Construction management

1. Chapter 4. Construction Project Cost Management
Introduction
Cost management is concerned with the process of planning and controlling the budget of a project or
business. It includes activities such as resource planning, estimating, budgeting and controlling costs so
that the project can be completed within the approved budget.
Cost management covers the full life cycle of a project from the initial planning phase towards
measuring the actual cost performance and project completion. This article will explain the different
steps or processes in Project Cost Management, in line with methods such as the PMBOK5.
Step 1: Resource planning
In the initial phase of a project the required resources to complete the project activities need to be
defined. Work Breakdown Structures (WBS) and historical information of comparable projects can be
used to define which physical resources are needed. You can think of the required time, material, labor,
equipment, etc. Once the resource types and quantities are known the associated costs can be
determined.
Step 2: Cost estimating
Several cost estimating methods can be applied to predict how much it will cost to perform the project
activities. The choice for the estimation method depends on the level of information available. Estimates
can be refined when more information becomes available during the course of a project. Eventually this
results in a detailed unit cost estimate with a high accuracy. Remaining uncertainties in estimates that
will likely result in additional cost can be covered by reserving cost (e.g. using escalation and
contingencies).
Step 3: Cost budgeting
The cost estimate forms together with a project schedule the input for cost budgeting. The budget gives
an overview of the periodic and total costs of the project. The cost estimates define the cost of each work
package or activity, whereas the budget allocates the costs over the time period when the cost will be
incurred. A cost baseline is an approved time-phased budget that is used as a starting point to measure
actual performance progress.
Step 4: Cost control
Cost control is concerned with measuring variances from the cost baseline and taking effective corrective
action to achieve minimum costs. Procedures are applied to monitor expenditures and performance
against the progress of a project. All changes to the cost baseline need to be recorded and the expected
final total costs are continuously forecasted. When actual cost information becomes available an
important part of cost control is to explain what is causing the variance from the cost baseline. Based on
this analysis, corrective action might be required to avoid cost overruns.

2. The first two sub processes were covered on the contract, Specification & quantity surveying course; so
will only cover the last two sub processes in this chapter.
4.1.Cost Budgeting
Cost budgeting involves in aggregating the estimated costs of individual schedule activities or work
packages to establish a total cost baseline for measuring project performance. The budgeting process
establishes a means for developing and tracking the cost goals for all contractually authorized work.
The project's budget plan integrates the materials, the labor, the utilities and all other related expenses to a
particular function or task to be performed. Another aspect of managing cash flow control in a
construction project is the matter of monitoring if the project budget is being implemented as planned.
Any company can improve the manner in which projects are executed to become more efficient. However,
no matter how efficient a project team may be, if the project being executed is not in alignment with the
company’s financial goals and strategy, there is a limit to how the company will profit from the project.
A project’s budget must be based on the company’s strategy and financial goals. These goals are reflected
by the company’s budget, which may be represented by a number of different documents, including pro
forma or projected revenue and expense, cash flow, and balance sheets.
The project budget that is based on the company’s financial planning has a much greater chance of
contributing to the company’s success. In this chapter, we will only look at the process of creating a project
budgets. But a project’s budget does not exist in isolation from the rest of the company.
The current financial situation of a company as well as projections into the future must be considered
during all phases of the project. When choosing a project, the project manager must take care that it is in
alignment with the company’s strategic and financial goals and contributes to the growth of the company.
4.1.1. Project Cash Flow
Construction company operations are project based. Cash flows can be estimated by attempting to assess
flows from (a) projects in progress, (b) projects under contract but not yet begun, and (c) potential
projects which will start during the coming financial accounting period.
These sources of income can be viewed as (a) ‘‘birds in the hand,’’ (b) ‘‘birds in the bush,’’ and (c) ‘‘birds
flying in the sky.’’
In other words, cash flows can be projected from projects in progress and projects which may, with some
probability, start in the coming period for which forecasts are being made. The advent of spreadsheet
analysis and high-speed computing has led to ‘‘scenario testing’’ of future cash flow expectations.
The projection of income and expense during the life of a project can be developed from several time-
scheduling aids used by the contractor.
The sophistication of the method adopted usually depends on the complexity of the project. In many
contracts (e.g., public contracts), the owner may require the contractor to provide an S-curve of estimated
progress and costs across the life of the project.

3. Steps in developing Project Budget (Project Budgeting Processes)
1. Establish the Schedule Baseline
Based on the Project Scope and available resources, the work activities in the WBS are scheduled to
establish the Schedule Baseline.
Preliminary Design 1.1.1 Jan Feb Mar Apr May
1.1.1.1 Define Specifications & Req.
1.1.1.2 Develop Preliminary Design
1.1.1.3 Review Preliminary Design
1.1.1.4 Incorporate Comments
1.1.1.5 Preliminary Design Complete
2. Establish the Cost Baseline
Based on the Project Scope and available resources, the project budget is allocated across the scheduled
activities and across time. The time phased allocation of resources, establishes the Cost Baseline.
Elements of a Contract Baseline
The contract baseline is comprised of eight key elements:
• Total Contract Price
• Total Contract Cost
• Profit / Fee
• Contract Budget Base (CBB)
• Performance Measurement Baseline (PMB)
• Management Reserve (MR)
• Distributed Budgets
• Undistributed Budgets (UB)
The relationship between these eight elements is depicted below. Each element is defined on the following
pages and is illustrated using the ABC House Building Project.
Basic Terms
 Total Contract Price is the total negotiated contract cost plus profit/fee.
 Total Contract Cost is the total negotiated contract cost without profit/fee.
 Profit/Fee is the estimated profit or fee realized by executing the contract or project. Profit/Fee is not
part of the Contract Budget Base (CBB), as defined on the next page.
 The Contract Budget Base (CBB) represents the total budget for all authorized contractual work,
minus Profit/Fee. The CBB can only be modified when duly authorized changes to the contract are
received. CBB is always calculated as follows:

4.  The Performance Measurement Baseline (PMB) is the time-phased budget plan against which
contract performance is measured. It includes all allocated or Distributed Budgets plus the
Undistributed Budget. PMB does not include Management Reserve.
PMB = Sum of Control Accounts
PMB = Distributed Budgets + Undistributed Budgets
PMB = Contract Base Budget – Management Reserve
Once the CBB is established, the Program Manager establishes a Management Reserve (MR) prior to
distributing budgets to the performing organizations. The purpose of Management Reserve is to have a
budget for the Program Manager to allocate for unforeseen problems. Management Reserve is not part
of the Performance Measurement Baseline because it is held at the program level only. Transactions
into and out of Management Reserve are approved by the Program Manager. The documentation
supporting all Management Reserve transactions is maintained and reported by Program Control.
 Distributed Budgets reflect the contractually authorized efforts allocated to the WBS elements. It
include budgets assigned to control accounts during baseline establishment as well as work packages
and planning packages. Distributed Budgets = Budgets assigned to Control Accounts
 Undistributed budget (UB) applies to contractually authorized efforts not yet allocated to WBS
elements. The UB consists of a budget for authorized changes for which there has not been adequate
time to plan the change at the control account level. Undistributed budget is an element of the
Performance Measurement Baseline, but it is not time-phased.
Every effort should be taken to distribute budgets in a timely manner and to minimize undistributed
budgets. Undistributed budgets are controlled by the Program Manager, and all changes must be
documented using an Undistributed Budget Log.
Time phased budgets or Master Work schedule are prepared for each work package and planning
package. Each work package and planning package contains a budget divided into time increments
(typically monthly) by elements of cost, such as direct labor, material, subcontract, and other direct cost
(ODC). During the phasing process, Management ensures that requirements will be met, work sequences
are logical, and resources are available to execute the plan. Master schedule prepared by combining work
schedule and bill of quantities. This table shown below is Master schedule or Time phased budgets.
Preliminary Design 1.1.1 Hours Jan Feb Mar Apr May
1.1.1.1 Define Specifications & Req. 1,500 1,000
1.1.1.2 Develop Preliminary Design 2,000 2,000
1.1.1.3 Review Preliminary Design 500 500
1.1.1.4 Incorporate Comments 320 320
1.1.1.5 Preliminary Design Complete 1,000
From Master schedule, we can prepare material, labor and equipment schedule or time phased budget. The
step to prepare material labor and equipment schedule are: (1) Determine cost proportion each activities
material, labor and equipment using cost analysis or unit rate analysis spread sheet. (2) Multiply the total
cost of each activity by the cost proportion and set the values in the respective Master schedule time phase.

