List of Acronyms

Acronym Description

AOA Acrivitv Oil Arro«:

AO Act ivirv ()Il ~ode
ACWP ;\ct\l.l\ ( 'OS\ of" \ Vork Perti JrI11l:d
BCWS BlIdg.ctnl CO\( ,,(\\'ork
Scheduled
BCWP Bud!!cted Cmt of"\\'()rk
I'crl: JrIl1ed
CCI'M Critical Ch.iin l'rojed
l\bll;l~e me nt
CM (:()Ibt run ion ,\ 1.111,1g.er
CPM Critic,l\ 1',1\11,\!t:t1lOd
CSI C onxtru cri () Il S pcci tl c ,H1()11
Institute (,\L1sterForlll,Hi
E~ Larly-l-inivh Time
ES Farh",St.lrt Time
EV l<lI"I1Cd \',lluc Technique
FF Free HO,H Time
GC (;l'IICLd ('()Iltrxt()r
GMP (;lI,lLlIllecd ,\Lnimlllll Price (:()IltL1Cl
L"f I "lIC" linixl: Time
LOB I.inc ot' B,lLlIlce .\h't1lOd
LS Lu c-St.ut Timc
OBS ()rg.,llli/.lli()1l Brc.ikclown
Srruct IIJ"C
PC Prime Coutr.uror
PCM Prokssioll;ll (:UI1Slruct i( )11

"L1I1;1~cmcnt (:0111 r.icr

PDM Precedence Di.1g.Lll11 .\1cthod

PERT l'rog.r,llll Ev.ilu.uion and Review Tcc hniquc

TF TOL1\ Ho;lt Time
WBS \\'ork Brc.ikdown Strlldurc
Library of Congress Cataloging-in-Publication Data
Hegazy, Tarek.
Computer-based construction project management / Tarek Hegazy.
p.cm.
Includes bibliographical references and index.
ISBN 0-13-088859-1
1. Building-Superintendence--Data processing. I. Title.

TH438.H42 2002
690'.068-dc21
2001021379

Editor in Chief: Stephen Helba

Executive Editor: Ed Francis
Production Editor: Christine M. Buckendahl
Production Coordination: Carlisle Publishers Services
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Cover Designer: Diane Ernsberger
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Marketing Manager: [arnie Van Voorhis
This book was set in Palatino by Carlisle Communications, Ltd., and was printed and
bound by Courier Kendallville, Inc. The cover was printed by Phoenix Calor Corp.

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Copyright © 2002 by Pearson Education, Inc., Upper Saddle River, New Jersey 07458.
All rights reserved. Printed in the United States of America. This publication is pro-
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Hall ISBN: 0-13-088859-1
Preface

This book is first about improving the efficiency in managing construction projects
through the use of computers. Second, it is about coping with increasing challenges
of tight budgets, strict deadlines, and limited resources of construction projects.
Third, it is about the modeling and utilization of construction information to support
construction operations. With computer use so prevalent at the university and in-
dustry levels, this book focuses on the efficient use of computers in project manage-
ment, as an important domain in which information technology can achieve substan-
tial benefits.
The book introduces the basic quantitative methods for construction project man-
agement with hands-on computer application. Users will develop skills to analyze
projects and use computers to optimize resource use and meet various project chal-
lenges during their planning and control. A variety of computer applications (spread-
sheet templates, commercial software, and custom applications) are incorporated into
the CD that comes with this book. These computer applications are not only for
demonstration purposes but also for actual use in real-life project management.
In this book, computer-aided construction project management is described in a
collective and practical manner that is not a software vendor's point of view. It in-
cludes topics such as construction contracts, integrated estimating and scheduling,
resource management, bidding strategies, cash flow analysis, and project control.
Whereas the book deals with the basics of these topics, the handling of these topics is
current and reflects on recent research and developments in these areas. Early chap-
ters (2, 3, and 4) use simple spreadsheets, and the reader is given detailed steps on
how these spreadsheets are implemented and how they fit within a firm's informa-
tion management system. Starting from Chapter 5, the reader will be using Microsoft
Project and Primavera P3 software systems, powerful commercial programs for proj-
ect management. Some chapters will also utilize custom applications and macro pro-
grams in Microsoft Project. The reader, however, will not be exposed to the complex
code but to the relevant mathematical basics and the details of using the program. The
last chapter also discusses advanced topics such as the application of artificial intelli-
gence and the Internet in construction.

Main Features:
• Comprehensive coverage of quantitative construction management techniques
for planning, estimating, scheduling, project crashing, cost optimization, cash
flow analysis, bidding, and project control;
• All underlying concepts are presented both manually and on computer applica-
tions;
• A unified case study is used, and its development evolves with the concepts cov-
ered in the successive chapters;

