Construction Management full lecture note-By Melese Mengistu.pdf

Construction Management [CENG 5194]
Civil Engineering Department
By: Melese Mengistu (MSc. Construction Engineering and Management)
Lecturer at Dire Dawa University Institute Of Technology- School Of
Civil Engineering & Architecture
E-mail: melesemngst@yahoo.com

Chapter 1
Introduction
Lecture # 1
2 by Melese M. DDU, SCEA

Construction Project
 A project is defined, whether it is in construction or not, by the
following characteristics:
 A defined goal or objective, Specific tasks to be performed, A
defined beginning& end, and Resources being consumed.
 Construction industry is different from other industries by its size, built
on-site, and generally unique.
 Projects begin with a stated goal established by the owner and
accomplished by the project team.

Cont…
 Any series of construction activities and tasks that :.
 Have a specific objective to be completed within certain
specifications.
 Have defined start and end dates
 Have funding limits
 Consume human and nonhuman resources
 Generally project is ‘‘a temporary effort/endeavor undertaken to
create a unique product, service, or result’’.

Need for Construction Project Management
 The construction industry is the largest industry in the world.
 It is more of a service than a manufacturing industry.
 Growth in this industry in fact is an indicator of the economic conditions of a
country.
 This is because the construction industry consumes a wide employment circle of
labor.
 While the manufacturing industry exhibit high-quality products, timelines of service
delivery, reasonable cost of service, and low failure rates, the construction industry,
on the other hand, is generally the opposite.
 Most projects exhibit cost overruns, time extensions, and conflicts among parties.

Magnificent projects with huge cost overruns
 In general, the construction industry is more challenging than other
industries due to:
 Its unique nature; every project is one-of a kind; many conflicting parties
are involved; projects are constrained by time, money and quality; and
high risk.

What is Construction Project Management
 Construction Project management is the planning, organizing, leading,
staffing and controlling of all aspects of a project, to achieve the project’s
objective.
 management is usually considered to have five functions or principles:
Planning
 The management function that involves anticipating future trends and
determining the best strategies and tactics to achieve organizational
objectives.

Cont…
Organizing
 The structuring of resources and activities to accomplish objectives in
an efficient and effective manner. Matching resource & work
Staffing
 Determining human resource needs, recruits, selects, trains, and
develops human resources for jobs created by an organization.
 It is undertaken to match people with jobs so that the realization of
the organization’s objectives will be facilitated

Cont…
Leading
 Influencing others to engage in the work behaviors necessary to reach
organizational goals”.
 Creating a shared culture and values, communicating goals to employees
throughout the organization, and infusing employees to perform at a high
level.
Controlling
 process of ascertaining/checking whether organizational objectives have
been achieved; if not, why not; and determining what activities should then
be taken to achieve objectives better in future.

14 Principles of Management(by Henry Fayol)

Cont…
1. Work division
Specialization allows the individual to build up experience, and to
continuously improve his skills. Thereby he can be more productive.
2. Authority
The right to issue commands, along with which must go the balanced
responsibility for its function.
3. Discipline
Employees must obey, but this is two-sided: employees will only obey orders
if management play their part by providing good leadership.

Cont…
4. Unity of command
 Each worker should have only one boss with no other conflicting lines of command.
5. Unity of Direction
 People engaged in the same kind of activities must have the same objectives in a
single plan.
 This is essential to ensure unity and coordination in the enterprise.
 Unity of command does not exist without unity of direction but does not
necessarily flows from it.
6. Subordination of individual interest
Management must see that the goals of the firms are always paramount

Cont…
7. Payment/Remuneration
 Payment is an important motivator although by analysing a number of possibilities, Fayol
points out that there is no such thing as a perfect system
8. Centralization (Or Decentralization)
 This is a matter of degree depending on the condition of the business and the quality of its
personnel.
9. Scalar chain (Line of Authority)
 A hierarchy is necessary for unity of direction. But lateral communication is also
fundamental, as long as superiors know that such communication is taking place. Scalar
chain refers to the number of levels in the hierarchy from the ultimate authority to the
lowest level in the organization. It should not be over-stretched and consist of too-many
levels

Cont…
10. Order
 Both material order and social order are necessary. The former minimizes lost time and
useless handling of materials. The latter is achieved through organization and
selection.
11. Equity
 In running a business a ‘combination of kindliness and justice’ is needed. Treating
employees well is important to achieve equity.
12. Stability of Tenure of Personnel
 Employees work better if job security and career progress are assured to them.
 An insecure tenure and a high rate of employee turnover will affect the organization
adversely.

Cont…
13. Initiative
 Allowing all personnel to show their initiative in some way is a source of strength
for the organization.
 Even though it may well involve a sacrifice of ‘personal vanity’ on the part of many
managers.
14. Esprit de Corps
 Management must foster the morale of its employees.
 He further suggests that: “real talent is needed to coordinate effort, encourage
keenness, use each person’s abilities, and reward each one’s merit without arousing
possible jealousies and disturbing harmonious relations.”

Construction Project Management Process
Project integration management
Project scope management
Project time management
Project cost management
Project human resource management
Project communication management
Project risk management
Project quality management
Project procurement management

Cont…

The project management triangle

Historical Aspect, Recent Trends and Future Prospects of
Ethiopian construction industry
21
 Modern construction however had started during the region of
Emperor Menilik II (The road from Asmara to Addis Ababa).
 Italy during its invasion (1936-1941) had also contributed to the
development of the construction industry.
 It had constructed about 6000km of roads.
 After Italian invasion, the first Ministry called “Ministry of
Communication and Public Works’’ was established during the
Imperial regime.
 Now a days ministry of construction is established.
by Melese M. DDU, SCEA

Recent Trends and Future Prospects
 Ethiopia engaged in massive construction of mega infrastructures to
satisfy large demand of its people.
 Road Construction
 Railway Construction
 Hydropower Development
 Wind power Development
 Sugar plants
 Irrigation Projects
 Industry zones
 Housing Developments

Current status of the Ethiopian construction sector
 The general state of the domestic construction industry in Ethiopia is
characterized by the following five major deficiencies:
 An inadequate capital base;
 Old and limited numbers of equipment;
 Low levels of equipment availability and utilization;
 Deficiencies in technical, managerial, financial and
entrepreneurial skills; and
 Insufficient and ineffective use of labor-based
construction and maintenance technology

Major categories of construction industry
 A construction is a process of constructing something by man for one
purpose or another.
 It may be a road, bridge, a dam, a dwelling place, an airport, a
commercial building, etc.
 The broad spectrum of constructed facilities may be classified into four
major categories, each with its own characteristics:
A. Residential Housing Construction:
 Includes single-family houses, multi-family dwellings, and high rise apartments.
 The residential housing market is heavily affected by general economic
conditions, tax laws, and the monetary and fiscal policy.

Cont…
B. Institutional and Commercial Building Construction:
 Encompasses a great variety of project types and sizes, such as schools and
universities, medical clinics and hospitals, recreational facilities and sport stadiums,
retail chain stores and large shopping centers, warehouses and light manufacturing
plants, and skyscrapers for office and hotels.
 Because of the higher costs and great sophistication in comparison with residential
housing , this market segment is shared by fewer competitors.
C. Specialized Industrial construction:
 Involves very large scale projects with a high degree of technological complexity,
such as oil refineries, steel mills, chemical processing plants and nuclear plants.

Cont…
 Long range demand forecasting is the most important factor since such
projects are capital intensive and require considerable amount of planning
and construction time.
D. Infrastructure and heavy construction:
 Includes projects such as highways, mass transit systems, tunnels, bridges,
pipelines, dams, drainage systems and sewage treatment plants.
 Most of these projects are publicly owned and therefore financed by either
through bonds, taxes, grants or aids.
 This category of construction is characterized by a high degree of
mechanization.

Construction Projects Participants
 The Owner (The Client) : The owner is the individual or organization for
whom a project is to be built under a contract.
 Duty of the Client
 Demand for the product. For example for the building project:
 Availability and cost of land,
 Location & accessibility
 Price
 Required Infrastructure
 Legal constraints
 Current & future development
 Soil characteristics of land
 Site preparation (right of way)
 Permits

Cont…
Consultant
The consultants’ team shall:
 Ascertain, interpret and formulate the client’s requirement into an
understandable project.
 Design the project to much requirements and constraints
 Assess client’s cost limit to decide on materials & the like.
 Prepare contract documents.
 Supervise the project and constantly inform the client on the progress
 Approve payments and Resolve contractual disputes
 Issue provisional and final acceptance certification

Cont…
Contractor
Responsibility of contractors:
 Carry out a full site investigation prior to submission of tender,
 Submit tender,
 Plan, Program, Control the construction process.
 Notify the consultant about delays, discrepancies/disagreement,
 Effect all payments to his employees, suppliers, subcontractors,
 Rectify/repair all defects on completion of works, etc
 Provide post occupancy repair & maintenance if required.

