Modern construction management

Introduction 1 Structure of the book 2 Objectives and contents 3 Section 1 4 Section 2 4 Section 3 5 Section 4 5 2 Quality management 7 Summary 7 Introduction 7 Notions of quality 7 Quality in transition 8 Quality control and inspection 9 Quality assurance 11 Total Quality Management 20 A systems approach to managing quality 25 Reference 31 Section 1: Project production management 33 3 Production process improvement 35 Summary 35 Introduction to lean construction 35 Productivity 36 Economic development 37 Energy consumption 39 Sustainability 40 International environmental protocols 41 UK emissions 44 Productivity improvement 44 Management systems 48 Management processes (BSI (2002), BS 60791:2002) 53 Employee participation 61 vvi  Contents Macro key performance indicators 77 References 78 4 Planning techniques 80 Summary 80 Introduction 80 Planning in construction 80 Who plans? 81 Planning techniques 83 Other planning techniques 101 Modern construction planning 107 Data exchange 111 Planning multiple projects 113 Reference 116 Appendix 4.A: Normal probability distribution tables 116 5 Workforce motivation 117 Summary 117 Introduction 117 Motivation theories 117 Payment systems, remuneration and performance 121 References 131 6 Project cost control 133 Summary 133 A costcontrol procedure for construction works 133 Systems in current use 134 Points to consider when choosing a costcontrol system 145 Management of the carbon footprint 146 7 Management of equipment 147 Summary 147 Acquisition of plant and equipment 147 The financing of equipment 148 Systematic plant selection 150 The essential characteristics of a decision situation 151 Setting hire rates 159 Marginal costing 166 Plant maintenance 167 Monitoring of maintenance servicing and exhaust emissions 168 References 168 Section 2: Business management 169 8 Project procurement 171 Summary 171 Introduction 171Contents  vii The construction process (BS 60791:2002) 172 ISOBS procurement standards 175 Appointing the teamparties to the contract 176 Public contracts and supplies 178 Project managerleader 178 The contract 182 Health and safety considerations 186 Categories of contract 190 Separated and cooperative contracts 190 Managementoriented contracts 193 Integrated contracts 197 Discretionary contracts 205 Performance of different contract categories 209 References 210 9 Estimating and tendering 211 Summary 211 Introduction 211 Parties involved in estimating and tendering 213 The estimating process 214 BOQ estimating 215 Collection and calculation of cost information 217 Project study 225 Preparing the estimate 226 Tendering adjustments 232 Submitting the tender 234 Estimating in management contracting 235 Use of estimating software 237 Methods of estimating 240 Reference 241 10 Competitive bidding 242 Summary 242 Introduction 242 Part 1: A brief review of bidding strategy 243 Part 2: The importance of accuracy in estimating 250 Part 3: Some ways of using the existing theories 257 Recent developments in bidding 263 Client evaluation of bids 265 References 266 11 Company budgetary control 268 Summary 268 Introduction 268 Preparation of budgets 269 The carbon footprint 275viii  Contents 12 Cash flow and interim valuations 277 Summary 277 Introduction 277 The need for cash flow forecasting by contractors 277 The requirements of a forecasting system 279 Capital lockup 284 The factors that affect capital lockup 285 Interim valuations and cash flow 289 Measurement of work in activities 293 Computers and cash flow 294 Cash flow forecast by standardised models 296 Concluding remarks 297 References 297 13 Economic assessments 298 Summary 298 Introduction 298 Interest 300 Economic comparisons 303 Profitability measures 305 Inflation 310 Accuracy of future estimates 314 Financial modelling 319 Costbenefit analysis 323 Some worked examples 324 Appendix 13.A: Tabulations of interest and time relationships 332 Section 3: Administration and company management 335 14 Company organisation 337 Summary 337 Introduction 337 The function of a manager 337 Company organisational structures 339 Departmentsfunctions 348 Health, safety, occupational welfare and pensions 356 Educational qualifications and vocational training 358 Corporate Social Responsibility 365 Management attitude 366 Reference 368 15 Market planning and business development 369 Summary 369 Introduction 369 Market planning 369 The businessdevelopment process 370 References 381Contents  ix 16 International construction logistics and risks 382 Summary 382 Introduction 382 The international environment 383 Conclusions 389 17 Information