5. Let us compute cost proportion for C25 reinforced cement concrete work as an example. To determine the
cost proportion we have to understand the materials, labor and equipment required to cast concrete. This
data can easily extracted from cost analysis or unit rate analysis spreadsheet. The computation is displayed
in the table shown below.
The basic formula to determine the materials cost proportion, sand is total cost of sand per unit divided by
unit price while for labor and equipment is total cost of labor (e.g. mason) divided by unit price and the
productivity of the crew.
Daily out put ; 1.50
Factor Factor Factor
TYPE UNIT QTY. RATE COST PER SKILL NO U,F DAILY RATE DAILY COST TYPE NO U,F Rental rate/hr
Daily cost
(BIRR) UNIT (BIRR0 (BIRR) (birr / hr ) (birr)
gravel m3 0.68 330.72 224.89 0.08 masone 1 1 191.25 191.25 0.05 mixer 1.00 1 75 600.00 0.15
cement qtl 3.60 144.98 521.92 0.20 D. labour 6 1 90 540.00 0.14 vibrater 1.00 1 25 200.00 0.05
sand m3 0.46 333.98 153.63 0.06 operator 2.00 1.00 130.00 260.00 0.07
water m3 0.12 115.50 13.86 0.01 forman 1.00 0.25 222.75 55.69 0.01
TOTAL' A' (BIRR) 914.30 0.34 TOTAL'B' (BIRR) 1,046.94 0.26 TOTAL 'C'(BIRR) 800.00 0.20
1.MATERIALTOTAL" A " 914.30 0.34 2. MANPOWERTOTAL" B" 697.96 0.26 3. EQUIPMENTTOTAL" C" 533.33 0.20
DAILY OUTPUT DAILYOUTPUT
1. DIRECTCOST="1" +" 2" +" 3" =BIRR 2,145.59 0.81
7% 150.19 0.06 0.81
17% 364.75 0.14
2,660.54 1.00
Profit
Overhead
Unitprice
concrete C-25 m3/day
A.MATERIAL B.MANPOWER C.EQUIPMENT
Example from the table shown above, the cost proportion for sand, CPsand is 153.63/2660.54=0.08 which
means if total cost of C25 concrete in the BOQ is 200,000 birr, the respective cost of sand is 0.08 times
200,000=16,000 Birr. But cost proportion for mason is 191.25/ (1.5*2660.54) =0.05 which means cost of
masons from 200,000 birr is 10,000 Birr. Similarly, the cost proportion for other cost component is shown
in table above.
From master schedule given below we can develop material, labor and equipment schedule by multiplying
cost proportion by their respective time phased budget.
1 2 4 5 6 7 9 10 11
Sub Structure
1 Concrete Works 8,213.09 20.52 - 4,064.21 4,148.88 - - - - - -
C-30 Reinforced concrete 8,213.09 20.52 - 4,064.21 4,148.88 - - - - - -
For footing 2,790.61 6.97 2,790.61 -
For foundation Column 1,273.59 3.18 1,273.59 -
For grade beam 4,148.88 10.36 4,148.88 -
Super Structures - -
2 Concrete Works 31,815.88 79.48 - - 2,777.01 4,998.78 14,019.99 10,020.10 - - -
Reinforced concrete 31,815.88 79.48 - - 2,777.01 4,998.78 14,019.99 10,020.10 - - -
in elevation column 4,896.80 12.23 1,064.52 1,916.14 1,916.14 -
in top tie beams 7,020.64 17.54 7,020.64 -
in floor slabs 10,562.61 26.39 10,562.61 -
in stairs cases 6,336.37 15.83 1,712.49 3,082.64 1,541.24 -
Concrete Parapet 1,040.75 2.60 1,040.75 -
in lintels 1,958.71 4.89 1,958.71 -
40,028.97 100 - 4,064.21 6,925.89 4,998.78 14,019.99 10,020.10 - - -
Project: G+1 Building
Master / Work Schedule
Project Amount including 1,269,166.52
Contractor: The owner Commencement date Mon 3/26/12
Consultant: ABC Completion Date Tue 2/12/13
Item
no. Description
Value in
Birr
Value
in %
Months
Total Project Cost

6. The material schedule for the above master schedule is shown in table below
Program Funding is based on the estimates developed during the proposal preparation phase. These
estimates can be modified during the contract negotiation phase. The Program Funding amount is used to
establish the Contract Budget Baseline (CBB).
The contractor develops this by constructing a simple bar chart of the project, assigning costs to the bars,
and smoothly connecting the projected amounts of expenditures over time.

7. Fig. 4.3 Influence of front, or advance payment on expense and income profiles
3. ProjectCostControl
Project cost control actually begins with the preparation of the original cost estimate and the subsequent
construction budget. Keeping within the cost budget and knowing when and where job costs are deviating
are two factors that constitute the key to a profitable operation.
The early detection of actual or potential cost overruns in field construction activities is vital to
management. It provides the opportunity to initiate remedial action and increases the chance of eliminating
such overruns or minimizing their impact. Because cost overruns increase project costs and diminish
profits, it is easy to see why both project management and upper-level management must become sensitive
to the costs of all project activities.
Almost all the projects need to be guided right throughout in order to receive the required and expected
output at the end of the project. It is the team that is responsible for the project and most importantly the
project manager that needs to be able to carry out effective controlling of the costs. There are, however,
several techniques that can be used for this purpose.

8. In addition to the project goals that the project manager has to oversee, the control of various costs is also
a very important task for any project. Project management would not be effective at all if a project
manager fails in this respect, as it would essentially determine whether or not your organization would
make a profit or loss.
PROJECT COST CONTROL SYSTEMS
The design, implementation, and maintenance of a project cost control system can be considered a
multistep process. The five steps, shown schematically in Figure below form the basis for establishing and
maintaining a cost control system. The following questions regarding each step in the implementation of
the cost control system must be addressed.
1. Chart of Cost Accounts: What will be the basis adopted for developing estimated project
expenditures, and how will this basis be related to the firm’s general accounts and accounting
functions? What will be the level of detail adopted in defining the project cost accounts, and how will
they interface with other financial accounts.
2. Project Cost Plan: How will the cost accounts be used to allow comparisons between the project
estimate and cost plan with actual costs as recorded in the field? How will the project budget estimate
be related to the construction plan and schedule in the formation of a project cost control framework?
3. Cost Data Collection: How will cost data be collected and integrated into the cost reporting system?
4. Project Cost Reporting: What project cost reports are relevant and required by project management in
its cost management of the project?
5. Cost Engineering: What cost engineering procedures should project management implement in its
efforts to minimize costs?
Figure 4.1 Steps in cost control.

9. CostControlTechniques
Following are some of the valuable and essential techniques used for efficient project cost control:
1-PlanningtheProjectBudget
You would need to ideally make a budget at the beginning of the planning session with regard to the
project at hand. It is this budget that you would have to help you for all payments that need to be made
and costs that you will incur during the project life cycle. The making of this budget therefore entails a lot
of research and critical thinking.
Like any other budget, you would always have to leave room for adjustments as the costs may not remain
the same right through the period of the project. Adhering to the project budget at all times is key to the
profit from project.
2- KeepingaTrackofCosts
Keeping track of all actual costs is also equally important as any other technique. Here, it is best to
prepare a budget that is time-based. This will help you keep track of the budget of a project in each of its
phases. The actual costs will have to be tracked against the periodic targets that have been set out in the
budget. These targets could be on a monthly or weekly basis or even yearly if the project will go on for
long.
This is much easier to work with rather than having one complete budget for the entire period of the
project. If any new work is required to be carried out, you would need to make estimations for this and see
if it can be accommodated with the final amount in the budget. If not, you may have to work on necessary
arrangements for 'Change Requests', where the client will pay for the new work or the changes.
3-EffectiveTimeManagement
Another effective technique would be effective time management. Although this technique does apply to
various management areas, it is very important with regard to project cost control.
The reason for this is that the cost of your project could keep rising if you are unable to meet the project
deadlines; the longer the project is dragged on for, the higher the costs incurred which effectively means
that the budget will be exceeded.
The project manager would need to constantly remind his/her team of the important deadlines of the
project in order to ensure that work is completed on time.
4-ProjectChangeControl
Project change control is yet another vital technique. Change control systems are essential to take into
account any potential changes that could occur during the course of the project.
This is due to the fact that each change to the scope of the project will have an impact on the deadlines of
the deliverables, so the changes may increase project cost by increasing the effort needed for the project.

10. 5-UseofEarnedValue
Similarly, in order to identify the value of the work that has been carried out thus far, it is very helpful to
use the accounting technique commonly known as 'Earned Value'.
This is particularly helpful for large projects and will help you make any quick changes that are absolutely
essential for the success of the project.
One widely accepted way of calculating progress on complex projects using a work or account-based
breakdown system is the earned value approach.
This system of determining project progress addresses both schedule status (i.e., on schedule, behind
schedule or ahead of schedule.) and cost status (i.e., on budget, over budget or under budget).
The idea of earned value is based upon a rigorous development of percentage complete of the budgeted
costs associated with individual work packages or line items. Each work package has an initial budget or
estimate which is defined as the budgeted cost at completion (BCAC). As work proceeds on an individual
work package or account, assessment of the percentage complete is made at various study dates. The initial
schedule establishes an expected level of work completion as of the study date.
The level of expected production is often shown as an S-Curve plotting the cost or units of production (e.g.,
units produced, work hours expended, and so on) against time. This cost/production curve is referred to as
the baseline. At any given time (study date), the units of cost/production indicated by the baseline are
called the budgeted cost of work scheduled (BCWS).
The tracking system requires that field reports provide information about the actual cost of work performed
(ACWP) and the actual quantity of work performed (AQWP). The earned value is the budgeted cost of
work performed (BCWP).
The relative values for a given work package or account at a given point in time (see Figure 4.2) below
provide information about the status in terms of cost and schedule variance.
Fig4.2 The six parameters which form the foundation of the earned value concept are:
BCWS: Budgeted Cost of Work Scheduled = Value of the baseline at a given time
ACWP: Actual Cost of Work Performed. Measured in the field

