CONSTRUCTION PROJECT ORGANIZATION 3.

Communication and decision process -

smooth flow of decision are made
Construction project organization refers to the
4. Policies - Setting regulations and
systematic arrangement of resources, roles, and
guidelines.
responsibilities to achieve project objectives
effectively. It involves coordinating various PRINCIPLES OF ORGANIZATION
stakeholders, including engineers, architects,
A well-organized construction project follows key
contractors, and workers, to ensure seamless
principles to ensure smooth operation and
execution.
effective management.
TWO TYPES:
-> Principle of Objective
Formal Organization
Every construction project must have a clear and
- a structured group of people that has a well-defined goal. The objective serves as the
defined set of rules, roles, and guide to future planning and action.
responsibilities for achieving specific
-> Analysis
goals or objectives
- typically guided by formal rules, laws, Thoroughly analyzing project requirements
and procedures, and are accountable to ensures optimal structuring and execution.
a higher authority, such as the
government or the law -> Simplicity

Informal Organization The organization should be as straightforward as

possible to avoid unnecessary complexities.
- organization formed within the formal
organization as a network of -> Functionalism
interpersonal relationship, when people The organization must be built around the main
interact with each other functions of the business and not around the
STRUCTURAL ORGANIZATION individuals.

Structural Organization is defined as formal -> Centralization of Authority and Responsibility

arrangements that are established to coordinate Proper delegation of authority maintains
all activities in order to implement a given balance and accountability.
strategy.
-> Departmentalization
Structural Elements of an Organization
Departmentalization can be through functions,
• Men - Represents all members of an products, location, or by projects of the
organization, from top executives to organization.
workers.
• Materials - Represents the materials -> Limited Span of Control
required for operations. The number of subordinates a leader can
• Machines - tools necessary in producing supervise effectively.
its desired output.
• Methods - Defines how work is done ORGANIZATION & BUSINESS
within the organization. Business is defined as an organization of people
• Money - The financial resources of the with varied skills, which uses capital and talents
organization. to produce goods or services, which can be sold
Major Elements of Organizational Structure to others for more their costs, or it may be
considered as the system through which
1. Distribution of Responsibilities - economic activity was organized by those who
defining the roles and tasks among seek to make profit.
members.
2. Vertical and horizontal authority MANAGEMENT
relationships. • Management is a process. It is the
process of directing and facilitating the
 work of people who are organized for a • From the executive to the supervisor
common purpose. It is the process of down to the workers under his
combining the efforts and resources of jurisdiction and conversely.
individuals with a common interest to • From the workers to those who are in
achieve a desired objective. authority over him.
• Management is a function. It is the
MANAGEMENT CONTROL
function of getting things done through
the efforts of others. It is the application Control
of authority and the assumption of
responsibility. It is an art, the art of - Webster's definition of control as "to
handling people. Management properly check or regulate to keep within limits"
applied, gives individuals in the same - Managerial control defined as broader
organization the feeling of security, of scope of regulation, stimulation, and
recognition, of opportunity and of corrective action
belonging. Importance of Control in Enterprises
• Management to be effective must be
systematic. Things can be done better by - Control leads to specific management
means a plan of action. The plan is a action and variations from routine
step-by-step outline of what is to be - Success or failure of enterprise depends
done and who does what. (ensure that on manager's ability to control
the management is organized, - Effective control is an important tool for
structured, and efficient) success
• Management must be humanistic. Characteristics of an Effective Manager
Human beings preferably should be led
by goals they accept as justifiable, - Understanding of business objectives
worthy, and fair to all concerned and needs
(emphasizes the importance of - Good planning and organizing skills
understanding human behavior, - Ability to anticipate problems and set
motivations and needs) long range goals
• Management to be successful must be - Good organizational skills, including
scientific. By the application of the delegation of authority and fixing of
scientific method to the study and responsibilities.
analysis of the operations of a particular Managerial Responsibilities
job, men have discovered the best-
known methods of performing the - Setting overall objectives and
operation (allows for continuous measurements
improvement and innovation) - Allocating resources and evaluating
performance
Management Structures - Stress on getting the right men for the
• Management structure aims to facilitate job
the coordination and control over the - Concentration on getting the job done
activities of the company. Each company and preventing abuse and waste of
should be studied in terms of its resources
purpose, size, and the nature of its The Manager
business.
• It is important to have a delegation of Manager as an executive is the most difficult and
authority and responsibilities. The line of with the highest degree of responsibility. Being
responsibility must be fixed. the bridge between the board of directors and
stockholders or between top management and
Organization & Business the rest of the agency personnel or between the
The line of responsibility works in two ways: agency itself and the general public, he is always
blamed for management, and yet, he is
oftentimes not praised for his success.
Qualities of an Effective Manager -> To Control