resources and ICT systems 390 Summary 390 Introduction 390 The construction company’s business 390 Processes involved in construction business 391 Information needs to support business processes 393 Management of contractors’ information resources 394 Construction information systems 397 The construction information manager 400 ICT in construction 401 ICT change within construction 402 Enablers of current construction IT 402 Using ICT resources in construction 403 Construction in a wireless world 414 Information security 415 18 Financial management 416 Summary 416 Introduction 416 Types of businesses 417 Types of capital 421 The control of capital 426 The company accounts 430 Regulatory authorities 444 References 445

Modern Construction Management The book’s companion website is at www.wiley.com/go/MCM7 and offers invaluable resources for both students and lecturers: •  Solutions to the self-learning exercises •  PowerPoint slides with discussion topics •  Journal and web references Modern Construction Management Seventh Edition Frank Harris Emeritus Professor of Construction Science University of Wolverhampton and Ronald McCaffer Emeritus Professor of Construction Management Loughborough University with Francis Edum-Fotwe Lecturer in Construction Management Loughborough University A John Wiley & Sons, Ltd., Publication This edition first published 2013 John Wiley & Sons, Ltd © 2006, 2013 John Wiley & Sons, Ltd Blackwell Publishing was acquired by John Wiley & Sons in February 2007 Blackwell’s publishing program has been merged with Wiley’s global Scientific, Technical and Medical business to form Wiley-Blackwell Registered office: John Wiley & Sons, Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, UK Editorial offices: 9600 Garsington Road, Oxford, OX4 2DQ, UK The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, UK 2121 State Avenue, Ames, Iowa 50014-8300, USA For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com/wiley-blackwell The right of the author to be identified as the author of this work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher Designations used by companies to distinguish their products are often claimed as trademarks All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners The publisher is not associated with any product or vendor mentioned in this book This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is sold on the understanding that the publisher is not engaged in rendering professional services If professional advice or other expert assistance is required, the services of a competent professional should be sought Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with the respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom If professional advice or other expert assistance is required, the services of a competent professional should be sought Library of Congress Cataloging-in-Publication Data Harris, Frank, 1944–   Modern construction management / Frank Harris and Ronald McCaffer with Francis Edum-Fotwe – 7th ed     p cm   Includes bibliographical references and index   ISBN 978-0-470-67217-4 (pbk : alk paper)  1.  Construction industry–Management.  I.  McCaffer, Ronald.  II.  Edum-Fotwe, Francis.  III.  Title   HD9715.A2H35 2012   624.068–dc23 2012023206 A catalogue record for this book is available from the British Library Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books Cover image: courtesy of Shutterstock.com Cover design by Meaden Creative Set in 10 on 12 pt Minion by Toppan Best-set Premedia Limited, Hong Kong 1  2013 Contents Preface to the sixth edition xi Preface to the seventh edition xii Introduction Structure of the book Objectives and contents Section Section Section Section 4 5 Quality management Summary Introduction Notions of quality Quality in transition Quality control and inspection Quality assurance Total Quality Management A systems approach to managing quality Reference Section 1:  Project production management Production process improvement Summary Introduction to lean construction Productivity Economic development Energy consumption Sustainability International environmental protocols UK emissions Productivity improvement Management systems Management processes (BSI (2002), BS 6079-1:2002) Employee participation 7 7 11 20 25 31 33 35 35 35 36 37 39 40 41 44 44 48 53 61 v vi  Contents Macro key performance indicators References 77 78 Planning techniques Summary Introduction Planning in construction Who plans? Planning techniques Other planning techniques Modern construction planning Data exchange Planning multiple projects Reference Appendix 4.A: Normal