ill
iv I PREFACE

• Another complete case study is included in Appendix B to present all concepts to-
gether in one place;
• The latest versions of industry-standard software for project management (Mi-
crosoft Project and Prima vera P3) are covered in the book;
• Various tips and tricks are included to fully utilize the simple and powerful fea-
tures of Excel and project management software to organize project information
and efficiently manage construction;
• A simple step-by-step process to optimize project cost under time, resource, and
cash flow constraints is explained and demonstrated in case studies;
• A fully working Excel template is included on the CD with a comprehensive
model for estimating, scheduling, cash flow analysis, bid unbalancing, cost opti-
mization, and project control, with automated links to Microsoft Project. This tem-
plate is ready for use in your next project;
• Comprehensive coverage of resource management topics with various Microsoft
Project templates for repetitive construction, multiskilled resources, and resource
optimiza tion;
• Newly emerging concepts such as Critical Chain Project Management are covered;
• A class game is included in Chapter 12 to demonstrate the impact of uncertainty;
• Many manual and computer-based exercises are included after each chapter to
supplement the students' educational experience. Also, case study exercise proj-
ects in Appendix C can be used for student group projects;
• All Excel and Microsoft Project files that relate to the various chapters are in-
cluded on the CD;
• A working version of Evolver (a commercial Genetic Algorithm software) is in-
cluded on the CD and is used for cost optimization;
• A fully working version of ProBID software for competitive bidding is included
on the CD; and
• Appendix A lists Web resources that supplement the material in various chapters.
Although this book is intended mainly for a senior undergraduate course in con-
struction project management, the material also can be used for a course at the grad-
uate level and for specialized workshops for trade engineers. The book assumes
familiarity with basic computer operation and the use of word processing and spread-
sheets in the Microsoft Windows environment.
Thanks to the reviewers of this book for their helpful comments and suggestions:
David Bilbo,Texas A&M University; Burl George, Bradley University; Madan Mehta,
University of Texas, Arlington; and John Schaufelberger, University of Washington.

Tarek Hegazy, Ph.D., PEng.

University of Waterloo
Contents

Chapter I Construction Project Initiation 1

1.1 Introduction I
1.2 Construction: A Magnificent Creativity
1.3 Need for Scientific Project Management in Construction 4
1.4 Construction Project Participants 5
1.5 Types of Construction 7
1.6 Life Cycle Stages of Projects 8
1.7 Project Contract Strategy 9
1.7.1 Project Objectives and Constraints 10
1.7.2 Project Delivery Methods 11
1.7.3 Design/Constru.ction Interaction 14
1.7.4 Construction Contract Form/Type 15
1.7.5 Project Administration Practices 17
1.8 Emerging Trends 23
1.9 Where Do We Go From Here? 25
1.10 Bibliography 26
l.l1 Exercises 27

Chapter 2 Information Management Tools 29

2.1 Introduction 30
2.2 Excel Data Management Tools 30
2.2.1 Sorting Lists 31
2.2.2 Filtering Lists 33
2.2.3 Using Data Forms 36
2.3 Useful Excel Functions for Retrieving List Information 37
2.3.1 Statistical List Functions 38
2.3.2 Looking up Data 39
2.4 Excel Reporting features: Pivot Tables 42
2.4.1 Using the Pivot Table Wizard to Create a Report 44
2.4.2 Using the Pivot Table Toolbar 47
2.4.3 Cust01nizing a Data Field 47

v
vi I CONTENTS

2.5 Excel Optimization Tools 48

2.5.1 Goal-Seek 48
2.5.2 Excel Solver for Mathematical Optimization 49
2.5.3 Nontraditional Optimization Tool 50
2.6 Project Management Software 52
2.6.1 Microsoft Project Software 53
2.6.2 Primavera P3 Software 57
2.7 Summary 58
2.8 Bibliography 59
2.9 Exercises 59

Chapter 3 Planning: Part 1 - Network Diagrams 63

3.1 Introduction 63
3.2 Planning: A Challenge 64
3.3 Planning Steps 65
3.3.1 Step 1. Project Breakdown 66
3.3.2 Step 2: IdentifYing Logical Relationships Among Activities 69
3.3.3 Step 3: Drawing the Project NetJJ70rk 71
3.4 Case Study Project 78
3.4.1 Project Description 79
3.4.2 Planning 79
3.5 Summary 82
3.6 Bibliography 82
3.7 Exercises 83

Chapter 4 Planning: Part 2 - Time and Cost Estimation 87

4.1 Introduction 88
4.2 Construction Estimating: Types and Challenges 88
4.3 Cost Components 90
4.3.1 Direct Costs(70 to 90% of total cost) 91
4.3.2 Indirect Costs 91
4.3.3 Mark up (0 to 20% of total cost) 91
4.4 Detailed Estimating 92
4.4.1 Direct Cost 93
4.4.2 Using Published Cost Data 97
4.4.3 Indirect Cost 99
4.4.4 Finalizing a Bid Proposal 102
4.5 Commercial Estimating Software 103
4.6 Back to Our Case Study Project l03
4.6.1 A Spreadsheet-Based System 104
4.7 Summary III
4.8 Bibliography III
4.9 Exercises 112
 CONTENTS I vii

Chapter 5 Critical-PathAnalysis for Network Scheduling 115

5.1 Scheduling Objectives 116
5.2 Network Scheduling 116
5.2.1 Critical Path Method (CPM) 117
5.2.2 PrecedenceDiagram Method (PDM) 120
5.2.3 Schedule Presentation 122
5.3 Manually Solved Examples 124
5.4 Criticisms to Network Techniques 126
5.5 Scheduling With Microsoft Project Software 127
5.6 Scheduling With P3 Software 133
5.7 Back to Our Case Study Project 134
5.7.1 Manual Solution 134
5.7.2 Critical Path Model on a Spreadsheet 136
5.7.3 Tying the Estimate to the Schedule 139
5.8 Advanced Topics 140
5.9 Summary 141
5.10 Bibliography 141
5.11 Exercises 141

Chapter 6 Scheduling of Linear and Repetitive Projects 143

6.1 Introduction 144
6.2 Linear Projects 144
6.3 Resource-Driven Scheduling: How Is It Different 144
6.4 Basic LOB Representation 144
6.5 CPM-LOB Calculations 146
6.5.1 Crew Synchronization 146
6.5.2 Meeting a Deadline Duration 148
6.5.3 Calculating Resource Needs 148
6.5.4 Drawing the LOB Schedule by Hand 150
6.6 Back to Our Case Study Project 151
6.6.1 Detailed Calculation Procedure 151
6.6.2 Schedule Modifications 155
6.6.3 The BAL Program 156
6.7 Summary 162
6.8 Bibliography 162
6.9 Exercises 163

