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G guidelines construction management good practice
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guidelines
construction management good practice
G guidelines construction management good practice Ground floor, Milner Place 32 Princess of Wales Terrace Parktown,

Ground floor, Milner Place 32 Princess of Wales Terrace Parktown, Johannesburg

Postnet Suite 240 Private Bag X30500 Houghton, 2041

Tel. (011) 274-6200 Fax. (011) 642-2808

www.shf.org.za

Postnet Suite 240 Private Bag X30500 Houghton, 2041 Tel. (011) 274-6200 Fax. (011) 642-2808 www.shf.org.za
Postnet Suite 240 Private Bag X30500 Houghton, 2041 Tel. (011) 274-6200 Fax. (011) 642-2808 www.shf.org.za
Postnet Suite 240 Private Bag X30500 Houghton, 2041 Tel. (011) 274-6200 Fax. (011) 642-2808 www.shf.org.za
f Foreword GUIDELINES CONSTRUCTION MANAGEMENT When a social housing institution, co-operative or private property

f Foreword

GUIDELINES CONSTRUCTION MANAGEMENT

When a social housing institution, co-operative or private property developer has to decide on an approach for the delivery of housing, it must ask itself which strategy fits best, given its own and the client’s developmental objectives and constraints. One can deliver housing through any of the following scenarios:

Acting as building “client” or developer, but outsourcing the development function on a design-and-build (“turn-key”) package basis to a professional external developer

Acting as developer, retaining overall management of the development function in-house, employing professionals for design and supervision, and using a main contractor for the actual construction work (“design by employer” method)

Acting as “main contractor”, employing sub-contractors and/or community-based labour to carry out the actual construction work; responsible for supervising and controlling the construction process and activities, including all the required resources

The final choice of the approach will be determined by factors such as:

The internal skills available and capacity to manage the respective options

The extent and cost of external expertise available to assist in managing the various options

Developmental objectives (often in conjunction with sponsor and other stakeholder requirements) such as local economic empowerment and availability of local skills

The risk “appetite” of the social housing institution, co-operative or private property developer

These guidelines focus on the scenario where a social housing institution, co-operative, private property developer or contractor acts as a “main contractor”, taking on all the attendant risks and responsibilities that normally accompany the main contracting function. A main contractor plans, organises, co-ordinates, controls and leads activities on site during

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the actual construction process, including the management of resources, from the date of taking possession of the site until the final handover of completed units to the client.

The guidelines take into account the decisions and actions that need to be taken during the construction planning and implementation phase, as these have an impact on the effectiveness of the hand-over of stock to the client, as well as the future management and maintenance of stock.

The Social Housing Foundation is confident that this guide will be widely used and will assist the development and growth of those social housing institutions, co-operatives, private property developers and contractors acting as “main contractors”.

developers and contractors acting as “main contractors”. Brian Moholo Managing Director, Social Housing Foundation 2

Brian Moholo

Managing Director, Social Housing Foundation

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GUIDELINES CONSTRUCTION MANAGEMENT

n Note: The topics of property development and property management are covered by extensive existing
n
Note: The topics of property development and property management are
covered by extensive existing literature and guidelines developed
by others. For the convenience of users of this manual, brief

introductory notes on important general aspects of the property

development and construction processes are given, but these

should be used in conjunction with the more comprehensive

existing materials contained in other publications such as:

The SHF’s Social Housing Institutions Operations Manual (together with accompanying training materials)

SHF Best Practice Booklets

Manuals and guidelines produced under the Support Programme for Social Housing’s Capacity-Building Programme

Manuals and guidelines produced by NASHO

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Acknowledgements

The authors gratefully acknowledge the contribution to this volume by others. Parts of the text are based on consultation with, or have been borrowed from the work of, the following people and organisations:

The Social Housing Foundation (SHF)

The Support Programme for Social Housing (SPSH)

The Construction Industry Development Board (CIDB)

The Urban Sector Network (USN) and its affiliates, in particular Planact and the Development Action Group (DAG), and Afesis-corplan

CSIR BOUTEK

The Department of Construction Economics at the University of Pretoria

Social Housing Institutions across the country, especially the eMalahleni Housing Institution

The Masisizane Women’s Co-operative, and Andrew Moore of Rooftops Canada

The General Motors SA Foundation (previously Delta Foundation)

The authors nevertheless take full responsibility for any errors that may remain.

Social Housing Foundation Postnet Suite 240 Private Bag X30500 Houghton, 2041

Tel: +27 (11) 274-6200 Fax: +27 (11) 642-2808 www.shf.org.za

Edited by Wordsmiths

Design and Layout by MANIK Design Studio

DISCLAIMER

Great care has been taken in the preparation of this document, and the information contained herein has been derived from sources believed to be accurate and reliable. The Social Housing Foundation does not assume responsibility for any error, omission or opinion expressed, or for as investment decisions based on this information.

This publication was made possible through support provided by the Norwegian Embassy

Copyright © Social Housing Foundation 2006

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GUIDELINES CONSTRUCTION MANAGEMENT

c Contents
c
Contents

scope and purpose

What you will find in these Guidelines

housing project development phase

Housing Project Development Phases – where do these Guidelines fit in?

why?

Why is good construction-management practice important?

how?

How should the entity behave when acting as a “main” contractor?

the construction process

The construction process

What is construction? What are the main objectives of a construction project What does a main contractor do? Composition of a construction team Common risks that need to be managed by the main contractor Factors that determine success in construction How can the entity learn more about being a contractor?

Decisions that the entity acting as contractor should be involved in before construction

Choice of construction technology (structure and finishes)

Planning for execution of work

Deciding on the implementation approach and the construction methodology Site establishment, temporary works and services, general management requirements (preliminaries) Preliminary cost estimates vs. detail cost estimates Estimating, cost estimating, rates, pricing and costing What is included in a main contracto’s price build-up? Building up rates and building price from first principles Estimating costs of material, labour and plant Planning and programming of the works

Executing the work

Site layout and organisation Material supply and management Management of labour

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Management of plant, tools and equipment Managing sub-contractors Required tests, inspections, approvals and certificates Health and safety Security Contract administration Construction cost management Cash-flow management (income and expenditure) Construction finance (operating or working capital)

Community-based construction

Reasons for community involvement in development projects Community-based construction – the “development team” approach

Training

Training objectives Planning and preparing for training Who should be trained? Pre-construction training “Hard” building skills training

experiences

The experiences of some entities acting as “main” contractors

Wattville/Tamboville – low- to medium-density housing and community facilities project

Construction of the houses Organisation of the contruction Construction of the community facilities

Masisizane Women’s Housing Co-operative, Midrand, Gauteng

Introduction Organisation of the contruction

General Motors SA foundation – medium-density housing in the Eastern Cape

Missionvale Community Housing Initiative and Sakhasonke Village, Port Elizabeth

Badiri House, Hillbrow (high-rise inner city refurbishment)

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w
w

What you will find in these Guidelines

The purpose of the guidelines is to assist users in employing good construction management practice in the construction of low- and medium-density housing projects.

This guide is intended for use in the pre-construction and construction phases of housing development, by any of the following parties:

social housing institution acting as a “main contractor”

co-operative acting as a “main contractor”

private property developer acting as a “main contractor”

contractor acting as a “main contractor”

Service providers to any of the above (support organisations, technical advisors, professional teams and subcontractors)

A

A

A

A

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SHF BP5 2006 h Housing Project Development phases – where do these Guidelines fit in? The

h Housing Project Development phases

– where do these Guidelines fit in?

The housing project development process can be divided into the following broad phases:

1. Project initiation and validation phase - Conceiving the development idea or concept and initiating the project, including gaining control of a site that suits the idea

2. Pre-design feasibility or development appraisal phase - Preliminary studies are conducted to determine if the idea is viable, and whether to proceed

3. Pre-contract detail design development and technical documentation phase - Extending the appointment of professionals for further work stages, refining and finalising designs, conducting cost estimates and feasibility studies, preparing technical documentation, obtaining municipal approval to start building, initiating marketing (if applicable), and securing funding

4. Construction procurement or tender phase – Deciding on tender and contracting strategies and options, calling for proposals or tenders, adjudicating tenders, and awarding and signing construction contracts

5. Implementation or post-contract construction phase - Managing the actual construction process from site handover to the contractor(s) to taking on the completed units, and closing out the process financially and administratively

These guidelines deal with Phase 5 above, from the perspective of managing the physical process on site as a main contractor rather than managing it as part of the development function.

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GUIDELINES CONSTRUCTION MANAGEMENT w Why is good construction management practice important? Good construction

w Why is good construction

management practice important?

Good construction management practice is essential in maintaining efficiency, cost- effectiveness and control on projects. This, in turn, helps to maintain and protect projected profits, long-term financial viability, integrity, good reputation and good customer relations. Effective construction management, therefore, is an essential tool in ensuring the sustainability of the construction entity, together with marketing and adequate capitalisation. Other reasons for practising good construction management include the following:

Ensuring the most efficient and effective use of scarce and costly resources such as money, people’s time, materials and equipment in producing affordable housing to people with low income

Maintaining high standards of quality and workmanship to ensure that beneficiaries live in pleasant and well-functioning buildings; and managing entities enjoy low-maintenance requirements and expenses for the ultimate benefit of paying occupants

Maintaining high standards of health and safety on building sites

Setting an example and being a role model for aspiring entrepreneurs and development organisations in the community

Building a reputation for dependable service (on time, within budget, and of good quality) with clients, communities and funding agencies

Building trust and good relations with suppliers, subcontractors, professionals, and support organisations, which leads to smoother running of projects with fewer problems, delays and disputes

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SHF BP5 2006 h How should the entity behave when acting as a “main contractor”?
SHF BP5
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h How should the entity behave when
acting as a “main contractor”?

Where an entity acts as developer only, it will normally employ professional consultants and a main contractor to do the design and construction work respectively. In this case, design risk and accountability rest with the design team, while construction risk lies with the main contractor.

Acting as both developer and main contractor often places an entity in a position in which it is important to draw a clear line between the two responsibilities, and to organise its operational structure or project in such a way that accountability resides where it appropriately belongs. This could mean, for instance, that the external design team reports to those members or employees within the entity that are responsible for managing the development process, and that construction-related activities and resources (subcontractors, suppliers and labour) are managed by other members or employees of the entity responsible for managing the construction process.

Establishing and maintaining differentiated functions and accountabilities becomes difficult where some or all of the same people from the organisation are involved in both functions (as is often the case). It is advisable to draw up function charts and organograms before starting a building project, so that staff who fulfil dual or multiple roles can clearly differentiate between the actions required for management of the development process on the one hand, and management of the construction process, on the other.

Acting as a main contractor only requires an entity to focus on the management of construction process. This also requires an operational structure to be in place, in order to clarify the roles and responsibilities of each of the members or employees.

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t The construction process
t
The construction process

What is construction?

Construction can be seen as the conversion of “raw” resource inputs into defined functioning outputs, by means of a managed process.

More specifically, construction is the use by a contractor of supervised labour, and appropriate plant, equipment and other constructional aids, to process and assemble materials and components on site (sometimes partly off site), according to design and specifications, into a completed functioning building.

What are the main objectives of a construction project?

The main objectives of each construction project (based on the principles of project management) are to erect the building or facility in accordance with the design and specifications, with the most effective use of resources and control of risk, and to complete it:

within the budget (allowable cost)

on time (within the specified and agreed contract period or legitimate extensions thereof)

to an acceptable and agreed standard of quality and workmanship

The above are the “technical” objectives of a project. There are usually other “softer” objectives as well, such as achieving buy-in through participation, capacity building, skills transfer, and promoting job creation and local economic development.

What does a main contractor do?