probability distribution tables 80 80 80 80 81 83 101 107 111 113 116 116 Workforce motivation Summary Introduction Motivation theories Payment systems, remuneration and performance References 117 117 117 117 121 131 Project cost control Summary A cost-control procedure for construction works Systems in current use Points to consider when choosing a cost-control system Management of the carbon footprint 133 133 133 134 145 146 Management of equipment Summary Acquisition of plant and equipment The financing of equipment Systematic plant selection The essential characteristics of a decision situation Setting hire rates Marginal costing Plant maintenance Monitoring of maintenance servicing and exhaust emissions References 147 147 147 148 150 151 159 166 167 168 168 Section 2:  Business management Project procurement Summary Introduction 169 171 171 171 Contents  vii The construction process (BS 6079-1:2002) ISO/BS procurement standards Appointing the team/parties to the contract Public contracts and supplies Project manager/leader The contract Health and safety considerations Categories of contract Separated and cooperative contracts Management-oriented contracts Integrated contracts Discretionary contracts Performance of different contract categories References 172 175 176 178 178 182 186 190 190 193 197 205 209 210 Estimating and tendering Summary Introduction Parties involved in estimating and tendering The estimating process BOQ estimating Collection and calculation of cost information Project study Preparing the estimate Tendering adjustments Submitting the tender Estimating in management contracting Use of estimating software Methods of estimating Reference 211 211 211 213 214 215 217 225 226 232 234 235 237 240 241 10 Competitive bidding Summary Introduction Part 1: A brief review of bidding strategy Part 2: The importance of accuracy in estimating Part 3: Some ways of using the existing theories Recent developments in bidding Client evaluation of bids References 242 242 242 243 250 257 263 265 266 11 Company budgetary control Summary Introduction Preparation of budgets The carbon footprint 268 268 268 269 275 viii  Contents 12 Cash flow and interim valuations Summary Introduction The need for cash flow forecasting by contractors The requirements of a forecasting system Capital lock-up The factors that affect capital lock-up Interim valuations and cash flow Measurement of work in activities Computers and cash flow Cash flow forecast by standardised models Concluding remarks References 277 277 277 277 279 284 285 289 293 294 296 297 297 13 Economic assessments Summary Introduction Interest Economic comparisons Profitability measures Inflation Accuracy of future estimates Financial modelling Cost-benefit analysis Some worked examples Appendix 13.A: Tabulations of interest and time relationships 298 298 298 300 303 305 310 314 319 323 324 332 Section 3:  Administration and company management 335 14 Company organisation Summary Introduction The function of a manager Company organisational structures Departments/functions Health, safety, occupational welfare and pensions Educational qualifications and vocational training Corporate Social Responsibility Management attitude Reference 337 337 337 337 339 348 356 358 365 366 368 15 Market planning and business development Summary Introduction Market planning The business-development process References 369 369 369 369 370 381 Index accounts 5, 134, 346, 356, 374, 430–438 company 337–367 depreciation 435 dividend 438 financial reporting standards 433 general reserve 436 regulation of 434 ratio analysis 439–443 stock options 437 accuracy of estimates 250 acid test 439 acquisition of company 346, 383, 421 activity on the arrow 80, 83, 86, 101, 103 float 85, 86, 87, 89, 90, 91, 94, 102, 103, 108 dummy 87 earliest time 89, 90, 92 critical 89, 101–103, 105 latest time 88, 89 activity on the node 83, 86, 93–95, 101 activity sampling 74–77 activity schedule 107, 112 added value 47 adjudication – Construction Act 186 advertising 377 alliancing contract 207 articles of association 418 asset support contract(ASC) 201 assets 37, 149, 427, 437 audit 18, 19, 346, 398–400, 430 information 398–400 augmented reality 406 average annual rate of return 309, 310 average margin lost in competition 250–252 award fee contract 184 back end rate loading 288 balance sheet 150, 203, 435, 437 interpreting 438 trial 434 bankruptcy analysis banks 386, 425, 444 regulatory authorities 444 basic time 66 benchmarking 49 bid 177, 242–251, 257–259, 260, 261, 263, 352 contractors’ average 257 lowest 243, 245, 248, 249, 251, 257 mean 250–252, 257, 259, 