Cont…
Public sector clients
 Central Government Offices (Ministries)
 Local Authorities (Regional or Town)
 Public Corporations
A. Statutory Authorities
 These bodies offer technical advice during design and construction in their respective
areas.
E.g. EEPCO, AAWSA, Fire Authority - requires meeting their specific requirements.
 Thus early information to these authorities is required.
B. Municipalities and Government Authorities
 These bodies offer the basic Land permit and building permit.

Cont…
The Design Professionals : The major role of the design professional is to
interpret or assist the owner in developing the project’s scope, budget, and
schedule and to prepare construction documents.
Architect: An architect is an individual who plans and design buildings and
their associated landscaping
Engineer: The term engineer usually refers to an individual or a firm engaged
in the design or other work associated with the design or construction.
Engineering-Construction Firm: An engineering-construction firm is a type of
organization the combines both architect/engineering and construction
contracting

Cont…
The Construction Professionals:
The constructions Professional are the parties that responsible for
constructing the project.
 The prime contractor is responsible for delivering a complete project
in accordance with the contract documents.
The Project Manager: is the individual charged with the overall
coordination of the entire construction program for the owner.
These include planning, design, procurement, and construction.

Cont…
 Among his/her duties:
 Clear definitions of the goals of the project.
 Investigate alternative solutions for the problems.
 Develop a detailed plan to make the selected program reality.
 Implement the plan and control the project.
 Construction Manager: The construction manager is responsible for
administering the on-site erection activities, design coordination,
proper selection of materials and methods of construction, contracts
preparation for award, cost and scheduling information and control.

Project Life Cycle
 A process through which a project is implemented from beginning to end.
 The solutions at various stages are then integrated to obtain the final outcome.
 Although each stage requires different expertise, it usually includes both
technical and managerial activities in the knowledge domain of the specialist.
 All stages from conceptual planning and feasibility studies to the acceptance
of a facility for occupancy may be broadly lumped together and referred to
as the Design/Construct process.
 There is no single best approach in organizing project management throughout
a project's life cycle.

1. Preconstruction phase
Project Feasibility study
 This identifies project constraints, alternatives and related assumptions
applied to the end product to be developed.
 Project feasibility is characterized by four basic components:
 Business Problem Description.
 Approach Overview to be used to develop.
 Potential Solutions of the problem.
 Preliminary Recommendations.

Cont…
Conceptual design:
 Very important for the owner.
 During this stage the owner hires key consultants including the designer and
project manager, selects the project site, and establish a conceptual
estimate, schedule, and program.
 The owner must gather as much information as possible about the project
and The most important decision is to proceed with the project or not.
Schematic design: the project team investigates alternate design solutions,
materials and systems.
 Completion of this stage represents about 30% of the design completion.

Cont…
Design development: Designing the main systems and components of the project.
 Good communication between owner, designer, and construction manager is critical
during this stage because selections during this design stage affect project
appearance, construction and cost.
Contract documents:
 Final preparation of the documents necessary for the bid package such as the
drawings, specifications, general conditions, and bill of quantities.
 All documents need to be closely reviewed by the construction manager and
appropriate owner personnel to decrease conflicts, and changes.
 With the contract documents are almost complete; a detailed and complete cost
estimate for the project can be done

2. Procurement phase (Bidding and award phase)
 The project formally transits from design into construction.
 This stage begins with a public advertisement for all interested
bidders or an invitation for specific bidders.
 In fast-track projects, this phase overlaps with the design phase.
 If the project is phased, each work package will be advertised and
bid out individually.
 It is very important stage to select highly qualified contractors. It is
not wise to select the under-bid contractors

3.Construction phase
 The actual physical construction of the project stage.
 This stage takes the project from procurement through the final completion.
 It is the time where the bulk of the owner’s funds will be spent.
 It is the outcome of all previous stages (i.e., good preparation means
smooth construction).
 The consultant will be deployed for contract administration and
construction supervision.
 Changes during construction may hinder the progress of the project

4. Closeout phase
 Transition from design and construction to the actual use of the constructed facility.
 In this stage, the management team must provide documentation, shop drawings,
as-built drawings, and operation manuals to the owner organization.
 The as-built drawings are the original contract drawings adjusted to reflect all the
changes that occurred.
 Assessment of the project team’s performance is crucial in this stage for avoiding
mistakes in the future.
 Actual activity costs and durations should be recorded and compared with that
was planned. This updated costs and durations will serve as the basis for the
estimating and scheduling of future projects.

Cont…
Provisional acceptance
 the client accepts the completed works on provisional basis for a period one year.
 During this period all payments except the retention money (10%) are paid.
Final acceptance
 At this stage the owner completely accepts the works executed and the retention
money is released to the contractor.
 But if default found during this period, the owner can oblige the contractor to
work out that default or the client himself worked it out from the retention money.
 The contractor is assumed to have completed his contractual obligation from this
time on.

Cont…

Project Delivery Methods
 It is how project parties are involved in the project and how they interact
with each other.
 It can be facilitated considering the following factors:
• Size and nature of the work packages within the project.
• Selection of the design team form in-house resources external
consultants or contractors.
• Process of supervision of construction.
• Restrictions upon using combination of organizational structures within
the project.
• Expertise which the client wishes to commit to the project.

1.Traditional approach
 The most common approach in civil engineering projects in which the
design has to be completed before construction can start.
 Design and construction are usually performed by two different parties
who interact directly and separately with the owner.
Advantages:
 Price competition
 Total cost is known before construction starts
 Well documented approach used in most government projects.
Disadvantages
 Long time and Conflict between owner, contractor and A/E

2. Direct labor
 In this approach, owner organization performs both the design and
construction using its in-house labor force.
 Used by large authorities
 The owner performs both the design and the construction
 May use consultants for some specialized designs
 Most suitable for small projects
 Can be used when expertise are available
 Low risk projects
 Inadequate scope definition

3.Design-build
 In this approach, a single organization is responsible for performing
both design and construction.
Advantages:
 Only one contract used
 Minimum owner involvement
 Used for fast-track projects in order to reduce time
 Co-ordination between design and construction and easier in implementing
the changes
Disadvantages
 Cost may not be known until end of the construction
 High risk to contractor and more cost to owner
 Design-build company may reduce quality to save cost

4.Turnkey
 This approach is similar to the design-build approach but with the
organization being responsible for performing both design,
construction, know-how (if any), and project financing.
 Owner payment is then made at the completion (when the contractor
turns over the “key”).

5. Build-operate-transfer (BOT)
 In this approach, a business entity is responsible for performing the design,
construction, long-term financing, and temporary operation of the project.
 At the end of the operation period, which can be many years, operation
of the project is transferred to the owner
 This approach has been extensively used in recent years and is expected
to continue.
 This approach has also been used extensively in large infrastructure
projects financed by the World Bank in parts of the world that cannot
afford the high investment cost of such projects.

Cont…
 This delivery system is advantageous because of three major factors:
 It minimizes owners’ scarcity of financial resources;
 It devoid of considerable risks from the project owners and lessen
regulatory activities; and
 The facility is well operated and transferred with free of charge or
minimum compensations to project owners.
 The increasing popularity of the BOT project is largely due to a shortage
of public funding and the opinion that the facility will be more efficiently
managed by a private entity.

6. Professional construction management (PCM)
 In this approach, the owner appoints a PCM organization (also
known as Construction Management organization) to manage and
coordinate the design and construction phases of a project using a
Teamwork approach.
 The use of PCM approach, therefore, should be considered when:
 There is a need for time saving,
 Flexibility for design changes is required, and
 Owner has insufficient management resources.

7. Contractual relationships
 Within each project delivery method, the contractual relationships
among the project participants can take various arrangements
 The owner needs to make a decision regarding the proper
arrangement that suits the project and the parties involved.
 The different contractual relationships associated with various
project delivery methods are illustrated in the following Figures.

Cont…

End of Chapter 1
Introduction
Lecture # 1
Thank You!!!

Chapter 2 and 3
Project Planning and Scheduling
Lecture # 2 # 3

Planning and Scheduling

Planning and Scheduling
 Planning and scheduling are two terms that are often thought of as synonymous,
but They are not!
 Scheduling is just one part of the planning effort.
 Project planning serves as a foundation for several related functions such as
cost estimating, scheduling, and project control.
 Project scheduling is the determination of the timing and sequence of
operations in the project and their assembly to give the overall completion time

Cont…
 Planning is the process of determining how a project will be
undertaken. It answers the questions:
The Plan
What
How
much
By
whom
where
Why
How
when

Why Plan and Schedule Projects ?
 To calculate the project completion.
 To calculate the start or end of a specific activity.
 To predict and calculate the cash flow .
 To evaluate the effect of changing orders .
 To improve work efficiency.
 To resolve delay claims , this is important in critical path method
‘CPM’ discussed later..
 To serve as an effective project control tool .

Project Planning Methods
1. Bar (Gantt) Charts
 A bar chart is ‘‘a graphic representation of project activities, shown in a
time-scaled bar line with no links shown between activities’’
 The bar may not indicate continuous work from the start of the activity until
its end. Or
 Non continuous (dashed) bars are sometimes used to distinguish between
real work (solid line) and inactive periods (gaps between solid lines)
 Before a bar chart can be constructed for a project, the project must be
broken into smaller, usually homogeneous components, each of which is
called an activity, or a task.

