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Construction Management, 5th Edition

Daniel W. Halpin, Bolivar A. Senior, Gunnar Lucko

ISBN: 978-1-119-36502-0 July 2017 416 Pages

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It’s often said that the construction professional has to be a “jack of all trades, and master of all.” This text covers a wide range of subjects, reflecting the breadth of knowledge needed to understand the dynamics of this large and complex industry. This edition includes updated chapters on planning and scheduling, a new chapter addressing linear scheduling methods, material regarding the historical background of construction as a profession, and includes an Instructor Resource of solutions to the end-of-chapter review exercises.

This text has become a standard course text at many universities. The first four editions have enjoyed wide success as an introductory treatment of the subjects which are critical to success in the construction industry. This fifth edition preserves the features that have been most appreciated by its users throughout the years, and adds suggestions provided by instructors and students through formal surveys and informal feedback to the authors.

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About the Authors v

Preface vii

1 History and Basic Concepts 1

1.1. Bridges and History 1

1.2. The Historical Impact of Construction 2

1.3. Great Captains of Construction 3

1.4. Panama Canal 5

1.5. Other Historic Projects 8

1.6. Construction versus Manufacturing Processes 9

1.7. Project Format 10

1.8. Project Development 11

1.9. Construction Technology and Construction Management 12

1.10. Construction Management Is Resource Driven 13

1.11. Construction Industry 14

1.12. Structure of the Construction Industry 14

1.13. Differing Approaches to Industry Breakdown 15

1.14. Management Levels of Construction 16

Review Questions and Exercises 18

2 Preparing the Bid Package 19

2.1. Project Concept and Need 19

2.2. Establishing Need 20

2.3. Formal Need Evaluation 21

2.4. Conceptual Drawings and Estimates 22

2.5. Preliminary and Detail Design 27

2.6. Notice to Bidders 28

2.7. Bid Package 28

2.8. General Conditions 33

2.9. Supplementary Conditions 34

2.10. Technical Specifications 34

2.11. Addenda 38

2.12. Decision to Bid 38

2.13. Prequalification 39

2.14. Subcontractor and Vendor Quotations/Contracts 39

2.15. Bid Bond 40

2.16. Performance and Payments Bonds 41

2.17. Cost and Requirements for Bonds 42

Review Questions and Exercises 43

3 Issues during Construction 45

3.1. Acceptance Period/Withdrawal 45

3.2. Award of Contract/Notice to Proceed 46

3.3. Contract Agreement 47

3.4. Time Extensions 47

3.5. Change Orders 48

3.6. Changed Conditions 49

3.7. Value Engineering 50

3.8. Suspension, Delay, or Interruption 51

3.9. Liquidated Damages 53

3.10. Progress Payments and Retainage 54

3.11. Progress Reporting 55

3.12. Acceptance and Final Payment 55

3.13. Summary 57

Review Questions and Exercises 58

4 Contracts 59

4.1. Contract Environment 59

4.2. Process of Purchasing Construction 60

4.3. Major Construction Contract Types 61

4.4. Competitively Bid Contracts 61

4.5. Stipulated-Sum Contracts 62

4.6. Unit-Price Contracts 63

4.7. Negotiated Contracts 66

4.8. Project Delivery Methods 68

4.9. Design-Build Contracts 69

4.10. Design-Build in a Consortium Format 70

4.11. Construction Management Contracts 71

4.12. Construction Management At-Risk 72

4.13. Comparing Project Delivery Methods 72

Review Questions and Exercises 73

5 Legal Structure 75

5.1. Types of Organization 75

5.2. Legal Business Forms 75

5.3. Proprietorship 76

5.4. Partnership 77

5.5. Corporation 78

5.6. Comparison of Legal Structures 82

5.7. Joint Venturing 84

Review Questions and Exercises 85

6 Impact of Taxes 86

6.1. Society and Taxation 86

6.2. Business Impact of Taxation 87

6.3. Why Taxes? 88

6.4. Types of Taxes 88

6.5. Income Tax Systems 88

6.6. Taxation of Businesses 89

6.7. Business Deductions in General 91

6.8. Taxable Income: Individuals 91

6.9. Itemized Deductions, Standard Deductions, and Personal Exemptions 92

6.10. The Tax Significance of Depreciation 93

6.11. Marginal Tax Rates 93

6.12. Tax Credits 95

6.13. Tax Payroll Withholding 96

