About the Authors v
Preface vii
1 History and Basic Concepts 1
1.1. Bridges and History 1
1.2. The Historical Impact of Construction 2
1.3. Great Captains of Construction 3
1.4. Panama Canal 5
1.5. Other Historic Projects 8
1.6. Construction versus Manufacturing Processes 9
1.7. Project Format 10
1.8. Project Development 11
1.9. Construction Technology and Construction Management 12
1.10. Construction Management Is Resource Driven 13
1.11. Construction Industry 14
1.12. Structure of the Construction Industry 14
1.13. Differing Approaches to Industry Breakdown 15
1.14. Management Levels of Construction 16
Review Questions and Exercises 18
2 Preparing the Bid Package 19
2.1. Project Concept and Need 19
2.2. Establishing Need 20
2.3. Formal Need Evaluation 21
2.4. Conceptual Drawings and Estimates 22
2.5. Preliminary and Detail Design 27
2.6. Notice to Bidders 28
2.7. Bid Package 28
2.8. General Conditions 33
2.9. Supplementary Conditions 34
2.10. Technical Specifications 34
2.11. Addenda 38
2.12. Decision to Bid 38
2.13. Prequalification 39
2.14. Subcontractor and Vendor Quotations/Contracts 39
2.15. Bid Bond 40
2.16. Performance and Payments Bonds 41
2.17. Cost and Requirements for Bonds 42
Review Questions and Exercises 43
3 Issues during Construction 45
3.1. Acceptance Period/Withdrawal 45
3.2. Award of Contract/Notice to Proceed 46
3.3. Contract Agreement 47
3.4. Time Extensions 47
3.5. Change Orders 48
3.6. Changed Conditions 49
3.7. Value Engineering 50
3.8. Suspension, Delay, or Interruption 51
3.9. Liquidated Damages 53
3.10. Progress Payments and Retainage 54
3.11. Progress Reporting 55
3.12. Acceptance and Final Payment 55
3.13. Summary 57
Review Questions and Exercises 58
4 Contracts 59
4.1. Contract Environment 59
4.2. Process of Purchasing Construction 60
4.3. Major Construction Contract Types 61
4.4. Competitively Bid Contracts 61
4.5. Stipulated-Sum Contracts 62
4.6. Unit-Price Contracts 63
4.7. Negotiated Contracts 66
4.8. Project Delivery Methods 68
4.9. Design-Build Contracts 69
4.10. Design-Build in a Consortium Format 70
4.11. Construction Management Contracts 71
4.12. Construction Management At-Risk 72
4.13. Comparing Project Delivery Methods 72
Review Questions and Exercises 73
5 Legal Structure 75
5.1. Types of Organization 75
5.2. Legal Business Forms 75
5.3. Proprietorship 76
5.4. Partnership 77
5.5. Corporation 78
5.6. Comparison of Legal Structures 82
5.7. Joint Venturing 84
Review Questions and Exercises 85
6 Impact of Taxes 86
6.1. Society and Taxation 86
6.2. Business Impact of Taxation 87
6.3. Why Taxes? 88
6.4. Types of Taxes 88
6.5. Income Tax Systems 88
6.6. Taxation of Businesses 89
6.7. Business Deductions in General 91
6.8. Taxable Income: Individuals 91
6.9. Itemized Deductions, Standard Deductions, and Personal Exemptions 92
6.10. The Tax Significance of Depreciation 93
6.11. Marginal Tax Rates 93
6.12. Tax Credits 95
6.13. Tax Payroll Withholding 96
6.14. Tax Payment Schedules 96
6.15. Marginal, Average, and Effective Tax Rates 97
6.16. Summary 97
Review Questions and Exercises 98
7 Project Planning 99
7.1. Introduction 99
7.2. Work Breakdown Structure 100
7.3. Developing the Work Breakdown Structure 102
7.4. A Work Breakdown Example 102
7.5. Work Packages for the Gas Station Project 103
7.6. Determining Sequence of Work Packages 104
7.7. Estimate Development and Cost Control Related to the Work Breakdown Structure 106