11. BCWP: Budgeted Cost of Work Performed= [% Complete] X BCAC
BCAC: Budgeted Cost at Completion = Contracted total cost for the work package
AQWP: Actual Quantity of Work Performed. Measured in the field
BQAC: Budgeted Quantity at Completion. Value of the quantity baseline as projected at a given
point.
Example
To put these terms into context, consider the small project shown in Figure below. The project consists of
two control accounts ‘‘A’’ and ‘‘B.’’ A consists of two
subaccounts, A.1 and A.2. The information for these
work packages depends on its cutoff date (the ‘‘now’’
date – obviously, each date may have different values),
and for the example it is given in Table below.
Table: Study Date Data for Simple Project
Project PC (PPC) = Total BCWP ÷ Total BCAC = 124.3 ÷215= 57.8%
ECACi = Estimated Cost at Completion for Work Package i =ACWPi ÷ PCi
In this example, the budget is expressed in worker hours so the baseline for control is in worker hours. The
estimated total number of worker hours for this scope of work is 215 (the sum of the estimated worker
hours for A.1, A.2, and B). The BCWP or earned value for a given work package is given as:
BCWPi = PCi _ BCACi
Where i-is the work package or account label, and PC is the percentage complete as of the study date.
The percent complete (PC) for each package is based on the ratio of the actual quantities (i.e., it’s AQWP)
divided by its Budgeted Quantity at Completion (i.e., BQAC) based on the latest quantity assessment. If we
know the original quantity estimate is 100 units but updated information indicates that a total of 120 units
will be required to complete the work, completion of 50 units would not indicate 50 percentage complete.
The correct PC would be 50/120(i.e., AQWP/BQAC).
Based on the information in Table 17.2, the PC for each work package in the small project would be:
PC (A:1) 35/105 = 0:333
PC (A:2) 60/77 = 0:780
PC (B) = 100/125 = 0:800, hen
BCWP Project) = 0.333(100) + 0.78 (50) + 0.8(65) = 33.3 + 39 + 52 = 124.3

12. Therefore, the project percentage complete (PPC) for the small project is:
PPC {124:3/215} X100 = 57.8 percent
This simple example illustrates several points:
1. The PC for a given package is based on the ratios of the AQWP/BQAC.
2. The PPC is calculated by relating the total BCWP (i.e., earned value) to the total BCAC for the project
scope of work.
3. The total work earned is compared to the work required. The values of units to be earned are based on
the originally budgeted units in an account/work package and the percentage earned is based on the
latest projected quantity of units at completion.
It is important to know that schedule and cost objectives are being achieved. Schedule and cost
performance can be characterized by cost and schedule variances as well as cost performance and schedule
performance indices.
These values in C/SCSC are defined as follows:
CV; Cost Variance = BCWP - ACWP
SV; Schedule Variance = BCWP - BCWS
CPI; Cost Performance Index = BCWP/ACWP
SPI; Schedule Performance Index = BCWP/BCWS
At any given study date, management will want to know what are the cost and schedule variance for each
work packages.
The variances can be calculated as follows:
CV (A:1) = BCWP (A:1) - ACWP (A:1) = 33:3- 40= -6:7
CV (A:2) = BCWP (A:2) - ACWP (A:2) = 39 - 35 =+4
CV (B)= BCWP (B) - ACWP(B) = 52 – 50=+2
Since the CV values for A.2 and B are positive, those accounts are within budget (i.e., the budgeted cost
earned is greater than the actual cost). In other words, less is being paid in the field than was originally
budgeted. The negative variance for A.1 indicates it is overrunning budget. That is, actual cost is greater
than the cost budgeted.
This is confirmed by the values of the CPI for each package.
CPI (A:1) = 33/40 < 1.0 A value less than 1.0 indicates cost overrun of budget
CPI (A:2) = 39/35 > 1.0 and
CPI (B)= 52/50 > 1:0 Values greater than 1.0 indicate actual cost less than budgeted cost.
The schedule variances for each package are as follows:
SV (A:1) = BCWP(A:1) – BCWS(A:1) = 33.3 - 50 = -16:7
SV (A:2) = BCWP (A:2)- BOWS (A:2) = 39 – 32 =+7
SV (B)= BCWP(B)- BCWS(B)= 52- 45 =+7

13. The positive values for A.2 and B indicate that these items are ahead of schedule. The negative value for
A.1 indicates a scheduling problem. The calculation of the SPI values will confirm this assessment.
Overall, it can be stated that A.2 and B are ahead of schedule and below cost while A.1 is behind schedule
and over cost.
The earned value approach requires a comprehensive knowledge of work packaging, budgeting, and
scheduling. It is a data intensive procedure and requires the acquisition of current data on the ACWP and
AQWP for each work package or account. It is a powerful tool, however, when management is confronted
with complex projects consisting of hundreds of control accounts. In large projects consisting of thousands
of activities and control accounts, it is a necessity. Without it, projects can quickly spiral out of control.
Values of CPI, CV, and SPI, SV for the Six Scenarios.
TheAdditionalStepsforProjectCostControl
It is advisable to constantly review the budget as well as the trends and other financial information.
Providing reports on project financials at regular intervals will also help keep track of the progress of the
project. This will ensure that overspending does not take place, as you would not want to find out when it
is too late. The earlier the problem is found, the more easily and quickly it could be remedied.
All documents should also be provided at regular intervals to auditors, who would also be able to point out
to you any potential cost risks.
Simply coming up with a project budget is not adequate during your project planning sessions. You and
your team would have to keep a watchful eye on whether the costs remain close to the figures in the initial
budget. You need to always keep in mind the risks that come with cost escalation and need to prevent this
as best as you can. For this, use the above techniques explained and constantly monitor the project costs.

14. 5. Human or Personnel Management
5.1. Introduction
The construction industry is one of the largest global employment sectors, providing work for a significant
proportion of the labor market and accounting for a significant share of the world gross domestic product
(GDP). The industry also represents one of the most risky, complex and dynamic industrial environments.
A construction project relies on skilled manual labor supported by a management framework, which has to
coordinate many professional, construction and supplier organizations whose sporadic involvement will
change through the course of the project.
The fragmentation and dynamism of this process and the need to integrate wide range of occupational
cultures renders construction one of the most complex project-based industries in which to apply good
human resource management (HRM) practices.
The ability to attract, retain and develop talented employees is a key feature of successful businesses.
People are an organization’s most valuable asset and this is especially true in relatively low-tech, labor-
intensive industries such as construction. However, people also represent the most difficult resource for
organizations to manage. Unlike physical assets, people have their own individual needs which must be
met and idiosyncrasies which must be managed if they are to contribute to organizational growth and
development. People are individuals who bring their own perspectives, values and attributes to
organizational life, and, when managed effectively, these human traits can bring considerable benefits to
organizations (Mullins 1999). However, when managed poorly they have the potential to severely limit
organizational growth and threaten the viability of a business. There are countless examples of corporate
and project crises in the construction sector which have arisen as the result of people's behavior, and it
would seem that human resource management (HRM) has the potential to eliminate more construction
risks than any other management approach (Loosemore2000). More importantly, HRM has the potential to
release a significant amount of productive potential in the construction industry, which has remained
untapped because of widespread ignorance of good practice, in this area.
In this chapter we aim to outline the aspects of the construction industry’s structure and culture that render
it one of the most problematic industries in which to manage people effectively
If there were no people involved, construction management would be duck soup! Whenever one talk in
construction managers about problem areas, people problems always head the list. Perhaps it's because we
spend so much time working on construction technology, methods, and procedures and so little time on
human factors. In-depth investigation of human factors in the business world has taken place only in the
past several decades. Since the middle 1960s, considerable research and data based on Herzberg's theories
have been published in management journals. The general management community has eagerly accepted
the work on human factors, and have sought to apply it. Also, literature on human factors in project and
construction management has increased somewhat, but it doesn't seem to have affected actual practice that
much. If it had, project and construction managers would not continue to rate human factors as their
number-one problem area. It is believed that proper handling of the human factors is the critical third leg of
the stool leading to successful projects. It rates right up there with the Golden Rule of Construction
Management and project communications as a requirement for successful projects. Even though we plan,
organize, and control our projects perfectly, the projects can still fail if we mishandle the human factors.
The human element in construction management involves human relations, personality traits, leadership,
and career development. Strength in those areas can help us do a better job of managing projects, as well as
improve the chances of meeting our personal goals. Years ago, good construction managers with a natural
flair for human relations consistently had better projects than those without it. With the research and
literature in the humanities available now, we no longer have to depend so much on chance. All we need is
the right attitude, study, training, and practice in human relations. This chapter cannot possibly cover all of
the human factors involved in project work, because the field is so broad. The areas that selected for
discussion are the more important ones relating to management performance.