- He studies, analyzes and dissects his job. Control has been defined as the process by which
- He knows how to delegate the an executive gets the performance of his
administrative details of his job. subordinates to correspond as closely as possible
- He is willing to delegate to and share to chosen plans, orders, objectives, or policies.
with his subordinates the credit of a job
In planning, the critical task is the formulation of
well done.
policies. Policies are general statements, which
- He trains and develops his men to
guide or channel the thinking and action of
prepare them to assume delegated
members of an organization. Procedures are
work.
reflection of policy. It involves the selection of a
- He knows how to control and plan his
course of action and applied to future activities
time.
Procedures also detailed the manner in which a
- He institutes controls for effective
certain activity must be accomplished.
performance.
EXECUTIVE LEADERSHIP
EXECUTIVE FUNCTIONS
Executive Leadership is the bridge between
-> To Plan
objective and result. Human progress is the
Planning is the job of making things happen that crowning glory of success. Success is the result of
would otherwise not occur. It is an intellectual good management. And management is the
process, the conscious determination, and effective, efficient and economical utilization of
direction of action. Planning economic and the resources of man, money, materials,
essential control necessary because of machine, methods and memoranda
uncertainty and change.
As a leader or a manager, he/she must:
Plans may be classified as:
- Be an exemplar of good personal appearance,
- Objectives of the enterprise pleasant mannerisms, friendliness, cheerfulness,
- Budget and good health;
- Policies
- Possess adaptability, understanding, patience,
- and Programs
and self-control;
- Procedures
- Have the ability to motivate subordinates and
-> To Organize
other people toward the achievement of
A good organizational structure does not organizational objectives;
guarantee good performance, but a poor one
- Possess at least a certain degree of imagination
makes good performance impossible, either the
and vision;
caliber of the individual managers
notwithstanding - Must have a goal, which is practical and right.
-> To Direct DELEGATION OF AUTHORITY
Directing is guiding and overseeing subordinates. DELEGATION refers to the transferring of
One can plan, organize and staff, but until responsibilities for specific tasks from one person
subordinates are taught what to do and told to to another.
get on with the job, nothing gets done.
AUTHORITY the power or right to give orders,
Leadership has been defined as, the process by make decisions, and enforce obedience
which an executive imaginatively directs, guides
or influences the work of others in choosing and DELEGATION OF AUTHORITY is a process that
attaining particular ends. Leadership is more enables a person to assign a task to others.
than excellence in administrative performance. RESPONSIBILTY AND AUTHORITY
Coordination is the process whereby an Responsibility
executive develops an orderly pattern of group
effort among the subordinates, and secures unity In management literature, responsibility has two
of action in the pursuit of common purpose. meanings. It refers to a duty assigned to a
subordinate based on their position and the - It was one of the earliest attempts to
obligation to fulfill that duty. apply science to the engineering of
processes in management.
Authority
- also known as Taylorism
The official and legal power given to a job role,
The obvious strength of management science is
allowing the person in that position to carry out
its objective, quantitative treatment of
their responsibilities effectively. It is formally
management problems. The treatment is
assigned.
characterized by:
-> Authority is the power to make decisions,
1. A statement of the problem in a
while responsibility is the duty to complete tasks.
mathematical form.
Authority helps a person fulfill their
2. Reliance on measurable quantities such
responsibilities, and both should be balanced to
as costs and income.
work effectively. Responsibility and authority are
3. Use of computers.
closely linked. One famous professor defines
4. Dedication to rational decision making.
responsibility as "hell" without authority. Some
people seek authority but avoid responsibility, Business capitals have long accepted the benefits
known as "buck passing". Authority can be of engineering expertise in connection with
shared but cannot be fully delegated. construction and production operations. They
have started to call engineering to supply the
PERSONNEL COORDINATION
same scientific approach to problems in:
Two Factors are Significant:
• Organization
- The need for close supervisors as judged • Financing
by the skill of the workers and the • Office and field operations
difficulty of the operations. • Inventory and control and in fact almost
- The availability of experienced and trust all phases of the business
worthy personnel capable of acting in
History has proven that engineers were effective
supervisory capacity.
executives. This is due to their inherent analytical
THE SHORTAGE OF PEOPLE WHO ARE CAPABLE mind, creativeness, conceptual, and
OF LEADERSHIP AND SUPERVISION OF OTHER IS mathematical perceptions as their jumping
ONE OF THE BIGGEST DIFFICULTIES board in rendering effective decisions. By nature,
ENCOUNTERED BY COMPANIES, AND THIS MAY Engineers are not talker, just doers. As effective
BE DUE TO: executive, engineers do not make many
decisions because a decision on principle does
- Lack of incentive in the supervisory
not as a rule take longer than a decision on
positions.
symptoms and expediency.
- Inadequate or ineffective recruitment of
those possessing potential leadership To be effective executive, engineers had five
ability. habits in mind:
- Insufficient training of present and
1. They know where their time goes. They
potential supervisory personnel.
work systematically at managing the
SCIENTIFIC MANAGEMENT little of their time.
2. They focus on outward contribution.
The origin of management science, have started
They gear their efforts to results rather
from the works of Frederick W. Taylor, an
than to work.
Engineer who was accredited the title of father
3. They build on strengths. They do not
of scientific management. Other contributors
build on weakness. They do not start out
are Carl G Barth and Henry L. Gantt.
with the things they cannot do.
What is Scientific Management? 4. They concentrate on a few major areas
where superior performance will
- is a theory of management that analyzes
produce outstanding results. They force
and synthesizes workflows
themselves to set priorities. They have
 no choice but to do first thing first and actually are without clinging to
second things not at all. preconceived notions.
5. Engineers finally make effective
DIRECTING PEOPLE ON THE JOB
decisions. They know that this is above
all a matter of system of the right steps Directing people on the job involves providing
in the right sequence. guidance, leadership, and clear instructions as
well as ORDERS to ensure tasks are completed
HUMANISTIC MANAGEMENT
efficiently and effectively.
- is a philosophy of management that
What is Order?
emphasizes the interests of the employee
in the manager-employee partnership A specific message conveyed by a leader to their
- It is inclusive of a number of more follower/s for the purpose of influencing the
specific theories that place a high value follower/s to take desired action. Orders are
on human growth, potential, and dignity. either through verbal or written form.
Mr. Matsushita was asked; what is the key, to the When to use Verbal Order?
success of your management? Matsushita
answered, there is no magic phrase that will - When the order is simple and the
answer your question, our management is message can be clearly heard.
anchored on the following steps: - When privacy is important.
- When the follower is intelligent and
1. We have a good staff. reliable.
2. Our policies were clear. - When a demonstration is involved.
3. We upheld an ideal to be striven for.
4. Our chosen field of business was When to have written orders?
appropriate at the time. - When precise figures or complicated
5. We did not allow factions to form within details are involved.
our company. - When orders must be passed on to
6. We regarded the company as a public someone else.
institution. - When workers involved are slow to
7. We followed a policy of open understand and forgetful.
management. - When you want to hold the receiver
8. We worked towards a system of strictly accountable.
management by all employees. - When particular sequence must be
To Matsushita, there are three management followed.
philosophies, which are indispensable factors in - When you are quoting general
the success of enterprise management, namely: instruction on higher authority.
- When a record is desirable, perhaps the
- A GOAL order may need to be referred to in the
- AN IDEAL future.
- A VISION
FOUR CATEGORIES OF ORDERS
Five Key Points to Success in Enterprise
Management Request