Chapter 7 Resource Management: Part 1 -

Resource Allocation and Leveling 165
7.1 Resource Management Objectives 166
7.2 Smoothing Resource Profiles (Resource Leveling) 167
7.2.1 Manual Heuristic Solution: Method of Moments 168
7.2.2 Modified Heuristics: Double Moments 169
viii I CONTENTS

7.3 Scheduling with Limited Resources (Resource Allocation) 170

7.3.1 Manual Heuristic Solution for our Case Study 171
7.3.2 Another Example 175
7.4 Using Microsoft Project 177
7.5 Using Primavera P3 181
7.6 Improving Resource Allocation 184
7. 6.1 Using Biased Priorities 185
7.6.2 Advanced Topic: Improving Resource Allocation Utilizing Multiskilled
Resources 190
7. 6.3 A Macro Program for Multiskill Resource Allocation 195
7.7 Optimization of Resource Allocation and Leveling on Excel 199
7.8 Back to Our Case Study Project 202
7.8.1 CPM/LOB Analysis 203
7.8.2 Dealing with Resources 203
7.8.3 What is Next 203
7.8.4 Random Improvements 205
7.8.5 Generic Algorithms Optimization 206
7.9 Advanced Topics 206
7.10 Summary 207
7.11 Bibliography 207
7.12 Exercises 207

Chapter 8 Resource Management: Part 2 - Time-Cost Tradeoff 211

8.1 Resource Management Continued 211
8.2 Project Time-Cost Relationship 212
8.3 Existing TCT Techniques 213
8.4 The Cost-Slope Method 214
8.5 Back to Our Case Study Project 214
8.5.1 Manual Cost-Slope Method 214
8.5.2 Cost-Slope Method on Excel 219
8.5.3 Genetic Algorithms Optimization 222
8.5.4 Integration ofTCT, Resource Allocation, and Resource Leveling 224
8.5.5 Solution Approach 1 225
8.5.6 Solution Approach 2 227
8.5.7 Other Experiments 228
8.6 Another Solved Example 228
8.6.1 Cost-Slope Method 230
8.6.2 Genetic Algorithms Optimization 231
8.7 Summary 232
8.8 Bibligraphy 232
8.9 Exercises 233
 CONTENTS I ix

Chapter 9 Bidding Strategy and Markup Estimation 237

9.1 Accounting for Project Risks 237
9.2 Analyzing the Bidding Behavior of Key Competitors 238
9.3 Estimating Optimum Markup 240
9.3.1 What to Optimize? 240
9.3.2 Beating All Competitors Simultaneously 241
9.4 The Optimum-Markup Estimation Process 242
9.4.1 Important Bidding Relationships 245
9.5 Bidding Strategy Program on Excel 246
9.6 Incorporating Qualitative Factors 248
9.7 Back to Our Case Study Project 253
9.8 Summary 253
9.9 Bibliography 253
9.10 Exercises 254

Chapter 10 Project Financing and Schedule Integration 257

10.1 Introduction 258
10.2 Project Cash Flow 258
10.3 Project Financing Options 260
10.4 Calculating the S-Curve 261
10.5 Overdraft Calculations and Interest Charges 263
10.5.1 Financing Scenario 1 263
10.5.2 Financing Scenario 2 268
10.6 Using Microsoft Project 272
10.7 Using Primavera P3 275
10.8 Back to Our Case Study Project 277
10.8.1 Cash Flow Optimization 278
10.8.2 Using the Excel Template on Other Projects 281
10.8.3 Summary of Schedule Optimization Experiments 283
10.8.4 Finalizing Our Bid Proposal 284
10.9 Summary 285
10.10 Bibliography 286
10.11 Exercises 286

Chapter 11 Construction Progress Control 289

11.1 Preparing for the Big Challenge: Construction 290
11.1.1 Problemsduring Construction 290
11.1.2 Objectivesof Project Control 290
11.2 Measuring Work Progress 291
11.2.1 Calculating Activities) Percent Complete 291
11.2.2 Calculating the Project's Percent Complete 292
11.3 Cost and Schedule Control 295
11.3.1 SrCurve Method 295
x I CONTENTS

11.3.2 Double S-Curve Method 296

11.3.3 The Earned Value Technique 297
11.4 Forecasting 298
11.5 Schedule Updating 299
11.5.1 Evaluation of Work Changes and Delays 300
11.6 Back to Our Case Study Project 304
11.6.1 Using the Excel System 305
11.6.2 Using Microsoft Project 308
11.7 Critical Chain Project Management: A New Concept 311
11.7.1 ProblemsAddressed by the Critical Chain Concept 311
11.7.2 The Critical Chain Method 312
11.7.3 The Best ofCPM and CCPM 314
11.8 Golden Rules for SuccessfulConstruction 315
11.9 Summary 315
11.10 Bibliography 316
11.11 Exercises 316

Chapter 12 SpecialTopics 321

12.1 Effect of Uncertainty: A Classroom Game 321
12.1.1 The Game 323
12.2 The PERT Approach for Project RiskAssessment 324
12.2.1 Step-by-StepAnalysis 325
12.2.2 Criticisms to PERT Technique 327
12.3 Monte Carlo Simulation for Project Risk Assessment 327
12.3.1 Step-by-StepAnalysis 328
12.4 Advanced Tools, Techniques, and Applications 329
12.4.1 Enterprise Project Management: A New Wave 329
12.4.2 Simulation 330
12.4.3 Artificial Intelligence Techniques 332
12.4.4 The Internet 335
12.4.5 Advanced Applications 336
12.5 Summary 337
12.6 Bibliography 337
12.7 Exercises 337

APPENDIX A Web Resources 339

APPENDIXB New Case Study 345
APPENDIXC Exercise Projects 369
APPENDIXD Probability Table for Standard Normal Distribution 387
APPENDIXE Detailed MasterFormat List 389
Index 393
 CONSTRUCTION
PROJECT INITIATION

In this chapter, you will be introduced to:

• The unique characteristics and challenges of the construction industry.