Acting as the main contractor on a building project involves the following:

Interpreting the project drawings, specifications, tender and contract documents, in order to fully understand the project requirements, risks, and legal and physical conditions under which it will have to be carried out

Using the above interpretation to:

estimate the likely cost (for tendering, budgeting and cost-control purposes)

determine and allocate resources to the different phases of the work

plan a functional site layout (placing of material stockpiles, storage, administration and service facilities, securing entrances and ensuring efficient movement of vehicles)

plan and schedule the execution of the work, establish quality control measures, and determine own working capital and cash-flow requirements for the work to be done

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Deciding, as part of work planning and resource allocation, what work to do in-house with own core personnel, and what work to outsource to sub- contractors

Calling for quotes and tenders from suppliers, sub-contractors and plant-hire companies

Negotiating prices and contracts with these service providers

Where required, obtaining completion guarantees in favour of the employer or client

Organising and paying the premiums for all the necessary insurances on a building project

Ensuring compliance with industrial health and safety regulations and requirements on site, at workshops and on other premises, including providing safety clothing to workers and visitors; and making sure plant, equipment, temporary works and installations are regularly inspected and serviced

Drawing up and executing environmental site management plan, where required

Ensuring compliance with employment legislation and procedures, paying workers fairly and on time, and generally managing labour relations in the work place

Submitting all required statutory returns (taxes, UIF, local authority levies)

Taking custody of, and protecting for the duration of the contract all benchmarks, datum levels and boundary pegs pointed out by the employer or principal agent at the beginning of the contract

Arranging all temporary service connections required for effective execution of the work, for example, electricity, water, and sewerage

Fencing the site and arrange necessary security

Providing (hired or owned) all temporary site facilities, such as storage huts, worker ablutions, a site office, plant such as mixers or batching plants, and tower cranes where required, including transporting to site, erecting, maintaining, dismantling and removing on completion

Calling for inspections by municipal building inspectors, project engineers, NHBRC or bank inspectors, of work such as foundation trenches, reinforcing steel, and sewer lines before covering them up

Arranging for all required tests, for example, making and submitting to a laboratory concrete crushing strength cubes, and supplying the results to the engineer to prove compliance with specifications

Arranging for on-site re-measurement of all provisionally measured work before covering it up, to ensure reimbursement of actual expenses incurred

Planning and programming the execution of the work on a daily, weekly, monthly and overall contract-period basis

Planning and co-ordinating ordering, delivery, receipt, storage, security, protection, and safe handling of materials

Co-ordinating the work of different sub-contractors (and managing any conflict between them)

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Calculating and submitting claims for interim progress payments from the employer and/or funders for own work completed, and ensuring sub-contractors do the same

Practising continuous internal costing and cost control

Keeping a site book for instructions, as well as a drawing-receipt register to ensure that work is being carried out in accordance with the latest drawings and/or instructions

Assisting with pricing variations and site instructions with cost implications

Keeping a site diary and other records (covering rainfall, incidents, number and categories of personnel, plant and equipment on site)

Submitting well-motivated claims for extras and requests for extension of the contract period

Hosting site meetings

Cleaning and protecting all completed or partly completed work, removing rubble regularly, and maintaining a clean, neat and safe building site

Generally maintaining efficient administration of the contract, both on and off site

Managing risks related to the construction process

Costruction Management Triangle

Cost Quality Time

Cost

Quality

Cost Quality Time
Cost Quality Time

Time

off site • Managing risks related to the construction process Costruction Management Triangle Cost Quality Time
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Composition of a construction team

The diagram shows the composition of a typical construction team that needs to be managed by the main contractor (some of the team members are employed directly by the main contractor).

Approved plans Local authority Permanent service connections Subsidy agreement Employer Professional services Loan
Approved plans
Local authority
Permanent service
connections
Subsidy
agreement
Employer
Professional services
Loan
agreement
Professional
Funder
(s)
team
Inspections
Supply
Pay
Main
Orders
overheads
contractor
Payments
Admin
support
Head
Managers
office
Supply
Site
Materials
suppliers
Plant-hire
Site establishment
companies
Admin
support
Site admin and
management
Community
Recruit, supervise,
Labour
pay wages
Contract, co-ordinate
Labour-only
supply materials,
pay for work done
sub-contractors
Contract, co-ordinate,
Temporary
pay for work done
Supply & fit
sub-contractors
connectionsService
as to agent
Act control
(no
contract)
provides
Draws paid
via employee
Building
provides
contract
provides
provides
Project
Participates in planning
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Common risks that need to be managed by the main contractor

The main contractor should at all times be aware of all the risks involved. Below is a summary of the most common risks that face main contractors in the execution of construction contracts. This summary serves as a checklist for the construction manager, to make sure the most common risks are being taken into account, both during the planning and the execution phase.

Risk!
Risk!
 

Under-performance of in-house staff with

 

regard to:

Management of the process, especially controls and monitoring

 

Acquiring necessary competencies and skills

How to counter:

Putting in place clear HR and personnel-management policies and procedures

Selecting competent staff

 

Providing training and support (identifying real training needs is very important here)

Monitoring progress, conducting appraisals and providing counselling where appropriate

Having good contracts with performance clauses

 

Using a “stick” and “carrot” system (sanction and incentives)

Taking care with succession-planning

Risk! Under-performance or non-performance of worker teams and sub-contractors with regard to: • Completion of
Risk!
Under-performance or non-performance of
worker teams and sub-contractors with regard to:
• Completion of the works
• Sub-standard quality of workmanship and materials supplied
• Delays and late completion
How to counter:
Non-completion of the works:
Obtain, where possible, performance guarantees from sub-contractors issued
by a bank or insurance company. This usually involves the main contractor
providing back-to-back payment guarantees to the sub-contractor. With small
and emerging sub-contractors this will, however, in many cases not be possible,
and the contractor will have to rely on proper selection, regular and fair payment,
and hands-on management to ensure sub-contractors perform
Sub-standard quality of workmanship:
Evaluation and selection of sub-contractors with known reputation for good
work (check references – do physical checks of work rather than just telephonic
confirmations)
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Provide training and mentoring

Provide good supervision

Provide clear documentation (drawings, specifications, site instructions)

Provide samples. At the beginning of the contract, for instance, bricklayers must build small sample face-brick walls somewhere on site displaying an acceptable and agreed standard. These samples can then be used as references for all permanent face-brick work. This will prevent arguments down the line about what constitutes an acceptable standard

Do not pay for defective work until it has been rectified. Remember that retention is a reserve for fixing possible latent defects, and not for covering the cost of visible patent (current) defective work

Delays and late completion:

Perform evaluation and selection as before

Levy penalties for late completion

Insist on realistic and detailed programmes of work

Monitor progress regularly

Order materials timeously and ensure work is not delayed because of materials shortages on site

Re-schedule work when necessary. For example, it is good practice to wait until roofs are up before plastering walls. If the roof is delayed, however, it may be necessary to plaster in the meantime, to keep to the programme, as long as the plaster is then protected against drying too quickly (causing cracks) by spraying it with water or covering it with plastic sheeting

Risk!
Risk!
 

Under-performance of suppliers with regard

 

to:

Late delivery of materials

 

Unavailability of materials

Quality of materials

Price fluctuations

Short deliveries

How to counter:

Choose reliable suppliers

Ensure timeous ordering of materials

Have formal ordering procedures (negotiate, quote, written order, check deliveries and delivery notes) with a proper follow-up system

Negotiate, as far as possible, fixed prices for the duration of the project

 

Get bricks delivered in pallets rather than tipped

Specify standard materials of known quality where possible

Always try to obtain physical samples of materials and check their quality before ordering

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Risk!
Risk!

Damage to and/or loss of materials and

 

equipment through:

Robbery

Pilfering and fraud

 

Negligence

Neglect (no proper storage, lack of maintenance)

 

Incompetence or lack of training in proper use and handling

How to counter:

Theft on site:

Take out insurance

 

Provide safe storage

Maintain site security

Have proper control systems and procedures for receipt, issuing and checking on the usage and wastage of materials on site

Do not bring valuable materials to site or instal them too early (before that section of the works can be locked securely)

Waste and breakage:

 

Training and supervision of staff to ensure careful and responsible handling

Monitor consumption against allowances

Issue just enough for specific tasks to site teams at a time

Reduce handling to a minimum by judicious placing of stores facilities and planning of the work

Responsibility for materials:

 

On site: Make sub-contractors responsible and accountable

Off site: Inspect, obtain cessions of ownership and proof of insurance (preferably do not pay for materials off site)

Risk!
Risk!

Unavailability of working capital at the right time (cash-flow problems) due to:

Delays in subsidy and loan draw-downs

Poor cash-flow management

Unexpected expenses not provided for in contingency allowances

Problems with overdraft and credit facilities

How to counter:

Build up and keep some cash reserves

Secure overdraft facilities while things are going well, not when you are already in crisis

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Comply with funder requirements: Plan work so that achieving payment milestones, if any, coincides with your cash requirements (dates for paying wages, supplier accounts, etc); call for inspections timeously; ensure procedures are followed and that paper work is one correctly

Push for payment – it is usually necessary to follow-up on processing of payments personally, and to put pressure on the people doing the processing

Monitor cash-flow requirements continuously, and make arrangements for obtaining payments or credit facilities in good time

Risk!
Risk!
 

Industrial action and other disputes:

 

How to counter:

Ensure compliance with legislation and agreements

Foster good human relations

Put in place fair practices and clear employment criteria

General risks:

Inexperience of workers

Inadequate security on site

Vandalism

Dealing with latent defects

 

Bad weather

Breakdown of co-ordination between trades (and resulting disputes)

Underestimation of resources, cost and time required for the work

Disputes around materials lost through excessive wastage, theft, damage, wrong setting out of works, and replacement of defective work

Working with large amounts of cash on site and in transit (wages) – this is to be avoided as far as possible by opening bank accounts for all service providers and paying via electronic funds transfers (EFTs)

Conflict among sub-contractors or in the community regarding who should get the work and be part of the construction team

Interference by local politicians (or would-be politicians) and other vested interests and powers

How to counter:

 

Most of the above are dealt with in these Guidelines. Some specific advice is as follows:

Latent defects:

Put in place a retention/construction guarantee

 

Get NHBRC registration where applicable

Make sure there is adequate supervision

Insist on proper specifications and designs

Be aware of the law and your legal rights

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Bad weather:

In your schedule, allow for work stoppages caused by the kind of weather conditions to be expected in accordance with the season

Plan a construction sequence to ensure, for instance, that roofs are up as soon as possible for phases completed during the rainy season

Protection – ensure, for instance, that storm water will not flood foundation trenches or other parts where work must proceed in order to stay on programme

Inadequate co-ordination of trades:

Ensure planning, organisation and monitoring

Clear delineate areas of responsibility in contracts and works descriptions

Provide complete drawings for each trade

Factors that determine success in construction

Success in construction depends on:

The organising and leadership ability of those in charge (project manager, construction manager, site agent)

The planning and allocation of adequate resources at the right times

The accuracy and timely availability of professional documentation and guidance

Field experience

Planning

Realistic programming of the work, regular monitoring of progress, and corrective action (including re-programming, additional resource allocation, etc.) when deviation occurs

Timely ordering of materials and labour

Ability to motivate the trades

Effective co-ordination of trades

Insistence on quality

Maintaining good labour relations

Coping with unforeseeable factors (for example, inclement weather, shortage of materials)

Meeting critical deadlines

Satisfying the local authority inspectors and the NHBRC

Support of the developer/employer and the professional team

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How can the entity learn more about being a contractor?

Simplistically, construction appears to be a matter of putting materials and components together according to a drawing, with a team of workers, tools and equipment. Proper construction, however, requires a combination of management skill (planning, organising, co-ordination, leadership and control), knowledge, and experience in the fields of technology, finance, law, commerce and human relations. Construction should not be underestimated because of unregulated entry into the construction market.

This document provides starter guidelines only. If the entity is involved in large-scale and continuous construction as a contractor, it should send staff members on training courses offered by private colleges, universities and technical universities/technikons, and other organisations in the industry; subscribe to technical journals (check with Brooke Patrick Publications for available titles); and acquire some good books on the subject.

Authors who deal with building construction as well as management aspects, include:

Calvert, Chudley, Davis, Langdon and Everest, Everett, MacKay, Nunnally, Seeley, Harris and McCaffer, the Mitchell’s Building Construction series, Spence Geddes, Willis, and a very readable series of publications by the British Aqua Group. Locally, the CSIR’s BOUTEK division and its predecessor, the National Building Research Institute (NBRI), published over the years many useful papers and booklets with good practice guides. Most university libraries keep copies of these, or you can order them from the CSIR direct. The International Labour Organisation (ILO), with support from Ntsika Enterprise Promotion Agency, the Black Construction Council, and the Department of Public Works, also developed a series of manuals for the Contracting Entrepreneurial Training Programme (CET), and it may still be possible to obtain copies from one of the promoters.