6.14. Tax Payment Schedules 96

6.15. Marginal, Average, and Effective Tax Rates 97

6.16. Summary 97

Review Questions and Exercises 98

7 Project Planning 99

7.1. Introduction 99

7.2. Work Breakdown Structure 100

7.3. Developing the Work Breakdown Structure 102

7.4. A Work Breakdown Example 102

7.5. Work Packages for the Gas Station Project 103

7.6. Determining Sequence of Work Packages 104

7.7. Estimate Development and Cost Control Related to the Work Breakdown Structure 106

7.8. Role of Code of Accounts 108

7.9. Summary 109

Review Questions and Exercises 109

8 Project Scheduling 111

8.1. Introduction 111

8.2. Estimating Activity Durations 112

8.3. Using Historic Productivity Data 113

8.4. Bar Charts 113

8.4.1. Description 113

8.5. Scheduling Logic 116

8.6. Scheduling Networks 119

8.7. The Critical Path Method 119

8.8. Forward Pass 120

8.9. Backward Pass 122

8.10. Activity Floats 123

8.11. Working to Calendar Dates 125

8.12. Example: Scheduling the Small Gas Station 127

8.13. Summary 130

Review Questions and Exercises 130

9 Scheduling: Program Evaluation and Review Technique Networks and Linear Operations 134

9.1. Introduction 134

9.2. An Example Program Evaluation and Review Technique Network 136

9.3. Program Evaluation and Review Technique Shortcomings 139

9.4. Linear Construction Operations 140

9.5. Production Curves 141

9.6. Line of Balance 144

9.7. Line of Balance Applied to Construction 145

Review Questions and Exercises 148

10 Resource-Related and Advanced Linear Scheduling Techniques 152

10.1. Resource Scheduling 152

10.2. Resource Allocation 152

10.3. Resource Leveling 153

10.4. Time–Cost Trade-off 155

10.5. Linear and Repetitive Scheduling Techniques 156

10.6. Linear Scheduling Method 158

10.7. Case Study of a Linear Project 160

Review Questions and Exercises 163

11 The Mathematics of Money 164

11.1. Introduction 165

11.2. Time Value of Money 165

11.3. Factors Determining the Time Value of Money 166

11.4. Simple and Compound Interest 166

11.4.1. Simple Interest 166

11.4.2. Compound Interest 167

11.5. Nominal and Effective Rate 167

11.6. Equivalence and Minimum Attractive Rate of Return 168

11.7. Discount Rate 169

11.8. Sunk Costs 169

11.9. Cash Flow Diagrams 169

11.10. Annuities 170

11.11. Conditions for Annuity Calculations 170

11.11.1. Present Value of an Annuity: Finding P Given A 171

11.11.2. Instalments Paying for an Item: Finding A Given P 172

11.12. Future Value of a Series of Payments: Finding F Given A 172

11.13. Annuity Required to Reach a Goal Amount: Finding A Given F 173

11.14. Summary of Equivalence Formulas 173

11.15. Worth Analysis Techniques: Rationale and Vocabulary 175

11.16. Present worth Analysis 175

11.16.1. Example: Small Excavator 175

11.17. Equivalent Annual Worth 176

11.17.1. Example: Best Job Offer 176

11.18. Internal Rate of Return 176

11.19. Limitations of the Internal Rate of Return Method 177

11.20. A Practical Example Using Present worth Analysis 177

11.21. Comparison Using Equivalent Annual Worth 179

11.22. Summary 181

Review Questions and Exercises 181

12 Project Cash Flow 183

12.1. Cash Flow Projection 183

12.2. Cash Flow to the Contractor 184

12.3. Overdraft Requirements 186

12.4. Comparison of Payment Schemes 188

Review Questions and Exercises 192

13 Project Funding 194

13.1. Money: A Basic Resource 194

13.2. Construction Financing Process 195

13.3. Long-Term Pro Forma Example 195

13.4. Mortgage Loan Commitment 198

13.5. Construction Loan 199

13.6. Owner Financing Using Bonds 201

13.7. Build, Operate, and Transfer 203

Review Questions and Exercises 204

14 Equipment Ownership 205

14.1. General 205

14.2. Equipment Ownership and Operating Costs 206

14.3. Depreciation of Equipment 207

14.4. Straight-Line Method 209

14.5. Declining Balance 211

14.6. Production Method 213

14.7. Depreciation Based on Current Law 213

14.8. Depreciation versus Amortization 215

14.9. Interest, Insurance, and Tax Costs 215

14.10. Operating Costs 217

14.11. Overhead and Markup 219

Review Questions and Exercises 219

15 Equipment Productivity 221

15.1. Need for Heavy Equipment 221

15.2. Productivity Concepts 222

15.3. Cycle Time and Power Requirements 225

15.4. Power Available 227