• The life-cycle phases of projects.
• The various decisions involved in initiating a project: project delivery methods,
contract types, and contractual relations among project participants.
• The competitive bidding process for project acquisition.
• Recent trends in contract strategies.

1.1 Introduction
A construction project is defined as a planned undertaking to construct a facility or
group of facilities. The principal participants in construction projects are the owner,
the architect/ engineer, the consultant, the general contractor, and the subcontractors.
Usually, there are many ways in which some or all of the participants join their efforts
in a project. A suitable arrangement of these participants depends on the nature of the
project, the size and strength of each participant, and the project objectives and con-
straints. It is important, therefore, to understand the environment in which a con-
struction project is initiated so as to clearly define the roles and responsibilities of the
various participants and to bring the project to fruition and success with respect to all
of them. This chapter provides the background material regarding the organizational
aspects of selecting the project participants, the contract type, and the project deliv-
ery approach that suit the environment of a project under consideration.

1.2 Construction: A Magnificent Creativity

Since the beginning of time, humans have been fascinated by large-scale objects in na-
ture such as mountains, landscape, and the endless oceans. As humans grew more so-
phisticated over the years, some groups began to build large-size monuments of their

1
2 CHAPTER 1

own to glorify their civilization. The great pyramids of Giza are early examples of
these monuments. Undoubtedly, the effort spent on building such huge monuments
is a witness to the human ability to make creative and challenging construction. The
impact of such large structures on human development has been tremendous on all
fronts, including social, economic, and cultural.
In recent history, the human fascination with developing large-scale structures re-
mains unchanged. The twentieth century was marked by its far leap in terms of tech-
nology, materials, and human sophistication. No wonder it is the greatest century in
which humans have developed so many structures of unique scale and creativity that
impacted the lives of almost all humans. The century also witnessed a rapid pace of
developments in science and technology made by so many people in different places
on our planet that it is seemingly becoming a single village. Despite some of the draw-
backs of the rapid industrial developments on the environment and on the personal
lives of humans, the achievements made in this century are remarkable. No doubt one
of the major achievements that made everything else possible is the development of
the existing huge infrastructure. This includes the highways we travel on, the build-
ings and factories in which we live and conduct our business, and the facilities that
deliver all utilities easily to our reach.
It is beneficial before we embark on a book on construction to briefly recognize
those individuals and also the landmark projects that were constructed during the
twentieth century. Worth mentioning are three particular issues of the ENR tEngi-
neering News Record) weekly construction magazine that were published during 1999,
which marked the magazine's 125th anniversary. The July 26th issue selected the no-
table 125 projects that were constructed all over the world and covered in the maga-
zine during its 125 years of service. These are:

1874 Eads Bridge 1937 Golden Gate Bridge 1973 Sydney Opera House
1875 Hoosac Tunnel 1940 Rockefeller Center 1974 Sears Tower
1883 Brooklyn Bridge 1940 Pennsylv. Turnpike 1974 Snowy Mountain Hydro
1885 Home Insur. Building 1940 MississippiDam 1975 Louisiana Superdome
1886 Lawrence Station 1941 Colorado Aqueduct 1975 CN Tower
1886 Statue of Uberty 1942 Grande Coulee Dam 1976 Quincy Market
1888 Homestead Steel 1942 Alaskan Highway 1976 Washington D.e. Metro
1889 Eiffel Tower 1943 The Pentagon 1977 Nurek Darn
1890 London Deep Tunnel 1944 Project Mulberry 1977 Trans Alaska Pipeline
1890 Firth of Forth Bridge 1944 Tennessee Dams 1980 Haj Terminal
1894 Union Station 1945 Oak Ridge Weapon 1980 Crystal Cathedral
1895 Folsom Power 1947 Levittown Housing 1980 St. Gotthard Tunnel
1900 Chicago Ship Canal 1950 Walnut Lane Bridge 1981 Statfjord B Platform
1902 Ingalls Building 1955 Disneyland 1981 Humber Bridge
1904 Trans-Siberian Rail 1957 Shippingport N.P. Plant 1982 Sasol
1904 New York Subway 1957 Mackinac Bridge 1982 Camp David AirlJases
1907 NY Corton Dam 1959 St. Lawrence Seaway 1982 Thames Barrier
1909 Spiral Tunnels 1959 Guggenheim Museum 1982 Spaceship Earth
1909 Bayway Refinery 1960 Kuwait Desalination 1985 Hyperion Treat. Plant
1913 LA Aqueduct 1960 Brasiiia 1985 James Bay Hydro
1913 Woolworth Tower 1962 Port Elizabeth Terminal 1985 Chicago Tunnel
1914 Panama Canal 1962 TWA Airport Terminal 1986 Hongkong-Shanghai
1916 Jones Island Treatment 1964 Verrazano Bridge Bank
1917 Ford Rouge Plant 1964 Japanese Bullet Trains 1986 Jubail Industrial City
1920 Lincoln Highway 1964 Kennedy Space Center 1986 Holland's Delta Project
1922 Miami District 1965 St. Louis Gateway Arch 1986 Sunshine Stillwater Dam
1925 Cleveland Airport 1965 Houston Astrodome 1987 Upper Stillwater Dam
1927 Holland Tunnel 1966 Severn Bridge 1988 Seikan Rail Tunn!~1
1928 The Cascade Tunnel 1968 Guri Dam and Plant 1988 Canberra Parliament
1931 The Empire State Bldg 1970 Aswan High Dam 1988 Love Canal Cleonup
1931 George Wash. Bridge 1970 U.S.Pavilion - Expo 70 1989 Toronto Skvdorne
1932 Magnitogorsk 1973 Eisenhower Tunnel 1989 Salt Lake City Building
1935 Hoover Dam 1973 California Water Project 1989 European Atom
1936 S.F.Bay Bridge 1973 World Trade Center Smasher
 CONSTRUCTION PROJECT INITIATION I 3

