EV409:

1b. PROJECT AND

CONSTRUCTION
MANAGEMENT
 CHAPTER 1

INTRODUCTION TO
CONSTRUCTION INDUSTRY
Management in construction
can be divided into two distinct
levels:
1. Management at the company
(corporate) level.

2. Management at project level.

 1b.Nature of
Construction Industry
 Nature of the Construction Industry
• Management of construction projects differs
from that in other industries due to the unique
nature of the construction industry;
1. Heterogeneous and fragmented firms
2. Size of firms
3. Size of the industry
4. Regulator of the economy
5. Characteristics of projects
6. Characteristics of workforce
7. Ease of entry to the industry
8. Separation of design and production
9. Speculative demand
1.Heterogeneous and fragmented firms

• Construction industry comprises of a

group of heterogeneous and fragmented
firms, meaning;
- there are large differences between
firms in terms of size and scope of
work, and
- within firms there is often diversity in
activities.
 2. Size of firms
• The construction industry is made up of
mostly small firms.
• The Construction Statistics shows that
of the total of 54,500 construction firms
(in 2003), 80 % are small and medium
sized companies.
• The small and medium sized firms
however accounts for only around
20-30 % of the total construction works.
 3.Size of the industry

• The size of the construction industry is large;

- 3 to 10 % of a nation’s GDP
- employs between 5-12 % of the total
workforce.
• These figures for GDP and labour employed
would be much higher if other closely related
industries, especially construction material
manufacturers, are considered.
 4.Construction industry as a regulator
of the economy.
• Due to its large size and its wide influence
over other related industry, the government
has very often used the construction industry
as a regulator of the national economy.
• This done in the following ways:
- Direct intervention as a major client for the
industry.
- Indirectly through the manipulation of interest rates to
control private sector building demand
 5.Characteristics of projects
The industry is project-based, with construction
works having the following characteristics:
• projects are large discrete units,
• works are carried out over relatively long
duration,
• projects are constructed away from where
the firms are located,
• projects undertaken by any one firm are
geographically dispersed,
• majority of projects are designed and tailor-
made to a client’s requirements,
 6.Characteristics of workforce

• Workers are predominantly male and

casually employed, with strong trade
traditions and little training.
• Most construction works are sub-
contracted with workmen employed
directly by the sub-contractors.
 7.Ease of entry to the industry

• There are few constraints to setting up a

contracting or property/housing
development business.
• The authorities have imposed mandatory
registration for contractors as well as
developers, but the conditions for
registration are relatively easy compared
to the consultants.
 8.Separation of design and production

• Traditionally design is separated from

production, making the management of
the construction process difficult and
complicated; reasons being:
(i) conflict of interests between the
designers and constructors,
(ii) poor communication and
coordination.
*How can the above difficulties be overcome?
 9.The nature of demand
• The demand for construction projects is
called ‘derived’ demand; meaning it is
derived from the need for buildings or
infrastructure in which to live, play, work
and to manufacture, store and transport
goods, etc.
 Cont’d
• there is wide variability in the types of
construction projects,
• prices for projects are established through
competitive tendering; meaning the
products are sold before they are produced,
• each individual project frequently constitutes
a significant proportion of a firm’s workload,
and
• projects are built based on speculative
demand.
 End of lecture on
Nature of Construction Industry