1. To have a clear management philosophy, - Asking politely or formally for something

clear goals, and definite ideal. - The leader asks the follower to act as the
2. To manage a company with the full leader wishes
realization that every enterprise is a Suggestion
public enterprise.
3. To practice open management. - Idea that is mentioned for other people
4. To collect the wisdom of the many. to consider
5. To try your best to acquire an - There is a lot of value to be gained from
unflappable and supremely adaptable the use of carefully phrased suggestion.
mind to enable you to see things as they Asking for Volunteers
 - The leader explains what is to be done 10. Give him faith in his ability to carry it out
and asks for volunteers to do it.
What is Knowledge Worker?
Direct Order or Command
Workers whose main capital is knowledge. Their
- The last alternative important skills are the ability to find and access
new information.
“The trusted ones who ensure your requests are
always met.” What is Knowledge Work?

- Passionate with work Is complex and includes a high degree of

- Welcomes Responsibilities uncertainty and ambiguity. It is all about
- Interested in Advancement problem solving and requires both convergent
- Group of Experience Personnel with and divergent thinking to answer all the simple
good moral and complex questions that arise in daily work.

"People who are always open to and act on your What is Manual Worker?
suggestions."
According to Drucker, we need only efficiency,
- Open-minded Collaborators that is, the ability to do things right rather than
- Encouraging Supporters the ability to get the right things done.
- Reliable Problem Solvers
ADVANCES DELIVER RESULTS
- Insightful Consultants
Management advances deliver business results.
“Circumstances where volunteers are needed to
Some companies such as Samsung have proven
step in and help."
that radical change is possible. Lee Hun Hee,
- Jobs that are Dangerous or Disagreeable chair of Samsung focused on nurturing creativity
- Extra Heavy Works and innovation in the corporate culture while
- Jobs that require overtime simultaneously doing away with the hierarchical
- For a Skilled Worker to do a Special management style.
Unskilled Job
Lower-level managers gained more decision-
"When immediate action is required and a direct making responsibilities, and workers at all levels
order must be given." were encouraged to develop new skills or
interests unrelated to their specific job
- In case of danger or extreme urgency
responsibilities. The result of this restructuring
- Lazy workers or chronic objectors
program made Samsung the leading force in the
- Careless Workers
electronics industry that is today. Likewise, Asian
- When all other methods have failed
companies realized that knowledge economies
repeatedly
based on knowledge work and workers will be
HOW TO GIVE EFFECTIVE ORDER the platform for future prosperity and growth.