The Concrete Masonry Association (CMA) based in Midrand, Gauteng, produces handy booklets on how to build simple structures, and on the use of concrete masonry building units (bricks and blocks). The Clay Brick Association does the same for the use of its member’s products. Building-materials supplier, Cashbuild, and the Urban Foundation published a booklet called Home Builder’s Handbook.

Many materials manufacturers (of roof sheeting and tiles, cement, paint, ceramic tiling and other materials) provide technical brochures to assist in the proper measurement and use of their materials. These are often obtainable from the larger building supply stores. It may also be worthwhile (for a fee) to subscribe to a good product catalogue library such as Archi-text.

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GUIDELINES CONSTRUCTION MANAGEMENT d Decisions that the entity acting as contractor should be involved in before

d Decisions that the entity acting as

contractor should be involved in before construction

Choice of construction technology (structure and finishes)

Introduction

Although design and specification is normally the domain of architects and engineers, contractors can play a useful part in giving practical advice. Where the entity acts as contractor, it is imperative that they are actively involved in design and specification decisions from the start, in order to ensure:

Cost-effective construction and an affordable end-product

Low-maintenance facilities

Socio-economic and empowerment objectives are promoted through the choice of construction technologies to be employed, for example, labour-based rather than plant-based construction

It is always a challenge for an institution developing any form of social housing to balance its primary objective of providing quality affordable accommodation, with the secondary objectives of job creation, empowerment and local economic development. Each institution must examine its priorities and set its own criteria in this regard, and the contractor can guide the decision-making parties on how to achieve their objectives, by distinguishing between labour-based, labour-intensive and community-based construction.

The contractor should also share its experience with regard to technology required in various designs and specifications, and the practicality of the proposed technology to be used. Various products (with different specifications) are available on the market. The contractor should be open to sharing information with regard to the quality of the product or the practicalities pertaining to the applications of such specifications.

Labour-based, labour-intensive and community-based construction

Labour-based construction is different to labour-intensive construction.

Labour-intensive construction implies the use of as much labour as possible. In practice, it is usually implemented by substituting people for machines

Labour-based construction, however, aims at changing the technology employed in the construction methods, thereby providing employment and training opportunities for both unskilled and semi-skilled labour. The labour-based

approach to both the design and construction of engineering services enables the unskilled worker to instal the complete service with minimal reliance on

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plant. The emphasis in labour-based construction is on employment, training and development, while ensuring that cost and quality compare with those of plant-based construction. Construction plant and hi-tech tools are used only where appropriate

Labour-based construction benefits a community by creating employment and facilitating the acquisition of technical skills. If, however, the community also participates in the administration and management of the project, the activity becomes community-based

Community-based construction in a sensitive and non-imposing manner aims at the use of labour-based projects to promote the emergence of local entrepreneurs who, with adequate technical, commercial and financial support and instruction, could in due course, become fully fledged contractors

Technical considerations

Foundations

Conventional strip footings under walls, and reinforced pads or bases under columns in framed structures can be labour-intensive (excavations and concreting by hand, with or without the aid of mechanical excavators and concrete mixers).

Engineers often specify integrated floor and foundation raft systems for stand-alone houses, especially because of their effective performance in poor soil conditions and the speed at which they can be built. Specialised mechanical excavators are normally used for the narrow ribs or beams in the ground. These could also be dug by hand, but this is not very practical. Some foundation raft companies have initiatives where they rent out equipment and provide training and assistance to local teams or emerging sub-contractors to construct the rafts.

Walls

Conventional brick or block walling is labour-based (even more so if the bricks or blocks are manufactured on site), and the most familiar method to bricklayers. Single- skin block walls, although quick to erect and the cheapest option, are problematic with regard to water penetration. The structural integrity of the walls can also be compromised if the blocks are not built with properly filled beds and joints. Fixing of window and door frames and roof anchors, especially if not detailed correctly, can also be problematic.

There are countless patented walling “systems” on the market, from so-called “dry- stacking” blocks (interlocking blocks with no mortar beds and joints required) to complete composite wall panels pre-fabricated on site or in a factory off site.

Competent technical advice (and “market” feedback) should be obtained before purchasing any system or product. Beware of products without Agrément or MANTAG or NHBRC approval. However, even with such approval, discuss with an architect and/or engineer the suitability of such product for your purposes, and check its acceptability to the end-user public.

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Wall finishes

Internal wall finishes should provide good cover (plaster basis with paint) and the paint should be washable (although this is more expensive) in order to reduce the maintenance requirement of the house or unit once occupied. External finishes, within the bounds of affordability, should provide adequate resistance to water penetration, should be durable and should have low maintenance requirements. Wall finishes should provide attractive facades.

Face brick is ideal from a maintenance point of view, and is not much more expensive than a good plaster-and-paint finish. When used in double-skin construction, and if bought from a reputable manufacturer, face bricks offer adequate resistance to moisture absorption. Face bricks vary widely in cost and quality, and should be carefully selected and incorporated into designs that make aesthetically acceptable use of them – remember this cannot be changed later, as with paint colours. It is also more difficult to repair damage (matching later batches of bricks, and colour of mortar in joints), and to clean face-brick walls defaced by graffiti.

Plaster and paint may offer more variety and scope for re-decoration, but periodic re-painting will be required. This could become quite expensive in taller buildings because of the need for scaffolding. If this option is selected, use good quality externalpaint, preferably thicker-textured or elastic types of coatings that will cover minor cracks. Usual practice is to re-paint every five or six years.

of coatings that will cover minor cracks. Usual practice is to re-paint every five or six

Plaster and paint

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Some experts recommend, however, that the first re-painting be done within 3 years of completion. This “consolidates” the painted surface after the initial reactions with oxygen, solar radiation and moisture, both inside the structure and in the atmosphere, and makes it possible to stretch subsequent re-paintings to longer intervals, say up to seven or even nine years.

Cement-based paints with mixed-in pigments such as “Cemwash” or “Earthcote” provide attractive and durable options, and some suppliers provide equipment and training on site, so the finishes can be applied by local labour.

Certain patented wall coatings claim to last the life of the building (“Marmoran”, “Gamma-Zenith”), but these are expensive, and if there is movement or moisture in the underlying structure, there could be expensive-to-fix problems such as discolouration, cracks and spalling.

Structural floors (slabs) in multi-storey buildings

There are two basic types of slabs: a solid in-situ concrete slab and a composite slab.

The composite slab consists of a pre-fabricated component placed to span from support to support. This is covered with an in-situ concrete topping and is used for simple rectangular single-span structures. The composite slab is often the quickest and most cost-effective solution, provided there is access for a mobile crane for off-loading and placing the heavy pre-cast beams or “planks”.

Another type of composite slab makes use of concrete hollow blocks packed in narrowly spaced parallel rows on a flat steel deck, and covered in in-situ concrete to form a ribbed structure. The blocks are light enough to be handled manually, and therefore provide employment.

For shapes that are more irregular, and smaller slabs, it is more practical to cast an in-situ solid slab. Building solid slabs is also a more labour-intensive method. Always get quotes for both options and discuss the options with your engineer before deciding on the type of slab.

Roof structures

Conventional trusses can be made on site in a jig (which provides employment), but this can be time-consuming, because production is limited by the number of carpenters, jigs and amount of space available. Truss components are first nailed together, and then bolted tight once erected. This can time-consuming and labour- intensive. This method also requires more cutting on site and increases the amount of material wastage.

The other option is to buy engineered trusses from a specialist who provides the design, supply and, if required, erection as well. These trusses are of better quality, and are lighter than those made on site. Lightweight galvanised steel truss systems can also be considered, pending the effectiveness in certain applications.

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Roof covering

You will need to choose between concrete and clay tiles, or long-length profiled metal and fibre cement sheeting. The user public seems to prefer tiles, although pre-painted corrugated sheeting appears to have made a comeback. Tiles require steeper pitches (meaning more brickwork in gables), and more support in the form of trusses and battens spaced closer together. Profiled sheeting can be put on flatter pitches, and can span longer distances without support. On the other hand, they require more edge treatment (fascias and bargeboards) to appear acceptable, can make rooms very hot if there is not an insulated ceiling underneath, and could be prone to leaks if the pitch is too flat, or if there is poor workmanship during installation. Maintenance-wise, there is little difference between different roofs under normal circumstances. In areas with high winds, tiles may be damaged from time to time, and in corrosive industrial or coastal atmospheres, metal sheeting is prone to rusting, even if it is pre-painted.

Flooring

Carpeting and vinyl flooring wear out and are easily damaged by occupants. They will have to be patched and replaced several times during the lifetime of a building. Ceramic tiling is more durable, but also costs more. Life-cycle cost comparisons should be made, where the estimated escalated costs of each option over the lifetime of a building or occupancy period (initial, periodic replacement, cleaning and maintenance) are discounted to a present value and compared. (If you do not know how to do this, ask a quantity surveyor to help.)

Windows

Steel window frames are most commonly used because they are strong, durable, come in many standard sizes and shapes for every application, and are readily available at competitive prices. With a bit of preparation and training, they can also be manufactured on site or in the local community. They do, however, require good protection against rust by periodic re-painting, which is a tedious and costly exercise.

Wooden windows, although fashionable and attractive, are expensive, easily damaged during construction, and require regular and expensive treatment against ultra-violet light (the sun) and moisture penetration.

Aluminium and PVC windows are attractive and durable, with virtually no maintenance requirements, but they are expensive.

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SHF BP5 2006 p Planning for execution of work
SHF BP5
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p
Planning for execution of work

Deciding on the implementation approach and the construction methodology

Introduction

Construction of single-storey buildings is usually quite simple. Acting as contractor on these projects requires fewer resources and less skilled labour. Unless the site is geologically suspect, only rudimentary structural design of foundation may be required, providing the roof construction is properly certified in terms of legislation pertaining to roof design, erection and inspection (notably for prefabricated timber trusses).

Construction of multi-storey buildings significantly increases the complexity of operations. It requires more resources (plant, constructional aids such as scaffolding and form-work, and vertical transportation equipment such as hoists and cranes). Higher levels of skills from the contractor and sub-contractors are also required. Programming the sequence of work is more complex. Allowance must be made for propping and back-propping of slabs, which prevents the commencement of certain building work immediately after the casting of slabs. Final finishing is done from the top floors down, to avoid damaging or dirtying completed work on the lower floors.

Who does what?

The entity acting as developer will assemble all the pre-construction parts of the project, such as determining the nature and scope of the project, securing land and funding, carrying out the social survey and market assessment, and initiating the marketing itself. It may then engage contractors on either a “design and build package”, or the “design by employer” method, where the professional team works for the entity, and a main contractor carries out the actual construction work without any responsibility for design.

In a situation where the entity acts as “main contractor”, however, as is dealt with by these Guidelines, there are many issues to consider in addition to the normal development functions. Before construction starts, the entity as contractor will have to carefully study the drawings, specifications and bills of quantities; consider site location and conditions in order to work out the approach to implementation; and draw up lists of work to be done and resources that will be needed for each phase (labour and skills requirements, plant and equipment and constructional aids needed). Aspects to be decided on include the following:

Which approach to physical implementation is best suited to the type and size of project? Should we use sub-contractors rather than directly employed labour, or is there a need to employ local labour/community-based construction teams directly for the main part of the work such as brickwork, plastering, roofs, other carpentry work and tiling, only using sub-contractors for specialist work such as plumbing and electrical work and perhaps glazing?

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Guideline:

If the entity acts as contractor only occasionally, for instance tackling one project at a time as the opportunity for new stock-development arises, it is best not to employ full-time staff, but to do all the work with sub-contractors, managed by a professional construction manager under contract. Clear allocation of responsibilities, careful co-ordination between different trades, good communication, and good monitoring and reporting systems and procedures are very important. If the entity is going to build continuously for a long time, for example under an extended stock-development programme, it may be prudent to employ a small full-time core team of skilled people and general workers who can do basic work that sometimes falls into the gaps between different types of sub-contract work. Examples would be excavating and concreting foundations before the brick-laying sub- contractors arrive. Instead of a full-time team, the entity could also train and employ community-based labour teams to perform this kind of work, from the areas in which projects are carried out.