261 mean standardised 257–258 number of 243, 259 open 243, 264, 265 sealed 243, 246 bidders 177, 178, 243, 244, 257 number of 243257, 259 bidding 242–266, 282 behaviour 245, 246, 258, 259, 262, 263 strategy 243 theory 257 binomial distribution 75 board of directors 345–346 bond, financial 423 junk 425 bonus system 117–131 book-keeping 348, 356, 430–434 brainstorming 22, 24 bribery act (2010) 176 BS EN ISO 14001 44 BS 11000 54 BS1192- (2007) 60 Modern Construction Management, Seventh Edition Frank Harris and Ronald McCaffer with Francis Edum-Fotwe © 2013 John Wiley & Sons, Ltd Published 2013 by John Wiley & Sons, Ltd 548 Index  549 BS 7000–4(1996) 60 BS 8541–2:(2011) 60 BS3375 (1993) 64 BS 8534 175 BS1192- (2007) 182 BS EN ISO 14001 41 budget 146, 268–276 budgetary control (see also cost control) 268–276 building information modeling 59, 405 2D 405 3D 405 models 405 business 235, 236, 263, 277, 298 338, 370, 417 business model 376 customer relations 379 development 235, 349, 370 plan 376 processes see management process 53, departments and functions 348 promotion of product or service 377 public relations 378 satisfying customer needs 379 selling 379 business information modeling (BIM) 59 buying/purchasing department 352, 399 CAD 59, 402, 403 capital 138, 381–388 debentures 423 gearing 429 loans 425 rights issue 423 retained profits 426 shares 423 types of 421 working capital 427–428 carbon footprint 43, 146, 275 cash flow 271, 277–297, 300 calculations 283 capital lock-up 283 claims 286 cash in 166, 278, 280, 284 cash out 146, 278, 280, 284 cost versus time 278 data 278 delay in paying 278, 283, 284, 288 delay in receiving 278, 288 factors affecting 284 forecasting models 296 front end loading 288 interim valuation 290 margin 284 model 296 over-measurement 288 reports 295 retention 288 under-measurement 289 value versus time 277 cause and effect diagram 24 champion 51, 54, 77 claims 282, 285, 286 client 78, 171, 81, 211, 264, 288 cloud computing 410 Infrastructure as a Service 410 Platform as a Service 410 Software as a Service 410 communications 347, 406 patterns of 347 closed tendering 177 CO2 allowances 146, 275 Companies Act 356, 377 company 417 accounts 430, acquisition integration options 346 administration 355 balance sheet 437 book-keeping 430–434 capital 421 cash flow 283, 288 communication patterns 347 corporate social responsibility (CSR) 51, 365–366 departments and functions 348 director 213, 345, 417 education and training 358–365 finance and accounts department 356 functions and departments 348 environmental management 365 leadership 367 manager function 337 matrix organisation 347 motivation 367 objectives 338 operations 349 organisation 339 pattern of communications 347 personnel development 367 plant and equipment organisation 353–355 policies 339 private company 340–342, 417 profit and loss account 436 550  Index company (cont’d) public liability company 342, 318 public relations 349, 378 ratio analysis 429 span of control 346 research and development (R&D) 353 services 351–354 training and education 358–365 shares 423 stakeholder management 49–51 strategy 339 value of 421 waste management 60 competition 250, 257, 373, 374 margin lost 250, 257 competitive 177, 211, 243 bidding 243 tendering 177, 211 competitors’ bid 245 distribution 247, 248 lowest 245 probability of beating 245, 246, 247 compound amount 301, 302 uniform series 302 concurrent engineering 53 construction 11, 19 349 Act 186 economics 353 process11, 19, 53, 172–176 site management 350 construction equipment – see construction plant construction logistics 383–389 also see international construction construction management, definition of construction management contract 194 construction project management, definition of construction operations function 349 construction plant 147–168 acquisition 148 depreciation 161–166 emissions legislation 156–157 EU Stage IIIB legislation 157 financing 148 hire purchase 149 hire rate 159–167 leasing 149 maintenance 167 marginal costing 167 ownership cost 164 operating cost 164 overseas 387 pre-shipment inspection 388 procurement standards 175 selection 150 US Tier legislation 157 construction process 172 construction skills certification scheme (CSCS) 364 contract 178, 183 adjudication – Construction Act 186 alliancing 207 appointing the team/parties to the contract 176 asset support contract (MAC) 201 award fee contract 184 bill of quantities contract 183 arrangements 183 categories 190 conditions 182, 192, 194, 205, 208, 386 construction management 194 cost reimbursement contract 184 DBFO 199 direct labour contract 185 design and build 198 