Cont…

Cont…
 Advantages Of Bar Charts
 Time-scaled and Simple to prepare
 Can be more effective and efficient if CPM based - Still the most
popular method
 Bars can be dashed to indicate work stoppage.
 Can be loaded with other information (budget, man hours, resources,
etc.)
 Disadvantages Of Bar Charts
 Does not show logic
 Not practical for projects with too many activities

Cont…
 Bar Charts Loaded with More Info. Such as : budget, man hours and
resources .
500$
220$
400$
850$
140$
500$
900$
10 12 7 11 10 9 15

2. Work Breakdown Structure (WBS)
 The WBS is hierarchical structure which is designed to logically
subdivide all the work-elements of the project into a graphical
presentation.
 The full scope of work for the project is placed at the top of the
diagram, and then sub-divided smaller elements of work at each
lower level of the breakdown.
 At the lowest level of the WBS the elements of work is called a
work package.

Cont…
 A list of project’s activities is developed from the work packages.
 Effective use of the WBS will outline the scope of the project and the
responsibility for each work package.
 There is not necessarily a right or wrong structure because what may
be an excellent fit for one discipline may be an awkward burden for
another.

Steps to develop a project plan by WBS
1. Define the scope of work, method statement, and sequence of work.
2. Generate the work breakdown structure (WBS) to produce a complete list of
activities.
3. Develop the organization breakdown structure (OBS) and link it with work
breakdown structure and identify responsibilities.
4. Determine the relationship between activities.
5. Estimate activities time duration, cost expenditure, and resource requirement.
6. Develop the project network.

Cont…

Example
 Figure below shows a double-span bridge. Break the construction works
of the bridge into activities. The plan will be used for bidding purposes.

Cont…
 A list of activities

Activities Relationships
 In order to identify the relationships among activities, the planning team needs to
answer the following questions for each activity in the project:
 Which activities must be finished before the current one can start?
 What activities may be constructed concurrently with the current one?
 What activities must follow the current one?
 For example, if activity A precedes activity B, activity B precedes activity C, and
activity C precedes activity A, then the project can never be started or completed.

Relationships Between Activities
 Activities represented by nodes and links that allow the use of four
relationships:
1) Finish to Start – FS
2) Start to Finish – SF
3) Finish to Finish – FF
4) Start to Start – SS

Determination of the relationships between activities

3. Networks
 A network is a logical and chronological graphic representation of the
activities (and events) composing a project.
 Network diagrams are the preferred technique for showing activity
sequencing.
 Two classic formats :-
 AOA: Activity on Arrow and
 AON: Activity on Node
 There is 1 start & 1 end event
 Time goes from left to right

Arrow Diagramming Method (ADM)
 Also called activity-on-arrow (AOA) network diagram or (I-J) method (because
activities are defined by the form node, I, and the to node, J)
 Activities are represented by arrows.
 Nodes or circles are the starting and ending points of activities.
 Can only show finish-to-start dependencies

Cont…
 Basic Logic Patterns for Arrow Diagrams

Cont…

Cont…
 Draw the arrow network for the project given next.

Cont…

Cont…
 Dummy activity (fictitious)
• Used to maintain unique numbering of activities.
• Used to complete logic, duration of “0”

Cont…
 Draw the arrow network for the project given next.

Cont…

Node Networks Method (AON)
 Also called activity-on-node (AON) network diagram.
 Activities are represented by node.
 arrows are the starting and ending points of activities.

Cont…

Node Format
 ES- Earliest start
 EF- Earliest finish
 LS- Latest start
 LF- Latest finish
 TT- Total float
 FF- Free float
Activity Name
Activity ID
Duration
ES EF
LS LF
TF FF

Cont…
Draw the node network for the project given next.

Cont…

Cont…
Draw the node network for the project given next.

Cont…
Solution

Cont…
Draw the node network for the project given next.

Cont…
Solution.

PROJECT SCHEDULING

 Scheduling is the determination of the timing of the activities comprising the
project to enable managers to execute the project in a timely manner.
 The project scheduling issued for:
 Knowing the activities timing and the project completion time.
 Having resources available on site in the correct time.
 Making correction actions if schedule shows that the plan will result in late
 completion.
 Assessing the value of penalties on project late completion.
 Determining the project cash flow.
 Evaluating the effect of change orders on the project completion time.
 Determining the value pf project delay and the responsible parties.

The Critical Path Method (CPM)
 The most widely used scheduling technique is the critical path method (CPM) for
scheduling.
 This method calculates the minimum completion time for a project along with the
possible start and finish times for the project activities
 Thus, the critical path can be defined as the longest possible path through the
"network" of project activities.
 The duration of the critical path represents the minimum time required to complete
a project.
 Any delays along the critical path would imply that additional time would be
required to complete the project

Cont…
 Critical activity : An activity on the critical path any delay on the start or
finish of a critical activity will result in a delay in the entire project.
 Critical path : The longest path in a network from start to finish. This
longest path is called the critical path. (If more than one path tie for the
longest, they all are critical paths.
 A path through a network is one of the routes following the arrows (arcs) from the
start node to the finish node.
 The length of a path is the sum of the (estimated) durations of the activities on the
path.
 The (estimated) project duration equals the length of the longest path through the
project network.

Cont…
 There may be more than one critical path among all the project
activities, so completion of the entire project could be delayed by
delaying activities along any one of the critical paths
 The CPM is a systematic scheduling method for a project network and
involves four main steps:
 A forward path to determine activities early-start times;
 A backward path to determine activities late-finish times;
 Float calculations; and
 Identifying critical activities.

Activity-On-Arrow Networks Calculations
 The objective of arrow network analysis is to compute for each event in
the network its early and late timings.
 These times are defined as:
 Early event time (ET) is the earliest time at which an event can occur,
considering the duration of preceding activities.
 Late event time (LT) is the latest time at which an event can occur if the
project is to be completed on schedule

Cont…
 Schedule the following project with activity on arrow network diagram

Forward path
 The forward path determines the early-start times of activities.
 The forward path proceeds from the most left node in the network and
moves to the right, putting the calculations inside the shaded boxes to the
left.
 Each node in the network, in fact, is a point at which some activities end
(head arrows coming into the node)
 That node is also a point at which some activities start (tail arrows of
successor activities)
 Certainly, all successor activities can start only after the latest predecessor
is finished.

Cont…
 Therefore, for the forward path to determine the early-start (ES) time of
an activity, we have to look at the head arrows coming into the start node
of the activity.
 We then have to set the activity ES time as the latest finish time of all
predecessors.

Preparation for the forward path

Cont…

Backward Path
 The backward path determines the late-finish (LF) times of activities by proceeding
backward from the end node to the starting node of the AOA network.
 We put the LF values in the right side boxes adjacent to the nodes, as shown in
Figure.

Float Calculations
 The free float is amount of time that an activity can be delayed without
affecting any succeeding activity.
 Total float (TF): The maximum amount of time an activity can be delayed from its
early start without delaying the entire project.
(TF) = LF – EF
= LS – ES
Free Float (FF) = ETj – ETi – d or
FF = smallest ES (of succeeding activities) – EF (of current activity)
critical path, TF=FF=0

CPM results
Critical activities are : A,D and E
Total duration = 14 days

Precedence Diagram Method (PDM)
 Precedence Diagram Method (PDM) is the CPM scheduling method
used for AON networks and it follows the same four steps of the CPM
for AOA method.
 Example

Forward pass calculations
 Forward pass: The process of navigating through a network from start to
end and calculating the completion date for the project and the early
dates for each activity.
 In mathematical terms, the ES for activity j is as follows :
ESj =max( EFi )
where (EFi) represents the EF for all preceding activities.
Likewise, the EF time for activity j is as follows :
EF j= ESj + Dur j
where Dur j is the duration of activity j

Cont…

Backward pass calculations
Backward pass: The process of navigating through a network from end to
start and calculating the late dates for each activity.
In mathematical terms, the late finish LF for activity j is as follows
( LFj =min(LSk)
where (LSk) represents the late start date for all succeeding activities.
Likewise, the LS time for activity j (LS j) is as follows :
LS j= LFj - Dur j
where Dur j is the duration of activity

Cont…

Floats
Total float (TF): The maximum amount of time an activity can be delayed
from its early start without delaying the entire project.
TF = LS – ES
or
TF = LF - EF
or
TF = LF – Duration - ES
Free Float: may be defined as the maximum amount of time an activity can
be delayed without delaying the early start of the succeeding activities
FFi = min(ESi+1) - EFi
 where min (ESi+1) means the least (i.e., earliest) of the early start dates of
succeeding activities

CPM Result
In the previous example we can find the free float and total float for each activity as the
following :
Activity C’s free float, FF = 11 - 11 = 0 days
And
Activity C’s total float, TF =16 - 11= 5 days …… and so on.
Critical activity
Note : ES = LS , EF = LF , TF = FF = 0

Example
 Perform the CPM calculations, including the event times, for the arrow
network shown below.
10 30
40
20 60
C
E
B
50
D
F
70
A
G
H
10
5
7
8
9
4
5
8
d1
d2

Cont…
Solution

End of Chapter 2 and 3
Project Planning and Scheduling
Lecture # 2
Thank You!!!