To give orders effectively, and earn yourself a PLANNING AND SCHEDULING

reputation as Compelling Leader, you must:
Construction Planning
1. Clarify your objective
The process of identifying the steps required to
2. Obtain favorable attention
build a structure. It involves defining what
3. Make it simple and specific
actions need to be completed, creating an
4. Phrase it tactfully for best results
ordered timeline of events, staffing the project
5. Share the reasons why your approach is
and determining the necessary materials and
the best option
equipment.
6. Learn how much information and
guidance he needs CONSTRUCTION PROJECT PLANNING
7. Let him have it
Construction bidding: This is the process of
8. Make him trust you and believe in the
submitting a proposal for a project to a client. A
rightness of your instructions.
construction bid includes an accurate cost
9. Pay attention to whether he's ready to
take action
estimate for the project. The client must accept deadlines, as well as a list of where they plan to
the bid before work can begin. allocate necessary resources. This can be
beneficial if multiple projects are in progress at
Baselines: Also referred to as performance
the same time.
measures, baselines are the approved starting
points of the construction project STEPS IN PREPARING PROJECT PLAN

Baseline project management: The baseline 1. Clearly define the problem to be solved
project management plan establishes what steps by the project.
management and the rest of the team may take 2. Define the project objectives or goals.
if the project deviates from the course 3. Developing schedule and cost.
established by the baselines 4. Identify project deliverables.
5. Estimate activity duration, resources
Blueprint drawings and specifications: These
and develop schedule.
refer to the drawings that show the layout of the
6. Estimate cost and develop budget based
finished project. Blueprint drawings and
on project schedule and deliverable.
specifications may also include a detailed list of
7. Supporting plans such as quality
the items needed to build the structure
management, human resources,
Submittals: A contractor submits these communication, risk management and
documents to the architect for approval before procurement/ supply management are
the project can begin simultaneously developed
8. Compare the plan compliance with
Scope documentation: The scope original project objectives.
documentation contains feedback from key 9. The plan is updated to meet original
stakeholders and provides a short financial objectives/ goals.
timeline for the project 10. Project is launched based on this plan.
TYPES OF CONSTRUCTION PROJECT PLANNING TYPES OF PLANS (PcPpDcTMMCeF)
(SOBRe)
Project Conceptual Plan
Strategic Planning
The initial plan outlining the overall scope, vision,
When developing a strategic construction project and objectives of the project
plan, the project manager may meet with
corporate planners and the client to determine Project Preliminary Plan
what needs to be done to satisfy both the user
Includes a rough outline of the project’s budget,
and the owner of the project
schedule, and resources. it is more detailed than
Operational Planning the conceptual plan

Operational planning may take place after the Detailed Construction Plan
client approves a strategic plan. In this phase, the
Provides detailed guidance in executing the
construction teams come together to craft a
construction work. It covers all aspects of the
detailed plan with strategic goals and action
construction process.
steps. They agree on baselines and work together
to complete documents and reports. Time Plan

