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