Chapter 4 and 5
Stochastic Scheduling and
Project Time-cost Trade-off
Lecture # 4 & # 5
2

Stochastic Scheduling
3
 In some situations, estimating activity duration becomes a difficult task due
to ambiguity inherited in and the risks associated with some work.
 In such cases, the duration of an activity is estimated as a range of time
values rather than being a single value.
 Some scheduling procedures explicitly consider the uncertainty in activity
duration estimates by using the probabilistic distribution of activity
durations.

Cont…
4
 The duration of a particular activity is assumed to be a random
variable that is distributed in a particular fashion.
 For example, an activity duration might be assumed to be
distributed as a normal or a beta distributed random variable as
illustrated in following Figure

Cont…
5
 The following figure shows the probability or chance of experiencing a
particular activity duration based on a probabilistic distribution.
 The beta distribution is often used to characterize activity durations,
since it can have an absolute minimum and an absolute maximum of
possible duration times.
 The normal distribution is a good approximation to the beta
distribution in the center of the distribution and is easy to work with, so
it is often used as an approximation

Cont…
6

Scheduling with Uncertain Durations
7
 The most common formal approach to incorporate uncertainty in the scheduling
process is to apply the critical path scheduling process and then analyze the
results from a probabilistic perspective referred to as the Program Evaluation and
Review Technique (PERT).
 Using expected activity durations and critical path scheduling, a critical path of
activities can be identified.
 This critical path is then used to analyze the duration of the project incorporating
the uncertainty of the activity durations along the critical path.
 The expected project duration equal to the sum of the expected durations of the
activities along the critical path.

Program Evaluation and Review Technique(PERT)
8
 Both CPM and PERT were introduced at approximately the same time
and, despite their separate origins, they were very similar.
 The PERT method shares many similarities with CPM.
 Both require that a project be broken down into activities that could be
presented in the form of a network diagram showing their sequential
relationships to one another.
 Both require time estimates for each activity, which are used in routine
calculations to determine project duration and scheduling data for each
activity.

Cont…
9
 CPM requires a reasonably accurate knowledge of time and cost for
each activity.
 In many situations, however, the duration of an activity can not be
accurately forecasted, and a degree of uncertainty exists
 Contrary to CPM, PERT introduces uncertainty into the estimates for
activity and project durations.

Cont…
10
 It is well suited for those situations where there is either insufficient
background information to specify accurately time and cost or where
project activities require research and development.
 The method is based on the well-known “central limit theorem”.
 The theorem states that: “Where a series of sequential independent
activities lie on the critical path of a network, the sum of the individual
activity durations will be distributed in approximately normal fashion,
regardless of the distribution of the individual activities themselves.

Cont…
11
 PERT, unlike CPM, uses three time estimates for each activity.
 These duration estimates are:
 Optimistic duration (o); an estimate of the minimum time required for
an activity if exceptionally good luck is experienced or under most
favorable conditions.
 Most likely or modal time (m); the time required if the activity is
repeated a number of times under essentially the same conditions.
 Pessimistic duration (p); an estimate of the maximum time required if
unusually bad luck is experienced or under most unfavorable conditions

Cont…
12
 These three time estimates become the framework on which the probability
distribution curve for the activity is erected and Many authors argue that beta
distribution is mostly fit construction activities.

Example: Construction Company Project
13
 The Construction Company has just made the winning bid of $5.4 million to
construct a new plant for a major manufacturer. The contract includes the following
provisions: A penalty of $300,000 if Contractor has not completed construction
within 47 weeks and A bonus of $150,000 if Contractor has completed the plant
within 40 weeks.
1. How can the project be displayed graphically to better visualize the activities?
2. What is the total time required to complete the project if no delays occur?
3. When do the individual activities need to start and finish?
4. Identify critical path & how much delay can be tolerated for each activity?
5. What is the probability the project can be completed in 47 weeks?

Activity o m p Immediate
Predecessors
A 1 2 3 —
B 2 3.5 8 A
C 6 9 18 B
D 4 5.5 10 C
E 1 4.5 5 C
F 4 4 10 E
G 5 6.5 11 D
H 5 8 17 E, G
I 3 7.5 9 C
J 3 9 9 F, I
K 4 4 4 J
L 1 5.5 7 J
M 1 2 3 H
N 5 5.5 9 K, L

Mean and Standard Deviation
An approximate formula for the variance (2) of an activity is
An approximate formula for the mean (m) of an activity is
2

p o
6






2
 
o 4m p
6

Time Estimates for Construction Project
Activity o m p Mean Variance
A 1 2 3 2 1/9
B 2 3.5 8 4 1
C 6 9 18 10 4
D 4 5.5 10 6 1
E 1 4.5 5 4 4/9
F 4 4 10 5 1
G 5 6.5 11 7 1
H 5 8 17 9 4
I 3 7.5 9 7 1
J 3 9 9 8 1
K 4 4 4 4 0
L 1 5.5 7 5 1
M 1 2 3 2 1/9
N 5 5.5 9 6 4/9

Activity List for Construction
Activity Activity Description
Immediate
Predecessors
Estimated
Duration (Weeks)
A Excavate — 2
B Lay the foundation A 4
C Put up the rough wall B 10
D Put up the roof C 6
E Install the exterior plumbing C 4
F Install the interior plumbing E 5
G Put up the exterior siding D 7
H Do the exterior painting E, G 9
I Do the electrical work C 7
J Put up the wallboard F, I 8
K Install the flooring J 4
L Do the interior painting J 5
M Install the exterior fixtures H 2
N Install the interior fixtures K, L 6

Project Network
A
START
G
H
M
F
J
K L
N
A
A
B
C
D
E
F
G
H
I
J
K
L
M
N
2
4
10
7
4
6
7
9
5
8
4 5
6
2
0
0
FINISH
D I
E
C
B

ES and EF Times for Construction project
A
START
G
H
M
F
J
FINISH
K L
N
D I
E
C
B
2
4
10
7
4
6
7
9
5
8
4 5
6
2
ES = 0
EF = 2
ES = 2
EF = 6
ES = 16
EF = 22
ES = 16
EF = 20
ES = 16
EF = 23
ES = 20
EF = 25
ES = 22
EF = 29
ES = 6
EF = 16
ES = 0
EF = 0
ES = 25
EF = 33
ES = 33
EF = 38
ES = 38
EF = 44
ES = 33
EF = 37
ES = 29
EF = 38
ES = 38
EF = 40
ES = 44
EF = 44
0
0

LS and LF Times for construction Project
A
START
G
H
M
F
J
FINISH
K L
N
D I
E
C
B
2
4
10
7
4
6
7
9
5
8
4 5
6
2
LS = 0
LF = 2
LS = 2
LF = 6
LS = 20
LF = 26
LS = 16
LF = 20
LS = 18
LF = 25
LS = 20
LF = 25
LS = 26
LF = 33
LS = 6
LF = 16
LS = 0
LF = 0
LS = 25
LF = 33
LS = 33
LF = 38
LS = 38
LF = 44
LS = 34
LF = 38
LS = 33
LF = 42
LS = 42
LF = 44
LS = 44
LF = 44
0
0

Project Network
A
START
G
H
M
F
J
FINISH
K L
N
D I
E
C
B
2
4
10
7
4
6
7
9
5
8
4 5
6
2
S = (0, 0)
F = (2, 2)
S = (2, 2)
F = (6, 6)
S = (16, 20)
F = (22, 26)
S = (16, 16)
F = (20, 20)
S = (16, 18)
F = (23, 25)
S = (20, 20)
F = (25, 25)
S = (22, 26)
F = (29, 33)
S = (6, 6)
F = (16, 16)
S = (0, 0)
F = (0, 0)
S = (25, 25)
F = (33, 33)
S = (33, 33
F = (38, 38
S = (38, 38)
F = (44, 44)
S = (33, 34)
F = (37, 38)
S = (29, 33)
F = (38, 42)
S = (38, 42)
F = (40, 44)
S = (44, 44)
F = (44, 44)
0
0

Spreadsheet to Calculate ES, EF, LS, LF, Slack
Activity Description Time ES EF LS LF Slack Critical?
A Excavate 2 0 2 0 2 0 Yes
B Foundation 4 2 6 2 6 0 Yes
C Rough Wall 10 6 16 6 16 0 Yes
D Roof 6 16 22 20 26 4 No
E Exterior Plumbing 4 16 20 16 20 0 Yes
F Interior Plumbing 5 20 25 20 25 0 Yes
G Exterior Siding 7 22 29 26 33 4 No
H Exterior Painting 9 29 38 33 42 4 No
I Electrical Work 7 16 23 18 25 2 No
J Wallboard 8 25 33 25 33 0 Yes
K Flooring 4 33 37 34 38 1 No
L Interior Painting 5 33 38 33 38 0 Yes
M Exterior Fixtures 2 38 40 42 44 4 No
N Interior Fixtures 6 38 44 38 44 0 Yes
Project Duration 44