Business Planning Focuses on scheduling the whole project. It

guarantees that this project is finished on time by
A manager usually develops the business plan at
designating particular amounts of time for every
the beginning of a project. This plan describes the
stage.
project and includes a draft of what the project
should look like, guidelines to execute the project Manpower Plan
and assignments for specific team members.
describes the human materials required for the
Resource Planning project, indicating the quantity and types of
workers, their roles, as well as their involvement
To keep everything organized, project managers
in various phases of the project
often create a timeline of important dates and
Material Plan coordination among the various parties
involved, ensuring everyone knows their
Plan that identifies and schedules the materials
roles, responsibilities, and timelines.
required for the project.
• Risk Mitigation
Construction Equipment Plan - Construction projects involve numerous
risks and uncertainties. By incorporating
details the machinery and equipment needed for contingencies and buffer times into the
the construction project schedule, construction scheduling helps
Finance Plan mitigate risks. It allows flexibility in
responding to unexpected events, such
Outlines the budget, funding sources, cost as weather delays, material shortages, or
estimates, and financial management strategies design changes.
for the project. • Quality Control
- A well-structured construction schedule
includes time for inspections, testing,
SCHEDULING and quality control activities at various
There is a significant difference between stages of the project. It ensures that the
“planning” and “scheduling.” Scheduling can necessary checks and balances are in
never be performed effectively without place to maintain the desired quality
planning. standards and adhere to regulatory
requirements.
Scheduling consists of integrating the plan with a • Stakeholder Satisfaction
calendar or specific time frame. It determines - Construction scheduling helps manage
the time needed for each of the planned tasks stakeholder expectations by providing
and the overall length of the project schedule. transparency and clarity on project
timelines. Delivering the project within
IMPORTANCE OF SCHEDULING
the agreed-upon timeframe enhances
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customer satisfaction and strengthens
• Efficient Resource Management relationships with clients, investors, and
- A well-planned construction schedule other project stakeholders.
allows for optimal allocation and • Project Monitoring and Reporting
utilization of resources, including labor, - A construction schedule serves as a
materials, and equipment. Scheduling baseline against which project progress
activities in a logical sequence helps can be monitored and measured. It
avoid resource conflicts, reduces provides a framework for tracking actual
downtime, and maximizes productivity. versus planned progress, identifying
• Time and Cost Management deviations, and initiating corrective
- Construction scheduling enables project actions as needed. Regular reporting on
managers to set realistic timelines and schedule performance enables effective
deadlines for each activity. It helps project management and decision-
identify critical paths, dependencies, and making.
potential bottlenecks, allowing for
METHODS OF SCHEDULING
proactive management of project delays
and risks. By keeping the project on • Gantt Charts or Bar Charts
track, construction scheduling helps - A matrix of rows and columns
control costs and minimize budget - Time scale is indicated along the
overruns. horizontal axis
• Coordination and Communication - Activities are arranged along the vertical
- Construction schedule serves as a axis
central reference point for all project • Milestone Charts
stakeholders, including contractors, - Modification over the original bar chart
subcontractors, suppliers, and - The beginning and the end of the
regulatory agencies. It facilitates activities or task are termed as
effective communication and milestone
NETWORK ANALYSIS • Looping error should not be formed in a
network, as it represents performance of
- Synthesis of two most useful techniques
activities repeatedly in a cyclic manner.
of project management
• In a network, there should be only one
PROGRAM EVALUATION AND REVIEW start event and one ending event.
TECHNIQUE & CRITICAL PATH METHOD • The direction of arrows should flow from
left to right avoiding mixing of direction.
Program Evaluation and Review Technique
(PERT) is a project management methodology RULES IN CONDUCTING A NETWORK
used to analyze and represent the tasks involved
• No single activity can be represented more
in completing a project.
than once in a network. The length of an
Critical Path Method (CPM) is a project arrow has no significance.
management technique to schedule and manage • The event numbered 1 is the start event and
complex projects. an event with highest number is the end
event.
Project Evaluation and Review Technique (PERT)
• Before an activity can be undertaken, all
and Critical Path Method (CPM) are both useful
activities preceding it must be completed.
tools when planning and controlling a project.
PERT and CPM are complementary and both are • In assigning numbers to events, there should
not be any duplication of event numbers in a
important analytical techniques in project
management when managing tasks. network.
• Dummy activities must be used only if it is
COMPONENTS OF PERT AND CPM necessary to reduce the complexity of a
network.
I. Activity
- It represents an action and consumption DETERMINING THE CRITICAL PATH
of resources required to complete a
portion of a project. Step 1
II. Event Make a forward pass through the network as
- An event (or node) will always occur at follows: For each activity i beginning at the Start
the beginning and end of an activity. The node, compute:
event has no resources and is
represented by a circle. - Earliest Start Time (ES) = the maximum
of the earliest finish times of all activities
-> Merge and Burst Event immediately preceding activity i.
One or more activities can start and end - Earliest Finish Time (EF) = (Earliest Start
simultaneously at an event. Time) + (Time to complete activity i). This
represents the earliest time at which an
-> Dummy Activity activity can end.
An imaginary activity which does not STEP 2
consume any resource and time.
Make a backwards pass through the network as
TYPES OF NOTATIONS follows: Move sequentially backwards from the
Finish node to the Start node. At a given node, j,
1) Activity on Arrow (AOA) – that is using
consider all activities ending at node j. For each
arrows to designate activities.
of these activities, (i,j, compute:
2) Activity on Node (AON) – using nodes to
designate activities. - Latest Finish Time (LF) = the minimum of
the latest start times beginning at node
ERRORS TO BE AVOIDED IN CONSTRUCTION
j.
NETWORK
- Latest Start Time (LS) = (Latest Finish
• Two activities starting from a tail event Time) (Time to complete activity (i,j)).
must not have a same end event. To
STEP 3
ensure this, it is absolutely necessary to
introduce a dummy activity. Calculate the slack time for each activity by:
 Slack = (Latest Start) - (Earliest Start), or 1. Commissioning a Project
= (Latest Finish) - (Earliest Finish). 2. Determining Requirements
3. Forming a Design Team
A critical path is a path of activities, from the
4. Designing the Structure
Start node to the Finish node, with 0 slack times.
5. Bidding Based on the Scope of Work
CRITICAL PATH METHOD 6. Forming a Design Team
7. Construction
1. Create a network construction diagram. 8. Close-Out
2. Determine the critical path. 9. Completion
3. Find the values of early start and late
finish. THE ELEMENTS OF THE CONSTRUCTION COST
4. Find the values of late start and early ESTIMATES
finish.
QUANTITY TAKE-OFF: Developed during the pre-
5. Find the values of total float, free float,
construction phase, a quantity take-off measures
and independent float.
the materials and labor needed to complete a
CONSTRUCTION ESTIMATES & VALUES project
ENGINEERING
LABOR HOUR: The labor hour, or man hour, isa
CONSTRUCTION ESTIMATING - the process of unit of work that measures the output of one
calculating all of the required costs for a person working for one hour
construction project, including direct costs
LABOR RATE: The labor rate is the amount per
(materials, labor, equipment) and indirect costs
hour one pays to skilled craftsmen
(permits, insurance, overhead expenses).
MATERIAL PRICES: The cost of materials used to
CONSTRUCTION COST ESTIMATES - proseso ng
manufacture a product or provide a service.
pagtataya ng kabuuang halaga ng isang proyekto
sa konstruksiyon bago ito simulan. EQUIPMENT COST: Refer primarily to the cost of
running, and possibly renting heavy machinery.
FIVE LEVEL SYSTEM
SUBCONTRACTOR QUOTES: Most contractors
1. Order of Magnitude Estimate
will hire multiple specialist subcontractors to
2. Schematic Design Estimate
complete parts of the construction. You add
3. Design Development Estimate
these subcontractor’s quotes to the contractor’s
4. Construction Document Estimate
total estimate.
5. Bid Estimate
INDIRECT COSTS: Expenses not directly
THE MAIN TYPES OF CONSTRUCTION COST
associated with construction work.
ESTIMATES
PROFITS: In order to make profit, the contractor
Detailed Estimate
adds a margin on to the cost of completing the
These estimates, prepared during a project’s pre- work.
design and design phases, start with an order of
CONTENGENCIES: Since even the most accurate
magnitude estimate, or screening estimate,
estimate is likely to be affected by unforesee able
which determines which construction methods
factors an estimate will usually have a
and types are most feasible.
predetermined sum of money built in to account
Bid Estimates for such added costs.

