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QSM 506
ConstructionEconomics
Overview of theConstruction and
Development
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p
Overview of the Construction
and Development Introduction to development economics
Development economics Vs Economic
developmentDefinition of economics, construction
industry, construction economics
Economics in construction industry Classification of the industry
Construction industry categories
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Overview of the Construction
and Development The nature of construction industry
Characteristics of construction industry
Building process
Factors related to construction economics
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Introduction to developmenteconomics
Development economics Vs EconomicDevelopment
Development economic- a branch of economics that deals with the study
of developing countries, focuses on
macroeconomics (long term economic growth)
and microeconomics (the incentive issues ofindividual households and firms)
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Introduction to developmenteconomics
Development economics Vs Economicdevelopment
Economic developmentThe process of expanding the real freedoms
that people enjoy
The objective of the development is to create an
enabling environment for people to enjoy long,
healthy and creative lives (more to economic
development than growth in incomes)
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Introduction to developmenteconomics
Definition of economics
The science studies ofhuman behavioras a
relationship between ends (needs) and scarcemeans (things) which have alternative uses
Choice of the way in which scarce resources
are allocated between all their possible uses
It is all about the choice of means to achieveends
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Introduction to developmenteconomics
Definition of construction industry
The erection, repair and demolition of things
as diverse as houses, offices, shops, dams,bridges, motorways, home extension, factories
and airports
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Introduction to developmenteconomics
Definition of construction industry (contd)
Provide construction products to clients and tosociety at large
The carrying out of buildings, engineering,
mining or other operations in, on, over or under
land, or the making of a material change in theuse of any buildings or other land
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Introduction to developmenteconomics
Definition of construction industry (contd)
Construction, extension, installation, repair,
maintenance, renewal, removal, renovation,alteration, dismantling, or demolition of;
any building, erection, edifice, structure, wall,
fence or chimney, whether constructed wholly
or partly above or below ground level
any road, harbour, works, railways, cableway,
canal or aerodrome
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Introduction to developmenteconomics
Definition of construction industry (contd)
any drainage, irrigation or river control works
any electrical, mechanical, water, gas,
petrochemical or telecommunication works; or
any bridge, viaduct, dam reservoir,
earthworks, pipelines, sewer, aqueduct culvert,
drive, shaft, tunnel or reclamation works
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Definition of construction industry (contd)
- And includes any works which form part and
integral part of, or are preparatory, to ortemporary for works described before,
including site clearance, soil investigations and
improvement, earthmoving, excavation, laying
of foundation, site restoration ad landscaping
Introduction to developmenteconomics
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Definition of construction economics
A study of the ways in which resources
available to the construction industry may beappropriately allocated and optimally used
Consists of the application of techniques and
expertise of economics to the study of theconstruction firms, construction process and the
construction industry
Introduction to developmenteconomics
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Economics in constructionindustry
5 important issues regarding economics
BEST RESOURCES
BEST CHOICE
BEST ALTERNATIVE
BEST ALLOCATION
BEST OBJECTIVE
scarce resources (resources in this world are limited)
choice; choosing the right choice
allocation of resources (right allocation or use of
everything and anything)
possible use of resources (alternative inresources; gives best value for money)
means to achieve ends (objectives or
aim of life or task)
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Economics in constructionindustry
About the importance of achieving the objective or aims of
life
The way how the scarce resources is being selected from
many alternatives to produce its best use, for best value for
money VALUE is probably the criteria of every humans objective
QUALITY and PRODUCTIVITY is the utmost agenda in
everyones mind
Everybody is asking not only for quality product, but also
forBEST QUALITY or even WORLD CLASS QUALITY
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Economics in constructionindustry Construction product is basically the output of the
public sector (government) and the private sector Works termed under New Works or Repair and
Maintenance Works Classified under Building Works and Civil Works Construction products can be classified under 4
major headings a) nature b) structure
c) demand or market d) price determination
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Construction industry categories
1. Building Construction Industry
All general and operative contractors primarily engaged
in the construction of residential, farm, industrial,commercial, or other buildings
Classification of the industry
* Definition Source: Standard Industrial Classification
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2. Heavy Construction Industry
All general contractors primarily engaged in heavy
construction other than building, such as highways and
streets, bridges, sewers, railroads, irrigation projects, and
flood control projects and marine construction
This includes special trade contractors primarily engaged
in activities not normally performed on buildings, such as
highway grading or underwater rock removal (does not
include special trade contractors primarily engagedactivities performed on buildings)
Classification of the industry
* Definition Source: Standard Industrial Classification
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3. Special Trade Construction Industry
All special trade contractors who undertake
activities of a type that are specialized either to
building construction, including work on mobile
homes, or to both building and non-building
projects
e.g. painting, electrical work, plumbing, etc. (not
include activities for heavy construction)
Classification of the industry
* Definition Source: Standard Industrial Classification
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The nature of construction industry
1. Technologically complex
- range from the familiar, well-known materials and tradesto highly complex facilities involving multi-
interacting sub-system
2. Vague
- involves such a wide range of activities that industrys
external boundaries are also unclear as well asrelationship between the parties are also not always clear
Characteristics ofconstruction industry
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3. Poor at coping with risk
4. Poor at safety records and inherently or naturally
dangerous industry
- due to its nature; encompasses very wide range of risksources
- complexity, different, unique production process
- different structure of the procurement, dynamic of the
end user
Characteristics ofconstruction industry
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5. Often very heavy, very costly, covers wide
geographical area
6. Involves extraordinary diversity of professions,
specialists and suppliers
7. Very massive, multi-dimensional of interaction,
integration, interfacing and coordination
8. Future in nature
Characteristics ofconstruction industry
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9. Procurement for services rather than a simple
sale of goods
10. Temporary multi-organisation, product
contacted out for and covering payment andservices delivery
11. Demand or product originates from the owner
12. Uncertainties, lack of vital information
13. Adversarial
Characteristics ofconstruction industry
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Factors related toconstruction economics
Consideration of the broad categories of clients
of the industry, their individual needs and factors
influencing them, and the best ways in whichthese requirements may be met
Evaluation of the total (life cycle) costs of
alternative solutions to the problems of meeting
the requirements of a particular client and choiceof the best solution
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Factors related toconstruction economics
Study of the nature of the construction process,
the roles of the participants on construction
projects, and ways and means of planning,
monitoring and controlling costs and ensuring
efficiency throughout the construction process
Assessment of the determinants of demand for
construction activity and study of the effect onthe industry of different volumes and mixes of
total demand
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Factors related toconstruction economics
Consideration of the nature of the construction
industry and its needs, strengths and problems
Examination of the relationship betweenconstruction and other sectors in economy, the
contribution the industry makes to the national
product and implications to the construction, of
changes in government policies related to themanagement of the economy
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Factors related toconstruction economics
Examination of the government policies and
roles to the construction sector
The construction economics should extent tosustainable development and environmental
economics taking care of the environmental
isssues
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