BY FREDERICK A.
NUAMAH
KAAF UNIVERSITY COLLEGE
FACULTY OF ENGINEERING
DEPARTMENT OF CONSTRUCTION TECHNOLOGY
Structure of the Construction Industry
Economics of the Construction Industry
Construction Cost, Price and Value
Design factors of Geometry
Estimating: Levels of Estimating, Introduction
to Estimating Procedure.
Introduction to basic construction resources:
Labour, Materials and Plant
Ashworth, A. (1998) Cost Studies of Building
(4th Edition) Longmans
Barthurst, P.E. (1973) Building Cost Control
Techniques and Economics. Heinemann
Seely, I.H. (1975) Building Economics.
Macmillan
Ferry, D.J. and Brandon, P.S. (1994) Cost
Planning of Buildings. Granada
The construction industry is an industry that
undertakes constructional works (.i.e. The
production of land of certain kinds of fixed
capital goods).
It can be described as a manufacturing industry
that produces investment products either for
promoting production process/consumption.
It is a collection of industries (i.e. Cement
industry, steel industry, timber industry, stone
& quarry industry)
The physical nature of the product
The fact that the product is normally
manufactured on the Client’s premises
The fact that many of its projects are one-off
designs, with no prototype model available
The arrangement of the industry, where
design is normally separate from
construction.
The organisation of the construction process
The methods used for price determination
The final product is often large and
expensive.
It can represent a client’s largest single
capital outlay.
Most construction are bespoke designed and
manufactured to suit the individual needs of
each customer.
Individual project can often represent a large
proportion of the turnover of a single
contractor in any year.
Like other durable manufactured products (e.g.
Cars, furniture etc), requires a combination of
factors (land, capital and management) in its
production.
Land; for locating/producing the construction
product.
Capital; required on a long/short term basis to
finance plant/equipment, materials, and labour.
Management; needed to plan, organise and co-
ordinate the production process.
Besides these similarities of the construction
industry with the manufacturing industry, these
inherent x’tics of the construction industry
requires consideration.
The final product is large, in physical terms
Required over a large geographical area.
The product is unique in relation to design,
location, price, engineering and technological in
its production with few exceptions.
A large proportion of the materials/components
of the product are manufactured elsewhere.
The product has a long production cycle as
usually there is a long gestation period between
inception, design and production phases.
The price of existing stock of structures
determines the price of new stock, and small
fluctuations in the demand for the existing stock
have large repercussions on the price of new
stock.
The purchase and sale transaction for the
products are lengthy, complicated and expensive.
Interest in the product may be diverse and
proof of ownership can be quite a difficult,
lengthy and costly process.
The construction industry includes building,
civil engineering and process plant
engineering.
It is concerned with the planning, regulation,
design, manufacture, installation and
maintenance of buildings and other
structures.
Wide variety of activities, depending on the
size & type of projects undertaken and the
professional & trade skills required.
The industry may be classified and structured to
reflect the method of organising the
construction process but with the ff, x’tics:
A complex structure in terms of different
establishments involved in design, engineering,
surveying, production, plant hire and
materials/component supply;
Bedevil by separation of functions as, unlike
other industries, the design and production
functions of the construction process are
separate.
The contractual arrangement tends to cause
and sustain a “them and us” attitude which in
turn leads to friction among the project team;
A multi-party industry with cash flowing from
client to main contractor and then down the
sub-contract chain;
Transient production organisation;
The work place and production process
needs organising continuously with each new
project
Sketch and explain:
The separation of design and production
functions
Contractual relationship in the design and
build.
The CI plays a very vital role in the national
economy of countries worldwide. Its
importance stems from three of its
characteristics:
Size
Provision of predominantly investment
products
Government being the client for a large
proportion of its work
Contributes about 21.9% of the total
industrial output and
3.20% of the total Gross Domestic Product
(GDP)
Employs about 2.3% of the economically
active population and holds a similar position
in most economies worldwide.
Considered as an investment products
industry:
Its products created are wanted, especially on
account of the goods and services they can
create or help to create
Example; a factory building – used to produce
commodities
Their value is high in relation to the income
of the purchaser.
CI is used by governments for national
construction.
Due to the high monetary value of projects
undertaken by government, they
automatically becomes the industry’s major
client.