Contractors prepare bid estimates when bidding ESCALATION: Refers to the natural inflation of
to construct the project. costs over time, and its especially vital to take
into account for long- running projects.
Control Estimates
BONDS: The bond functions as a kind of
Prepared after one signs a contractor agreement guarantee of delivery.
and before construction gets under way.
CAPITAL COSTS: Simply the costs associated with
OVERVIEW OF THE CONSTRUCTION establishing a facility.
ESTIMATION PROCESS
OPERATION AND MAINTENANCE COSTS: Are the or evaluated to have an initial and final budget to
ongoing expenses incurred to operate and be produced.
sustain the functionality of an asset.
COST ESTIMATION PROCESS
VARIANCES: The difference between the
DEFINE THE SCOPE: Define the scope of the
planned cost of a project and its actual cost after
project (objectives, deliverables, timelines, and
accounting for any extra expenses or unexpected
requirements).
savings.
BREAKDOWN TASK: Divide the project into
USING HISTORICAL DATA IN CONSTRUCTION
smaller work or tasks.
ESTIMATES
GATHER DATA AND INFORMATION: Collect
When preparing a cost estimate, an estimator
relevant data and information.
usually relies on historical data. Using
comparable historical cost and estimate data can IDENTIFY COST ELEMENTS: Identify the various
be an excellent way to validate estimates. cost elements including direct costs, indirect
costs, contingency reserves, profit margin, and
Historical data comes from a number of sources,
any other relevant expenses.
including catalogs of vendor data, databases,
periodicals, commercial references, and digests ESTIMATION TECHNIQUES: Utilize appropriate
of actual project costs. estimation techniques to predict the cost of each
work package or activity.
THE MAJOR APPROACHES TO CONSTRUCTION
COST ESTIMATION ACCOUNT FOR CONTINGENCIES AND RISKS:
Factor in contingency reserves to account for
PRODUCTION FUNCTION: A production function
unforeseen events, risks, and uncertainties that
relates the amount built (the output) to factors
may impact project costs.
such as materials and labor (the input).
REVIEW AND VALIDATE: Review the cost
STICK ESTIMATING: Stick estimating lists costs
estimates to ensure accuracy, completeness, and
for every job component, making it highly
consistency.
accurate but time-consuming
DOCUMENT AND PRESENT: Document the cost
EMPIRICAL COST INFERENCE: This statistical
estimates in a clear and transparent manner,
method uses regression analyses to relate the
detailing the assumptions, methodologies, and
cost of construction to a model of predictors.
data sources used.
UNIT COST ESTIMATING: Unit cost estimating
UPDATE AND REFINE: As the project progresses
assigns costs to each assembly in a construction
and more information becomes available,
process. It's quick and accurate, especially with
regularly update and refine the cost estimates to
prior use and justification.
reflect any changes.
ALLOCATION OF JOINT COSTS: You allocate costs
MONITOR AND CONTROL: Continuously monitor
that are difficult to assign to individual project
and control project costs throughout the project
elements by using different mathematical
lifecycle.
formulas.
KEY COMPONENTS OF COST ESTIMATION