15. 5.2. Qualities of a Successful
Construction Manager
Let's start by taking inventory of the most important personal traits necessary to manage construction
projects successfully. You can then study the lists to see how to shape your own qualifications to meet the
requirements. A periodic review of your performance in these key areas can be a valuable tool for keeping
the necessary skills up to date.
The successful manager of construction projects must be
An effective manager administrator
 People-oriented
 Decisive
 A strong communicator
 Resourceful
 A problem solver
 Responsive
 Knowledgeable in the
business
 Creative and imaginative
 Patient
A successful CM must possess
 Strong leadership and motivational capability
 High standards of ethics and integrity
 Personal drive
 Physical stamina and mental toughness
 Multidiscipline capability
 Common sense
Those two lists taken as one, present an impressive array of characteristics. It further confirms how broadly
based construction management work really is. Most of the traits involve human factors in one form or
another.
Personality
In looking over the lists, it becomes readily apparent that a person matching the requirements should have a
dominant personality. Clearly, a person meeting the qualifications ought to be a self-starter with enough
drive to stay the total course. We also know that capital projects are not successfully completed by brute
force alone. Because of the people-oriented nature of project work, a lot of persuasion also is necessary.
Combining the two personality traits results in the dominant-persuasive personality that is ideally suited to
project and construction management.
The largest number of construction management professionals come from the technical side of the
business. Understanding the technical nature of the work is a prerequisite for managing capital projects.
Technology seems to appeal to people with introverted personalities because complete concentration and
hard work are needed to meet the college degree requirements. The intensity of the technical course work
virtually excludes study in the humanities, which could broaden the technical person's personality. Given
that type of background, most of us are still at the introverted end of the spectrum by the time we reach the
construction management level. If your personality tests on the introverted side, it is time to do something
about it. Much psychological research shows that we are products of our forebears and environment.
Ethics and integrity
As in any profession, high standards of ethics and integrity are important in project and construction
management. Capital project managers often control large sums of money that don't belong to them.
Usually accountants thoroughly audit the funds, but there is still a lot of room for possible conflict of
interest. A conflict of interest can arise on either side of the client-contractor equation. Both parties must
conduct project activities on a businesslike basis and show no favoritism to vendors, suppliers, or
subcontractors. That includes accepting favors, kickbacks, and gifts. Today most companies have a
statement of policy governing the behavior of those employees who handle company business. Be certain
that you stay within those guidelines in all your dealings. You cannot build a professional reputation in this
business if you don't adhere to the rules. There are a lot of insidious ways to circumvent the rules, so be
alert for any traps.
Some firms vying for the project business may not be as scrupulous as you are about bending the conflict-
of-interest rules. As leader, maintaining the ethical standards of the construction team rests on you.
Set a good example yourself, and make it known to the others where you stand on ethics and personal
integrity.
Personal drive
Construction management is a demanding profession that often generates long working hours, extensive
travel, and frequent family relocation. Conflict resolution and problem solving add more stress to the job.

16. All that is taking place within an environment of change, which further compounds the pressure. Many
people won't consider those working conditions to be inducements for entering a field of work. Only
people who look on that working environment as a challenge and have a strong personal drive to excel in it
can be successful. On the plus side, a certain amount of authority, power, and respect comes with the job.
The pay is usually attractive, and the personal satisfaction of a job well done is invigorating. Effective CMs
usually are in short supply, so job security is good. The mental side of the job demands a sound physical
side to support it. CMs should keep in shape to handle their demanding schedules.
This means having a regular exercise program and good dietary habits throughout your career. The fitness
program and diet should be sensible and matched to your individual needs. In my opinion jogging, for
example, is not an absolute necessity.
Relaxation is an equally important part of a CM's personal schedule.
No one can live in a pressure cooker forever. Relaxing when time permits is necessary, but don't play as
hard as you work. Some people have tried that unsuccessfully. Performing with a hangover the next
morning does not improve your management abilities!
Multidiscipline capability
Construction people with experience across several disciplines are best suited for the job. Most of us who
became CMs moved up from the technical ranks by working on capital projects. If you plan to get into
construction management, seek work assignments that broaden your technical scope. That includes areas
such as cost engineering, scheduling, procurement, and all areas of construction.
The most difficult cross-discipline transition is the one from non-process to process projects. The key here
is the chemical engineering expertise required in the process environment. If you are making such a
transition, a short course in chemical engineering for nonchemical engineers would be helpful. Obviously
it's not necessary to become a chemical engineer, but the training will give you the necessary basics to
better understand the inner workings of chemical process equipment and systems. That knowledge is
especially useful for reading and understanding flow diagrams and for supervising the final plant checkout
and acceptance by the owner.
The same advice holds for training in any other discipline in which overcoming a knowledge gap will help
you to do a better job and further your career.
Human Relations
The area of human relations in construction management is broad because of the many interpersonal
contacts involved in a largely conflict-oriented environment. In addition to the external human relations,
there are the personal ones concerning the CM's career. Of course, the two are closely related. The rest of
this chapter covers those crucial human factors and picks up the traits not covered in the previous lists. It is
found that the following areas to be the most critical to effective construction management
 Client-contractor relations
 Contract administration
 Project relations
 Public relations
 Labor relations
 Leadership
 Common sense
 Keeping your cool
 Negotiating ability
 Patience
Client-contractor relations
Contractor-client relations involve two very important aspects in the business of meeting project goals.
They are too valuable an asset to be sacrificed in a breakdown of human relations. Contractor-client
relations can make or break
1. The success of the current project or, at the very least, meeting of the project goals
2. Contractor’s opportunities for future work with the client
Those are two powerful incentives for making the client-contractor relationship work throughout the
project.
The project and construction managers can give up on meeting their personal goals, but they do not have
the authority to give away their company's goals. They accepted those goals when they took on their
respective project assignments.
It's impossible to write a scenario in which everyone has successful relations with a client or contractor.
After all, a lot of personal chemistry is involved. A lot can happen over the complex course of a normal
capital project. However, there are some things I can tell you that will improve the odds considerably. The

17. primary necessity in any client-contractor scenario is having both parties realize that the relationship is
essential to project success. Neither the project nor the construction manager can afford to have the project
branded a failure, regardless of the personalities involved. Poor contractor-client relations can completely
wipe out an otherwise outstanding performance.
That makes an effective working relationship the number one priority throughout the project, both for your
company and for your personal reputation in the business.
No two people will handle a given situation in the same way. You must handle human relations in a
natural, unforced way to make any solution work. You will have to try various techniques with each
contractor (or client) to see which one works for the given situation.
Some key areas in the client-contractor relationship are discussed in the following sections.
Ethical conduct
Any failure in the key area of ethical conduct by either party will seriously undermine the relationship from
the start. Neither party can condone unethical practices in the other. Fortunately, unethical conduct does not
occur very often. When it does, squelch it immediately.
PMs and CMs have a fiduciary responsibility to their respective managements to spend the project budget
wisely. That doesn't leave any room for anyone on the project to show favoritism or accept kickbacks from
vendors, suppliers, or subcontractors. Be sure that everyone on your project has a copy of the company's
code of conduct and abides by it. If your company doesn't have a code of ethics, write one for the project to
define your own ground rules.
Responsiveness
Contractors must be responsive to the client's needs first. This is a typical buyer/seller arrangement that
places the customer in a preferred position. It does not, however, give the customer an automatic right to
make unreasonable demands on the contractor or supplier.
Responsiveness is also a two-way street. Clients must be equally responsive to the contractor's needs for
proper execution of the work.
It's vital for clients to make their inputs and approvals in a professional and timely manner as defined in the
contract. A strong effort by both client and contractor managers in this area will result in a highly
successful working relationship.
Mental toughness
Weakness is seldom respected in any culture, not even by bullies.
To keep control of their project, CMs should resist domination by their client counterparts. The buyer/seller
relationship is not grounds for an uneven playing field. If there is any doubt in your mind, the contract
should define the client-contractor relationship.
I recommend that you gently, but firmly, cut off any one-upmanship activity whenever it occurs on your
project. People who are prone to that type of activity will usually get back into line when pressed on the
matter.
Contract administration
Contract administration is an area that sometimes produces friction in the client-contractor relationship.
Even the best-crafted contract requires some interpretation from time to time. It's important that both
parties take a proactive stance on meeting contractual requirements.
That avoids friction over the need for one party to constantly remind the other of the contract requirements.
Also, there are areas of give-and-take in any contract that can make a contractual relationship run more
smoothly. However, neither party can give away the store. Likewise, the other party should not ask for it.
This area requires a lot of judgment for proper handling, so approach it with caution. Take a few smaller,
calculated risks until you get the feel of it.
Relations of the project staffs
CMs also are responsible for the client-contractor relations throughout their field staffs. They must resolve
any inter staff human relation problems not resolved at the individual level. The number of personality
problems seems to be directly proportional to the size of the staff. The best way to reduce problems in this
area is for the client and contractor project managers to set good examples as role models for the rest of the
staff. Also, be sure that all members of your staff know the policies on how you expect them to handle their
contractor (or client) relations.