7.8. Role of Code of Accounts 108
7.9. Summary 109
Review Questions and Exercises 109
8 Project Scheduling 111
8.1. Introduction 111
8.2. Estimating Activity Durations 112
8.3. Using Historic Productivity Data 113
8.4. Bar Charts 113
8.4.1. Description 113
8.5. Scheduling Logic 116
8.6. Scheduling Networks 119
8.7. The Critical Path Method 119
8.8. Forward Pass 120
8.9. Backward Pass 122
8.10. Activity Floats 123
8.11. Working to Calendar Dates 125
8.12. Example: Scheduling the Small Gas Station 127
8.13. Summary 130
Review Questions and Exercises 130
9 Scheduling: Program Evaluation and Review Technique Networks and Linear Operations 134
9.1. Introduction 134
9.2. An Example Program Evaluation and Review Technique Network 136
9.3. Program Evaluation and Review Technique Shortcomings 139
9.4. Linear Construction Operations 140
9.5. Production Curves 141
9.6. Line of Balance 144
9.7. Line of Balance Applied to Construction 145
Review Questions and Exercises 148
10 Resource-Related and Advanced Linear Scheduling Techniques 152
10.1. Resource Scheduling 152
10.2. Resource Allocation 152
10.3. Resource Leveling 153
10.4. Time–Cost Trade-off 155
10.5. Linear and Repetitive Scheduling Techniques 156
10.6. Linear Scheduling Method 158
10.7. Case Study of a Linear Project 160
Review Questions and Exercises 163
11 The Mathematics of Money 164
11.1. Introduction 165
11.2. Time Value of Money 165
11.3. Factors Determining the Time Value of Money 166
11.4. Simple and Compound Interest 166
11.4.1. Simple Interest 166
11.4.2. Compound Interest 167
11.5. Nominal and Effective Rate 167
11.6. Equivalence and Minimum Attractive Rate of Return 168
11.7. Discount Rate 169
11.8. Sunk Costs 169
11.9. Cash Flow Diagrams 169
11.10. Annuities 170
11.11. Conditions for Annuity Calculations 170
11.11.1. Present Value of an Annuity: Finding P Given A 171
11.11.2. Instalments Paying for an Item: Finding A Given P 172
11.12. Future Value of a Series of Payments: Finding F Given A 172
11.13. Annuity Required to Reach a Goal Amount: Finding A Given F 173
11.14. Summary of Equivalence Formulas 173
11.15. Worth Analysis Techniques: Rationale and Vocabulary 175
11.16. Present worth Analysis 175
11.16.1. Example: Small Excavator 175
11.17. Equivalent Annual Worth 176
11.17.1. Example: Best Job Offer 176
11.18. Internal Rate of Return 176
11.19. Limitations of the Internal Rate of Return Method 177
11.20. A Practical Example Using Present worth Analysis 177
11.21. Comparison Using Equivalent Annual Worth 179
11.22. Summary 181
Review Questions and Exercises 181
12 Project Cash Flow 183
12.1. Cash Flow Projection 183
12.2. Cash Flow to the Contractor 184
12.3. Overdraft Requirements 186
12.4. Comparison of Payment Schemes 188
Review Questions and Exercises 192
13 Project Funding 194
13.1. Money: A Basic Resource 194
13.2. Construction Financing Process 195
13.3. Long-Term Pro Forma Example 195
13.4. Mortgage Loan Commitment 198
13.5. Construction Loan 199
13.6. Owner Financing Using Bonds 201
13.7. Build, Operate, and Transfer 203
Review Questions and Exercises 204
14 Equipment Ownership 205
14.1. General 205
14.2. Equipment Ownership and Operating Costs 206
14.3. Depreciation of Equipment 207
14.4. Straight-Line Method 209
14.5. Declining Balance 211
14.6. Production Method 213
14.7. Depreciation Based on Current Law 213