1989 Grande Arche 1995 NRDC's Building 1998 Baldpate Platform

Monument 1996 Interstate Highway 1998 Great Belt East Bridge
1991 Itaipu Dam 1996 H-3 Highway 1998 Akashi Kaikyo
1992 Georgia Dome 1996 Northumberland Strait 1998 Chek Lap Kok Airport
1993 General Plaza 1997 Guggenheim Museum 1999 Millennium Dome
1993 Natchez Trace Bridge 1997 Kuala Lumpur 1999 Tatara Bridge
1994 Channel Tunnel 1997 San Joaquin HillsCorridor 1999 URSATension-Leg
1995 Boston Harbor Cleanup 1997 Hibernia Offshore Platform
1995 Normandy Bridge Platform
1995 Denver Airport

The ENR's August 30th issue identified 125 people with the most outstanding
contributions to the construction industry during the 125 years from 1874 to 1999.
Their efforts, singularly and collectively, helped shape the world. Each pioneered in
his territory, developing new analytical tools, equipment, engineering, or architec-
tural designs. Through their companies, they also invented new means and methods
for constructing the built environment. Examples of builders are Stephen Bechtel
(1900-1989), John Dunn (1893-1964), Peter Kiewit (1900-1979), and John Fluor
(1923-1984).Examples of architects are Albert Kahn (1869-1942) and Henry Richard-
son (1838-1886). Examples of structural engineers are Gustave Eiffel (1832-1923),
Alan Davenport (1932),Karl Terzaghi (1883-1963),and Horst Berger (1928).Examples
of technology and materials innovators are Omer Blodgett (1917), Willis Carrier
(1887-1950), and Paul Teicholz (1937). Examples of educators are Robert Peurifoy
(1902-1995)and Clarkson Oglesby (1908-1992).
Worth mentioning also is the ENR's October 18th issue that listed the most im-
portant innovations that have been introduced to the construction industry during
the 125years between 1874 to 1999.These innovations are in fact solutions provided
by the industry pioneers to respond to the challenges they faced in their projects. The
results have been a glorious record of admirable and effective solutions to old prob-
lems, as well as new methods and materials for today's challenges and for the proj-
ects in the new millennium we have just embarked on. A listing of these innovations
is as follows:

Transportation Photogrammetry Concrete Pumps

High Speed Highways Computerized Project Concrete Mixers
Bridge Cantilevered Forms Management Skid-Steer Loaders
Steel Framing in Bridges Project Websites Pneumatic Tools
Pneumatic Caissons Computerized Takeoffs Power Tools
Jersey Barriers Lasers in Construction
Management III Finance Theodolites
Precast Bridge Segments
Critical Path Method Global Positioning Systems
Mechanically Reinforced
Earth Design Review by Peers Dump Trucks
Asphalt Paving Privatized Public Works
Surety Bonds Materials & Processes
Cloverleafs
Cable-Stayed Bridges Wrap-Up Insurance Engineered Wood Products
Safety Programs High-Strength Bolted
Concrete Paving
Connections
High-Speed Roil Equipment & Tools Rotary Cement Kilns
Design, Testing, & Hydraulic Excavators Reinforced Concrete
Into. Tech. Self-Erecting Tower Cranes Precast Concrete
Bulldozers Rebar
Finite Element Analysis
Safety Devices Underwater Concrete
Computer-Aided Design
Shear Walls Cordless-Tool Technology Concrete Admixtures
Mobile Lift Platforms Gypsum Wallboard
Nonlinear Analysis
Limit-State Design Material Conveyors SlurryWalls
Material Hoists Geotextiles
Performance-Based Design
Directional Drilling Machines High-Performance Metals
Wind-Tunnel Analysis
Seismic Engineering Backhoe Loaders Fiber-Reinforced POlymers
Concrete Strength Testing Automatic Paving Machines Hot-Rolled Steel
In-Place Milling Machines Cold-Formed Steel
Nondestructive Testing
4 CHAPTER 1

ARC Welding Power, Industrial, 8c Retractable Roofs

PVC Pipes Communication Space Frames
Standardized Sizing of Nuclear Powerplants Thin-Shell Concrete
Materials Alternative Power Sources Composite Structural Systems
Soil and Rock Anchors Combined-Cycle Generation Moment-Resisting Frames
Steel Decks Fluidized-Bed Boilers Fire-Resistant Construction
Sheet Piles Pulverized-Coal Combustion High-Performance Buildings
Modular Construction Cool Gasification Flat-Slab Design
High-Streng1h Concrete Improved Instrumentation / Air Conditioning
Driven Piles & Drilled Shafts P&IDS Integrated Systems
Cofferdams & Caissons Zero Discharge Production Tunnel 8c Dams
Telecommunications Cable
Environmental Tunnel Boring Machine
Wastewater Treatment Buildings Drill Jumbo
Bioremediation Tensioned Fabric Structures Arch Dams
Water-Quality Modeling Model Building Codes Ground Freezing
Wastewater Digestion Base Isolation Austrian Tunneling Method
Drinking Water Treatment Dampers Vehicle Tunnel Ventilation
Environmental Impact Review Slipforms Embankment Dams
Waste-to-Energy Power Flying Forms Rolled-Compacted Concrete
Engineered Landfill Tilt-Up Construction Shield Tunneling
Pump-and-Treat Technology Curtain Walls Water-Cooled Moss Concrete
Microfiltration