How will we manage the construction work? Should we employ our own full-time in-house contract manager and clerk of works; should we engage the services of a professional construction manager; or should we extend the brief of the normal professional team to include organising, co-ordination and supervision of the various labour teams and/or sub-contractors on site, while we, as main contractor, provide plant, materials and working capital?

Guideline:

In the early stages of its existence, the internal priorities of an entity are to have a competent CEO and financial officer or manager in place, with some support staff. The number and size of construction projects determines whether a full-time in-house construction manager is necessary. For projects of up to 200 units, the cost of a full-time in- house construction manager or project manager is not justified, and the CEO or operations manager will take responsibility for managing the construction process, with outside help from stakeholders such as provinces, the SHF, the NHFC and others. Although the entity can make do in this way for a while, the CEO’s attention tends to shift to dealing full-time with strategic management and internal office administration.

As the number of construction projects (and units under construction) grows, it becomes imperative to appoint a full-time construction or project manager who will be responsible for the management of one or more projects simultaneously. In this case, it may also become necessary to appoint site agents (who are responsible for hands-on management of construction work, and are based on site) who report to the project manager or construction manager. It is usually more cost- effective to appoint such a person on a fixed-term contract basis.

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Should we opt for labour-intensive/labour-based construction as described earlier (possibly resulting in a longer construction period and some quality issues), or a more mechanised approach with greater use of plant (which is more cost- and time-efficient, and results in better quality of certain elements)?

Guideline:

The entity should aim for maximum employment without sacrificing production, quality and affordability. For example: compaction of filling under floors can be done by hand (if the areas are relatively small), however, it would be more economical and appropriate to compact larger areas such as parking areas with small petrol-driven compactors, which

also make the level of quality of compaction much easier to achieve.

the level of quality of compaction much easier to achieve. Plate-compactor for compaction of large areas

Plate-compactor for compaction of large areas

to achieve. Plate-compactor for compaction of large areas Bomag roller for compaction of large areas Wacker

Bomag roller for compaction of large areas

of large areas Bomag roller for compaction of large areas Wacker for compaction of small areas

Wacker for compaction of small areas and narrow widths

What is the most effective horizontal transportation method on site for different sites and different types of materials – wheelbarrows, dumper trucks?

Guideline:

Moving materials around by wheelbarrow is labour-intensive and works well on smaller sites. For larger sites, it slows down production, and increases the labour requirement beyond cost-effectiveness. It may be better to hire a dumper truck or two for bulk carting of materials from stockpiles to the area of work, and to use wheelbarrows only for

the short distances to the final position. A very useful piece of plant to have on larger sites is a tractor loader backhoe (TLB), which is a modified tractor with a hydraulically operated front loader scoop and

a rear excavating bucket. Its intended function (for which it is very

versatile and cost-effective) is to excavate long trenches and holes for manholes, and to load excavated material and rubble onto trucks for carting away. However, many site agents use it as a general- purpose carrier for moving cement, aggregates, mixed concrete and mortar, window frames and even workers in the front loader scoop. The machine is not designed for this purpose and its load-carrying capacity

is too small to justify its running costs when used in this way.

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Wheelbarrows for horizontal transportation GUIDELINES CONSTRUCTION MANAGEMENT Dumper truck for horizontal transportation

Wheelbarrows for horizontal transportation

GUIDELINES CONSTRUCTION MANAGEMENT

transportation GUIDELINES CONSTRUCTION MANAGEMENT Dumper truck for horizontal transportation What is the most

Dumper truck for horizontal transportation

What is the most effective method of vertical transportation on site – with mechanical hoist, tower or mobile crane, scaffold plank ramp, mechanical conveyor, bucket and rope?

Guideline:

For single-storey buildings, materials required higher up (at the top of walls or on the roof), can simply be passed by hand from the ground up onto scaffolding erected for bricklaying and plastering, and from there onto the required level. For double-storey buildings, scaffolding could still work. If there is space it is a good idea to build a ramp up the side of the building or over the steps of stairways to the first floor, made of scaffold frames and planks, so it can be used by people with wheelbarrows.

For low-rise multi-storey buildings (three to four storeys), a small mechanical hoist is the best solution for a single large building. For a number of buildings spread over the site this becomes uneconomical,

and it is better to go back to ramps built over the steps of stairways.

If buildings are quite close to each other however, it may be possible

to connect them by temporary bridges, and share one hoist between buildings by supplying the bridge (see sketch below).

For medium-rise tower blocks (five- to 12-storey blocks of flats), a fixed tower crane (or one that moves along a short track), with a jib (the “arm” that lifts the load) long enough to reach all the buildings is the most effective solution. Cranes are expensive to erect, hire and operate, and should only be on site for the required period. There is no point in having a crane standing idle at thousands of rands per month while you are still excavating for foundations. Discuss your requirements with an advisor from the crane-hire company, and match its lifting capacity with your requirements to keep costs down.

Mobile cranes are too expensive to have on site full-time, and are usually only hired for specific days (or even hours) for lifting heavy components

in spaces that cannot be reached by other means, for example, lifting

a 300 kg safe door over the roof into a second-storey office.

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SHF BP5 2006 Mobile crane for vertical transportation Tower crane for vertical transportation What types of

Mobile crane for vertical transportation

SHF BP5 2006 Mobile crane for vertical transportation Tower crane for vertical transportation What types of

Tower crane for vertical transportation

What types of constructional aids are needed (for example, different types of scaffolding, support work and formwork)?

Guideline:

The general understanding in the industry is that the main contractor provides heavy-duty external scaffolding
The general understanding in the industry is that the main contractor
provides heavy-duty external scaffolding for use by sub-contractors
such as bricklayers and plasterers, while the sub-contractors provide
their own trestles and planks for internal work such as plastering,
painting, and nailing up ceilings. The entity working with small or
emerging sub-contractors may have to provide the
internal support work as well – remember to check and
cater for this in your cost estimates.
Steel pipe frames and props for scaffolding, or support
work for formwork are strong, durable and reasonably
priced, and are still the most commonly used. If the
entity is going to do a lot of building, it is a good idea to
invest in a basic set of frames, props and planks. Scaffold
planks must be proper saligna (gumtree) scaffold boards
at least 50 mm thick. Old pine roof timbers will not do,
and are dangerous, as they are usually full of weak spots
caused by knots and other defects, and rot more easily
when exposed to moisture.
Steel props for support
Scaffold planks are very expensive and should be well
looked after. They must always be cleaned before being
stored between jobs. Frames and props must also be
cleaned, and working parts such as threads of telescopic
props must be kept well oiled or greased. Regular painting
will also extend their life. If the price of new equipment
is too steep for your entity, keep an eye open for second-hand sales
and auctions. Be careful though when buying used frames, especially
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when they have thick coats of shiny new paint on them – the paint may be all that holds a rusty old pipe underneath together.

There are versatile lightweight aluminium support systems on the market, but they are costly and are not as strong as steel.

The most common and economical type of formwork for flat concrete slabs is standard steel pans, which can be re-used many times if properly cared for. Likewise, there are standard steel panels clipped together to form “boxes” for column formwork. The contractor must check the design and ensure that column sizes specified correspond with these standard panel sizes.

Timber formwork, or formwork made from shutter board is expensive and time-consuming to erect, and has limited re-use. It should be avoided as far as possible, and used only for elements where standard steel formwork will not do the job.

Formwork is only needed from time to time for short periods, and it is therefore more cost-effective to hire it when needed. Another alternative is to employ sub-contractors who supply and erect their own formwork. Some, though, will only erect flat decks excluding edges or other vertical formwork, as their insurance does not cover them for the latter. This can be a nuisance, as the contractor must then

provide the vertical formwork.

This can be a nuisance, as the contractor must then provide the vertical formwork. Timber formwork

Timber formwork for flat slabs

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Illustration of conventional steel pan formwork for flat slabs

of conventional steel pan formwork for flat slabs Steel column box Deck panels Box floor centre

Steel column box

Deck panels

Box floor centre hanger bracket Box floor centre tube Flat Deck Formwork 50x50
Box floor centre
hanger bracket
Box floor centre
tube
Flat Deck Formwork
50x50

Fastrike props and box floor-centres can be used with either pressed or coined deck panels for quick and easy erection and dismantling of soffit formwork

Fastrike prop

panels for quick and easy erection and dismantling of soffit formwork Fastrike prop Scaffold lacing Band

Scaffold

lacing

Band and plate coupler

Guideline:

For small volumes, excavating by hand is generally best (and provides more employment). To have an excavator on site for a day is expensive. The machine may only be required for an hour or two, meaning you pay for transportation and idle time out of proportion to the value of the work to be done. For longer runs of trench excavation (strip footings for long buildings, or sewer trenches), it is most economical to take out the bulk of the material by machine, and then trim by hand.

For large volumes and deep excavations such as in cut and fill- over site, and basements, using machines is more productive and economical. There are many different types of specialised excavating and earthmoving equipment, and the most appropriate machine for the job should be hired.

On small and medium-sized excavations, it is best to get a multi-purpose machine such as a combination “tractor-loader- backhoe” (TLB) that can be used to dig trenches and do bulk excavations, load excavated material onto trucks, and do general lifting and carrying around the site (see illustration of TLB at work).

Small quantities of rock or old concrete encountered in foundations can be broken up and removed with picks and crowbars if there are seams to get into, or by means of pneumatic hand-held breakers. Large quantities of solid rock may have to be blasted with explosives. This is specialised work; permits and extra safety precautions will be required in urban areas.

extra safety precautions will be required in urban areas. Excavation by hand Excavation by tractor-loader-backhoe

Excavation by hand

extra safety precautions will be required in urban areas. Excavation by hand Excavation by tractor-loader-backhoe (TLB)

Excavation by tractor-loader-backhoe (TLB)

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Concrete and mortar – to mix on site (by hand or by mechanical mixer) or to buy ready mix?

Guideline:

According to conventional wisdom it is more economical to mix on site. This is sometimes a fallacy, and contractors are notoriously unable to estimate properly for the true costs of site mixing once all the waste factors and breaks in productivity have been accounted for. Quality control is also more difficult with site mixing, but it does provide more employment for manual labour.

If ready mix is used, concrete pours must be well planned and efficiently executed. Delivery trucks run on a schedule, and cannot afford to stand around while concrete is laboriously transported by wheelbarrow from the point of off-loading to where it is needed on site. Although the cost of hiring a concrete pump may seem prohibitive at first, it is often more economical in the long run because of he time saved.

Mixing by hand is labour-intensive, but slow and not effective for larger quantities. Mechanical mixers provide better consistency and quality in the mixing of concrete. They come in all shapes and sizes, from small portable drums with electric motors to those operated by crank, to large petrol-driven machines that can yield up to a cubic metre per batch.

For large projects, it is most economical to set up concrete batching plants where cement is delivered and stored in bulk in metal silos, dispatched into hoppers from where it is fed into the mixing plan, and aggregates are shovelled directly from stockpile into the mixer with dragline and bucket. Batching is done by weight rather than volume, and is more accurate.

is done by weight rather than volume, and is more accurate. Mix by hand Batch plant
is done by weight rather than volume, and is more accurate. Mix by hand Batch plant

Mix by hand

Batch plant on site for bulk mixing requirements

Mix by hand Batch plant on site for bulk mixing requirements Ready mix for delivery to

Ready mix for delivery to site

Mix by hand Batch plant on site for bulk mixing requirements Ready mix for delivery to

Mix with concrete mixer

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Plant and equipment – to own or to hire?

Guideline:

Careful calculations are required (see also pricing of plant in the section on Estimating and Pricing further along in this document) to determine which option is more economical. Owning plant means you carry the fixed annual cost (depreciation, finance charges/loss of interest on capital, insurances) even when the machine is not working and recovering those costs, maintenance and repairs are your responsibility. Owning also brings about a certain inflexibility and potential mismatch between what you have, and what is required on a specific project (for example, the mixer you own may be too large or too small for a particular project to be practical and cost-effective), whereas if you hire you can get the right machine for the job.

