1. Costs and Economics of Construction
(Additional materials)

2. Costs through Design Shape and Size
Shape and size to be considered together
Volume and surface area
Other features remaining the same, a perfectly square building will usually cost less than a rectangular building
Higher buildings cost more than lower buildings of equal capacity
Wind
Earthquake
Smaller buildings more expensive per unit area
Economy of scale

4. Costs through Design Materials and Methods of Construction
Partially determined by owner-designer
Partially determined by external factors
Climate
Availability of materials and labor
Laws, codes, and regulations
Attitude of people

5. Costs through Construction Market
Materials
What type and quality of the material is required?
How much?
When?
Where do you want it to be delivered?
From whom do you want to purchase it?
What is your relationship with the supplier?

6. Costs through Construction Market
Labor
Rate
Direct (actual wages)
Indirect (fringe benefits)
Productivity
Rates of production by workman employed
Amounts of work done within a specified time
Equipment and Plant
Depreciation
Maintenance
Investment
Operating

7. Costs through Construction Market
Overhead
Job
Liquidated damages
Taxes and duties
Legal fees and costs
Consultant fees and costs
Contract documents
Site staff
Personnel expenses
Fees and premiums (permits, bond, insurance)
Protection of life, work, and property
Contingencies
Financing
Temporary facilities and services
Cleaning up
Close out

8. Costs through Construction Market
Liquidated damages for delay
Predetermined money damages to be paid to the owner should the contractor fails to deliver the job within contract time
Include the amount (if any) in the estimate if you anticipate delays
Contract documents
Cost of purchasing the documents
Contingencies
Late deliveries
Strikes and lockouts
Anticipated lower productivity
Temporary facilities
Offices, stores
Communications
Services (water, power, gas, drainage)
Roads
Fences, signs
Security and safety
Parking

9. Costs through Construction Market
Overhead
Operating
Costs that cannot be attributed to a particular job
Head office overhead
Management and staff
Business offices
Cost of owning/renting
Furniture & equipment
Supplies
Communications

10. Costs through Construction Market
Profit
Difference between total income and total expenditure
Return on investment (a measure of business success)
Ratio of current year profit on tangible net worth
A relationship of at least 10 percent is regarded as a desired objective
Current assets to current debt

11. Cost Accounting Primary objectives Requires
Plan, manage, and control original job (present)
Prepare estimates for other projects (future)
Plan, manage, and control other jobs (future)
Requires
Actual costs properly accounted and chargeable to a job to be allocated to specific items
An accurate estimate including measured quantities of work and estimated costs with which actual costs are to be compared
A knowledge of construction materials and methods that enables the above requirements
An understanding of cost accounting and its significance

12. Cost Accounting Cost accounting must be directed at proper target
Critical items of works must be identified
Eighty percent of the costs of a project are created by about 20 percent of the items
Target for CA is those 20 percent of the items

13. Future Estimates through Cost Accounting
If the unit prices used are based on several previous jobs, it is unlikely that they will change for future estimates.
But listen to warning signals asking for changes
Don’t wait till it is too late
Actual prices of all major items should be recorded
With sufficient data, a mean price can be established with upper and lower limits
Both unit prices unit rates (for labor costs) should be recorded
Unit rates are expressed in man-hours per production unit (e.g. man-hour/CY of concrete placement)

14. Future Estimates through Cost Accounting

15. Management through Cost Accounting
Avoid repetition of mistakes in future
If loss is incurred on an item, the contractor knows it at the outset
Further losses may be minimized by reorganizing the work
Labor crew may be too large
There could be a delay in delivery of the material
Both of the above

16. Management through Cost Accounting
Work should be planned and scheduled to achieve the highest possible degree of efficiency
Each part of the work must be assessed for the its
Duration
Materials, labor, and equipment requirements
Time relationship to other parts of the work
Work or activity critical to the completion of the job should be known at the outset
Develop critical path method of scheduling activities
Information required to do so can be obtained from the estimates

17. Management through Cost Accounting
Work time allocated for an item must be the same as that allowed in the estimate
CONCRETE FOUNDATION WALLS
Labor cost
$4,800.00
Crew of laborers 3
Unit price of labor
$16.00
Crew time (hours)
100