1.3 Need for Scientific Project Management in Construction

The construction industry is the largest industry in North America and the world. Al-
though products are made, the construction industry is more of a service than a man-
ufacturing industry. In Canada and the United States, investments in the construction
industry amount to about 10% of the total investments in all industries. Growth in this
industry in fact is an indicator of the economic conditions of a country. This is because
the industry cuts across a large number of trades that consume a wide employment
circle of labor. Construction also feeds and interacts with the manufacturing industry,
which exports a large portion of its products to the construction industry.
In our daily life, we use various services from various industries, including the
airline industry, publishing, railways, manufacturing, and the construction industry,
which produces the facilities in which we live and do business. Many of these indus-
tries generally exhibit high-quality products, timeliness of service delivery, reason-
able cost of service, and low failure rates. The construction industry, on the other
hand, is generally the opposite. Most projects exhibit cost overruns, time extensions,
and conflicts among parties. The reasons for the widespread use of these problems
can generally be attributed to three main factors (Figure 1-1): (l) the unique and

Figure 1-1.
Reasonsfor Poor
Performance in
Construction
• Projects are unique and • Extremely fragmented,
~_J
• Global market compe-
unrepeatable; with many small spe- tition;
• Projects are temporary; cialties involved; • Increasing regulations
• Projects are con- • Intense competition (e.g., environmental
strained by time, and high failure rates; and safety);
money, & quality; • Rapidly affected by re- • New advances in ma-
• Projects involve many cessions; terials and equipment;
conflicting parties; and • Little R&D expenditures; • Tight budget, lesstime,
• Many decisions are • Confidentiality and yet better quality isde-
made based solely on lack of information manded;
experience. sharing; and Risingcosts; and
• Slow to adopt new • Lack of skilled re-
technologies. sources.
 CONSTRUCTION PROJECT INITIATION 5

Figure 1-2. Time

Total Quality
Management
Objectives

Quality Money

highly uncertain nature of construction projects; (2) the fragmented and highly com-
petitive nature of the construction industry; and (3) the ever-increasing challenges
facing the industry as a whole. In view of these increasing challenges, efficient man-
agement becomes a key to the success of any construction organization.
A scientific approach to construction project management can help construction
participants in many ways, including:
• Cope with the increasing complexity of modern projects.
• Utilize resources (4 Ms) efficiently: Manpower, Materials, Machinery, and
Money.
• Meet fiscal requirements and deadlines.
• Communicate effectively among the participants and avoid adverse relations.
• Improve construction quality and safety record.
• Achieve higher productivity.
• Document and utilize past experience to improve future construction.
In order for these benefits to be materialized, construction project management as
a discipline has as its objective the control of three main aspects of construction: Time
(T),Quality (Q), and Money (M). The (TQM) acronym is also in rhythm with the prin-
ciples of "Total Quality Management" (Figure 1-2) which is a wide umbrella for qual-
ity in business and manufacturing. The specific discipline of construction project
management, therefore, involves a wide spectrum of techniques and approaches that
are discussed in this book and attempt to achieve its objectives through systematic ap-
plication of: (1) contract management; (2) information management; (3) cost manage-
ment; (4) time management; (5)resource management; (6) financial management; and
(7) execution management.

1.4 Construction Project Participants

1. Owner: The owner (also referred to as the Client) is the individual or or-
ganization for whom a facility or project is to be built or a service furnished
under a contract. The owner, whether public or private, owns and finances
the facility or project. Depending on the owner's in-house capabilities, he,
she, or they may handle all or portions of basic planning, budgeting, project
management, design, engineering, procurement, and construction. The
owner engages architects, engineering firms, and contractors as necessary to
accomplish the desired work.
Public owners are public bodies of some kind ranging from agencies of
the federal government down through the state, county, and municipal enti-
ties including boards, commissions, and authorities. Most public projects or
facilities are built for public use and not sold to others. Private owners may
be individuals, partnerships, corporations, or various combinations thereof.
Most private owners have facilities or projects built for their own use (e.g.,
business, habitation) or to be sold, operated, leased, or rented to others.
6 CHAPTER 1