If you hire on the other hand, you pay for the rental company’s overheads and profits, and delivery and repairs during emergency breakdowns could be unreliable. The rental company is responsible though for all the “hassle” of owning plant – insurance, maintenance and repairs, transporting around, keeping up to date with the latest models, and for starters, it is advisable to hire rather than purchase plant, especially larger, more expensive pieces that are only needed from time to time.

Site establishment, temporary works and services, general management requirements (preliminaries)

Contract preliminaries (prelims) or preliminary and general (P&G)

Construction is about more than just labour and materials. The construction process needs to be planned, coordinated, supervised, and supported with temporary works and services. The contractor must provide competent staff on site to manage and supervise the work, draw up programmes and keep them updated, prepare reports and other documentation for site meetings, assist the professional team in checking for correct setting out and levels, and keep track of when progress payments are due. The contractor needs water, power, lighting, plant and equipment, temporary works such as scaffolding, hoardings, traffic-diversion equipment and timbering (support) to carry out the work.

There must be site offices for meetings, sheds for safe storage of materials and tools, ablutions for the workers on site, fencing and security, name boards, certain fixed plant such as concrete batching plants and vertical hoists or tower cranes (sometimes also referred to as site establishment). The contractor must usually provide sureties that will make available funds for completion of the contract should the contractor

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fail to do so, and take out insurance for damage or loss of the works, loss or injury to workers, and third-party liability.

The contractor is also responsible for security of the site (fencing, access control and guarding). He must provide samples of materials for approval by the employer or architect, protect the completed works against damage, regularly clean the site, and cart away the rubble.

All of the above are usually priced separately from the direct labour and material costs, and are collectively referred to as preliminaries or preliminary and general.

collectively referred to as preliminaries or preliminary and general. Site offices Storage sheds Storage containers 35

Site offices

collectively referred to as preliminaries or preliminary and general. Site offices Storage sheds Storage containers 35

Storage sheds

collectively referred to as preliminaries or preliminary and general. Site offices Storage sheds Storage containers 35

Storage containers

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Preliminary cost estimates vs. detail cost estimates

Estimating for different purposes and at different phases

As part of the development function, it is necessary to estimate total development costs, including land, town planning and surveying; service connections; plan-scrutiny fees; escalated building costs; professional fees; and finance charges. This must be done so that the total funding requirement for the project can be determined, and financial viability studies can be done. These estimates are usually done at an early stage when only preliminary concept designs or sketch plans are available, and methods are used that do not rely on detailed and accurate measurement off completed drawings.

Once the decision, based on the preliminary estimates, has been taken to proceed, and more detailed working drawings have been prepared, it becomes necessary for the contractor to measure the quantities, and estimate the construction cost accurately. This is done so that the work can be properly planned and programmed, resources allocated, and materials ordered. This detailed estimate is also used as a baseline or budget for cost monitoring and control by the contractor. Where the entity acts as contractor, the construction side needs detailed estimates for the same reasons as above, as well as to provide the development side with more accurate budgets of construction costs to feed into refined total-development cost estimates.

Estimating, cost estimating, rates, pricing and costing

It is important to distinguish between the terms estimating, cost estimating, rates, pricing and costing.

Estimating entails the quantification (measurement), and cost estimating entails the valuation (apportioning costs to the different measured parts of the work) of the probable inputs (resources) that will be required to complete the work. The estimated cost is the total estimated quantities (labour, material, plant usage and other indirect costs) multiplied by estimated or known unit cost. It is usually used as one of the considerations in the determination of a price at which the contractor is prepared to do the work. Pricing, therefore, is a business decision: what amount (including some profit) does the contractor want to sell his/her labour, material, management skill and willingness to take risk to the employer/client for.

For the entity acting as main contractor, these distinctions help in estimating likely sub-contract prices (and estimating price negotiations with sub-contractors) on the one hand, and on the other hand the over-and-above costs that will be incurred by the entity as main contractor.

We can further distinguish between price and rates. Price usually means the total amount at which the contractor will erect the building or erect a certain portion of the work, whereas rates are the “prices” per unit of separate individual items of work, which make up the total price. Price, therefore, is quantity x rate.

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Costing is the collating of cost information during and after the erection of a building, and the processing thereof into monetary terms, mainly to monitor the profitability of the project or contract, and to make changes to improve it. It also provides the estimator with information for future estimating.

What is included in a main contractor’s price build-up?

It is important to understand what is normally included in the main contractor’s price build-up. The reason for this is that when the entity acts as main contractor, it will take on some of the functions that main contractors price for, and if additional resources need to be put in place, then these must be budgeted for on top of the estimates for the different sub-contract works.

The quotes received from sub-contractors normally include:

Labour

Materials (if applicable), including allowances for wastage

The use of some tools and equipment, including allowances for wear and tear

Sub-contractor’s site overheads (usually low or non-existent)

Sub-contractor’s head office overheads (if applicable)

Sub-contractor’s profit

Some sub-contractors will quote on a labour-only basis, meaning the main contractor must supply, and, therefore, budget for the cost of materials involved.

Others may quote on a supply-and-fit (labour and materials) basis, but the main contractor will have to supply some of the materials, for instance the plumber’s quote may include the supply of all pipes and pipe fittings, but the main contractor must provide the taps and sanitary fittings. In plumbing, the main contractor is also usually expected to do some of the work associated with that sub-contractor’s trade. An example is where the plumber’s quote would include the supply of manhole covers, but exclude the building of the manholes.

Sub-contract documentation must be clear on these issues, and the main contractor must ensure nothing is left to fall through the gaps when adding up total estimated costs of labour, materials and sub-contracts.

It would be a big mistake to simply add up all the sub-contract sums, and quotes from materials suppliers, and think that is the total building cost.

In addition, the entity acting as main contractor would have to budget in some form or other for most of the following costs that would normally be included in the main contractor’s tender price:

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Indirect on-site costs (“site overhead”)

Preliminaries

All of the above are usually priced separately from the direct labour and material costs, and are collectively referred to as preliminaries, which can vary from 7.5% to more than 25% of the contract value.

Attendance on sub-contractors

Providing sub-contractors with scaffolding, power, water and storage; and assisting them with off-loading and handling of materials and equipment (usually varies from 2.5% to 10% of the value of sub-contract work).

Indirect off-site costs (“general, or head office overhead”)

In a building contractor’s business, each contract must contribute towards paying overheads – usually in the ratio of its value to the total turnover of the company). Overheads can vary from 5% to 15% of annual turnover (total annual value of contracts of main contractor’s work).

The entity must exercise care when estimating costs. Certain of its head-office resources will be needed to manage the process, and this may mean buying-in additional capacity or specialised skills in the form of extra staff, equipment, office space, etc. or in outsourced form. It is often difficult to quantify the above accurately, but some allowances should be made in budgets and cash-flow forecasts.

On the other hand, the entity may save at least a portion of main contractor’s off-site costs, or head-office overheads (office rent, salaries of head office staff, telephones, office equipment, and general insurances).

Elements of a contractor’s price:

Direct cost

Cost of materials

Cost of labour

Directly attributable cost of plant

+

Indirect cost

On-site (preliminaries and attendance on sub-contractors)

General (head office) overhead cost

=

TOTAL COST (ESTIMATED) OF ITEM OR PROJECT

+

Profit

=

RATE AND/OR PRICE

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GUIDELINES CONSTRUCTION MANAGEMENT

Building up rates and building price from first principles

The steps in determining rates are as follows:

Quantify (measure) the amount of work that needs to be done (for example, m 3 concrete, m 2 walling, m 2 plastering)

Break the quantities down into their individual constituent ingredients or inputs (labour, materials and other resources) by using labour constants, mixing tables, etc. (For example, work out the number of pockets of cement, m 3 of sand and stone, hours of labour in handling, mixing and placing of a m 3 of concrete of certain mix proportions and application)

Determine unit rates for each measured item of work (in the case of schedules or bills of quantities) by multiplying the quantities of constituent parts of an item of work by their unit costs (for example, 5 pockets of cement x R48.00 = R240.00) adding the costs of the constituent parts together, and then adding allowances for overheads and profit, arriving at a unit rate of, say, R730.00 per m 3 of 20 Mpa reinforced concrete in footings

Further steps to take to arrive at the total building price:

Multiply the measured quantities of work by the unit rates to determine the “price” of individual items of work

Add all these together to arrive at the total price (taking into account other allowances such as provisional sums, contingencies, etc.)

Estimating costs of material, labour and plant

General aspects to be evaluated and decided on:

Plant - decide whether to hire or buy (weigh up cost and risk vs. risk and utilisation)

Labour - employ own full-time personnel and/or casual labour paid on a time basis, or per task (piece-work), labour sub-contractors, labour-intensive or a more mechanised working method

Materials - bulk or convenience buying, central yard or direct delivery, specials on alternatives

Allowance for waste - breakage during transit (bricks) and short delivery; wastage on site due to handling, mixing and installation; loss through theft and pilfering (risk management - insurance); overlaps; joints

Other factors - inflation/escalation, interest rate fluctuations, cash flow, discounts for early payment vs. return on investment elsewhere

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SHF BP5

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Estimation of material costs

The cost of material is made up of:

The price per unit paid to the dealer or supplier for the manufactured article

Delivery cost to the site, based on minimum delivery quantity and taking into account off-loading and storage

Allowance for waste as defined below

Less discount(s) (if any) as described below

Price per unit

This is the price quoted by the supplier in units such as R48.00 per pocket of cement, R8.00 per kg of nails, R950.00 per 1 000 bricks, etc. It is helpful if the estimator knows what units and minimum quantities materials are usually sold in.

Delivery cost

The price per unit quoted for items of smaller bulk that are delivered from the retailer’s own yard often includes the cost of delivery up to a certain radius (say within 10 km or 20 km of the yard). The retailer estimates that in a certain year, say, two 3-ton trucks will travel 30 000 km each on daily deliveries within the chosen radius. The total cost of this is taken as an overhead cost and added as a percentage to the price quoted for all materials.

For items of larger bulk or weight, such as bricks, sand, stone, cement, etc. where the cost of delivery is significantly influenced by distance, prices are usually quoted ex yard, and additional charges are made for loading, and on a rate per km or per area/zone for delivery. Delivery is also charged for smaller items that are delivered outside the normal radius.

Waste

Waste is that portion of materials that is lost in handling and processing and cannot be re-used in the permanent structure (see also the section on materials management).

Deliberate and negligent wastage or damaging of materials is not regarded as waste. While loss through theft is not provided for, this is insured against.

Discount

General discount to the trade

Suppliers often provide materials at lower prices to contractors than to the public. All steel window suppliers, for instance, work from a standard price list. Different discounts off the list prices are then offered to different categories of buyer. A small once-off sale to an unknown client may happen at a discount of, say, only 10%, while a contractor who regularly buys large quantities may get as much as 50% to 60% off the list price. The entity acting as contractor should vigorously negotiate for these kinds of discounts.

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Settlement discount

GUIDELINES CONSTRUCTION MANAGEMENT

This is offered by the supplier to the contractor as an incentive to pay accounts on time (usually 2,5% or 5% discount for payment within 30 days).

Compare this with interest earned at a bank:

Say the cost of a contract is R20 000, made up as follows:

Labour

R10 000.00

Material

R10 000.00

Contract cost

R20 000.00

If the material is paid for within 30 days, there is a 5% discount, therefore:

Material costs: R10 000.00 less (5/100 x 10 000) = R9 500.00 (Saving is R500)

If the R10 000.00 was kept in a call-account for 30 days at 6% p.a., it would earn interest of R10 000 x 6/100 x 30/365 = R49.31.

By judicious timing of purchase dates, the entity can get almost 60 days to pay, without forfeiting any discount. Accounts are usually made up on the 25 th of a month for all orders delivered up to then. Say the entity orders an item on the 26 th of the previous month (that is after accounts for the previous month have closed), he or she will receive an invoice for that item after the 25 th of the current month (around the end of month), and will only have to pay for it 30 days after that.