18. Those are a few areas that are critical to ensuring good contractor- client relations. If you learn how to
handle them well, any minor areas should fall into place as well. Remember, try different approaches to
suit different situations until you find the combination that works for you. There will probably be a time
where nothing seems to work, so making a change is inevitable. If it happens more than once or twice,
there is cause for concern. You must review your performance and correct the basic cause of the problem.
Internal project relations
The next most important human relations problem area is the field team's working relationships with each
other and with the rest of the company. Eventually you and your key team leaders will have business
contacts with everyone in the company, from general management down to the mail room. As the field
team's leader, you are responsible for seeing that these contacts are working smoothly.
The most frequent contacts are those with their peers in the firm's home office, as well as subcontractors,
vendors, government agencies, and the like. The home office contacts can include department heads and
managers of construction, design, procurement, safety, and project-Control groups. They may be the people
who will be supplying the members of your project team or having technical input to the work.
To a lesser degree you will have contact with business development, corporate legal, accounting, and
operating management. Certainly, the first four items we covered under client-contractor relations also
apply to the relationships mentioned above. Those areas were ethical conduct, responsiveness, mental
toughness, and holding others to their commitments. The one ingredient missing from the earlier discussion
is the buyer-seller relationship since most of us are now working for the same organization.
That makes it more important to establish yourself as a knowledgeable manager with a mature outlook and
respect for other people. It is essential to command respect and cooperation from the people who must
perform well if your project is to succeed. That reputation is not won by putting on your Superman suit
every morning before leaving for work. We build our respected reputations gradually, brick by brick and
stone by stone, much as we build our projects. Throwing the stones and bricks at the other guys, even when
they seem to be asking for it, will not build a solid reputation with our peers.
The philosophy is that it takes everybody pulling for you, in addition to a good performance on your part,
to have a successful construction project. Having even a few people waiting around to pull the rug out from
under you increases the chances for failure.
You also should remember that project relations work in all directions-up, down, and sideways. Most
managers are attentive to their upward relations as a matter of personal survival. It is from th
Labor relations
Labor relations policy and practices are without doubt the most critical human relations area in the
construction arena. Because labor relations impinge so heavily on day-to-day site operations and the
ultimate success of the project, CMs have to understand their firm's basic labor relations policies and labor
law. They need to have enough labor relations know-how to ensure effective choices when making field-
level labor decisions.
Any contractor's overall labor relations policies must be based on their labor posture and the labor laws in
effect at the construction site.
In addition to the labor law directly affecting project working rules, there are the other laws covering
affirmative action and equal opportunity for employment of minorities. Most contractors have the required
plans in effect to meet those laws. The CM's role in this area is to see that the relevant field department
heads are meeting the legal and corporate requirements of those laws in a positive manner. Just as with
OSHA and safety, citations in this area can lead to suits or fines and bad publicity.
The main goal of any labor policy is to maintain high productivity and reduce work stoppages, which
hamper job progress and increase labor costs. Local labor practice and usage play a large role in labor
relations and make it difficult to develop specific guidelines covering all situations, particularly if there are
union-shop setting.
Public relations
The CM usually acts as the public relations (PR) representative for the construction project. CMs should
mesh their project PR responsibilities into the overall corporate policies set by top management. It's natural
to want your project to be presented in the most favorable light. A proactive approach to project PR is the
best way to accomplish that. Bad PR can even get in the way of meeting the project goals. CMs ought to be

19. alert to spot newsworthy events on their projects that could be of interest to the business or the general
public.
This is one of those subjects not covered in our technical educations, so developing a feel for newsworthy
items is another self-taught skill. It is even more important to take a proactive stance on items that are
likely to be detrimental to your project or corporate image. Try to look ahead for any negative PR
concerning the project that might be developing in the community. Make sure that any adverse publicity
gets a fair counter presentation the first time around. If an adverse or erroneous item gets into the media, it
is virtually impossible to get a retraction later.
Establish the initial contacts with local government and community officials before opening the site. Tell
them about your plans to handle such problem areas as traffic, dust, noise, and fumes, which could
adversely impact the area. To keep the public on your side, stress the positive effects of the project on the
community. The project or construction manager often acts as the project's technical representative in
speaking to civic and government groups about environmental matters. The presentations require careful
preparation, including clearance from top management. Be especially careful in handling the news media.
Handing out a well-written and well-checked news release is safer than making an impromptu presentation.
Leadership
Leadership is an area that touches on most of the other human-factor areas in construction management. It
is a crucial requirement for effective practice of construction project management. Building leadership
and motivational skills is vital to becoming successful in construction management.
The following list of eight areas of importance in management illustrates the thoughts about the nature of
leadership in project management.
1. Peer skills-the ability to set up and maintain a network of contacts with equals
2. Leadership skills-the ability to deal with subordinates and with the kinds of complications created by
power, authority, and dependence
3. Conflict-resolution skills-the ability to mediate conflict and handle disturbances under psychological
stress
4. Information-processing skills-the ability to build networks, extract and validate information, and
transmit it effectively
5. Skills in unstructured decision making-the ability to find problems and solutions when alternatives,
information, and objectives are ambiguous
6. Resource allocation skills-the ability to decide among alternative uses of time and other scarce
resources
7. Entrepreneurial skills-the ability to take sensible risks and implement innovation
8. Skills of introspection-the ability to understand the position of a leader and the leader's impact on the
organization
Each one of those areas has a direct bearing on the practice of construction management. Now let it be tie
them into the discussion.
Peer skills
This is discussed earlier in connection with setting up effective working networks with key field staff,
home office department heads, and other operating groups. The contacts with peer groups are vital for the
necessary outside support to enable CMs to execute their projects.
Those networks are built and maintained largely through a mature professional performance and a
cooperative attitude with your peer groups.
Leadership skills
Management delegates to CMs a lot of the authority needed to fulfill the project goals. Knowing how to
use that authority to build and motivate an effective project team is essential to successful leadership in the
construction area. Wielding authority is the skill most involved with human relations!
Conflict-resolution skills
Construction management abounds with stressful conflict-resolution situations. Managers must learn how
to cope with those emotionally charged situations quickly, calmly, and fairly, without damaging working
relationships and project morale. Try to present decisions to the parties involved as win-win solutions. That
will allow participants in the decision to keep their self-esteem and maintain enthusiasm.

20. 1. Information-processing skills
Virtually all project communication passes over the CM's desk. In addition to assimilating that information,
the CM must get out into the trenches to find out what is going on. That requires every communication
skill: speaking, listening, reading, writing, and presenting information. The information gained is not worth
anything until it's analyzed to determine its effect on project performance. This area is crucial to
maintaining the good client-contractor and project relations mentioned earlier.
Skills in unstructured decision making
Positive leadership leaves no room for shillyshallying. Decisiveness is one of the character traits listed
earlier for successful CMs. "Shooting from the hip" on every decision is often hazardous, so I don't
recommend that either. Make use of the time available for making the decision, but don't drag it out
unnecessarily.
Resource allocation skills
Project and construction managers oversee the disposition of all project resources. That includes time,
money, people, material, equipment, and systems. Each of them makes a contribution toward meeting the
project goals, so allocate it wisely. That skill interacts closely with the decision making just discussed.
Entrepreneurial skills
The project is your business (profit center) to run. Some projects require a Mom and Pop approach, while
others are big business. In either case, you should take sound calculated risks when the payout looks good.
By internalizing your project numbers, you should know what to expect when the project reports arrive.
Most entrepreneurs are creative, so use some imagination in running your business.
Skills of introspection
In addition to understanding your position as a leader, skills of introspection mean periodic self-analysis of
your total performance. Is everything possible being done to reach the project goals? Does your
performance measure up to the personal standards you have set? Are your leadership skills getting effective
results?
Applying introspection to your job environment is one of the best teaching tools available to you.
Management schools and training courses can only point you in the right direction. Introspective practice
of management theory is the quickest way to learn what really works for you!
Motivational skills
Effective leadership in construction management is founded on having a fully motivated supervisory staff
and labor force. Success in this key area will ensure a safer, more productive, and smoother-running job
that will meet your project goals!
As you reviewed these nine areas of importance to management, it is sure that, you thought of several
specific examples of recent project situations applicable to each one. Run through those examples in your
own mind and rate yourself on how you actually handled them.
If the answers are not good in some areas, try to mold your leadership skills to improve the outcome next
time. Making a frank appraisal of your performance against the checklist a couple of times a year can
improve your leadership skills immensely.
Improvement in that area also will help you to mold the dominant persuasive personality necessary for
practicing construction project management.
Common Sense
Common sense is one of those intangible attributes that some of us were lucky enough to be born with.
Others, not so lucky, must acquire it. The dictionary defines common sense as "sound practical judgment
that is independent of specialized knowledge, training or the like; normal native intelligence. The operative
words are "sound practical judgment." As a start, it is recommend that to use sound practical judgment in
areas where you do have specialized knowledge and training, such as construction management. Areas
where you don't have specialized training and knowledge also call for common sense.
You need common sense when people seek to promote the use of impractical ideas on your projects.
Suppose, for example, that a department head is trying to impose an unproven, over detailed, costly
scheduling technique on your small project. That is when common sense should tell you to ask some
pertinent questions. Do we really need it on this type of job? Will it really work as well as you say? Can we
afford to experiment with it on such a small job? Can we stand the extra cost?