design and construct 198 design and management 195 design and management coordination 181 discretionary contracts 205 early contractor involvement 204 EC public procurement contracts 178 EPC 199 emerging cost contract 185 fixed or percentage fee contract 184 forms of agreement/contract 192, 194, 205, 208, 386 framework agreement 201 Health and Safety 186–190, 356–358 Joint venture 208 integrated contract types 197–205 lump sum contract 183 MAC contract 201 management oriented 193–197 negotiation 176 open and closed tendering 177 optimised contractor involvement 204 parties 176 partnering 206 percentage fee contract 184 performance data 209 pfi/ppp contract 202–205 prime contract 202 Index  551 pooled risks contract 208 programme management 181 project management 179 public contracts and supplies 178 quality 196 reverse auction 177 safety 197 schedule of rates contract 184 separated 190–192 serial contract 185 stage tendering 185 target cost contract 184 term contract 201 turnkey contract 199 two stage tender contract 185 contractor 82, 181, 176–177, 211 bidding behaviour 254 management functions 82, 83, 111 organisation chart 83 contractual arrangements 183 control 9, 23 charts 9, 23 cost 133–146 design 180, 181 span of 346 Corporate Manslaughter and Corporate Homicide Act 2007 189 corporate social responsibility 51, 346, 365, 438 corporation tax 325, 425, 436, 444 DCF yield 305 cost 112–294, 271 data 112, 145, 294 rate calculations 229, 240, 305 system 134, 145 cost benefit analysis 172, 323, 324 cost control (see also budgetary control) 133–146 allocation of costs 141 control 134 materials control 142 systems 134 costing 272 cost reimbursement contract 184 Credit Accumulation and Transfer Scheme (CATS) 359 creditor 277, 425, 435 CSCS card 364 current assets 427 customer 9, 29, 370, 379 cusum plot 260–262 data 107, 111, 112, 145, 237, 264, 294, 410, 411, 413 conferencing 410 management 413 warehousing 411, 412 DBFO-type contracts 199 DCF 305, 308 corporation tax 325 risk 314 yield 505, 313 debentures 423 debtor 427 decision to tender 216 delay 288, 289 paying 288 receiving 288 depreciation 161–166, 435 derivatives 426 design coordination 181 design review 13 design and build contract 198 design and construct contract 198 design and management contract 195 designer 81 design management/coordination 181 direct incentive 124 direct labour contract 185 director, company 345 discretionary contracts 205–288 dividend 438 DMADV 77 DMAIC 77 double entry book-keeping 430 drawings 198 early contractor involvement contract (ECI) 204 earinings before interest (Ebita) 440 Ebitda 421, 440 economic 298, 303 assessments 298 comparisons 298, 299, 303 EC procurement directives 178 education and training 358–365 CSCS card 364 Qualification and curriculum framework (QCF) 358 European Qualifications Framework (EQF) 360 electronic 404, 408, 412 commerce 412 mail 408 552  Index emerging cost contract 185 energy consumption 39 engineer 351, 352 environment 40, 380 environmental management carbon foot print 43, 146, 275 climate change 40–44, 380 equipment emissions 156, 168 marketing 380 protocols and regulations: 41–44 BRE Environmental Assessment Method (BREEAM) 43 Carbon Reduction Strategy For Transport 41 Clean Development Mechanism 41–42 Climate Change Act 41, 44 Climate Change Agreements (CCAs) 41 Climate Change Levy (CCL) 41 Committee on Climate Change (CCC) 41, 44 CRC Energy Efficiency Scheme 41 Energy Performance Certificates for Buildings 43 Environmental Product Declarations (EPDs) 43 EU Energy Performance of Buildings Directive 41, 43 European Emissions Trading Scheme 41, 42 Feed in tariff mechanism (FIT) 41 Global Reporting Initiative (GRI) framework 146, 276 Kyoto protocols 41 Large Combustion Plant Directive 41 Low Carbon Industrial Strategy 41 Low Carbon Transition Plan 41 REDD initiative 41, 42 Renewable Heat Incentive (RHI) 41 UK charity Forum for the Future 43 UK Emissions 44 UK Green Investment Bank (GIB) 44 UK Renewable Energy Strategy 41 UK renewables obligation scheme (RO) 41 United Nations Environment Programme (UNEP) 44 equipment (see also construction plant) 147–168 estimate 211 estimating 211–241 attendance 223 labour cost 217–220 material cost 221, 223 method statement 225 methods 240 operational 228, 230 overheads 230, 236 process 214 resource reconciliation 233 site overheads 230 subcontractors 222 synthetical 71 unit rate 228, 230 estimating and tendering 211–241 buyers 214 client’s staff 213 constructor’s personnel 213 estimators 212, 213, 230 parties involved 212 performance data 239, 64–77 planners 213 senior management 213 site staff 230 tender