14.8. Depreciation versus Amortization 215
14.9. Interest, Insurance, and Tax Costs 215
14.10. Operating Costs 217
14.11. Overhead and Markup 219
Review Questions and Exercises 219
15 Equipment Productivity 221
15.1. Need for Heavy Equipment 221
15.2. Productivity Concepts 222
15.3. Cycle Time and Power Requirements 225
15.4. Power Available 227
15.5. Usable Power 232
15.6. Equipment Balance 235
15.7. Random Work Task Durations 239
Review Questions and Exercises 241
16 Construction Labor 243
16.1. The Labor Resource 243
16.2. Short History of Labor Organizations 244
16.3. Early Labor Legislation 245
16.4. Norris-LaGuardia Act 246
16.5. Davis-Bacon Act 246
16.6. National Labor Relations Act 247
16.7. Fair Labor Standards Act 248
16.8. Union Growth 248
16.9. Labor Management Relations Act 249
16.10. Other Labor Legislation 251
16.11. Vertical versus Horizontal Labor Organization Structure 252
16.12. Jurisdictional Disputes 253
16.13. Union Structure 254
16.14. National Unions 256
16.15. State Federations and City Centrals 256
16.16. Union Locals 256
16.17. Union Hiring Halls 257
16.18. Secondary Boycotts 257
16.19. Open-Shop and Double-Breasted Operations 259
16.20. Labor Agreements 259
16.21. Labor Costs 260
16.22. Average Hourly Cost Calculation 264
Review Questions and Exercises 266
17 Estimating Process 268
17.1. Estimating Construction Costs 268
17.2. Types of Estimates 268
17.3. Detailed Estimate Preparation 271
17.4. Definition of Cost Centers 274
17.5. Quantity Takeoff 274
17.6. Methods of Detailed Cost Determination 278
17.7. Problems with Unit-Cost Method 280
17.8. Resource Enumeration 282
17.9. Work Package or Assembly-Based Estimating 284
17.10. Summary 286
Review Questions and Exercises 288
18 Cost Control 289
18.1. Cost Control as a Management Tool 289
18.2. Project Cost Control Systems 289
18.3. Cost Accounts 290
18.4. Cost Coding Systems 292
18.5. Project Cost Code Structure 292
18.6. Cost Accounts for Integrated Project Management 296
18.7. Earned Value Method 299
18.8. Labor Cost Data Collection 305
18.9. Charges for Indirect and Overhead Expense 307
18.10. Project Indirect Costs 309
18.11. Fixed Overhead 309
18.12. Considerations in Establishing Fixed Overhead 310
Review Questions and Exercises 312
19 Materials Management 314
19.1. Material Management Process 314
19.2. The Order 315
19.3. Approval Process 320
19.4. Fabrication and Delivery Process 322
19.5. Installation Process 323
19.6. Material Types 324
Review Questions and Exercises 326
20 Safety 327
20.1. Need for Safe Practice 327
20.2. Humanitarian Concerns 328
20.3. Economic Costs and Benefits 328
20.4. Uninsured Accident Costs 331
20.5. Federal Legislation and Regulation 332
20.6. Occupational Safety and Health Administration Requirements 334
20.7. How the Law Is Applied 334
20.8. Safety Record Keeping 337
20.9. Safety Program 338
Review Questions and Exercises 345
Appendices 347
Appendix A Typical Considerations Affecting the Decision to Bid 348
Appendix B Performance and Payment Bonds 351
Appendix C Arrow Notation Scheduling Calculations 356
Appendix D Generalized Network Relationships 362
Appendix E Productivity Scheduling Method Using Singularity Functions 368
Appendix F Plans for Small Gas Station 371
Appendix G Compound Interest Table 374
Appendix H Site Reconnaissance Checklist 375
Appendix I The Cumulative Normal Distribution Function 377
Bibliography 381
Index 385