The actions of government at both the
national and local level determine the level of
demand for construction activities, cost of
production, supply conditions etc.
The influence of government on the CI is the
way it is affected in the short and long terms by
its economic measures.
The industry depends heavily on the economic
stability, therefore if it is to flourish requires
that governments manage their respective
economies efficiently.
An efficiently managed economy will ensure
solvency of national reserves, to maintain an
acceptable level of employment to maintain
growth and to control inflation.
There are measures government adopts that
adversely affect the activities of the industry
in particular whilst managing the economy.
They include:
Fiscal policy
Monetary policy
Fiscal policies are employed to influence the level
of aggregate demand in the economy.
By this practice government seek to balance
taxation and expenditure and affects the
construction industry as follow:
High income tax rate reduces net income and
hence, purchasing power of consumers and this
results in a fall in demand for
services/commodities
Tax on commodities/services raises their prices
and hence, reduces the demand for them.
Governments use monetary policies to regulate
the quantity of credit that is available from
banks and the various financial institutions.
This action causes credit to squeeze and level
of interest rates raised. However the CI is
particularly sensitive to both measures as
follows:
Credit squeeze adversely affects construction
companies who depend on short term finance
for their business operations.
An increase in interest rates raises cost of
borrowing and this in turn increases the cost
of projects, which may cause postponement
or cancellation of schemes not yet started.
However economic measures that lower
income tax put more cash in consumers
pockets and eventually increases demand for
commodities and construction activities as
well.
Government in general remain vital for the
promotion of construction activities and can
directly affect construction industry’s
workload, by:
Increased capital expenditure on more public
construction projects improves the trading
position of the industry
Reduction of expenditure on capital projects
affects the CI as it reduces demand for
construction activities.
Influencing the general level of aggregate
demand to determine purchasing power and
willingness of construction clients to proceed
with their programme of construction
investment.
What is estimating?
It is defined as the technical process of
predicting costs of construction.
An estimate must be prepared in a way that
is;
1) explicit
2) consistent
3) takes account of methods of construction and
circumstances which may affect the execution
of the work on a project
A reliable estimate can only be achieved
when;
a) each operation or item is analysed into its
simplest elements, and
b) the cost calculated methodically on the basis
of factual information.
The estimate is a base document which
provides an important budget for cost control
during construction.
It is based on this that many assessments and
judgements will be made during the
construction phase.
To establish an estimate for a project at the
pre-contract stage. The following
levels/stages are undertaken to establish a
budget:
Preliminary estimate
Element unit quantities estimate
Approximate quantities estimate
Accurate quantities estimate
Of all the pre-contract cost information provided,
preliminary estimates are the ones that keeps a
lasting impression.
They could be the least accurate estimates
It is required before drawings, and even simple
sketch plans are prepared
However they should not be produced until
information about the following is at hand
1) The site and its nature
2) The type of building and its use
3) The overall height, number of floors and total
floor area of each building.
The indication of the quality of materials and
workmanship to be specified
An outline of the engineering services to be
provided.
Preliminary estimate will be based either on the units
of accommodation or on the net floor area/volume
to be provided priced at appropriate GH₵/unit, GH₵/m2
or GH₵/m3
It is imperative to carry out comparative cost studies
of alternative plan shapes, numbers of floors, types
of structure and other matters fundamental to the
design.
In over all developing the preliminary cost
estimate will lead to a feasibility report,
advising the employer whether the project is
feasible functionally, technically and
financially.
This is the second level of estimating.
As more design information becomes
available, a more refined estimate may be
prepared to check the accuracy of the
preliminary estimate.
The proposed buildings will be analysed in
terms of element unit quantities.
These element units are then assigned
elemental unit rates.
The estimated cost of the external works and
services will be based upon individually priced
approximate quantities.
An element unit quantities estimate should not be
produced until the ff. are available:
Sketch plans:
1:200 plan of each floor
1:200 elevations
1:200 sections
1:500 or 1:200 site plan showing extent of
external works and location of external services.
Brief notes relating to the extent and/or standard
of:
Substructure
Frame
Upper floors
Roof
Stairs
External walls
Windows and external doors
Internal walls and partitions
Internal doors
Wall, floor and ceiling finishes
Fittings and furnishings
Internal services (e.g. Sanitary fittings, disposal,
water, electrical, lift, communications)
External services (e.g. Disposal, water, electric,
telephone)
External works (e.g. Roads, paving, walls,
fences, gates)
Brief notes on any unusual conditions of work
or contract.
