form of
implementing a new course of action that will reduce the problem e.g., adopting less
complex processes, conducting more seismic or engineering tests, or choosing a more
stable seller. It may involve changing conditions so that the probability of the risk
occurring is reduced e.g. adding resources or time to the schedule. It may require
prototype development to reduce the risk of scaling up from a bench-scale model. Where
it is not possible to reduce probability, a mitigation response might address the risk
impact by targeting linkages that determine the severity. For example, designing
redundancy into a subsystem may reduce the impact that results from a failure of the
original component.

4. Acceptance. This technique indicates that the project team has decided not to change the
project plan to deal with a risk or is unable to identify any other suitable response
strategy. Active acceptance may include developing a contingency plan to execute,
should a risk occur. Passive acceptance requires no action, leaving the project team to
deal with the risks as they occur.
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6.5 Risks in construction Projects

The construction risks can be broadly grouped under the following categories:

Technical Risks

• Incomplete design.
• Inadequate site investigation.
• Uncertainty over the source and availability of materials.
• Appropriateness of specifications.

Logistical Risks

• Availability of resources - particularly construction equipments, spare parts, fuel and

labor.
• Availability of sufficient transportation facilities.

Construction Risks

• Uncertain productivity of resources.

• Weather and seasonal implications.
• Industrial relations problems.

Financial Risks

• Inflation.
• Availability and fluctuation in foreign exchange.
• Delay in Payment.
• Local taxes.

Political Risks

• Constraints on the availability and employment of expatriate staff.

• Customs and import restrictions and procedures.
• Difficulties in disposing of plant and equipment.
• Insistence on use of local firms and agents.

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