adjudication 232 tender submission 234 European Construction Institute 20, 25 EU Procurement Directive 178 European qualifications framework (EQF) 360 executive information support 397 export credit guarantee 385 extended enterprise 395 factors affecting cash flow 278, 285 failure prevention analysis 25 field count for activity sampling 74 finance 416–445 angel investor 426 capital sources 378–385 banks 422, 425 derivatives 426 instruments 426 lease 149 LIBOR (inter-bank rate) 422 mezzanine 425 ratio analysis 438–442 regulation 444 reporting standards 444 sovereign wealth fund 420 types of 421–426 venture capital 426 financial modelling 320–322 deterministic 321 probabilistic 321 reulation 444 simulation 321 what-if analysis 321 fit for purpose fixed or percentage fee contract 184 Index  553 flow chart 25, 65, 328 flow diagram 65, 144 force field analysis 25 forms of agreement 192, 194, 205, 208, 386 forms of contract 192, 194, 205, 208, 386 framework agreement 201 Friedman model 246 Framework agreement 210 front end rate loading 288 FTP 408 Functions of a manager 337 department functions 348–356 funds, flow of 438 sources 381–385 Gates model 246 GDP 37 geared incentive schemes 127 gearing, capital 429 general reserve 436 globalisation 382 group incentive schemes 127–129 health and safety 186–190, 356–358, 365 executive (HSE) 187 Herzberg 119 Hire: purchase 149 rate for equipment 159–166 hours saved system 125–126 human resources department see personnel hygiene factors (see also Herzberg) 119 incentive schemes 121–131, 124 day work 123 directors and senior managers 122 factors affecting 120–121 financial 122 geared schemes 127 group scheme 127 indirect scheme 130 job and finish 127 non-financial 121 piecework 123 setting target rates 130 principles of 130 profit sharing 122 semi financial 122 senior managers and executives 122 spot bonus 127 standard time scheme 123 inflation 293, 310, 311 adjusting cash flows 311 adjusting interest rates 312 ignoring 311 plant hire rates 165 present worth 311 yield 313, 314 infobases 414 information 390–415 audit 398 manager 355, 400 process 391 sources 393 security 415 strategy 397, 399 systems 397 technology 355, 356, 393 transaction 391 inspection 8, 9, 388 pre-shipment 388 integrated contract 197–205 interest rate 300, 305 factors 300, 333 interim payments 289, 292 procedure in BoQ contract 291 retentions 291, 292 valuation and certification 292 interim valuations 113, 289 interim certificates 292 JCT form of contract 192, 194, 205, 208, 292 monthly payments 291 monthly statements 291 NCE: EC 289, 291 retentions 292, 293 internet 53, 406–409 extranets 407 smart phone 53 tablet computer 53 international construction 382–389 conditions of contract 386 documentation and bureaucracy 386 equipment and materials 387–388 export credit guarantee 385 finance and payments 385 labour 387 materials and equipment 388 project funding 384 security 384 supply and delivery 388 interpreting balance sheet 438 554  Index intranets 407 investment: capital 38, 423 ratios 441 intellectual property rights 353 ISO 14025/TR 43 ISO 14067 44 ISO 9000, 44, 350, 356 ISO Guide 73:2009 58 ISO 29481–1:(2010) 60 ISO 10845–1:(2010) 175 joint contract tribunal (JCT) 192, 194, 205, 208, 292, 386 joint venture contract 208 just-in-time delivery 52, 54, 208 Kepner and Tregoe method 151 key performance indicators 77 knowledge 395 intellectual property rights 353 management 396 transfer 353 Kyoto Protocol 41 labour costs 217 last planner 106–107 leadership 29, 367 lean construction 51–53, 107 lean management systems 51–53 lean production 51–53 lean production processes 53–60 lean sigma 77 six sigma 77 lean six sigma process, see six sigma leasing 149 finance 149 operating 149 leverage 429 liabilities 426, 437 life cycle costing 322 line of balance 95–101 buffers 97 logic diagram 96 preparing a schedule 97 schedules 97, 98 use 98 linked bar-charts 84 loans 425 logistics also see international construction LOSC 223 low bids 259 lump sum 183, 234, 291 macro key performance indicators 77 maintenance of plant 167–168 condition-based 168 corrective 167 exhaust emissions 157, 168 fixed time to maintenance 167 monitoring of 168 preventive 167 statistically based predictive maintenance 168 management 81, 224, 367, 374, 394, 395 control and efficiency 224 functions 82, 348 leadership 367 organisation 339 processes 1, 48 training 362 management-type contracts 193–197 manager 337, 367, 400 functions of 337 managing agent contract (MAC) 201 margin 250, 286 lost in competition 250 marginal costing 166 marketing 369, 369–381 advertising 378 business development process 370 