This provide a more detailed approximate estimate
than any of the methods described.
They represent composite items which are measured
by combining or grouping together typical bill-
measured items.
This method relates cost to the actual work to be
carried out
Practically, only the major items that are of cost
importance are measured
It provides a more detailed and reliable method of
approximate estimating. However require more time
and effort.
Required considerable amount of information
from the designer.
Suitable for a more advanced design stage.
Contractors favour this method when they
have to prepare tenders on the basis of a
drawing and specification projects.
Using approximate quantities, the roof of a
building may be measured and described as
follows:
Three-layer bituminous felt on and including
50mm prefelted woodwool decking on
firrings on 50 x 200mm softwood joists at
450mm centres, including vapour barrier and
100mm fibreglass insulation
This level of estimate is produced only when
there are bills of quantities.
These are priced before tenders are received
to
check the accuracy of previous estimates
To give advance warning of where
adjustments in design may be necessary to
reduce cost and
To provide a base against which to compare
the lowest tender
CONSTRUCTION COST, PRICE AND
VALUE
The particular meaning of the above terms
generally lies in the context in which they
are being used.
◦ Cost to the building contractor, represents all those
items included under the heading of his
expenditure
◦ Cost is therefore reasonably clearly defined within
this context
Is the amount charged for the work carried
out by a contractor.
When this is received it becomes his income
The difference between cost and price is
PROFIT
Much more subjective than either price or cost.
In the economic theory of value, an object
must be scarce relative to demand to have a
value.
Where there is an abundance of a particular
object and only a limited demand for it, then,
using the economic criteria, it has little or no
value attributed to it.
Value constitute a measure, therefore, of the
relationship between supply and demand
An increase in the value of an object can
therefore be obtained either through an increase
in demand or a decrease in supply
Aristotle identified seven (7) classes of value that
are still relevant to our modern society.
These classifications of value can be summarised
as;
Economic
Moral value
Aesthetic
Social
Political
Religious
Judicial
Economic value may be seen as the more
objective consideration
This is because its measureable in terms of
money
The remainder are seen as being more subjective
Maximum value is assumed to be found when a
required service or function is attained
And when the cost of providing that service/function
is at a minimum
The following components of value when aggregated
combine to provide a clearer picture of value
Use value: this is the benefit attached to the function
for which the item is designed
Esteem value: this attribute measures the
attractiveness/aesthetics of the item
Cost value: this represents the costs to
produce/manufacture the item and to maintain it
over its period of possession or life
This relates very much to the issues
surrounding whole-life costing
Exchange value: this is the worth of an item
as perceived by others who are primarily
interested in its acquisition
How to derive profit
The following factors have a direct influence on
the cost of a project
These factors have to be considered during the
economic evaluation of the building or
engineering structure
They include:
◦ Site considerations
◦ Building size
◦ Planning efficiency
◦ Plan shape
◦ Height
◦ Storey height
Each consideration site has its own characteristics
This have an important influence on its suitability for
development
The type of project generally determines the size of the
site
The cost of the project is also affected by the location
of the site
Problems of access, materials deliveries, close
proximity of adjacent structures affects sites situated on
a congested city site
Transport costs and other associated costs also affects
sites located in the interior of the country
The availability of main services and the cost of their
provision
The construction cost also varies in different part of the
country
The location of the building on the site will also affect
the overall cost of the scheme; demonstrate examples..