Example:

± 60 Days

± 60 Days JAN FEB MARCH APRIL 25 25 25   Contractor Buys Cement Supplier’s Accounts

JAN

FEB

MARCH

APRIL

25

25

25

 

ContractorJAN FEB MARCH APRIL 25 25 25   Buys Cement Supplier’s Accounts Close Supplier Sends

Buys Cement

Supplier’s Accounts

Close

25   Contractor Buys Cement Supplier’s Accounts Close Supplier Sends Statement Contractor Pays Account Less 5%

Supplier Sends

Statement

Contractor Pays Account Less 5%MARCH APRIL 25 25 25   Contractor Buys Cement Supplier’s Accounts Close Supplier Sends Statement

Cash discount

These are attractive discounts to encourage contractors to pay cash.

Bulk discount

This is a discount for large quantities, to encourage contractors to buy in bulk.

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SHF BP5

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Example of estimating the cost, rate and price of material

Measured item in the bill of quantities:

Description

Unit

Quantity

Rate

Price

One-brick wall in 1:5 cement mortar

m

2

120

?

?

The cost and rate of materials for the above item could be calculated as follows:

 

Estimating cost of materials for the above (per m 2 ):

 

Bricks (after discount to trade):

Price of bricks ex yard:

R 450/1 000 R 200/1 000 R 650/1 000

 

Loading and delivery cost Net cost of bricks delivered to site

Net per m 2 : (1.0/(0.22x0.085)=53x2=106+4%(waste)=110/m 2 @ R650/1 000

R 71.50

 

Mortar (0.072m 3 /m 2 ):

Building sand: 5/6 x 0.072 x 1.5 = 0.09m 3 @ R90/m 3 (del. Incl.) Cement : 1/6 x 0.072 x1.5/0.033= 0.55 sk @ R36 (del. Incl.) Sub-total Waste: 5% say

R

8.10

R 19.80

 

R

27.90

R

1.40

R

29.30

Total cost of materials for above (per m 2 )

R

100.80

Add profit of say 10% (per m 2 )

 

R 10.08

Total Unit Rate

R

110.88

The completed estimate of material price for the item would be as follows:

Description

Unit

Quantity

Rate

Price

One-brick wall in 1:5 cement mortar

m

2

120

110.88

13 305.60

Estimation of labour costs

The cost-to-company of labour is made up of:

Basic wage per hour

Compulsory contributions by the employer in terms of the Collective Agreement between employers and organised labour for the particular area, in accordance with the Labour Relations Act (medical aid, bonus, holiday fund, etc.)

Other statutory contributions by the employer with regard to Skills Development Levies, accident insurance, Unemployment Insurance (UIF), and Regional Services Councils (soon to be replaced with a new business tax)

Agreed travel and/or accommodation and living-out allowances for out-of-town projects, as and when applicable

The above costs are converted to an all-inclusive cost per hour and multiplied by the average time (labour constant) that it takes to produce the unit of work in the bill or schedule.

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The Labour Constant (LC)

Definition

The term given to the average time it takes a healthy, worry-free, diligent tradesman or worker to do a certain unit of work under normal working conditions during average weather conditions

It is that factor which, if multiplied by the relevant rate, will give the labour cost for a particular operation or process

Labour constant = time required to perform the unit of work

The labour constant is calculated by keeping record of the time it takes a group of workers to do a large amount of a certain type of work over a period (1 year) under all kinds of working and weather conditions. The quantity of work units or output is measured and the total time is divided by the total number of units of work. The labour constant multiplied by the total cost per hour, i.e. wage, contributions and labour overhead of all the workers required to produce the unit of work, is the net labour cost of that unit of work.

Examples:

(i)

One worker takes 2.5 hours to dig a trench of 1 m 3

Labour constant = 2.5/1 = 2.5

(ii)

It takes four workers five hours to dig a trench of 0,5m x 8m x 2m

Calculate the labour constant:

LC = t/unit: 4 x 5 = 20 h divided by 0.5 x 8 x 2m = 8 m 3 = 2,5

or:

Four workers take five hours to excavate 8m 3 . One worker, therefore, would

have taken 20 hours to excavate 8 m 3 . For 1 m 3 we therefore have to divide

20

by 8:

20

hours/8 m 3 = 2,5 (labour constant)

The labour constant is then multiplied by the hourly rate of a worker to arrive at the labour cost of a specific activity

Compiling tables for labour constants

The basic principles are:

1. The unit in which the labour constant is reflected must relate to the unit of measure- ment in accordance with the Standard System of Measurement used, for example, for excavations the labour constant must be expressed in hours per m 3 .

2. All operations which are common to similar but different end results must be kept separate. Overlapping and gaps must be avoided, for example:

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SHF BP5

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In concrete work, separate labour constants would be used for the following discrete activities:

The transportation of ingredients from stockpile to place of mixing (e.g. LC = 0.5, therefore it would take one worker 0.5 h to transport 1 m 3 of materials)

Mixing (by hand) (e.g. LC = 3.5, i.e. it would take one worker 3.5 h to mix 1 m 3 of concrete)

Loading into barrows, and transportation to place of pouring (e.g. LC = 0.5, i.e. it would take one worker 0.5 h to transport 1 m 3 of materials)

Placing and levelling of concrete in foundation trenches (e.g. LC = 0.75, i.e. it would take one worker 0.75 h to place and level 1 m 3 of mixed concrete)

Although there are small theoretical differences, for practical purposes and within measurable margins, the labour constants for transporting and mixing are the same for all strengths of concrete. Thereafter the placing, spreading and compaction for different building elements are different. Placing in foundations is easier and quicker than placing in columns, etc.

3. Avoid division into too many operations.

4. LC for transportation of materials on site must be based on average trip distances, say 25 m per trip.

5. Distinguish between operations only if there are measurable differences in the LC.

6. Instead of additional tables, use multipliers where possible.

The multiplier

The multiplier is a factor that indicates how much longer a particular operation takes under circumstances different to the norm. Carting mixed concrete over a distance

of not more than 25 m would, for instance, have an LC of 0.5 h. Carting up to 50

m would take twice as long and a multiplier of x2 would therefore be applied to the basic LC of 0.5.

The use of multipliers reduces the number of tables that need to be compiled for LCs, and allows for discretionary adjustment of basic LCs when it is clear to the estimator that a standard piece of work is going to be executed under non-standard conditions.

Example:

From the tables, an LC of 0.75 is given for the placing of concrete in foundation trenches. Instead of giving separate tables for placing in columns, which is more difficult and takes longer, a multiplier of say 1.8 is used. The LC for placing concrete in columns therefore, is 0.75 x 1.8 = 1.35.

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GUIDELINES CONSTRUCTION MANAGEMENT

Factors that influence production (to be taken into account when compiling and/or using LCs and multipliers):

Weather conditions

(i)

Wet weather: Roads can become impassable. Trucks cannot get out of basement excavations. Workers cannot work in the rain unless cover is provided.

(ii)

Exceptional cold: Workers constantly seek shelter to warm themselves. Concrete plastering and masonry work cannot be carried out in freezing weather.

(iii)

Exceptionally warm weather: Workers become exhausted and must break for fluid intake more often.

(iv)

Wind and dust: Dust gets in workers’ eyes. Materials are difficult to handle. Cranes cannot be used.

(v)

Overcast weather: Lack of light slows down or stops work.

Organisational factors

(i)

Materials shortages: Results in waiting time and demoralisation of workforce. Materials stored untidily or far from the work area reduce efficiency.

(ii)

Untidy site: Reduces efficiency and leads to accidents.

(iii)

Poor worker relations: Foreman shouting and swearing at workers, workers not properly informed and motivated, inappropriate grouping of people with regard to skills, etc.

(iv)

Poor lighting: leads to sloppy work, mistakes and accidents.

(v)

Inefficient and poorly maintained plant and equipment.

(vi)

Workers’ wages less than on other sites in the same area.

Personal problems

(i)

Illness of workers.

(ii)

Domestic problems: financial problems or illness in the home.

(iii)

Exhaustion due to poor nutrition or work not suited to person’s personal ability and strength.

(iv)

Demand for and supply of labour: in times of high demand, production rates are generally lower than in situations of oversupply of labour.

When a contractor is tendering for work within its normal area of activity, the LCs should take into account expected average weather conditions for the area and time of year. Where the work is elsewhere, adjustments will have to be made for differences in the expected weather conditions.

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SHF BP5

2006

Example 1: Estimating labour costs, rate and price

If we use the same measured item that was used for estimating material price in the example above, then:

Description

Unit

Quantity

Rate

Price

One-brick wall in 1:5 cement mortar

m

2

120

?

?

Estimating labour cost for the above:

For this type of work, a small team consisting of one bricklayer and two assistants will be considered as a unit working together. The assistants will be mixing mortar, transporting materials, helping with the erection of scaffolding, etc. so that the bricklayer is free to lay as many bricks as possible in a day.

Say the unit is able to lay 900 bricks in a day of 8 hours, and the team’s total cost to the company is made up as follows (no living-out or travel allowances):

Description

Bricklayer/h

Two assistants/h

Total cost per hour of the unit/team

Basic wage

R 20.00

R 8.00 x 2 = R 16.00

R 36.00

Compulsory employer contributions (medical, bonus, holiday, etc.)

R

2.50

R

1.50 x 2 = R 3.00

R

5.50

Other statutory contr. (skills dev., UIF, RSC, etc.)

R

1.50

R

1.00 x 2 = R 2.00

R

3.50

Total/Hour

R 24.00

 

R 21.00

R 45.00

At 900 bricks a day, the LC for the unit is 900/8 = 112.5 bricks/h: Therefore at 110 bricks per m 2 , the LC = 110/112.5 = 0.98 (h per m 2 )

Labour cost per m 2 : 0.98 x R45.00

R 44.10/m 2

Add profit of 10%

R 4.41/m 2

Total Unit Rate

R 48.51/m 2

The completed estimate of labour price for the item would be as follows:

Description

Unit

Quantity

Rate

Price

One-brick wall in 1:5 cement mortar

m

2

120

48.51

5 821.20

The total price for the item (labour and material) would therefore be:

Description

One-brick wall in 1:5 cement mortar

Unit

Unit

m

2

Quantity

120

Rate

159.39

(110.88+48.51)

Price

19 126.80

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GUIDELINES CONSTRUCTION MANAGEMENT

Example 2: Estimating labour costs, rate and price

Measured item:

Description

Unit

Quantity

Rate

Price

Reinforced concrete 20 MPa in columns (ground floor)

m

3

10

?

?

Total cost to company of labour:

Description

General worker/h

Semi-skilled worker/h

Basic wage

R

8.00

R 12.00

Compulsory employer contributions (medical, bonus, holiday, etc.)

R

1.50

R

1.60

Other statutory contributions (skills development, UIF, RSC, etc.)

R

1.00

R

1.40

Total/Hour

R 10.50

R 15.00

Estimating labour costs for the above:

Note: The contractor has studied the drawings and visited the site and noticed that:

The columns are on the ground floor

His mixing platform will be about 40 m away from the stockpile of materials

The columns will be less than 25 m away from the mixing platform but the ground level will be about 5 m higher than the mixing platform, meaning transportation of mixed concrete will take longer

than allowed for in the standard LC for this activity

General worker:

Transport materials from stockpile:

0.5h x 2 (multiplier for distance 25-50m)=

1.0h

Mix concrete: 3.5h/m 3 = Transport concrete to position:

3.5h

0.5h x 1.2 (steep slope multiplier)=

0.6h

5.1h

@ R 10.50 =

R 53.55

Semi-skilled worker:

Place and consolidate concrete:

0.75h x 1.8 (multiplier for columns)=

1.35h

@ R 15.00 =

R 20.25

Estimated labour cost for the above

R 73.80/m 3

Add profit of say 10%

R 7.38/m 3

Total Unit Rate

R81.18/m 3

The completed estimate of labour price for the above item would be as follows:

Description

Unit

Quantity

Rate

Price

Reinforced concrete 20 MPa in columns (ground floor)

m

3

10

81.18

811.80

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SHF BP5

2006

Estimation of plant costs

Plant (machines, equipment, scaffolding, tools, etc.) can be priced in one of two places. If the cost of use of a particular piece of plant can be linked exclusively to a specific measured item of work, then it is customary to price for its use in the rate of that item. A concrete mixer, for instance, is used only to mix concrete and mortar. The cost of its use can therefore be recovered through the rates for concrete, brickwork and plastering. A tower crane, on the other hand, is used for many different things on a site. It would be impractical to try to apportion its costs to the hundreds of different items it transports daily. An estimate is then made of the total cost of using the crane on the project, and it is priced as one lump sum in the preliminaries section of the bill of quantities under the item “plant and equipment”.