business model 376 capital 373 client 374 company analysis 374 customer relations 379 identifying customer needs 370 materials, labour and subcontractors 373 market plan 379 marketing policy 376 promotion of product or service 377 public relations 378 relationship marketing 380 satisfying customer needs 379 selling 379 trends-political, sociological, cultural, economic, technological, environmental, social 379 mark-up 232, 240, 243, 259 Maslow theory 117 materials 54, 142, 214, 243, 259, 373, 388 control 142 costs 223 Index  555 matrix analysis 24 matrix organisation 347 McCaffer 221, 248, 252, 257, 258, 259 McGregor 118 mean standardised bids 258 measurement of work 142, 290, 293 activities 293 bill items 290 method study 80 BSI 3375 64 monthly payments 291 motivation 64, 66–67, 117–131, 367 schemes 122–130 theories 117–119 multiple activity chart 65 National reports on construction industry productivity 45–46 National Vocational Qualifications (S/NVQ) 263–265 net present worth 307, 308 limitation 308 net profit 436 network analysis 86–95, 226 new engineering contract 192, 194, 205, 208, 286, 288, 289, 291, 386 nominal share 420 non-conformity 16, 18, 20 non-financial 298 incentives 121 indicators 443 normal distribution 75, 103, 249, 321 number of bidders 257 NVQ qualifications 263–265 Oakland 13, 22, 25 occupational health 257 Official Journal of the European Union 174, 265, 394 offshoring 349, 417 Ogunlana and Thorpe 249 open bids 177, 264, 265 open tendering 177 operating lease 149 optimised contractor involvement contract (OCI) 204 operational estimating 227–228 organisation structure 339 matrix 347 outline process chart 65 output rates 73, 237, 262 outsourcing 349 overdraft 422, 421, 424 over-measurement 286 package deal contract 199 paired comparisons 24 pareto analysis 24 partnering 206 pattern of communications 347 payback period 309 payment 296 incentive scheme systems and remuneration 121 peak oil 40 pension, company 257 percentage fee contract 184 performance level 73, 77, 121, 239, 443 indicators 77 equipment 157 personnel development 367 department 355 PERT 101 duration 101, 102 expected 101 most likely 101 optimistic 101 pessimistic 101 PFI/PPP contract 202–205 piecework 123 planning techniques 80–116 activity-on-arrow 87 activity-on-node 87 bar charts 80 line of balance 95 linked bar charts 80 space-time diagrams 105 planning 80, 83, 112 client 81 company 81 artificial intelligence 113 cost and revenues 109 cost control 112 contractor 82 data exchange 111 department 83, 84 designer 81 estimating 112 monitor and control 109 multiple project 113 preparing schedule 108 resources 108 556  Index planning (cont’d) valuation 113 variations 113 what-if modelling 110 plant 147–168, also see construction plant plant maintenance, see maintenance plus rate bonus, 127 pooled risks contract 208 precedence diagram 92 listing activities 93 network logic 93 time analysis 93 present worth 165, 303, 304, 305, 306, 308, 310, 312, 330 compound amount 301 example 330 inflation 310, 312, 313 interest 300 net 307, 308 uniform series 302 price adjustment 293 price to earnings ratio 442 price variance 142 primary ratio 439 prime contract 202 principles, TQM 20 private company 340–342, 417 private finance initiative 202–205 process 25, 65 chart 25, 65 flow chart 25, 65 procurement 171–210 Procurement standards ISO 10845–1:2010 174 BS 8534 174 Production process improvement 35–78 productivity 36, 77 Contractor Appraisal Feedback (CAF) system 78 improvement 44–48 national reports on construction industry productivity 45–46 performance indicators 77 target rates 130 profit and loss account 436, 437 analysis of 435 profitability 305 ratios 439 programme management 181 project definition 235 document management 413 funding 384 management 178–182 procurement 171–210 promoters (see also client) 171, 211 promotion: product 377 service 377 prospectus, company 418 Public contracts and supplies 178 public liability company 418 public limited company 418 public private partnership 202–205 public relations marketing 378 Qualifications and Credit Framework (QCF) 358–359 quality assurance 8, 11, 14, 18, 19, 20 awareness 17 construction 19 definitions 13 developing system 17 evolution 13 implementation 17 ISO 8402 13 ISO 9000 8, 14, 15–17 quality manual 14, 17 standards 9, 11, 14, 17 system evaluation 18 quality chains 20, 28 quality control 8, 9, 10, 13, 14 construction 11 control control charts 10 statistical methods 10 quality definitions 13 audit 14 control defect 9, 11 design review 13 inspection 10 management specification 10 surveillance 14 system 9, 14 quality management 9, 