2. Architect: An architect is an individual who plans, programs, and designs

buildings and their associated landscaping. Sometimes the architect also
provides the aesthetics of the whole envelope or concept of the whole proj-
ect. Since most architects have only limited capabilities in structural, electri-
cal, and other specialized design, they mostly rely on consulting engineers
for such work The architect may be obligated by contract to make field vis-
its to the construction site during the progress of the project. Such periodic
visits are for the purpose of observing materials and completed work to
evaluate their general compliance with plans and specifications. These visits
can be interpreted neither as full-time inspection for quality control on the
work nor as supervision on project progress.
3. Architect/Engineer (AlE): The architect/engineer (also known as the de-
sign professional) is part of the business firm that employs both architects
and engineers and has the capability to do complete design work. The AlE
firm also may have the capability to perform construction management
services.
4. Construction Manager: The construction manager is a specialized firm or
organization which furnishes the administrative and management services
for on-site erection activities and may provide the consulting services neces-
sary and as required by the owner from planning through design and con-
struction to commissioning. The construction manager has a professional
services contract with the owner and provides consulting and/ or manage-
rial functions. The construction manager, as the construction professional
on the project team, is responsible for design coordination, liaison in the
proper selection of materials and methods of construction, contracts prepa-
ration for award by the owner, cost and scheduling information and control,
as well as quality, He or she is also responsible for managing operations
normally associated with a contractor organization. One construction man-
ager can handle more than one project.
5. Engineer: The term engineer usually refers to an individual and/ or a firm
engaged in specialized design or other work associated with design or con-
struction. Design engineers are usually classified as civil, electrical, mechan-
ical, environmental, and so on, depending upon their specialty. There are
also scheduling, estimating, cost, and construction engineers who origi-
nated from any of the basic engineering disciplines but have specialized in
a particular area.
6. Engineering-Construction Finn: An engineering-construction firm is a
type of organization that combines both architect/ engineering and con-
struction contracting. The engineering-construction firm has the capability
of executing a complete design-build sequence, or any portion of it. Some-
times this firm does the procurement of the equipment and materials
needed to construct the project. This capability is usually found only among
the largest firms.
7. General Contractor (G.c.): The general contractor (also known as the
prime contractor) is the business firm that is under contract to the owner for
the construction of the project, or for a major portion of the project. The
prime contractor brings together all of the diverse elements and inputs of
the construction process into a single, coordinated effort for the purpose of
management and control of the construction process. The prime contractor
generally performs common construction operations such as site prepara-
tion, concrete placement, mechanical work, electrical work, and finishes.
Subcontractors are frequently engaged, although the prime contractor re-
tains the responsibility for the satisfactory performance of these subcon-
tractors.
 CONSTRUCTIO~ PROJECT INITIArION I 7

8. Project Manager: The project manager is the individual charged with the
overall coordination of all the facets of a construction program-planning,
design, procurement, and construction-for the owner.
9. Project Engineer: The project engineer exercises liaison with field and
home office engineering. He or she also supervises and coordinates the
work of all the engineers working on the project and performs these func-
tions and responsibilities for the owner, the construction manager, or the
contractor. He or she may also relieve the project manager of such adminis-
trative functions as management of change orders, updating progress
schedules, conventional engineering practices, and monitoring delivery
schedules.
10. Subcontractor: A subcontractor is under contract to another contractor, as
opposed to an owner, to perform a portion on the contractor's work. A gen-
eral contractor who is under contract with an owner may engage subcon-
tractors for portions of the project, the type and amount depending on the
nature of the project and the contractor's own organization. These subcon-
tractors, in turn, may engage other subcontractors. Thus, there can be sev-
erallevels of subcontracting to a general contractor.
11. Specialty Contractor: This contractor performs only specialized construc-
tion, like plumbing, electrical, and painting, either as a subcontractor or as a
prime contractor.

1.5 Types of Construction

There is no universal agreement on the categories or types of construction and their
inclusive elements. One simple classification is shown in Figure ]-3 with the three
main categories of residential buildings, nonresidential buildings, and nonbuilding
construction. The numbers shown in the figure are approximate and generally apply
to the United States and Canada.
A more detailed classification of construction types is as follows:
1. Residential Building Construction: This category, also known as housing,
includes all single-family homes, condominiums, multi-unit town houses,
and low-rise and high-rise apartments. For some purposes, residential con-
struction is divided into homes, townhouses, low-rise buildings (four stories
or less), and high-rise buildings. Design of this construction type is done by
owners, architects, or the builders themselves. Construction may be per-
formed by the owner or independent contractors under contract with the
owner. The backbone of the building construction profession has been, and
always will be, the residential builder.

Figure 1-3. Simple Heavy, Highway,

Classification of Marine, & Military
Construction Types

Commercial,
Institutional, &
Industrial Buildings
8 CHAPTER 1

2. Nonresidential Building Construction: Nonresidential building construc-

tion includes buildings, other than housing, that are erected for commercial
and industrial purposes. Typical commercial buildings are stores, office
buildings, warehouses, small manufacturing facilities, hospitals, service sta-
tions, shopping centers, educational buildings, and institutional buildings
(banks, churches, nursing homes, and the like). Industrial buildings are
buildings reserved for major factories, power plants, petrochemical plants,
and other process plants. Design of this construction type is predominantly
done by architects, with engineering design services being obtained as re-
quired. Construction of this type is generally accomplished by prime con-
tractors or construction managers who subcontract substantial portions of
the work to specialty contractors.
3. Nonbuildings:
Heavy and Highway Construction: This is, in general, the largest category
in volume of work, though not in number of projects. Streets, highways, rail-
roads, airports, tunnels, subways, bridges, dams, canals, hydroelectric work,
refineries, chemical plants, power plants, industrial plants, and pipelines are
typical examples of heavy and highway construction.
Marine Construction: Marine construction, also known as waterfront con-
struction, includes aqueous and sub aqueous projects. Examples are dredg-
ing, jetties, piers, breakwaters, offshore platforms, submarine pipelines, and
structures related to navigation and ocean commerce. .
Military Construction: These are federally funded projects that directly
support the defense effort. Military construction includes everything from
military housing to missile bases.

1.6 Life-Cycle Stages of Projects

The development of a construction project, from its initiation into its operation, may
be divided into the following consecutive stages, as shown in Figure 1-4:

Figure 1-4. Project 100% 100%

Life-Cycle Phases Ability to Influence
Cost

O&M

1. Concept Stage: When the need to build a new project is identified, the
process of appraising various alternatives commences. This study, which is
known as feasibility study, can in some cases take several years, particularly
if environmental assessments need to be made. TIle study determines
whether the project is truly viable and which of the various alternatives for
carrying it out will be best. The master schedule using approximate dura-
tions of various operations is then prepared in order that the owner may
know how long and how much it would take to reach the objective. The con-
cept stage, in fact, is one of the major steps in a project Lifecycle, as it has the
largest impact on cost and performance, as shown in Figure 1-4.
 CONSTRUCTIO:-.J PROJECT INITIATION I 9