Calculation of Project Mean and Variance
Activities on Mean Critical Path Mean Variance
A 2 1/9
B 4 1
C 10 4
E 4 4/9
F 5 1
J 8 1
L 5 1
N 6 4/9
Project duration mp = 44 s2
p = 9

Probability of Meeting Deadline

Probability of Meeting a Deadline
P(T ≤ d) P(T ≤ d)
–3.0 0.0014 0 0.50
–2.5 0.0062 0.25 0.60
–2.0 0.023 0.5 0.69
–1.75 0.040 0.75 0.77
–1.5 0.067 1.0 0.84
–1.25 0.11 1.25 0.89
–1.0 0.16 1.5 0.933
–0.75 0.23 1.75 0.960
–0.5 0.31 2.0 0.977
–0.25 0.40 2.5 0.9938
0 0.50 3.0 0.9986
d   p
 p
d   p
 p

Spreadsheet for PERT
Time Estimates On Mean
Activity o m p Critical Path m s2
A 1 2 3 * 2 0.1111 Mean Critical
B 2 3.5 8 * 4 1 Path
C 6 9 18 * 10 4 m = 44
D 4 5.5 10 6 1 s2
= 9
E 1 4.5 5 * 4 0.4444
F 4 4 10 * 5 1 P(T<=d) = 0.8413
G 5 6.5 11 7 1 where
H 5 8 17 9 4 d = 47
I 3 7.5 9 7 1
J 3 9 9 * 8 1
K 4 4 4 4 0
L 1 5.5 7 * 5 1
M 1 2 3 2 0.1111
N 5 5.5 9 * 6 0.4444

27
Time-cost Trade-off
Lecture # 5

 Reducing both construction projects’ cost and time is critical in today’s market-
driven economy.
 This relationship between construction projects’ time and cost is called time-cost
trade-off.
 The objective of the time-cost trade-off analysis is to reduce the original project
duration, determined form the critical path analysis, to meet a specific deadline,
with the least cost.
 Time-cost trade-off, in fact, is an important management tool for overcoming
one of the critical path method limitations of being unable to bring the project
schedule to a specified duration.

Cont…
 It might be necessary to finish the project in a specific time to:
 Finish the project in a predefined deadline date.
 Recover early delays.
 Avoid liquidated damages.
 Free key resources early for other projects.
 Avoid adverse weather conditions that might affect productivity.
 Receive an early completion-bonus.
 Improve project cash flow

 Reducing project duration can be done by adjusting overlaps between
activities or by reducing activities’ duration.
 What is the reason for an increase in direct cost as the activity duration
is reduced? A simple case arises in the use of overtime work.
 By scheduling weekend or evening work, the completion time for an
activity as measured in calendar days will be reduced.
 However, extra wages must be paid for such overtime work, so the cost
will increase.
 Also, overtime work is more prone to accidents and quality problems that
must be corrected, so costs may increase.
Cont…

 The activity duration can be reduced by one of the following actions:
 Applying multiple-shifts work.
 Working extended hours (over time).
 Offering incentive payments to increase the productivity.
 Working on week ends and holidays.
 Using additional resources.
 Using materials with faster installation methods.
 Using alternate construction methods or sequence

Illustration of linear time/cost trade-off
 The limit beyond which an activity time cannot be shortened is known as the crash limit.
 Crash Limit = D –D’ where: D = normal time (duration) D’ = crash time (duration)
 Slope = (C’ –C)/(D –D’) = Crash Cost Per Unit Time

 It can be reduced by reducing the normal times of critical activities.
 Reducing the critical activity with the minimum cost-duration slope will
yield the minimum cost up to the crash limit.
 This does not guarantee that the project time will also be reduced by the
same length, since the above reduction may have led to the a new
critical path.
Reduction of the Project Completion Time

Detection of New Critical Path
 To find whether a new critical path may occur, check whether a positive free float
of any non-critical activity becomes zero.
 By reducing the duration of the critical activity by one time unit, compute the new
free floats of the non-critical activities.
 Check which ones have reduced their old positive free floats by one unit.
 The one with the smallest old positive free float gives the positive free float limit.
 Reduction Limit = min { crash limit, positive free float limit }
 Continue to proceed in the above fashion until all critical activities in the latest
critical path are at their crash limits.

Example 1
 Consider the following arrow diagram with activity times given in
days with no indirect cost paid on daily base.
1 4
2
3
A D
C
B
4 10
8
6

The normal and crash data
 Find the critical path
 Find the project completion time and the corresponding cost.
 If we want to complete the project in 18 days, find the best crash
time and cost.
 Note our aim is to reduce completion time for various reasons
such as, to escape from liquidated damage, to recover fro
delays, to save a time for other works, and etc…
Activity Normal Time (Days) Crash Time (Days) Normal Cost ($) Crash Cost ($)
A 4 3 80 105
B 6 4 180 250
C 8 5 200 320
D 10 6 350 530

Solution for the Critical Path
1 4
2
3
{FF = 10} A D
C
B
4 10
8
6
0
0
10,0
6
6
24
24
14
14
4,14

Solution
(a) Critical Path is B, C, D.
(b) Project completion time = 24 days Project cost = 80 +
180 + 200 + 350 = $810
(c) From the given data, construct the following crash time-
cost table:
Activity (I,j) Crash Limit (D - D')
Crash Cost/Day
(C' -C)/(D - D')
A(1,3) 4 - 3 = 1 (105 - 80)/(4 - 3) = 25
B(1,20 6 - 4 = 2 (250 - 180)/(6 - 4) = 35
C(2,3) 8 - 5 = 3 (320 - 200)/(8 - 5) = 40
D(3,4) 10 - 6 = 4 (530 - 350)/(10 - 6) = 45

Cont…
 Since the critical activity B has the lowest “crash cost per
day,” it becomes the first candidate for crash. The length
by which B can be reduced is found as follows:
Reduction Limit = min {crash limit,
positive FF limit}
= min {2, 10} = 2
Activity (I,j) A (1,3) B (1,2) C (2,3) D (3,4)
Critical … yes yes yes
Free Float 10 … … …

Crash activity B by 2 days
1 4
2
3
{FF = 8} A D
C
B
4 10
8
6
0
0
8,0
4
4
22
22
12
12
4,12
4

Cont…
 Critical path is still B, C, D.
 Project completion time = 22 days
 Project cost = 810 + 2*35 = $880
 Since the crash limit for critical activity B is reached,
consider activity C with the next lowest “crash cost per
day” for crash.
Activity (I,j) A (1,3) B (1,2) C (2,3) D (3,4)

Crash C
Reduction Limit = min { 3, 8} = 3
Hence, crash activity C by 3 days.
1 4
2
3
{FF = 5} A D
C
B
4 10
8
6
0
0
0,5
4
4
19
19
9
9
9,4
4 5

Cont…
 Project completion time = 19 days.
 Project cost = 880 + 3*40 = $1000.
 Since the crash limit for critical activity C is reached,
consider activity D with the next lowest “crash cost per
day” for crash.
Activity (I,j) A (1,3) B (1,2) C (2,3) D (3,4)

Crash D
Reduction Limit = min {4, 5} = 4
Although we can reduce D by 4 days, it is only necessary to
reduce it by 1 day to reach our project completion goal of 18
days.
1 4
2
3
A D
C
B
4 10 9
8
6
0
0
5,0
4
4
18
18
9
9
9,4
4 5

Final Answer
 From the critical path calculations, we have the
following information:
 Project completion time = 18 days
 Project cost = 1000 + 1*45 = $1045

Example . Consider the following time-cost relationship data for a
project. Find the least cost schedule (optimum duration) if the indirect
cost is 100birr per day.
Activity Normal
time
Normal
cost, Birr
Crash
time,
Days
Crash
cost,
Birr
1-2
1-3
2-4
2-5
3-4
4-5
8
4
2
10
5
3
100
150
50
100
100
80
6
2
1
5
1
1
200
350
90
400
200
100
580 1340
46
Example 2

Activit
y
Norma
l time
Normal
cost,
Birr
Crash
time,
Days
Crash
cost,
Birr
Cost
slope
A
B
C
D
E
F
4
8
5
2
10
3
150
100
100
50
100
80
2
6
1
1
5
1
350
200
200
90
400
100
100
50
25
40
60
10
18 580 1340
Solution:
The critical path = B and E. Normal duration = 18days
Total cost = Indirect cost + direct cost = 18*100 + 580 = 2380 birr
47
Cont…
start
A,4
B,8
D, 2
C,5
F,3
E,10
END

Stage 1.
B is the critical activity of least cost slope &Crash B by 2 days.
Current Project Duration = 18-2 = 16 days & Current critical path: B and E
Current Total cost = (16*100) +580+(2*50) = 2280 birr
Stage 1
48
Cont…
Activit
y
Normal
time
Normal
cost,
Birr
Crash
time,
Days
Crash
cost,
Birr
Cost
slope
A
B
C
D
E
F
4
8
5
2
10
3
150
100
100
50
100
80
2
6
1
1
5
1
350
200
200
90
400
100
100
50
25
40
60
10
18 580 1340