Plant has two types of costs. One is annual cost. This is made up of the costs incurred by owning the piece of plant, regardless of its usage, for example, annual depreciation of the asset value (purchase price), finance costs, insurances, licensing, maintenance and servicing. The other is hourly cost, i.e. direct operational costs such as fuel, lubricants and operator wages.

Annual cost of plant

Annual depreciation

From the moment you buy a piece of equipment, it starts depreciating in value. This is because it will eventually be used up and will have to be replaced sometime in the future. Provision must be made for this in order to recover the cost of using the equipment over its working life, through income from contracts. There are various methods for calculating annual depreciation, each with different implications for tax and the company’s financial reporting. In this example, we will use the straight-line method where the value of the asset (purchase price less salvage value at the end of its life) is depreciated by equal amounts per year over the extent of its working life.

Finance costs

If the plant is bought with borrowed money (financed by a bank), there are annual interest costs. If the plant is bought with own reserve funds, the money is not available for investment where it could potentially earn interest or other income. This loss of interest or income is a cost.

Licensing

Bigger plant often has its own road wheels for transportation and would have to be licensed with the traffic authorities.

Insurances

Plant must be insured against loss of or damage to the asset, as well as for third- party liability.

Maintenance and servicing

Provisions for this cost would be based on manufacturer estimates or, if available, the company’s own records.

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Hourly cost of plant

GUIDELINES CONSTRUCTION MANAGEMENT

(Note: Remember (i) that manufacturer’s claims of production rates, energy consumption, and maintenance intervals are optimistic; and (ii) that operating conditions (altitude, dust, extreme weather, operator competence) can greatly influence these factors)

Fuel/energy

Manufacturers’ estimates or past records will indicate the hourly consumption of petrol, diesoline and electricity.

Lubricants

Plant must be oiled and greased on a regular basis and this cost can be as much as 10% to 20% of energy cost, depending on operating conditions.

Operator wages

The total cost of dedicated operators is included here. (A dedicated operator is one who works full-time on a particular piece of plant, for example, a crane driver).

Example 1: Estimating plant costs

Plant has production rates (a concept similar to the labour constant), for instance, a concrete mixer can yield 12 batches of 250 litres each per hour, or an excavator can excavate 20 m 3 of soft material to a depth of 1.5 m, etc. Again, there are multipliers for work of a similar nature, but with different degrees of difficulty. The cost of use of the concrete mixer in this example is to be priced into the item rates for each measured item of concrete work

250 Litre petrol-driven concrete mixer:

1.

Information:

 

1.1

Purchase price

 

R 30 000.00

1.2

Salvage value (2 nd hand resale value at end of life)

 

R

6 000.00

1.3

Interest rate for financing

 

20% p.a

1.4

Anticipated working life

 

11 520 hours

1.5

Occupation factor hours/day (The other 2 hours used for cleaning, maintenance, etc.)

 

6 h

1.6

Production weeks (4-week builders’ holiday per year)

 

48 x 5 days/year

1.7

Deprecation method

 

straight-line

1.8

Fuel consumption litres/h

 

2.5 litre/hour

1.9

Lubricating oils, etc.

 

20% of fuel cost

1.10

Repair and maintenance

 

10% of purchase price p.a.

1.11

Insurance

 

R 0.10/R 10.00 p.a.

1.12

Life in years: (11520/6=1920 days/5=384 weeks/48=8 years)

 

8 years

1.13

Yield

 

250 litre/batch

1.14

Production/work rate (5 minute cycle)

 

12 batches per hour

2.

Annual cost:

 

2.1

Depreciation:(R30 000 – R6 000 )/8

R

3 000.00

2.2

Interest: 20% x R30 000 x 0.5

R

3 000.00

2.3

Repair and maintenance: 10% x R 30 000

R

3 000.00

2.4

Insurance: R0.50/R10 x R 30 000 x 0.5

R

750.00

2.5

Licence fees

R

150.00

 

R

9 900.00/1440 * = R 6.88/h

* (11520/8=1440 working hours per year)

 
R 150.00   R 9 900.00/1440 * = R 6.88/h * (11520/8=1440 working hours per year)
R 150.00   R 9 900.00/1440 * = R 6.88/h * (11520/8=1440 working hours per year)
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3. Hourly cost:   3.1 Fuel: 2.5 litre @ R4.00 R 10.00     3.2
3. Hourly cost:   3.1 Fuel: 2.5 litre @ R4.00 R 10.00     3.2
3. Hourly cost:   3.1 Fuel: 2.5 litre @ R4.00 R 10.00     3.2
3. Hourly cost:   3.1 Fuel: 2.5 litre @ R4.00 R 10.00     3.2

3. Hourly cost:

 

3.1

Fuel: 2.5 litre @ R4.00

R

10.00

   

3.2

Lubricants: 20% x R10.00

R

2.00

   

3.3

Operator: 8/6 x R12.00/h

R

16.00

R28.00

 

Total cost per hour

 

R34.88

 

Total cost per m 3 : 3m 3 /hour (12 x 250 litre/h)

=R 34.88/2

 

R 11 63/m 3

The total cost of using the concrete mixer is R11.63/m 3 . This cost will be included in the unit rate for each measured item of concrete work in the bill. The cost of transporting the mixer to and from site is calculated separately (it will vary for each contract) and priced in the preliminaries section of the bill.

Notes:

1. Simple interest was used for finance costs above. The interest is paid on a reducing balance (at the end of each year a certain amount of the loan has been paid off and interest is only payable on the outstanding balance). For simplicity, an averaging factor of 0.5 was therefore applied to interest charges, on the assumption that at the beginning of the repayment period (first year), interest is calculated on the full purchase price and at the end the balance is zero.

2. The mixer effectively works only 6 hours per day. The operator is paid for a full 8 hours however (he spends the other two hours on cleaning and maintenance). His attributable cost to the working time of the mixer is therefore 8/6 times his hourly rate.

cleaning and maintenance). His attributable cost to the working time of the mixer is therefore 8/6
cleaning and maintenance). His attributable cost to the working time of the mixer is therefore 8/6

Example 2: Estimating plant costs

It is estimated that a tower crane will be required on site from month 2 up to and including month 6 of a 7-month contract (= 5 months). The total cost of the use of the crane is estimated as follows, and priced as a lump sum in the

preliminaries section of the bill.

Estimation of total costs: tower crane (if owned):

Annual cost (calculated as before) say R 216 00.00/48 x 4.25x5

R

95 625.00

Transportation to and from site: 2 x R 3 000.00

R

6 000.00

Erection and dismantling: R 10 000.00 + R 8 000.00

R

18 000.00

Hourly cost:

 

Electricity: 5m x 4.25 weeks x 5d x 6h = 637.5h @ R 10.00/h

R

6 375.00

Operator: 637.5 x 8/6 = 850h @ R15.00/h

R

12 750.00

Total cost of owned crane priced in preliminaries

R139 750.00

If the crane in the above example was hired instead of being owned, the calculation might be as follows. (The plant-hire company would base its hire rate on the same calculations of annual cost plus an allowance for overhead and profit, except that it would be more conservative than the contractor owning his own plant. This is because, among other factors, it would have to maintain better, and replace stock more often to stay in the market with up to date equipment, and because the stock would be subjected to more abuse or carelessness by hirers):

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GUIDELINES CONSTRUCTION MANAGEMENT

Estimation of total cost of crane (if hired):

Plant-hire company charges:

Transportation: 2 x R3600.00 (R3 000.00 + 20% o/h and profit)

 

R

7 200.00

Erection and dismantling: (R10 000 + R8 000)+20%

 

R

21 600.00

Monthly rental: 5m x R23 760/m (R216 000x1.1+20%)/12

 

R 118 800.00

Contractor’s own costs:

Electricity as before

R

6 375.00

 

Operator as before

R 12 750.00

R

19 125.00

Total cost of hired crane priced in preliminaries

 

R 166 725.00

From the above, it may appear that it is always better to own plant, but this is not necessarily so. The “real” cost of owning plant must take the following into account:

1. Risk of damage, breakage, theft, etc.

2. Having to rent or own storage space

3. Underutilisation, meaning that capital is tied up uselessly instead of earning profits by being available as working capital on new contracts, etc.

4. The restricting cash-flow factor of regular and long-term repayment commitments

5. Hired plant is generally better maintained, thereby reducing downtime due to malfunction

6. Servicing and repairs are the hire company’s problem and just a phone call away

7. Obsolescence, etc.

Estimating costs of contract preliminaries

These are costs connected with organising work on site, and the provision of aids and facilities for the economical execution thereof, such as:

Personnel

Salaries of works foremen, storekeepers, security guards, gatekeepers, crane and hoist operators

Accommodation

Temporary site offices, sheds, toilets, etc. Hire charges and/or capital redemption and interest, maintenance, transport to and from site, erection and dismantling

Plant

All plant on site that are not used exclusively for the production of a particular item of work, for example, cranes, hoists, picks, shovels, wheelbarrows, etc. Hire charges and/or capital redemption and interest, maintenance and running costs

Temporary services

Water and power for the works

Contract requirements

Cost of sureties, insurance premiums, deposits and fees to local authority

Contract management

Cost of meetings, compiling work programmes and cash flows, planning and co-ordinating the works

The cost of preliminaries on conventional building contracts usually range between 7.5% and 20% of contract value, but can vary considerably between projects, depending on:

Type of work (building or civil construction, low-rise housing or inner-city tower block)

Size and phasing of project

Location (urban, suburban, peri-urban, rural, out of country). In certain remote or underdeveloped parts of the world, such as Siberia in Russia, preliminaries could be as high as the actual value of building work because contractors have to establish their own infrastructure, and provide expensive protection against the harsh climate

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The major cost items under preliminaries are plant and salaries/wages of site staff. Both are directly related to the size and duration of the contract, with duration or time being the major factor

In estimating preliminaries costs (the most difficult part of cost estimating, and best left to an experienced estimator), the following activities are involved:

After deciding what work will be done manually to increase employment, assessing what types and numbers of plant and equipment will be needed; and by studying the work programme, estimating how long they will be needed on site

Drawing up an organogram of site administrative staff needed (excluding labour directly involved in actual construction activities), and how long they will be needed

Studying the work force requirement, and contract stipulations to see what temporary facilities and services are needed for the execution of the contract

Studying the contract conditions and statutory requirements to see what insurances are required, and what fees and deposits are payable to the local and other authorities

Discussing with contracts managers and site staff what the security requirements are

Estimation of general (head office) overhead costs to be attributed or apportioned to a specific project for recovery

Overheads are those costs that cannot readily be apportioned to specific work items on a project or projects, but which are necessary to execute the project(s).

The cost of indirect or general office overheads, which can vary from 5% to 20% of contract value, must be spread over all the projects executed in a particular year, that is to say each project must make a “contribution” to overhead costs.

Example:

Project 1 (5% of contract value)
Project 1
(5% of contract value)

Project 2

(5% of contract value)

Project 3

(5% of contract value)

CONTRACTOR’S OFFICE COSTS (say 5% of turnover)
CONTRACTOR’S
OFFICE COSTS
(say 5% of turnover)
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Typical general overheads

GUIDELINES CONSTRUCTION MANAGEMENT

Accommodation

Office space for manager(s), clerks, typists, etc. Storage space for records, plant not in use, vehicles and materials. Total annual rent or an amount that would yield a certain return on investment in own property

Office equipment and expenses

Depreciation of office furniture and equipment, maintenance and finance charges, stationery, postage, telephone/fax, lighting, heating and cooling, bookkeeping charges

Personnel

Salaries of contracts manager(s), contract surveyors, clerks, typists, other head office staff, time-keepers, security guards, including pension/provident fund and medical aid contributions

Transport

Cars, bakkies, trucks. Capital redemption and interest on HP contracts, maintenance and repair, running costs, licences, insurance

Finance costs

Interest on capital (loans or own capital), bank charges, in connection with financing the business

Regular expenses

Fire, theft and third-party insurances, municipal service charges (water, power, refuse removal, sanitary charges)

Estimating overhead contribution

Overhead contributions for each project are commonly estimated by:

1. Estimating the total turnover of all projects for a particular year, say R10 million (value of actual building work excluding preliminaries, provisional sums, overhead and profit).