21. The construction management system is really nothing but the application of common sense. The
application of sound practical judgment in practicing total construction management is what I have been
talking about throughout this book. One learns common sense by observation, practice, and experience.
Keeping Your Cool
Keeping your cool is another trait we can do something about. CMs can't survive by pushing the panic
button. They have to learn to deal with panic situations calmly to avoid becoming nervous wrecks.
It's better to reserve your energies for clear thinking on how to solve the problem than to wallow in panic.
If the project leader is running around in a state of panic, the panic will spread to the rest of the
construction team. No serious problem ever was solved by creating a state of panic.
Panic is a symptom of extreme worry. If you have a tendency to worry, you also are likely to panic in
difficult situations.
Starting from that premise, coolly explore ways to improve on the worst-case scenario. Anything salvaged
over and above the worst case is an improvement. In many cases you can turn the panic situation around,
canceling out most of the adverse effects.
Furthermore, having successfully handled the panic coolly makes you look more professional in the eyes of
your management and peers. That kind of performance builds your desired reputation as a mature,
knowledgeable, and respected practitioner of construction project management.
Negotiating Ability
CMs routinely find themselves in negotiating situations. Such situations arise with peers, clients, and
subcontractors in almost every aspect of executing the project. They include areas such as staffing,
estimating, and scheduling, in addition to such normal areas as contract negotiation, purchasing, and
change orders.
Negotiation is one of the management arts that you can learn through training and practice.
Remember, a negotiation is a special form of meeting, so a detailed meeting plan and agenda are critical to
success. Before going into the negotiation, plan your basic strategy. That includes setting your short- and
long-term goals, a profit strategy, and selection of the negotiating team. Next, set up your information-
gathering and –processing systems and determine who makes the decisions. You should then be ready to
study and implement your strategic and tactical approaches to finally arrive at a satisfactory close.
It also is important to control the negotiating meeting to your advantage even if you are the seller or
plaintiff. It may surprise you to discover how often this can be done when your preparation is better than
the opposition's.
Patience
Patience is a virtue-most of the time. However, don't confuse patience with allowing an existing problem
area to continue, hoping that it will go away. Patience is something most of us develop naturally as we
mature; we base it on common sense and practical judgment.
That is why we often see effective project teams made up of mixtures of seasoned hands and young Turks,
providing both patience and push.
Patience is akin to controlling one's temper in a difficult situation. When you lose your temper, you often
lose the outcome of the situation. Patience is also a must in the client-contractor relationship discussed
earlier. This is especially true in international projects where cultural differences are involved. If you must
have one admitted weakness in your construction management makeup, lack of patience is the most
acceptable. According to good management practice, the reviewer should ask what you think your
weaknesses are. After a few moments of thought, admit to being a little impatient. The reviewer will
immediately transpose your admitted weakness into a strength and go on to the next subject.
Thus, you have neatly dodged the minefield of admitting your weaknesses. You are bound to increase your
score by a couple of points.
5.3. Project Manpower Management
5.3.1. Definition
Using this approach, manpower management in project setting can be defined in terms of all the decision
processes relating to:
1) The determination of the size of the project work force (whether field work force, design group, or
field management team).

22. 2) The acquisition of labor and control of the size of the project work force over the life of the project.
3) The structure and breakdown of the project work force into work groups such as crews and
management sections.
4) The planning, scheduling, directing, and monitoring of manpower activity.
5) The sizing and composition of specific crews in relation to the work content of project activities and
the work assignments to individual crew members.
5.3.2. Spectrum of Manpower Management
The management of people as a human resource ranges over a wide spectrum and can be readily divided
into four major hierarchical areas:
1) Human relations: from that associated with the management and behavior of an individual,
2) Personal management of labor: through the establishment and management of temporary work
groups (such as crews and design or project team sections),
3) Impersonal management of labor: to concern with the entire project work force and
4) Industrial relations: to the relationships that exist and develop between management and
workforce.
The hierarchical nature of these four human management areas reflects a progressive growth in the
organizational ways in which people are managed while portraying a progressive loss of individual identity
Figure 5-0-1 Hierarchical nature of the four human management areas. Source Asmerom T.
5.3.2.1. Human Relations
 Most fundamental human management area
 Concerns of this Human Management Area - General:
1) With those aspects of individual human behavior that relate to personality and skill level and the
requirements of the work environment, and with the detection and resolution of issues that arise
between individuals.
A. Concerns of Human Management Area - At the individual worker level
 Initially with the selection and hiring processes and the assessment of an individual's skills, past
performance, attitudes toward work, and the manner in which the individual will fit into a close
work environment with others.
Once hired, management concern additionally focuses on the quality of the work produced and the
extent to which the employee can be relied upon to work without constant supervision
B. Concerns of Human Management Area - At the individual manager level
 Initially with an assessment of the management potential of the individual, past managerial
experience, and leadership qualities.
 Once established as a member of the management team, concern can be directed to improving the
individual's management style so that harmonious and effective relations can develop between the
manager and the workers under the manager's control.
Progressive
growth in
organizational
ways in which
people are
managed
human relations
personal management of labor
Impersonal management of
labor
industrial relations
progressive loss of
individual identity

23.  Finally, at this human management level, management concern should be directed to the
improvement of motivational factors that strengthen attitudes toward work and with enhancing
worker pride in the quality and performance of the work produced.
Determination of Labour Characteristics
 Generally, Labor characteristics include age, skill, experience, leadership and motivation of
workforce. Labor characteristic is determined through a performance analysis which is a common
tool for assessing workers quality and contribution. Performance of labor is evaluated based on the
following factors:
 Quality of Work - calibre of work produced or accomplished.
 Quantity of Work - volume of acceptable work
 Job Knowledge - demonstrated knowledge of requirements, methods, techniques and skills
involved in doing the job and in applying these to increase productivity.
 Related Work Knowledge - knowledge of effects of work upon other areas and knowledge of
related areas which have influence on assigned work.
 Judgment - soundness of conclusions, decisions and actions.
 Initiative - ability to take effective action without being told.
 Resource Utilization - ability to delineate project needs and locate, plan and effectively use all
resources available.
 Dependability - reliability in assuming and carrying out commitments and obligations.
 Analytical Ability - effectiveness in thinking through a problem and reaching sound conclusions.
 Communicative Ability - effectiveness in using oral and written communications and in keeping
subordinates, associates, superiors and others adequately informed.
 Interpersonal Skills - effectiveness in relating in an appropriate and productive manner to others.
 Ability to Work under Pressure - ability to meet tight deadlines and adapt to changes.
 Security Sensitivity - ability to handle confidential information appropriately and to exercise care
in safeguarding sensitive information.
 Safety Consciousness - has knowledge of good safety practices and demonstrates awareness of
own personal safety and the safety of others.
 Profit and Cost Sensitivity - ability to seek out, generate and implement profit-making ideas.
 Planning Effectiveness - ability to anticipate needs, forecast conditions, set goals and standards,
plan and schedule work and measure results.
 Leadership - ability to develop in others the willingness and desire to work towards common
objectives.
 Delegating - effectiveness in delegating work appropriately.
 Development People - ability to select, train and appraise personnel, set standards of performance,
and provide motivation to grow in their capacity.
 Diversity (Equal Employment Opportunity) - ability to be sensitive to the needs of minorities,
females and other protected groups and to demonstrate affirmative action in responding to these
needs.
These different factors could each be assessed on a three point scale: (1) recognized strength, (2) meets
expectations, (3) area needing improvement
ABILITIES NEEDED FOR: "CONSTRUCTION LABORER"
 Static Strength -- The ability to exert maximum muscle force to lift, push, pull, or carry objects.
 Trunk Strength -- The ability to use your abdominal and lower back muscles to support part of
the body repeatedly or continuously over time without 'giving out' or fatiguing.
 Explosive Strength -- The ability to use short bursts of muscle force to propel oneself (as in
jumping or sprinting), or to throw an object.
 Manual Dexterity -- The ability to quickly move your hand, your hand together with your arm, or
your two hands to grasp, manipulate, or assemble objects.
 Multi-limb Coordination -- The ability to coordinate two or more limbs (for example, two arms,
two legs, or one leg and one arm) while sitting, standing, or lying down. It does not involve
performing the activities while the whole body is in motion.

24. 5.3.2.2. Personal Management of Labour
 This human management area is concerned with the face-to-face contact and management of small
work groups.
 It is here called the personal management of labor because the relevant field managers and
supervisors should know the individual members of the work group by name, skill level, and
reliability and should strive to develop a close rapport with the group as a whole.
At the construction crew level this labor management area is concerned with the performance of all
construction work, the attainment of acceptable productivity levels and work quality, and the development
of harmonious work relations between the crew members and field supervisors.
The critical areas requiring constant attention are the allocation of work assignments among the individual
crew members that best matches their skills and level of performance, the development of efficient work
patterns, and the consequent proper sizing of crews.
The best productivity ratio in 2009 was observed with contractors deploying one foreman to maximum of
60 labors. Any lack of skilled workers lead to project delay and cost increases. Any misconception in terms
of ratio foreman skilled/ unskilled workers leads to extreme downscaling of productivity.
In Europe the ratio would be 1 foreman to 5 skilled and 3 semi-skilled workers. The ratio for head foremen
are three foremen with their group to one head foreman. In terms of engineering staff on site level, the ratio
in Germany is traditionally one Engineer to 4 head foremen maximum.
5.3.2.3. Impersonal Management of Labour
 This human management area is concerned with the decision processes and management effort
associated with the planning, scheduling, enumerating, and performance monitoring of large groups of
personnel at the field work force, design group, and project management team levels.
 It can be considered as an impersonal management effort insofar as the individual identities of members
are lost, and to the extent that group totals and overall performance indicators are considered in
decision processes.
 At the field work force level, management concern is directed to
 Determining the labor content of a project
 Enumerating and scheduling the number of construction crews that will work the in project, and
 Establishing desirable or attainable project manpower profiles
 Monitoring, recording and general overall management of the total work force as a whole.
5.3.2.4. Industrial Relations
This human management area is concerned with the contractual and jurisdictional aspects of dealing with
trades and organized labor groups, the availability of skilled labor, and the terms under which individuals
are hired, paid, and worked.
In the majority of construction projects industrial relations guidelines are negotiated and/or established
before construction work begins. These guidelines thus become constraints under which all other human
management areas operate.
Summary
Good human relations skills in construction management are the key to personal and project success. The
CM must develop a persona that will foster an image of an ethical, mature, competent, levelheaded
professional. CMs are responsible for the key areas of client, project, labor, and public relations. They must
be effective, introspective leaders and role models for everyone on the project as well as their peers.
6. Construction site establishment& Construction Layout Planning
6.1. Construction site establishment
Site establishment is an essential component of pre-tender planning, pre-contract planning and start on site
is. An efficient and effective site establishment provides the foundation for a successful project by
configuring, structuring and organizing those temporary facilities needed to support the works on site.
While small construction works might require little temporary site establishment, larger projects may
require extensive site infrastructure.
According to (Griffith & Paul, 2004)Site establishment may be usefully considered under four main
headings, or groups of components:
(1) Preliminaries (2) Site organization (3) Site layout (4)Welfare provision