13, 14, 18, 25, 356 quantity surveying 213 radio frequency tagging 53 random observation 76 ranking and rating 24 of equipment 153–156 Index  557 rate loading 234, 288 rated activity sampling 77 rating 24 time study 66 scale 66 standard time 68 ratio 254, 258, 375, 438, 439, 440, 441 marketing 375 financial analysis 439–435 recording in method study 65 re-engineering 55 relationship marketing 380 relaxation allowances-work study 71 remuneration 121 pensions 357 replacement age 300, 326 reserve, general 434 resource reconciliation 233 resources 37, 90, 108 aggregation 85 allocation 93, 95, 108 resource limited 90, 92 time limited 90 retentions 286, 290, 292 reverse auction 179 rights issue 421 risk analysis 58, 316, 320 modelling 320 simulation 320 management 58–59 sampling 10 activity 74–77 schedule of rates contract 184 Sector Skills Councils 364 SE company 419 six sigma 77 skills certification scheme (CSCS) 364 sealed bids 243 selling 226, 379 shares 420 semi-financial incentives 122 sensitivity chart 314 serial contract 185 setting plant hire rates 159–166 shares 340, 344, 423 buying and selling 420 single stage bidding 243, 244 single envelope 243 double envelope 243 sinking fund method 162, 302 site overheads 136, 230 site visit 225 six sigma 77 smart phones 53 sources of capital 428 span of control 346 spot bonus 127 spreadsheets 159, 160, 282 stage tendering 185 stakeholder management 49 standard costing 135 standard performance 68, 74, 125 standard time 74 standardised bids 258 state/government owned enterprise (SOE/GOE) 420 stock exchange 420 stock options 437 straight line depreciation 161 string diagram 65 subcontractor 222, 350, 373 success rates 259 bidding 259 mark up 259 sum of digits method 161 supervisor delay surveys 61 supply chain 28, 54, 373 network 54 sustainability 40–41, 366 synthetical estimating 71 systematic plant selection 150–15 systems quality management 26 tablet computer 53 target cost contract 184 tendering 177, 213, 215, 232, 250, 251 adjustments 232, 234 parties 213 with a priced bill of quantities 234 without a bill of quantities 234 term contracts 201 time study (see also work measurement) 65–71 British Standard 3375 64 contingencies 71 performance level 73, 77 rating 66 relaxation allowances 71, 72 standard hours 68 standard time 68 time-lapse techniques 65 558  Index tools and techniques 20, 22, 23, 80 brainstorming 23 cause and effect diagrams 24 display data 23 failure prevention 25 force field analysis 25 matrix analysis 24 paired comparisons 24 Pareto analysis 24 process flow chart 25 ranking and rating 24 total quality management (TQM) 8, 14, 20, 48 construction 19, 25 commitment 20, 27, 28 definition 20 principles 20 QA in TQM 20 trading conditions 294, 295 traditional contract 19, 190–191 training 15, 17, 27, 220, 362–363 training and education 358–364 CSCS card 364 Qualification and curriculum framework (QCF) 358–359 turnkey contract 199 turnover ratio 440 turnover 17, 148 245, 252, 269 sales 436 two stage bidding 244 contract 185 under-measurement 288 unit rate estimating 226, 228, 229, 230 unit costing 135 utilisation factor 299 valuation and certifications 293 valuations 113, 134, 144, 232, 234, 289, 293 company 421 value added 47 value 9, 101, 104 engineering 57 for money 9, 324 management 55–57 value versus time 280, 282, 293 cumulative 280–282 variances 101, 103, 142–143, 272 materials 142 variation orders 191 video 65 virtual 191, 402, 403, 404, 405, 410 proximity 402 reality 191, 403 vocational education and training 358–364 Vroom 119 waste management 60 web based marketing 378 work measurement 64–71 work 9, 10, 11, 13, 17, 19, 20, 22, 24, 64–71, 83, 84, 85, 88, 90, 95, 212, 225, 235, 246, 250 package 105, 194, 212, 235 sampling 74–77 study 64–71 work study 64–71 DFSS 77 DMAIC 77 method study 65 Six Sigma 77 time study 64–71 work task management 64 worker surveys 61–62 workforce motivation 117–131 working capital 427 ratios 439 works contractors 194–196 world wide web 53, 408, 409 yield 299, 305, 306, 308, 313, 314, 319, 325, 326, 425, 441–442 z-scores 443 ŽŽŬůƐŽǀĂŝůĂďůĞĨƌŽŵtŝůĞLJͲůĂĐŬǁĞůů Financial Management in Construction Contracting Ross & Williams 978-1-4051-2506-2 Commercial Management: Theory and Practice Lowe 978-1-4051-2468-3 Construction Planning, Programming and Control Third Edition Cooke & Williams 978-1-4051-8380-2 Construction Management Strategies: A Theory of Construction Management Radosavljevic & Bennett 978-0-470-65609-9 Construction Management: New Directions Third Edition McGeorge & Zou 978-0-470-67401-7 Reconstructing Project 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