2. Estimating the total overhead cost that will be needed to support the estimated turnover for that year, say R0.5 million.

3. Expressing the estimated overhead cost as a percentage of estimated turnover (R0.5 million/R10 million = 5% in this case) and adding that percentage to all bill rates for building work.

In this way, the total amount of building work carried out during the year will contribute the full amount of overhead needed. This calculation must be reviewed constantly. This is because the estimates of turnover for the year will be adjusted as the real turnover figures start emerging. For example, if by mid-year it is evident that only 75% of estimated turnover is likely to be realised, the contractor will have to either adjust the percentage upward (if market conditions allow), or start cutting overhead costs.

Contingency allowances

This is one of the most misunderstood and abused aspects of estimating. Contractors, consultants (and their clients) see it as a simple case of “add 10% so we have a bit of fat in the estimate”.

Contingencies should be divided into two distinct categories of uncertainty or risk, and each category should be considered rationally before deciding on an allowance (past experience is invaluable in this regard):

1. Design and detail development – to allow for lack of detail at sketch plan and estimating stage. This allowance should be high in the early preliminary stages,

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and reduce with each subsequent estimate as more detail becomes available from the design team. Once tenders are in and construction is ready to start, this could be reduced to a very small allowance, unless parts of the design are still incomplete.

2. Building contract contingencies – to allow for real unforeseen expenditures. The circumstances of the project will determine the amount that should be allowed. It should also reduce up to a point, but an amount should remain in place until construction is well underway, or even until the end of construction.

How much to allow will depend on the circumstances. It is usual to allow 2.5% to 5% of estimated final building cost for each category (5% to 10% total) in the preliminary estimates, reducing to 1.5% to 2.5% (3% to 5% total) at tender stage, and reduced even more from time to time in cost reports during the construction phase. (For refurbishment and conversion, the initial contingency should be bumped up to at least 15%).

Cost escalations – why an estimate of current construction cost is not good enough

Note: In the discussion below the general situation where an employer or client engages a main contractor for construction work, is described. In the case where the entity acts as the main contractor, it becomes – for purposes of this section – the employer, and contractor then refers to the sub-contractors it employs. Where it acts as main contractor under contract to another organisation, the term contractor below applies to it.

The starting point for all construction cost estimates is the day on which the estimate is done. In other words, the rates used are those that apply on that day as if the project could be completed on the same day. This is usually called the “ESTIMATED CURRENT CONSTRUCTION COST”. This is logical because the rates known to us at this stage can only be from current or (recently) past tenders, and not from the future.

To estimate only the current building cost is not realistic. Feasibility studies (of which the estimate of construction cost is an important part) first have to be carried out, tender documentation must be prepared, tenders called and adjudicated, plans submitted for scrutiny and permission to start building by the local authority, etc. This can take from four to 12 months, and even longer on large and complex projects.

During this time, construction costs will fluctuate in response to both macro- economic and local construction market factors. Recently, these fluctuations have usually been upwards because of continued inflation, and it is expected to remain so for the foreseeable future. The anticipated future tender price for the work will invariably be higher than the estimated current construction cost, which must therefore be escalated in full for the estimated total planning period, at a projected rate based on construction market trends.

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Fixed-price contracts

GUIDELINES CONSTRUCTION MANAGEMENT

A

fixed-price contract is one where the contractor accepts full risk for any fluctuation

in

the costs of labour and material. Smaller contracts are often fixed-price contracts

where the contractor accepts full responsibility for any fluctuation in the costs of labour and material. The employer will not, therefore, reimburse the contractor for any fluctuations in building costs after acceptance of a tender, and the contractor must allow in his tender for any expected fluctuations.

Fixed-price contracts can be called for or arranged with a contractor during negotiations, but the employer must bear in mind that if the building period is prolonged (i.e. longer than 12 months), the risks for the contractor are great, which can lead to the initial tender price being abnormally high.

There is no way of knowing how much, if any, the contractor allows in his tender for this risk. When the market is competitive (with many builders chasing little work), contractors tend to use the escalation risk as a competitive variable. In plain language that means they will load their tenders with as little as possible, and hope to put the screws on their suppliers and sub-contractors (who should be equally hungry for business) to keep their input prices fixed as well. When the economy is booming and there is too much work around, the opposite will be the case.

The main advantage of fixed-price contracts for the employer, on the other hand,

is that the final cost is known with greater certainty from the beginning (making

budgeting less risky).

The time factor

From the above it is clear that, in order to be able to estimate preliminaries and escalation costs on a construction project, one must be able to estimate the length of the construction period.

The project planning and construction periods (time) have an important effect on time-related cost aspects such as:

Preliminaries (especially salaries, plant and other time-related items)

Pre- and post-tender construction cost escalations

Financing cost (interim interest)

It is also of benefit to the client if a project can be completed in a shorter period so that it can generate an income stream sooner.

The effects of time on final building costs as outlined above must always be taken into account in building cost estimates. This requires highly specialised knowledge and skill, as found in the competent professional quantity surveyor (QS).

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Estimating project planning and construction contract periods

The pre-tender project-planning time-line

At the time the first cost estimates are done, there is much to do before construc- tion work starts. All or most of the following processes and activities may still need to happen:

Acquire and secure the land (option periods, offer to purchase or Land Availability Agreement, registration of transfer in deeds office) – anything from two to six months (during this time preliminary designs and feasibility studies can be done)

If required, township establishment or rezoning, or other formal town planning/ legal procedure, including Environmental Impact Assessment (EIA) to clear obstacles to development – anything from an absolute minimum of six months for rezoning (more likely eight to nine months), to nine to 24 months for township establishment

If the above is not required (and land is already zoned for the intended purpose) proceed to the next step, namely:–

Architect prepares site development plan, followed by other drawings for municipal submission (two to four months)

Await municipal approval and permission to build – anything from two to four months (during this time the professional team could proceed with preparation of technical and tender documentation, and call for tenders so that municipal approval and go-ahead to contractor more or less coincide)

It is important for the contractor to understand the lead times in the overall development process, to enable him/her to provide for cost escalations in estimates.

A typical time-line for pre-construction project planning where the land is already proclaimed and correctly zoned, and requires no further formal town planning procedures

Activity Time in months 1 (to 3?) 2 3 4 5 6 7 8 9
Activity
Time in months
1 (to 3?)
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Define project
Identify land
Acquire land
Market surveys
Feasibility
Documentation
Plan approval
Tenders
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GUIDELINES CONSTRUCTION MANAGEMENT

A typical time-line for pre-construction project planning where the land is already proclaimed, but requires rezoning:

Activity Time in months 1(to 3?) 2 3 4 5 6 7 8 9-16 17
Activity
Time in months
1(to 3?)
2
3
4
5
6
7
8
9-16
17
18
19
20
21
22
Define project
Identify land
Acquire land
Rezone land
Market surveys
Feasibility
Documentation
Plan approval
Tenders

The above are indications only. Real times will be affected by the degree to which the developing institution is willing to take the risks involved in overlapping some activities, the availability of money to fund land acquisition, rezoning costs, professional fees for documentation, and administrative delays in getting Land Availability Agreements set up.

From the above it can be seen that the time between project initiation and having a builder on site is around 12 to 16 months in straightforward cases, and around 20 to 24 months where there are complications involved, such as rezoning. These periods vary considerably according to individual circumstances and the degree of overlapping the developing institution is willing to risk (for instance initiating land acquisition before preliminary studies are complete, proceeding with town planning procedures on risk before the property is transferred, preparing full tender documentation before plans are approved).

Township establishment could take slightly longer than rezoning in simple cases (single piece of land owned by council), or could add anything from 12 to 24 months to the normal process in cases where, say, a new estate is to be planned on previously un-proclaimed land. This is because new land-use layouts have to be prepared and submitted to several government departments for input.

The critical-element method for estimating a construction period

The most accurate way of estimating construction periods is to measure rough quantities of the critical elements (bulk earthworks, basements, concrete and steel structures, etc.) and then to draw up a bar chart or critical path programme by calculating the duration of each critical activity according to its quantity and typical production rates.

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This would be far too time-consuming at the time of estimating, and a quicker method is required. A simplified version of the critical-element method is therefore the most appropriate estimating tool. It is based on the observation that the concrete frame in the case of multi-storey buildings, and the walls, slabs and roofs in the case of, say, walk-ups are usually the main critical elements. The method is to first estimate the time needed for the structure, and then to add time for start-up and finishing off respectively.

Planning and programming of the works

Work or production planning

Production planning starts with analysis of the works, and the smallest parts of its components. In project management, the term Work Breakdown Structure (WBS) is used, where activities are set out on an inverted “tree”, where each lower level of branches represents more detailed breakdowns of clusters of activities.

Each activity or job is then planned while taking into account the materials required, and the resources of labour and plant required and available. This includes a close study of all the contract documents – such as drawings, specifications, bills of quantities, conditions of contract – so that all activities and important conditions and prescriptions that influence the method of execution can be noted.

All the main activities are then scheduled in logical sequence on a building or works programme.

Purpose of the building programme

The building programme reflects the agreed sequence and duration of construction activities on a particular project. The purposes of a building programme include:

To provide a timetable for co-ordinating the following:

The issuing of drawings and other information needed for construction

The placing of orders and drawing up of delivery schedules for materials

The work of sub-contractors

Hiring and/or bringing onto site plant and equipment

To show the logical sequence of operations so that work can be planned on a daily, weekly and monthly basis

To show the times available for activities so that output rates for labour and plant can be determined and resources allocated

To provide a measuring tool for monitoring progress

To provide a tool for estimating cash-flow projections and financing requirements

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Programming techniques and tools

GUIDELINES CONSTRUCTION MANAGEMENT

Programming tools vary from simple charts where activities are listed in sequence from top to bottom along the vertical axis, and the time an activity takes and where it belongs in the sequence are depicted graphically by lines or bars on the horizontal axis time-scale (bar chart or Gantt chart), to complex computerised network techniques.

Programming requires a good understanding of the construction process, and how changes in the duration and/or sequence of activities in the process impact on each other and the completion date.

Bar charts or Gantt charts

The usual procedure for preparing a bar chart is to:

Prepare a list of discrete activities in the most logical sequence

Estimate the time and resources needed for each activity

Draw a horizontal bar on a time-scale for each activity, with the length of the bar representing the time on the scale in days or weeks

Plot the bars for all the activities on a chart, with activities listed in sequence on the vertical axis, and the time bars for each activity correctly positioned in accordance with the horizontal time scale (including overlap of activities where appropriate)

Example

Prepare a list of activities:

The list should include all activities, from clearing of site and site establishment to final inspections and hand-overs. For the main or master programme, activities are reflected in broad categories, for example:

1. Site clearance and levelling

2. Site establishment

3. Setting out the works

4. Foundations:

4.1 Excavations

4.2 Concrete

4.3 Brickwork

On larger projects, a more detailed sub-programme for each major activity, such as structural concrete, will be prepared for internal use.

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Activity lists are drawn up as follows:

Number each activity in batches of 10’s if the order of activities is not perfect
Number each activity in batches of
10’s if the order of activities is not
perfect it can be corrected later.
Put the time it will take to complete each
activity here. Work only on working days to
start with, excluding weekends & holidays.
Put a brief description of
each activity here
Note who is resposible for
the activity in this column
Activity No
Description
Duration (days)
Responsibility

To assist you, the following list of typical activities on a residential building project is given. The activities in the shaded blocks are normally included in the building programme, while the unshaded ones represent actions the contractor undertakes in

the “background” as part of internal management of the contract:

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List of typical actions involved in the erection of a residential building

After signing of contract, but before starting construction

Programmable construction activities

“Background” planning and management activities

Formal handing-over of site to contractor, including:

Contractor’s construction planning

pointing out boundary pegs and benchmarks and encase them in concrete

Allocate resources

Prepare building programme and cash flow

providing sets of documentation (drawings, bills of quantities, contract)