25. 1. Preliminaries
The preliminaries section of the tender documents fulfils a number of important functions. At a holistic
level, the preliminaries section provides a management overview of the project, including a description of
the project and the site, and details of the conditions of contract to be used. The preliminaries will also
include a considerable amount of more detailed information about specific issues. Information covered in
the preliminaries section normally includes:
The Field Procedure Manual and Contents
The heart of the operating procedures for any construction project is the FPM. The CM has the prime duty
of seeing that the FPM is produced on time and that it works effectively for the life of the project.
The introduction
The introduction should contain a statement of purpose for the project. What is the owner hoping to
accomplish with the project? What needs is the project going to fill in the community, industry, or market?
The people involved with the work need to know what the owner's goals are. Also, it is always well to
include a statement to the effect that the FPM does not replace the contract and that any conflict between it
and the contract will be resolved by the contract.
The project description
A project description gives the location of the project, a site description, an overview of any processes
involved, and any other outstanding features of the project. An outline of the scope of work and the
services offered is important to the general knowledge of the team members. It can then be neatly tied into
the project objectives, which form the basis for the project MBO program. All the goal-oriented groups
involved on the project should be covered in this section, including any project-team performance
incentives. Any work by others involved on the project, including major subcontractors or licensors, along
with their contributions to the project, should be mentioned here.
Services offered is important to the general knowledge of the team members. It can then be neatly tied into
the project objectives, which form the basis for the project MBO program. All the goal-oriented groups
involved on the project should be covered in this section, including any project-team performance
incentives. Any work by others involved on the project, including major subcontractor’s licensors, along
with their contributions to the project, should be mentioned here.
Contractual matters
Since the contract is a quasi-confidential document, the key areas affecting project performance should be
included in this section. The people who are working on the project but who will not have access to the
contract need to know how the contract can affect their work. For example, it makes a difference to the
project team's performance whether the contract is on a lump-sum or a reimbursable basis.
Any requirements for project secrecy or confidentiality must be addressed in the FPM. All members of the
team need to conform to the regulations for security and secrecy agreements, including the handling of
confidential documents and equipment.
Project organization
This is where we cover the project organization charts, work descriptions, and any information pertaining
to organizations involved with the project. If there are any special organizational interfaces, they should be
described in this section. For example, the design-construction interface should be covered here. You may
also want to include the key project personnel job descriptions here.
Project personnel policies
This section covers the project labor policy and the handling of the related personnel policies for the
project's craft and supervisory people.
The hiring practices can go into such highly sensitive subjects as pre hiring and on-the-job drug testing and
substance abuse, all of which are key to having a safe project.
Project coordination
The main part of the project coordination section covers the communication procedures for the project. The
key names and addresses and the correspondence logs are set up to expedite the handling of project
communications. Logging the huge volume of letters, memos, transmittals, and minutes of meetings
generated during the project expedites the location of vital correspondence when needed later.

26. Minutes of meetings and confirmations of project information that has been transmitted verbally are critical
to maintaining control over the project scope and design. Often such oral communications result in project
scope changes that can have significant effects on the budget.
The document distribution schedule, which sets up who gets copies of correspondence, drawings,
specifications, and so on, plays a key role in controlling the project. It establishes the budget for the project
reproduction costs, which can be substantial on most jobs. Constant
Vigilance on the part of the CM is necessary to keep that perennially self-expanding cost item under
control.
Document approval procedures are the key to controlling project progress. They should be set up with
reasonable but fixed time limits for the approval process. If approval has not been forthcoming by the time
the limits have expired, the work should be allowed to proceed without it. Because clients or their agents
do most of the approving, they are the ones who need to agree to such an arrangement.
Having a standard project filing system is a big help in organizing the work in the field office. Having a
standard project filing system throughout the company makes for easier access to project information by
key team members as they move from project to project. It’s relatively simple item that pays big dividends
when it comes to meeting the firm's financial goals.
Planning and scheduling
Planning and scheduling comprises a key area that has to be decided on early in the construction project.
Quite a bit of generalizing has probably gone into it up to this point. Now is the time to crystallize all the
prior thinking about scheduling and to set down the detailed Procedures to be followed for scheduling the
construction of this project.
Agreement with the client also is critical in this area. Pay particular attention to the item of establishing an
earned-value system for reporting project completion in the status reports. A simple cost-effective
approach is essential to success in this area.
Project procurement procedures
Procurement procedures section lays out the work plan for the procurement and delivery of the physical
resources for the project. We are speaking of a procedure to control about 30 to 40 percent of the total
project budget, so this area deserves a good deal of management attention. The starting point is an
approved vendors list, an often overlooked item. If inquiries are sent to ill-chosen vendors, the whole
procurement chain will suffer.
As I will state several times in this book, do not for any reason slight the procurement effort on your
project, because it plays such an important part in attaining your project goals! I have seen too many CMs
mistakenly consider procurement a quasi-clerical function unworthy of their valuable time.
Field warehousing procedures
This section covers that portion of the materials management master plan that begins when the materials
start to arrive in the field. It needs to cover the physical storage facilities and the procedures for controlling
the materials passing through them. The cost of the materials
Passing though the field warehouse is a large part of the project budget, so it can really affect the project
costs.
Heavy construction equipment and small tools
This is a key section on those projects with a major input of heavy construction equipment and machinery.
Heavy-equipment costs are continuous as long as the equipment is on the job, so its management is crucial
to good cost control. The timely availability of the machinery is also critical to meeting the project
schedule.
Project estimating
Estimating is the foundation of the project financial plan, so it must be well conceived if the money on the
project is to be controlled. Many owners do not like to spend money on cost estimating because it adds
nothing visible to the finished product. That makes the selection of sound estimating procedures even more
critical when it comes to meeting a tight budget. You will have to be creative in developing this section of
the procedures to get the best handle on the project cost within the limited estimating funds available.
Project control and reporting

27. Project control and reporting is generally the largest section in the FPM, because there is a lot of ground to
cover. It is also a pivotal section, because failure here can cause loss of project control, which is sure to
result in unmet project expectations. We will be covering most of those subjects in more detail in the next
chapter, so I will not dwell on them here. The CM plays a key role in all the activities listed, but he or she
can also delegate a great deal of the work to project team specialists.
In that case, however, the CM becomes the editor of the material generated by the specialists. It is
important to read and check the procedures for content, writing style, conflicts, and project goal criteria
before releasing them for publication. It will be your first chance to evaluate the ability of your key project
staff leaders to communicate!
Particularly important items in the section are the cost-control procedures, the project budget, project
reporting, and project accounting. Ata minimum, they will appear in the FPM for most projects.
Site safety and security
This section spells out the safety program and procedures to be followed for the specific project. It starts
with a statement of the owner’s policies and then lays out a program to meet those needs. The viability of
the safety and security programs starts with good input to this section of the FPM.
Field engineering procedures
These procedures define the operations to be followed by the field engineering group, which plays such a
key role in quality control. It also plays a key role in managing the design-construction interface and
change-order procedures, which are very project-cost-related factors.
Change-order procedure
The change-order procedure could be included in the FPM controls section, but some people consider it
important enough to give it a section by itself. Change orders are the bane of a project's existence. No one
connected with the project likes to talk about them, and some project participants even refuse to believe
they exist. Like most other problems, however, change orders cannot be swept under the rug, and they do
have to be disposed of before the project closeout. Even in are relatively painless cost-reimbursable
contracting environment, change orders must be recorded to keep the project budget current and to
calculate the fee.
The legal language for changes in scope used in the contract is usually clear enough and does admit the
existence of change orders. That language is a good starting point for writing a detailed procedure for
handling changes. Perhaps the key clause to use here is the one that states: "No work will be started on the
change until the parties agree on the scope, schedule, and cost of the additional work." Since changes
happen after the job starts, they usually have a considerable impact on schedules. The above clause gives
the CM some leverage in forcing a decision on acceptance or cancellation of the proposed change because
it is holding up the project schedule.
In actual practice, however, the revised work often does proceed in order to avoid delaying the schedule.
When contractors proceed with unapproved change orders, they are placing themselves at financial risk. I
will expand on the processing of change orders in later chapters.
Computer services
The growth of computers in construction work has led us to make computer services a separate section. For
small projects, it could fit in the project-controls section. For larger projects, it usually rates a section of its
own. In any event, money is involved, so give computer services plenty of thought before deciding on the
scope that the project will bear.
Design procedures
The design procedures section plays an important part in any FPM involving design work done in the field.
The first part of this section covers such mundane matters as drawing formats and numbering systems.
However, when they are not properly thought out to suit the particular type of work being done, the
problems will nag you throughout the entire project. That is enough reason for the CM to give them proper
attention.
Selecting the applicable project design standards and codes involves legal matters and money, so it must
concern the CM. The design firm and the owner are legally bound to meet the minimum code requirements
of the area in which the work will be done. If codes and standards are improperly selected or applied,
expensive rework can result-with disastrous consequences to project performance.