The ground conditions of the site are a factor that can
substantially influence constructional costs
Poor ground-bearing capacity coupled with overall
poor working conditions for men and machines has a
high effect on cost
This makes construction expensive
And this is more worsened in inclement weather
Water-bearing ground, and the necessity to remove
obstructions or to work around them not only slows
down progress but also increases costs
Opposite conditions of running sand and hard rock
create their own peculiar problems
In cases where excavation work is necessary,
foundation costs are likely to increase
Steeply sloping sites can often result in large quantities
of cut and fill
Sloping banks should always be selected against
retaining walls for economic purposes
Artificial strengthening of the ground, the redirection
of watercourses or demolition can all significantly
increase costs and should be avoided where possible
Size is one of the foremost consideration for any
construction project
It is necessary in terms of cost efficiency, because costs
are not in proportion to changes in size
Because its generally determined by the client, the
designer has very little influence on the size
Larger buildings have lower unit costs than smaller-
sized projects offering an equivalent quality of
specification
Example
A house on an individual plot of land is expensive to
construct than a similar house which is part of a large
estate contract
Smaller factories cost more per unit than their larger
counterparts
The reasons been the effect of the economic theory of
economies of scale
Smaller projects take a proportionately longer time per
unit to design
A further reason for the lower unit cost is the lower wall-to-
floor ratio
For a given plan shape, a larger plan area will always result
in a lower ratio
Example:
A building 30m x 30m x 4m high has a wall-to-floor ratio of
0.533
A similar project offering nine times this area,
90m x 90m x 4m high, has a wall-to-floor ratio of 0.178
It might be noted at this point that just as size does not
change directly with cost, neither does the wall-to-floor ratio
There is a correlation of cost with wall-to-floor ratio
than with size
Manufacturers will always give larger discounts for
larger orders
Theoretical pricing data from price books will also
show costs grouped in project size bands
The utilisation of space has an effect on the costs of a
project
Designers who aim at economic layout will always
endeavour/attempt to reduce to an acceptable minimum
the amount of circulation/non-usable space
Circulation/non-usable space include entrance halls,
passages, corridors, stairways, lift wells etc
These areas cannot be used to generate any income and
yet require heating, cooling, lighting, cleaning,
decorating etc
All these requirements involves money.
Non-usable space are also known as dead space
Example with sketches
The more irregular the plan shape, the lower the
amount of usable space that is likely to be available
The building and planning regulations have influences
on the overall efficiency of the design layout
Example; provision of toilets in public buildings,
compliance with fire regulations and consideration for
means of escape
The plan shape of a building or any structure has a
significant effect on the total cost of the project
The simpler the shape of a building is, the more
economic the building becomes and hence less costly
A square plan shaped structure will in most cases
provide the most economic design solution
This is because a square shape provides less wall to
floor ratio
On the other hand, the more complex the shape the
higher the overall cost is expected to be
The lower the wall-to-floor ratio, the more economic
will be the design
An irregular outline will results in increased costs for
setting out, site works, drawing works etc
All of which are likely to be complicated and
expensive
The storey heights of buildings are largely determined by
the needs of the user
A greater storey height than normal may be necessary to
accommodate large machinery or equipment
It may be necessary to provide space within false ceilings
for service ducts for cables, pipes or air conditioning ducts
In other circumstances, increased storey heights may be
preferred for prestige reasons, as in the case of hotel foyers
Buildings such as churches, sports halls and theatres
provide for high storey heights because of either tradition or
design necessity
Excessive storey heights do have the effect of increasing the
costs of the vertical circulation elements initially
And also the future maintenance costs, particularly for
engineering services, such as heating and ventilation
Buildings with high storey heights will cost more per square
metre of floor area than comparable accommodation with
lower storey heights
Such buildings also result in higher wall-to-floor ratios
Although storey heights are often restricted by building
costs, over-generous storey heights are wasteful unless they
are absolutely essential
Construction cost for tall buildings are most likely to
be greater than low-rise buildings which offer similar
amount of accommodation
Tall structures are advisable and preferred only where
the land is either very expensive or in scarce supply
This is to ensure maximum possible use of the already
expensive provisions in terms of structure and services
The higher costs of the provision of foundation, structural
frame, special requirements for staircases and the engineering
services, hoisting equipments for vertical transportation
The increased cost of lifts/elevators, refuse disposal
installations, fire fighting equipment and lightening
conductors
Wind loading factors increases constructional difficulties and
associated costs
Other constructional costs include rental of hoists or cranes,
problems with storage of materials, increased safety
requirements.
Few contractors are often interested in such a high risk
construction and hence give high quotations
The life cycle costs of buildings are also likely to be
higher with taller buildings
This is largely due to maintenance costs associated
with the improved engineering services such as lifts,
plumbing and heating and electrical distribution
Which have all incorporated a higher cost specification
than a low-rise building
Groupings of buildings
Buildability
Constructional details
Standardisation, prefabrication and pre-
assembly