1. DIRECT COST
IMPORTANCE OF CONSTRUCTION ESTIMATES
- These are expenses directly attributable
1. Effective Cost Tracking to the project, such as materials, labor,
2. Clear Communication and equipment. Direct costs are usually
3. Effective Time Management the most significant component of total
4. Winning More Bids project costs.
2. INDIRECT COST
COST ESTIMATION
- These are expenses that are not directly
The process by which the costs of materials and attributable to a specific project but are
other resources of a given project are forecasted necessary for the overall operation of a
business or organization. Made up of
 insurance, facilities costs, and taxes and SOFTWARE TOOLS IN COST ESTIMATION
duties costs.
MICROSOFT EXCEL - Spreadsheet software that
3. SUBCONTRACTOR COST
is commonly used for creating project cost
- These are expenses incurred by a
estimates.
primary contractor for outsourcing
specific aspects of a project to another PROJECT MANAGER.COM - Cloud-based project
entity or individual, known as a management software that includes a cost
subcontractor. estimation module.
4. CONTINGENCY RESERVE
- This is an amount of money set aside to ESTIMATOR 360 - A construction estimating
cover unexpected or unforeseen events software that includes features for cost
or risks that may arise during the estimation project management and customer
execution of a project relationship management.
5. PROFIT MARGIN COSTIMATOR - Cost estimation software
- A profit margin is added to the total specifically designed for manufacturing and
estimated costs to ensure the machining industries
organization earns a return on
investment. PROEST - A cloud-based construction estimating
6. PROJECT MANAGEMENT COST software that includes features for cost
- Costs associated with project estimation, project management and bid
management activities, such as management.
planning, scheduling, coordination, and IMPORTANCE OF COST ESTIMATING IN
monitoring, should also be included in CONSTRUCTION
the cost estimation.
1. BUDGETING
COST ESTIMATION TECHNIQUES 2. PLANNING
ANALOGOUS. This technique involves using 3. CONTRACTUAL OBLIGATIONS
historical data from similar projects as a basis for 4. PROCUREMENT
estimating the costs of the current project. 5. BID SELECTION

BOTTOM – UP. In this technique, the cost of each BENEFITS OF COST ESTIMATING IN
individual component or task of the project is CONSTRUCTION
estimated, and these estimates are then ACCURATE PLANNING
aggregated to determine the total project cost.
Cost estimating helps organize tasks, allocate
PARAMETRIC. It involves using mathematical resources, and prevent delays. It ensures that
models and statistical relationships to estimate labor, materials, and time are properly managed,
costs based on specific parameters or variables. keeping the project on schedule and within
THREE-POINT. It involves using three estimates budget.
to account for uncertainty in project duration or INCREASED PROFIT MARGINS
cost: the optimistic estimate (O), the pessimistic
estimate (P), and the most likely estimate (M). Businesses can set competitive prices, avoid
financial losses, and maximize profitability.
Accurate estimates lead to better decision-
COMMON MISTAKES IN COST ESTIMATION making and long-term growth.