Stage 2.
B and E are critical activities.
Now, crash E by 4 days only since the duration of the path A-C-F is 12 days.
Current Duration = 16-4 = 12days Current critical paths: i) B and and ii) A,C and F
Current Total cost = (12*100)+680+ (60*4) = 2120 birr
Stage 2
49
Cont…
Activity Norma
l time
Normal
cost,
Birr
Crash
time,
Days
Crash
cost,
Birr
Cost
slope
A
B
C
D
E
F
4
8
5
2
10
3
150
100
100
50
100
80
2
6
1
1
5
1
350
200
200
90
400
100
100
50
25
40
60
10
18 580 1340

Stage 3.
Critical activities: A,B,C,E,F, Crash E by 1 day and Crash F by 1 day each (since the
duration of the path B,D and F is 11 days and also the activity E can be crashed only
by one day). Current critical paths: i) B and E and ii) A,C and F Current Duration
= 12-1 = 11dys and Current Total cost = (11*100)birr +920+
(1*300/5)+(1*20/2) =2090 birr
Stage 3
50
Cont…
Activity Norma
l time
Normal
cost,
Birr
Crash
time,
Days
Crash
cost,
Birr
Cost
slope
A
B
C
D
E
F
4
8
5
2
10
3
150
100
100
50
100
80
2
6
1
1
5
1
350
200
200
90
400
100
100
50
25
40
60
10
18 580 1340

No further crushing is possible (since all the activities on the critical path
B and E have been crashed to the maximum extent).
Answer: Hence the optimum duration is 11 days and the least cost is 2090birr
Stage Crash Current duration Direct cost Indirect cost Total cost
0 0 18 580 1800 2380
1 B by 2days 16 680 1600 2280
2 E by 4days 12 920 1200 2120
3 E and F by 1
day each
11 990 1100 2090
Table : Crashing schedule
51
Cont…

Determine the least cost for expediting and optimum duration of the contract
assuming the indirect cost is LE 125/day.
Example 3

Solution
 Both the crashability and the cost slope are shown beneath each activity.
 The critical path is A-C-G-I and the contract duration in 59 days.

Step 1
 Crash “G”, by 5 days, but if it is crashed by more than 2 days another critical path will be
generated. Therefore, activity “G” will be crashed by 2 days only.
 A new critical path A-C-F-H-I, duration is 57 days and the cost increase is 2 x 60 = LE 120

Step 2
 Crash Either “A” at cost LE 100/day, Or “C” at cost LE 200/day, Or “I” at
cost LE 75/day Or
 “F & G” at cost LE 360/day, Or “H & G” at cost LE 100/ day.
 Activity “I” is chosen because it has the least cost slope, and it can be
crashed by 2 days.
 Because it is last activity in the network, it has no effect on other activities.

Cont…
duration is 55 days
Cumulative cost increase = 120 + (2 x 75)= LE 270

Step 3
 Now, we could select “A” or both “H & G”, because they have the same cost slope.
Activity “A” is chosen to be crashed.
 New contract duration is 53 days
 cumulative cost increase = 270 + (2 x 100) = LE 470.

Step 4
 Now, activities “H & G” can be crashed by 2 days each. “A” new critical path AB- D-
I will be formed.
 New contract duration is 51 day.
 cumulative cost increase = 470 + (2 x 100) = LE 670

Step 5
At this stage, the network has three critical paths.
Crash Either C & B at cost LE 350/day or F, G & B at cost LE 510/day Activities C &
B are chosen because they have the least cost slope.
 duration is 49 days.
 Cumulative cost increase = 670 + (2 x 350)
= LE 1370
 Now, there is no further shortening is possible

Contract Duration and Corresponding Cost
Final answer

End of Chapter 4 and 5
Stochastic Scheduling and
Lecture # 3
Thank You!!!

Chapter 6
Construction Resources management
Lecture # 6
2

Construction Resources
3
 We have stated that the project manager must control company
resources within time, cost, and performance. Most companies have
six resources.
 Money
 Manpower
 Equipment
 Facilities
 Materials
 Information/technology

Human resource (Labour or Workmen)
4
 These include professional, skilled, semi skilled and unskilled laborers.
 Human resources can be understood in two values: Capacity and Capability.
 Capacity - refers to the quantity of labor for the scope defined.
 Capability - refers to knowledge, technology know-how and skill as per the demands
of the scopes ability.
 Construction Managers need to be capable of:
 Communication- Inter-personal, group interaction-skills
 Problem solving / Conflict resolution / Negotiation Skills
 Facilitating / Decision- making Skills
 Writing skills for Proposals / Reports /ToRs and
 Hard Skills- Planning, Implementing, Leading and Monitoring tools.

Cont…
5
Financial Resources (Fund): Usually funds are available from among Governmental
institution, Private institutions and Donors in the form of loan or assistance.
Information Resources: Information can be understood in two terms: data whether processed
or not; and its technology
Physical Resources
 Materials: Material covers 55-70% of the total construction cost.
 Equipment: Though their initial cost is high using equipment are far more better than using
labor.
 Other assets: Physical Infrastructures and Owned Land are assets which can be collaterals
for capital base enhancement and credit facilities and are useful to develop the scarce
financial resources and getting into business access.

Cont…
6
Service and Management
 Service
 Services such as acquisition of land, provisions of water supply, electric
power, communication systems, etc., are very much necessary in the
construction industry.
 Management
 Management has come to employ a disciplined approach to the use of
available resources.

Cont…
 Resources may be classified according to their importance:
 Consumable Resource: such as materials that may be used once and once only, or
 Non-consumable Resource: such as people, which may be used again and again.
 Key resources: most important, expensive and non-available resources in the
project such as skilled labors, or equipment. These types of resources will have a
great attention in the resource scheduling process.
 Secondary resources: resources which have no constraints on their availability, such
as normal labor.
 General resources: used by all or most of the activities on the project such as site
overheads. General resources will not be included in the resource management

Resources Management
 As we have seen in network scheduling, the basic inputs to critical-path analysis
are the individual project activities, their durations, and their dependency
relationships.
 The CPM algorithm is duration-driven and assumes that all the resources
needed for the schedule are available.
 This assumption, however, is not always true for construction projects Under
resource constraints, the schedule becomes impractical, cost and time are not
accurate, and resources may not be available when needed.
 In order to deal with such issue, a proper management of available resources is
required to adjust the schedule accordingly.

 The most important resources that project managers have to plan and manage on
day-to-day basis are people, machines, materials, and money.
 Obviously, if these resources are available in abundance then the project could be
accelerated to achieve shorter project duration.
 On the other hand, if these resources are severely limited, then the result more
likely will be a delay in the project completion time.
 In general, from a scheduling perspective, projects can be classified as either time
constrained or resource constrained.
Cont…

Resource scheduling
 Resource scheduling is prioritizing and allocating resources in such a
manner that there is minimal project delay.
 A project is resource constrained if the level of resource availability cannot
be exceeded.
 In those situations where resources are inadequate, project delay is
acceptable, but the delay should be minimal.
 However, it is also important to ensure that the resource limit is not
exceeded and the technical relationships in the project network are
respected.

Resource leveling (smoothing)
 The primary focus, for purposes of scheduling, in time constrained projects is
to improve resource utilization.
 This process is called resource leveling or smoothing.
 It applies when it is desired to reduce the hiring and firing of resources and to
smooth the fluctuation in the daily demand of a resource, as shown in Figure
below.
 In this case, resources are not limited and project duration is not allowed to be
delayed.
 The objective in this case is to shift non-critical activities of the original
schedule, within their float times so that a better resource profile is achieved.

Cont…
Figure : Resource leveling (smoothing)

Resource Allocation
 Resource allocation, also called resource loading, is concerned with assigning the
required number of resources identified for each activity in the plan.
 More than one type of resource may be assigned to a specific activity.
 For example, fixing steel plates on a bridge deck may require different types of resources
such as: welders, laborers and a certain type of welding machine.
 From a practical view, resource allocation does not have to follow a constant pattern;
some activities may initially require fewer resources but may require more of the same
resources during the later stages of the project.

Resource Aggregation
 Resource aggregation is simply the summation, on a period-by-period basis, of the
resources required to complete all activities based on the resource allocation carried out
previously.
 The results are usually shown graphically as a histogram.
 Such aggregation may be done on an hourly, daily, or weekly basis, depending on the time
unit used to allocate resources.
 When a bar chart is used, the resource aggregation is fairly simple and straightforward.
 For a given bar chart, a resource aggregation chart can be drawn underneath the bar chart.
 However, a separate graph will be required for each resource type.
 The required resource units for each time period are written on the bar chart.

Cont…
 The total number of resource units for each time period can then be summed and a
resource aggregation or load chart can be produced as presented underneath the
bar chart.
 Example

Cont…
 The non critical activities, do not have fixed starting and finishing times but are constrained by
the earliest and latest starting and finishing times.
 This situation offers the planner chance for adjusting the demand for resources.
 The above Figure illustrates such situation, which shows the resource aggregation when the
activities scheduled on their early times and late times.
 It can be seen that the resource requirements that arise when both earliest and latest start times
are considered are different.
 The shaded area represents the resources required by the critical activities, as these activities
have a fixed position because their early times equal their late time.
 Resources accumulate at the beginning of the project when the activities scheduled on their early
time.
 Resources accumulate at the end of the project when the activities scheduled on their late times.