15.5. Usable Power 232

15.6. Equipment Balance 235

15.7. Random Work Task Durations 239

Review Questions and Exercises 241

16 Construction Labor 243

16.1. The Labor Resource 243

16.2. Short History of Labor Organizations 244

16.3. Early Labor Legislation 245

16.4. Norris-LaGuardia Act 246

16.5. Davis-Bacon Act 246

16.6. National Labor Relations Act 247

16.7. Fair Labor Standards Act 248

16.8. Union Growth 248

16.9. Labor Management Relations Act 249

16.10. Other Labor Legislation 251

16.11. Vertical versus Horizontal Labor Organization Structure 252

16.12. Jurisdictional Disputes 253

16.13. Union Structure 254

16.14. National Unions 256

16.15. State Federations and City Centrals 256

16.16. Union Locals 256

16.17. Union Hiring Halls 257

16.18. Secondary Boycotts 257

16.19. Open-Shop and Double-Breasted Operations 259

16.20. Labor Agreements 259

16.21. Labor Costs 260

16.22. Average Hourly Cost Calculation 264

Review Questions and Exercises 266

17 Estimating Process 268

17.1. Estimating Construction Costs 268

17.2. Types of Estimates 268

17.3. Detailed Estimate Preparation 271

17.4. Definition of Cost Centers 274

17.5. Quantity Takeoff 274

17.6. Methods of Detailed Cost Determination 278

17.7. Problems with Unit-Cost Method 280

17.8. Resource Enumeration 282

17.9. Work Package or Assembly-Based Estimating 284

17.10. Summary 286

Review Questions and Exercises 288

18 Cost Control 289

18.1. Cost Control as a Management Tool 289

18.2. Project Cost Control Systems 289

18.3. Cost Accounts 290

18.4. Cost Coding Systems 292

18.5. Project Cost Code Structure 292

18.6. Cost Accounts for Integrated Project Management 296

18.7. Earned Value Method 299

18.8. Labor Cost Data Collection 305

18.9. Charges for Indirect and Overhead Expense 307

18.10. Project Indirect Costs 309

18.11. Fixed Overhead 309

18.12. Considerations in Establishing Fixed Overhead 310

Review Questions and Exercises 312

19 Materials Management 314

19.1. Material Management Process 314

19.2. The Order 315

19.3. Approval Process 320

19.4. Fabrication and Delivery Process 322

19.5. Installation Process 323

19.6. Material Types 324

Review Questions and Exercises 326

20 Safety 327

20.1. Need for Safe Practice 327

20.2. Humanitarian Concerns 328

20.3. Economic Costs and Benefits 328

20.4. Uninsured Accident Costs 331

20.5. Federal Legislation and Regulation 332

20.6. Occupational Safety and Health Administration Requirements 334

20.7. How the Law Is Applied 334

20.8. Safety Record Keeping 337

20.9. Safety Program 338

Review Questions and Exercises 345

Appendices 347

Appendix A Typical Considerations Affecting the Decision to Bid 348

Appendix B Performance and Payment Bonds 351

Appendix C Arrow Notation Scheduling Calculations 356

Appendix D Generalized Network Relationships 362

Appendix E Productivity Scheduling Method Using Singularity Functions 368

Appendix F Plans for Small Gas Station 371

Appendix G Compound Interest Table 374

Appendix H Site Reconnaissance Checklist 375

Appendix I The Cumulative Normal Distribution Function 377

Bibliography 381

Index 385

  • Chapters on planning and scheduling that have been streamlined to provide a smoother presentation.
  • A new chapter addresses linear scheduling methods in detail as well as the scheduling impact of resource allocation and resource planning has been added.
  • Coverage has been added on the historical background of construction as a profession and a discipline to help the student become excited about the multifaceted nature of realizing great construction projects.
  • Addresses the history of construction and the process by which owners procure and contractors execute construction projects
  • Features chapters which deal with company organization as well as planning and scheduling
  • Covers  the four M’s of construction: money, machines, manpower, and materials
  • Includes monetary concepts such as calculating the cost of money (i.e., issues regarding interest and investment), the impact of taxes, funding of projects, and how contractors manage cash flow during the construction process
  • Updates also include chapters discussing safety
  • An Instructor Resource provides solutions to the end-of-chapter review exercises