28. Quality-control procedures are established in the FPM for all to read and subscribe to for the duration of
the project. The company’s reputation is riding on this one, so the procedures must be both results-oriented
and cost-effective. This section of the FPM, like most sections, must constantly be monitored for
performance.
The ground rules for the critical interface between design and procurement must be covered in this section.
Work in that area involves technical bid evaluations and approval of vendor drawings, both of which are
critical to equipment and material delivery and therefore to project schedule!
Project relations among design, procurement, and construction personnel sometimes get edgy because of
turf disagreements over supplier contacts. Many members of the project team need to have contact with
subcontractors and vendors, so some diplomacy on the part of the project and construction managers is
required if the groups are to keep working effectively toward project goals. Design and field engineers
should stick to the technical aspects of the buying activities and leave the commercial aspects to
procurement.
If there are going to be any engineering subcontracts, the coordination between the prime and subcontract
groups must be worked out here. Don't assume that it will take care of itself, because it won't!
Here it is best to assume the worst that can happen and to try to develop procedures for minimizing any
potential hassles before they happen. The method for setting up and monitoring the design document
schedule and the control system falls into this area. If the method is standard within your organization, just
make sure that it will work on your particular project. Sometimes it will require modification if it is to meet
your project's special needs.
Issuing the FPM
A key factor to remember in issuing your field procedures is to get them published as early in the project as
possible. An issue date more than four or six weeks after project kickoff is too late. Issuing the FPM with
"holds" to be cleared up in later issues as the information is finalized is quite normal, so don't be made late
by trying to perfect the first issue.
Early issue of the FPM is an excellent project personnel indoctrination tool: it gets the new team members
up to speed in a hurry.
It's essential that they learn the "who, what, when, where, how, and why" of the project without any false
starts. This is especially true when a particular group of people may not have worked together as a team
before.
Interoffice Coordination Procedures
I am including a section for interoffice office procedures, because at some time you may be involved with a
construction project that is being run on a split-office or site basis. We have already noted the potential for
an increase in problems when a split basis is being used.
An example of that situation occurs when modular units are being used to build the job. The only way to
minimize those problems is to put in place a good coordination procedure to organize and harmonize the
work at both sites.
A good starting point for the interoffice procedure is to use the FPM and tailor it to suit the interoffice
operations. The satellite office has to perform the same functions as the prime office, so the systems should
be made compatible at the outset. In areas in which the same systems will not fit for some special reason, a
workable adaptation must be made. The differences must be minimized to the highest degree possible, in
order to maximize the opportunities for meeting the project goals.
A typical case for an interoffice procedure occurs when a third party constructor has a contract directly
with the owner. When the design firm has a commitment through the construction stage, a detailed
coordination procedure is needed. The division of work for handling material deliveries, design
modifications, drawing interpretation, responsibility for start-up, and so on, must be resolved early in the
project.
Site Organization
The form of site organization adopted for any construction project is determined by many factors, ranging
from the constitution of the principal contracting organization to the individual characteristics of the
particular contract. It is absolutely essential that project sites should adopt commonly accepted principles
of good organization and construction management practice

29. 6.2.Construction Site lay out planning
Most construction sites that run into trouble do so for reasons related to managerial factors rather than
because of technical problems. The site-based management can make significant improvements in the cost
and time savings during the construction process without involving a mass of additional work. The role of
site managers is to control and maintain work performance and then taking actions to rectify situations
where performance is unsatisfactory.
Site management, in general, involves many tasks, such as site investigation before construction
process starts, material delivery and procurement management, keeping better site records, keeping good
site communication and high level of information flow, monitoring performance regularly, establishing a
well co-ordination system among different parts, and performing a good site layout planning.
Among the important tasks of site management is the site layout planning. Extensive time loss and
cost overruns could result in large projects, where the number of manpower, subcontractors, and equipment
involved are high, if there is no effective and systematic approach to site planning. A detailed planning of
the site layout and location of temporary facilities can enable the management to make considerable
improvement by minimizing travel time, waiting time, and increasing worker morale by showing better and
safer work environment. Due to its importance, this research focuses on the site layout planning problem.
Construction site layout involves identifying, sizing, and placing temporary facilities (TFs) within the
boundaries of construction site. These temporary facilities range from simple lay down areas to
warehouses, fabrication shops, maintenance shops, batch plant, and residence facilities. Required
temporary facilities and their areas are depending in many factors including project type, scale, design,
location, and organization of construction work.
Site planning in particular, has been the most neglected aspect in the construction industry and the
attitude of the engineers has been that it will be done as the project progress. It is important to realize that
the site planning will be the conditions that site personnel will live with for the total duration of the
construction period. Thus the careful pre-planning is imperative. Also, since the labor cost on a large
project constitute approximately 50 to 60 percent of the total project cost, significant saving can be
occurred if the labor force moved freely and quickly within the site. In 1987, the Construction Industry
Institute reported in its “Constructability Concepts File” that temporary facilities are important elements
that can either enhance or adversely affect construction productivity.
Layout planning, in general, can be viewed as a complex optimization problem that has many
engineering applications ranging from the layout of manufacturing plants to the layout of computer chips
on a board. Since the early 1960's, the problem has been extensively analyzed in the Industrial Engineering
and Operational Research communities. However, it has not been satisfactory analyzed in the construction
domain.
There are two general objectives which planners should seek to meet through careful organization of
the site for construction. First, the site must be designed to maximize efficiency of operations in order to
promote worker productivity, to shorten project time and to reduce cost. Second, the final plan must create
a project with a good work environment in order to attract and retain the best personnel and thus contribute
to better work quality and productivity.
The problem of site layout planning has been solved by researchers using two distinctly techniques:
optimization and heuristics. Mathematical optimization procedures have been designed to produce the
optimum solutions. The heuristic methods, on the other hand, used to produce good but not optimal
solutions. However, the first category cannot be adopted for large projects, and the second category is the
only available mean for solving the complex real life projects.
6.2.1. The Problem
Failure to plan the site layout in advance is a prime cause of operational inefficiency, and can increase the
overall cost of a project substantially. In the absence of a precise site layout plan, the following problems
may occur:
a. Material stacks wrongly located. Materials arriving on site are off-loaded into what someone guesses
to be the correct location. This problem may involve double or triple handling of materials to another
location. For example:
- They may stocked over a drainage line or near the edge of excavation;

30. - They are too far from the work area;
- They are too remote from the hoist or not within the radius of the crane;
- They impede the smooth flow of work traffic across the site;
- Their delivery was wrongly phased and they are not needed until much later in the project;
- They are fragile.
b. Plant and equipment wrongly located. For example:
- The mixer is inaccessible for the delivery of materials; not enough room for the storage of
aggregates;
- Fixed cranes are unable to reach all parts of the works;
- Hoists have insufficient capacity or height to handle the loads or badly located in relation to the
floor layout;
c. Inadequate space allowed. Where inadequate space is allowed for the stacking of materials or
activities:
- Materials may be stacked to high or stacked on roadways causing hazards.
- Working areas may become too cramped or additional areas may have o be allocated with the
consequent waste of time caused by having to travel between them.
d. Site huts wrongly located in relation to their effective use, such as:
- Site office located too near noisy activities such as mixer, or located too near to site roads in
dusty conditions, or too remote with insufficient overview of the site.
- Warehouses having inadequate access for loading and unloading or located in insecure area.
Therefore, before moving on to a site, it is necessary to prepare a detailed site plan, showing the
positions to be taken by every item of equipment, accommodation, ancillary work areas and materials
storage areas.
6.2.2. Present Practice
In construction, field practitioners manually mark up a single site drawing to include major temporary
facilities needed on site throughout the duration of the project. They depend on knowledge of years of
experience, common sense, and adoption of past layouts in determining positions of temporary facilities on
site. But, they cannot keep track of all factors that could affect the selection, location, and interactions of
all facilities to be positioned.
In fact, site layout planning is one of the preplanning tasks to be accomplished in a construction
project. This task has an interactive relationship with the other planning tasks such as scheduling, selection
of construction method, procurement and material planning, manpower and equipment planning, and
financial planning. So, it becomes a task as important as other tasks that project managers have to
accomplish.
6.2.3. Site Layout Planning Elements
A well planned site including all temporary facilities and utilities lead to: 1) increasing productivity and
safety, 2) reducing area(s) needed for temporary construction, and 3) maximizing utilization. The following
points should be considered in good site layout.
1. Safety
- Fire prevention: Fire is a major cause of damage on construction sites. So that, fire extinguishers are
basic requirements on a construction project.
- Medical services: On construction project a first aid kit is a must. In remote projects a well-equipped
medical room with a doctor and nurse is important.
- Construction safety clothing: Basic safety supplies like safety shoes, hard hats, gloves, and goggles
must be used by workers.
2. Site Accessibility
Easy accessibility will keep the morale of the equipment and vehicle drivers high, minimize the chance
of accidents, and save time in maneuvering to arrive at and leave the project. In case of large projects,
proper planning is required to layout the roads leading from the nearest highway.
Internal roads are necessary for easy flow of work. Also, Parking Lots are provided for the owner,
office, and craft personnel, but this facility must be planned where space does exist.
3. Information Signs