 The problem of resource fluctuation appears after the initial scheduling of the
project without considering the resources.
 The peaks and valleys in the resource profile indicate high day-to-day variation
in the resource demand.
 Resource smoothing is the process that attempts to determine a resource
requirement that is "smooth" and where peaks and valleys are eliminated.
 Resource leveling heuristics shift non-critical activities within their float times
so as to move resources from the peak periods (high usage) to the valley periods
(low usage),without delaying the project (i.e., area underneath the resource
profile remains constant).
Cont…

Preferred resource usage

Heuristic Procedure for Resource Smoothing
 steps:
 Prepare a complete activity schedule.
 Draw a bar chart of the project under study based on ES timing of the
activities.
 Critical activities to be drawn first (as these activities will not be moved).
 Write the resource usage above each bar of the related activity.
 Draw the FF as dashed line beside the upper side of the bar and the TF
beside the lower side.
 Aggregate (determine the resource sum) the resources in each time period.
 Calculate the total usage of resources = Σ unit period usage.

 Calculate the average resource usage = Σ usage / utilization period.
 Shift non-critical activities within their FF first, then their TF to decrease the
peaks and raise the valleys.
 Revise activities floats.
 Aggregate resources in each time period after shifting any activity.
 When shifting activities, it is preferred to start with the activities that have
no successors, as shifting these activities will not affect other activities.
 Also, by shifting these activities, a float will be created for its
predecessors.
 Shift activities only that will enhance the resource profile.
Cont…

Example
Activity Activity Duration
(Weeks)
Predecessors Resource
(units/week)
A
B
C
D
E
F
G
H
I
J
K
L
M
N
0
2
5
3
2
6
6
6
4
2
7
3
2
2
-
A
A
A
B
B
C
D
D
E, F
F, G
B, H
B, H, I
J, K, L,M
0
0
2
2
1
2
3
1
0
4
2
2
4
0

Cont…

Activity ES EF FF TF
A
B
C
D
E
F
G
H
I
J
K
L
M
N
0
0
0
0
2
2
5
3
3
8
11
9
9
18
0
2
5
3
4
8
11
9
7
10
18
12
11
20
0
0
0
0
4
0
0
0
2
8
0
6
7
0
0
3
0
6
12
3
0
6
9
8
0
6
7
0
Cont…

Cont…
26
 The above Figure shows the bar chart and the resource histogram of
the project and the weekly usage of the resources and the total usage
of 90 resource units.
 As shown in the resource histogram, the peak resource usage is 13
units and the minimum usage is 2 units.
 The total resource usage equals 90 units with utilization period of 18
weeks. Then, the average resource usage equals 5 units (=90/18=5).

Cont…
27
The resource demand on weeks 9, 10, and 11 is high, while it is low in
weeks 13 through 18.
Accordingly, the solution process will try to sift the resources from that
peak period to the period of low usage.
The following activities will be shifted:
 Activity M has a free float of 7 weeks. Shifting activity M by 7 weeks
will reduce the peak usage of the resource on weeks 10 and 11 and
increase the usage on weeks 17 and 18. Also, shifting activity M will
give chance for preceding activities to be shifted.

Cont…
28
Activity J can be shifted by 6, however it has 8 weeks free float.
By shifting activity J, the free float of both activities E and F are changed.
Shift activity L by 2 weeks to optimize the resource usage.
 The free float of activity will be changed to 2 weeks.
Next, shift activity E by 10 weeks to improve the resource usage.
Shift activity H by 2 weeks.
Finally, shift activity F by 1 week

Levelled resource histogram

Resource-constrained Scheduling
 Shortage of resources is a major challenge for construction projects.
 Often, the number of skilled labor is limited, related equipment has
to be returned as soon as possible, and / or a limited require our
special consideration.
 Scheduling under these resource constraints becomes a complex
problem, particularly when more than one resource is limited.

Resource needed exceed resource limit

Cont…
 The technique that deals with limited resources has been referred to as
"resource scheduling“ or "resource-constrained scheduling”.
 The problem of resource-constrained scheduling appears after the initial
network analysis is conducted and a bar chart is drawn.
 A resource conflict occurs when at any point in the schedule several activities
are in parallel and the total amount of required resource(s) exceeds the
availability limit, for any of the resources required in these parallel activities.
 The situation is illustrated in the above Figure with activities A, B, and C that, at
time period 3, require 5, while 4 are only available per day.

Cont…
 The simple solution to that situation is that we can prioritizing the parallel
activities, given the resource to higher priority activities and delay the others
until the earliest time the resource become available again.
 Notice that if we delay an activity at time period 3, to solve the situation, we
may end up with another resource conflict later in time.
 Continuing with identifying next conflict points and resolving them, determines
the new schedule and the new project duration.
 Accordingly, the objective in such situation is to delay some activities so that the
resource conflict is resolved and the project delay is minimized.

Resource scheduling using least TF rule

heuristic rules
 These heuristic rules are based mainly on activity characteristics.
 The two most effective and commonly used heuristic rules are the least
total-float (LTF) and the earliest late-start (ELS).
 These two rules have been proven to provide identical results, with the
ELS rule being advantageous compared to the LTF rule.
 As such, the ELS rule can be applied with much less computational effort
than the LTF rule, and accordingly has been used as a basis for the
resource scheduling.

Procedure
 Prepare a complete activity schedule
 Aggregate the daily resource demand
 If demand greater than available then determine activities compete for
resources
 Prioritize these activities based on their LS
 Allocate resources to some activities and delay the others
 Put your solution in table format

Example
Activity Duration
(Weeks)
Predecessors Resource (units/week)
R1≤8 R2≤1
A
B
C
D
E
F
G
H
I
J
K
4
6
2
8
4
10
16
8
6
6
10
-
-
-
A
D
B
B
F
E, H
C
G, J
3
6
4
0
4
0
4
2
4
5
2
0
1
0
1
1
1
0
0
1
1
0
For the following project determine the activities schedule start and finish times
so that the weekly resource usage does not exceed the resource limits.

Final Schedule
Project Completion Time =40 Weeks

End of Chapter 6
Construction Resources management
Lecture # 6
Thank You!!!

Chapter 7 and 8
Project finance & Contract Cash Flow and
Project control
Lecture # 7 and # 8
2

Project finance and Contract Cash Flow
At the project level, a project’s cash flow is the difference between the project’s
expense and income
Cash flow = Cash in – Cash out = Income - Expense
 Forecasting cash flow is necessary for:
 To ensure that sufficient cash is available to meet the demands.
 It shows the contractor the maximum amount of cash required and when it will be
required. Thus, the contractor can made arrangements to secure the required cash.
 It provides a reliable indicator to lending institutions that loans made can be
repaid according to an agreed program.
 It ensures that cash resources are fully utilized to the benefit of the owner and
investors in the company.

The three main ingredients in determination of cash flow are:
 Expenses (cash out): It is the aggregate of the payments which the contractor
will make over a period of time for all resources used in the project such as labor,
equipment, material, and subcontractors.
 Income (cash in) :It represents the receipts a contractor will receive over a
period of time for the work he/she has completed.
 Timing of payments: in cash flow analysis, we are interested in the timing of
payments related to the work done by the contractor.
Cont…

Construction Project Cash out
The costs that spent on a specific activity or project can be
classified as;
Fixed cost: costs that spent once at specific point of time (e.g.,
the cost of purchasing equipment, etc.)
Time-related cost: costs spent along the activity duration (e.g.,
labor wages, equipment rental costs, etc.)
Quantity-proportional cost: costs changes with the quantities
(e.g., material cost)

The cash flow calculation steps
 Perform project schedule.
 Draw bar chart based on early or late timings.
 Calculate the cost per time period.
 Calculate the cumulative cost.
 Adjust the cost according the method of paying it to produce the
expenses.
 Calculate the cumulative revenue (revenue = cost x (1 + markup)).
 Adjust the revenue based on the retention and delay of owner payment.
 Calculate the cash flow (cash flow = income – expense) at the contract
different times.

Consider the construction of 8-week foundation activity with operation cost of
LE8800. The operation cost is broken down into the following elements:
 Labor LE1600 paid weekly, Plant LE4000 paid weekly after 4 weeks
credit facility, Materials LE800 paid weekly after 5 weeks credit
facility, Subcontractors LE2400 paid weekly after 3 weeks credit
facility. Determine the expenses (cash out) of this activity.
Solution
A time-scaled plan is developed for this activity for the payments for labor,
plant, material, and subcontractors. The cot will be plotted weekly with the
delay specified in Example
Example 1

The S-Curve
 The curve represents the cumulative expenditures of a project direct and indirect
costs over time is called the S-curve as it take the S-shape.
 In many contracts, the owner requires the contractor to provide an S-curve of his
estimated progress and costs across the life of the project.
 This S-shaped of the curve results because early in the project, activities are
mobilizing and the expenditure curve is relatively flat.
 As many other activities come on-line, the level of expenditures increases and the
curve has a steeper middle section.
 Toward the end of a project, activities are winding down and expenditures flatten
again.
 The S-Curve is one of the most commonly techniques to control the project costs.