• Overlooking scope changes MANAGEMENT OF RESOURCES

• Ignoring risk factors Accurate estimates help identify resource needs
• Using inaccurate data early, ensuring efficient workforce and material
• Not considering all costs allocation for smooth project execution.
• Failing to update the cost estimate
BETTER REPUTATION
• Underestimating complexity
• Using unrealistic assumptions
• Relying in single estimate
Reliable cost estimates build trust with clients, documentation, including design
showcasing professionalism and leading to more drawings, specifications, contracts, and
project opportunities. scope documents.
2. DESIGN STAGE
VALUE ENGINEERING refers to a systematic
- This stage involves conducting cost-
process aimed at increasing the value of a
benefit analyses, risk assessments, and
product. It focuses on improving functionality
performance evaluations to assess the
while keeping costs low.
value of proposed changes.
HISTORY OF VALUES ENGINEERING 3. METHODOLOGY STAGE
- This stage refers to a phase in a project
The history of value engineering dates back to where the approach, processes, and
WWII, starting at General Electric Co. During the techniques to be used for achieving
war, there was a shortage of labor, raw materials project objectives are defined and
and component parts, forcing engineers like planned.
Lawrence Miles and Henry Erlicher to explore
alternatives. As a result, they discovered STEPS IN METHODOLOGY STAGE
alternative materials and resources that would
1. GATHER INFORMATION
reduce costs while still maintaining quality.
- This stage involves collecting relevant
VALUE ENGINEERING IS IMPORTANT BECAUSE IT data and information about the project,
FORCES A COMPANY TO EVALUATE ITS FUTURE including its objectives, requirements,
PLANS TO MAXIMIZE PROFITABILITY constraints, and current status.
2. FUNCTION ANALYSIS
TYPES OF VALUE IN VALUE ENGINEERING - In this stage, the project team examines
1. USE VALUE the functions and objectives of the
Use value is the primary type of value project to identify its core purposes and
and it is determined by the attributes of essential requirements.
the good. These attributes define what 3. CREATIVE BRAINSTORMING
the product is able to do, how it is used, - This phase, also known as the
and what its purpose is. This heavily ties speculation phase, involves the team
to product differentiation where coming up with creative ideas for the
consumers can only derive value from a project’s function.
specific good without competitors. 4. EVALUATION AND ANALYSIS
2. COST VALUE - This involves evaluating all expenses at
The ration of function to cost implies every phase, spanning from initial
that the value of a product can be construction costs such as materials,
increased by either improving its land acquisition, and construction
function or decreasing its cost. In value equipment to long term development
engineering, the cost related to costs like energy and water
production, design, maintenance, and consumption.
replacement are included in the analysis. 5. PROJECT AND DEVELOPMENT
3. EAST/ESTEEM VALUE - During the development phase, the
It is the additional premium process team selects the best alternatives
which a product can attract because of identified thus far.
its intrinsic attractiveness to purchasers. 6. PRESENTATION AND BRIEFING
- In the final stage, the team will deliver
4. EXCHANGE VALUE their findings and suggestions to all
It is the sum of the attributes which stakeholders and decision-makers.
enable the product to be exchanged or CONSTRUCTION STAGE
sold
Once the three stages of value engineering are
THE 3 MAIN STAGES OF VALUE ENGINEERING complete, the construction stage begins. Though
1. PLANNING STAGE this is not always a phase that VEs get involved
- This stage involves conducting a in, it is still possible to implement value
comprehensive review of project
engineering in this stage through Value TYPES OF PROJECTS THAT BENEFIT MOST FOR
Engineering Change (VEC) Proposals. VALUE ENGINEERING

VALUE ENGINEERING CHANGE (VEC) 1. Costly Project

PROPOSALS 2. Complex Project
3. Repetitive Costs
These are post-award value engineering
4. Unique Projects with Few Precedents or
proposals made by construction contractors
With New Technology Elements
during the course of construction under a value
5. Projects With Very Restricted
engineering clause in the contract.
Construction Budgets
TOOLS AND TECHNIQUES FOR VALUE 6. Projects With Compressed Design
ENGINEERING Programs
7. High Visibility Projects
• FAST (function analysis system
technique)
• Brainstorming
• Benchmarking
• Cost-benefit analysis
• Design of experiments
• Value Analysis

STRATEGIES FOR REDUCING CONSTRUCTION

COSTS

1. REDESIGN
- The classic value engineering approach
involves redesign to reduce parts count,
simplify assembly/test, and use lower
cost parts. This method, often called
“Cost Avoidance”, yields the biggest
result when initiated at the beginning of
the project.
2. EXISTING COMPONENT COSTS
- The fastest, least intrusive way to
decrease product cost is to decrease
how much you are paying for parts. On
common components this may be done
by renegotiation, or sourcing through a
different vendor.
3. COMPONENT SUBSTITUTION
- This is the second fastest method. In the
best-case scenario, an equivalent part
with lower cost replaces an existing
component. Determining what is the
lowest cost part is a dynamic process
since prices change constantly.

4. RE-SOURCING/OUT-SOURCING
- Custom parts and manufacturing sites
can be resourced or out-sourced to a
lower cost producer.
5. DE-FEATURING
- Another fast method of lowering cost is
to examine what features and options
are really valued by customers and offer
only those which make economic sense.