Example 2
Consider the project shown in the following Figure . The costs of activities are
assumed as shown in The following Table. The indirect costs of tasks are calculated
considering a daily cost of LE500. It is required to draw the S-curve of the total cost
of the project.

Cost data

Project Income (Cash-in)
 The flow of money from the owner to the contractor is in the form of progress
payments, Advanced payment and retention money.
 Estimates of work completed are made by the contractors periodically (usually
monthly), and are verified by the owner's representative.
 Depending on the type of contract (e.g., lump sum, unit price, etc.), these estimates
are based on evaluations of the percentage of total contract completion or actual
field measurements of quantities placed.
 Owners usually retain 10% of all validated progress payment which is usually paid
with the last payment.
 When the contractor collects his/her money it is named project income (cash in).

The S-Curve for the Example Project
Project revenue and income curves

Calculating Contract Cash Flow
If we plotted the contract expense and income curves against each other,
then the cash flow is the difference between the points of both curves.
The contractor may request an advanced or mobilization payment from the
owner and the position of the income profile is shifted so that no overdraft
occurs.

Effect of advanced payment on improving cash flow

Example 3
In this project, the markup equals 5% and the contractor will pay his expenses immediately.
Retention is 10% and will be paid back with the last payment. The calculations will be made
every 8 days, i.e., the contractor will receive his/her payment every 8-days (time period).
Owner’s payment is delayed one period, while the contractor will submit the first invoice after
the first period. No advanced payment is given to the contractor.

Project cost and revenue

Solution
Revenue of each activity is calculated as revenue = cost (1 + markup)
By summing up the activities cost and revenue,
Total cost= LE 150,000 &
Total revenue= LE 157,500.
By considering that both the cost and the revenue are evenly distributed
over the activities durations.
Calculations will be made every 8-days and project duration is divided into
four periods each one equals 8 days.
 In addition, one period is added after project completion because of
payment delayed by one period(8 days)

Cont…
Summing up the costs it became direct expenses to the contractor as there
is no delay in paying them.
The expected owner payments are then added up to from the project
revenue.
 The retention is subtracted from the owner payment and will be paid back
to the contractor with the last payment.
As the contractor receives a payment of LE 43,470, the cash flow improves
and becomes -54,530 (43,470 – 98,000).

Then, the revenue is delayed by one period to form the contractor income.
The calculations in the last row are the difference between the project
income and project expense.
 Having two values in some periods shows the sudden change of the cash
flow as the contractor receives more payments from the owner.
 For example, in the second period, just before the contractor receive
his/her payment the cash flow was (0 – 98,000 = - 98,000 LE).
Cont…

The maximum overdraft money (maximum cash) is LE 98,000 and will be
needed at the 16th day of the project.
Hence it shows the importance of studying the contract cash flow.
Accordingly, the contractor can made his arrangements to secure the
availability of this fund on the specified time.
Below Figure shows the contract expense and income curves.
 These curves will be needed to calculate the contractor cost of borrowing
or investment of the overdraft money (area between expense and income).
Cont…

Cash flow

Minimizing Contractor Negative Cash Flow
Figure : Expense and income curves

Contract net cash flow for example 3

Procedures to minimize contractor negative cash flow
 Adjustment of work schedule to late start timing in order to delay
payments and be aware that completion time delay might happen and
may subjected to liquidated damages.
 Reduction of delays in receiving revenues.
 Asking for advanced or mobilization payment.
 Achieving maximum production in the field to increase the monthly
payments.
 Adjust the timing of delivery of large material orders to be with the
submittal of the monthly invoice.
 Delay in paying equipment rentals, material suppliers and subcontractors.

Cost of Borrowing (Return on Investment)
Cash requirements (negative cash flows) during a project result in a
contractor either having to borrow money to meet his/her obligation or
using funds from the company reserves.
Accordingly, there should be a charge against the project for the use of
these funds.
Charge against the project is the area between the expenses and income
curves in terms of units of LE x time period (money x time) multiplying by
interest rate.
Cost of borrowing = net area x interest rate

Cont…
Note that, the time may be in days, weeks, months, etc., the interest
rate should be calculated in the same time period as the time
period of the unit areas.
For example, if the units’ areas are calculated in LE. month, then the
interest rate should be in months.

Example 3
Consider the above example, it is required to calculate the cost of borrowing
if the interest rate is 1% every time period (8-days).
Solution
Referring to expenses and income curves, the approximate number of unit
areas between the expense and the income curves equals 24 units.
Each unit equals LE 10,000 time period.
Then, the cost of borrowing = 24 x 10,000 x 0.01 = LE 2400.
This value must be added to the contract price.

Project Cash Flow
The project cash flow deals with the whole life of the project not the construction
period only.
project cash flow studies the project finance from the feasibility studies phase till
the operation phase.
 In this case, the time is much longer than that of the contract.
At the early stage of a project, the project experience negative cash flow as
there is no income.
 In the operation stage, the revenue will increase than the expenses.
When comparing the economics of projects, the cumulative cash flow provides
indicators for such comparison as payback period, profit, and the maximum
capital.

Typical project cash flow

Project Profitability Indicators
Profit: It is the difference between total payments and total revenue without the
effect of time on the value of money, the project with the maximum profit is
ranked the best.
Maximum capital: It is the maximum demand of money, i.e., the summation of all
negative cash (expenditures) and The project with minimum capital required is
ranked the best.
Payback period: It is the length of time that it takes for a capital budgeting
project to recover its initial cost, where the summation of both cash out and cash in
equals zero.
When comparing alternatives, the project with the shortest payback period is
ranked the best.

Example 4
Two projects A and B have annual net cash flows as show in below Table . Assume all
cash flows occur at the year-end. Establish the ranking of the projects in order of
attractiveness to the company using:
a) Maximum capital needed
b) Profit
c) Payback period

Solution
Cont…
Cumulative cash flow

Maximum capital: project A (LE 80,000) is better than project B (LE 110,000)
because it needs less capital.
Profit: Project B (LE 80,000) is more profitable than project A (LE 65,000).
Payback period: Project A (5 years) is better than project B (6 years) because is
has shorter payback period.
Cont…

Project Control
Lecture # 8

Project Control
 During the actual construction, changes are likely to delay the project and
lead to inordinate cost increases.
 As a result, the focus of project control is on fulfilling the original design
plans or indicating deviations from these plans, rather than on searching
for significant improvements and cost savings.
 In construction, no project, almost, is executed as planned.
 Control needs to be carried out due to the dynamic nature of the
construction process.
 Controlling after project finish is trivial/unimportant and updates are
usually done periodically.

 The cause of delays /cost overruns:
 Change in activity durations and quantities.
 Sudden changes of the availability of resources.
 Change orders.
 Payment delay
 Dispute
 Accidents.
 Procurement delays and
Cont…

Schedule Updating
 A procedure for manual schedule updating.
 Change the duration of all completed activities to zero.
 Identify all activities on which work is currently processing as Live
Activities
 Put early start time of live activities equals the updating date and
their durations equal remaining duration.
 Change duration of future activities as given in the update report.
 Carry-out network analysis in the normal way and prepare a new
activity schedule.

Example

 At the end of the 7th week, new filed data are collected and the project
status activities is as follows:
Activities A, B, D, and E have been completed.
Remaining Duration of activity C is one week.
Remaining Duration of activity H is 4 weeks.
Activity G will not start until beginning of week 10.
Overlap between activities K and G is one week only
Volume of work of activity L has been increased by 33%.
Activity J has been omitted.
Cont…

Scheduling data

 The updated precedence network and the corresponding updated
schedule are shown in the above Figure.
 It is shown that a new critical path is developed. The new project
completion time is 21 weeks which indicates that a delay of one week is
encountered.
 Corrective actions should be taken to improve project performance during
the remaining portion.
Cont…

Updated network

Delays Analysis
 Work changes mean changes in the volume and duration of work to be
performed from that envisaged at the start of the contract.
 Variation in the form of addition and deduction result in more or less
cost and time to execute the varied item.
 On the other hand, omissions mean less cost but not necessarily less
time.
 It might result in wasting resources.
 For instance, if the quantity of work in a critical activity is increased by
x% then the duration of the activity will be extended by x%.

Cont…
The direct cost of the activity should be increased by the same ratio
while the indirect cost of the contract might be increased for the
extended period
 It is typical for construction contracts to be delayed.
 A delay that occurred on a noncritical activity does not participate
to the delaying completion date of the contract.
 Therefore, delays on non-critical paths are not considered

 Compensable delays: Those over which the client has control:
 Non-excusable delays: Those over which the contractor has control
 Excusable delays: Those over which the neither party has any control;;
and
 Concurrent delays: two or more delays that occur at the same time,
either of which, if it occurred alone, would have affected contract
completion date.
Types of Delays

Construction Management full lecture note-By Melese Mengistu.pdf

Construction Management full lecture note-By Melese Mengistu.pdf

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