2. Design Stage: In this stage, decisions are taken concerning the sizes and
types of structures required and the conceptual design is prepared. This in-
volves preparing outline drawings and details of all services. This conceptual
design should then be reviewed, as this is the main opportunity for cost sav-
ing and for ensuring that it meets the owner's objectives. At this stage also, a
suitable project contract strategy that satisfies project objectives and con-
straints (such as a target completion date) is proposed. This strategy (dealt
with in detail later) includes type of contract, interaction between design and
construction, and method of selecting contractors. The contract strategy pro-
posal is then submitted to the owner and is accompanied by a cost estimate,
a schedule, and a plan for risk management. Upon reviewing the proposal,
the owner may then proceed with investment in the project.
Upon owner approval of the conceptual design, a detailed design and
other steps are carried out to prepare specification and quantities of work,
prepare tender documents, and implement the project contract strategy to
procure bids and award the construction contract.
3. Construction Stage: The chosen project completion date will determine the
overlap between the design and construction stages. The general contractor
will carry out site construction. A mechanical and or electrical installation
may be subcontracted under the supervision of the general contractor. The
consultants will be deployed for contract administration and construction su-
pervision. The contractor would seek the most efficient use of his resources
using construction management techniques, such as those described in the
various chapters of this book. Commissioning is then made and performance
tests conducted, leading to project acceptance.
4. Operation & Maintenance (0 & M): The operational maintenance of the
project may be carried out by the owner's own employees. Project review
may be required for future interests. Demolition occurs at the end of serv-
ice life.

Project Contract Strategy

At the early stage of a project, and once a project manager is selected, the main issue
that faces the owner is to decide on the contract strategy that best suits the project ob-
jectives. Contract strategy means selecting organizational and contractual policies re-
quired for executing a specific project. The development of the contract strategy com-
prises a complete assessment of the choices available for the management of design
and construction to maximize the likelihood of achieving project objectives.
A road map to selecting a proper contract strategy for a project is illustrated in
Figure 1-5, involving five key decisions related to:
1. Setting the project objectives and constraints.
2. Selecting a proper project delivery method.
3. Selecting a proper design/ construction interaction scheme.
4. Selecting a proper contract form/type.
5. Contract administration practices.
Details on these five broad aspects are given in the following subsections.
As shown in Figure 1-5, a large number of possibilities exist for a contracting
strategy. Often, the project manager or another consultant may help the owner in the
five-step process of deciding a suitable contracting strategy. Such decisions, however,
are not an exact science. In many cases, there is no one single best strategy, but sev-
eral that are appropriate. The selection process often follows an "elimination" ap-
proach of rejecting obviously unsuitable strategies until reasonable alternatives re-
main. This process can also lead to new innovative strategies that suit the needs of
10 CHAPTER l

Figure 1-5. Key

Considerations in
6)
Design/Construction Interaction
m:»m}~:.»;~~;:o:~p;::r:z:"~~~':l"E;"'>'l
a Contracting I
Separate Phased Construction Fasl Traek
Strategy
/
./?/
Contractual
Relations I
l'

&
Project'
Design-Build
Selectinq
Key Players
1< et
Project
Delivery: Turnkey'
Method f AdministratIon

sor-
Contract
Documenls j;
t PCM' OrgHn~zf;\H()n :,:
Structure •

Compelitive Bidding Negotiated Cost Plus Combination

h8:~~<::~~~'f.i"1~<,~r-<W'1itr<~~Th$.:;-,::~:M:W§:~1~a~~~*d
Contract FormfType

• Abbreviations are explained

e
In detail in the tollowrnq sections

modern complex projects. Such innovative strategies can achieve various benefits, in-
cluding: Shortening project duration by overlapping design and construction; pro-
viding flexibility for changes during construction; creating more designer / contractor
teamwork to reduce adverse relationships; allowing a contractor to participate in the
design process, thus augmenting the designer's construction experience; providing
incentives for the contractor to save the owner money; and providing alternative fi-
nancing methods.

1.7.1 Project Objectives and Constraints

Before owners can begin lo choose a contracting strategy, they must gain an under-
standing of the project and the top-ranked objectives during its construction. A sum-
mary of various project objectives and constraints are as follows:
1.7.1.1 Time Objective There may be a need for an early start to the construction
phase for political reasons and/ or a need for minimum project duration to maximize
economic return. If this objective is top-ranked by the owner, the contracting strate-
gies that allow speedy project delivery, such as overlapping design and construction,
may become desirable.
1.7.1.2Cost Objective There may be a need for minimum project cost to ensure ad-
equate economic return, a need for minimum total cost incorporating operation and
maintenance costs, or a need to observe a maximum limit on monthly expenditure.
The selected contracting strategy, therefore, should be flexible to the owner's cost re-
quirement, while also maintaining the other objectives.
1.7.1.3 Performance Objective An appropriate functional performance of each
component in a project can be defined as the minimum acceptable to the owner and
to society To attain this objective, a "Value Engineering" program may be adopted by
the project management team at the design stage to reevaluate the design compo-
nents, thus introducing changes that save cost without sacrificing performance. Ifthis
objective is top-ranked by the owner, a contracting strategy that accommodates
changes and a teamwork approach may become desirable.
1.7.1.4Secondary Objectives These objectives could arise on a construction project
and would majorly influence contract strategy decisions. Examples include:
 CONSTRUCTION PROJECT INITIATION 11

• Risk sharing between the owner and the contractor.

• Project requirement of staff training or transfer of technology.
• Involving the contractor in the design stage to reduce construction prob-
lems.
• Involving the owner in contract management.
• Choice of labor-intensive construction.
• Use of local materials and resources.
• Protection of the environment.
1.7.1.5Project Constraints All construction projects have constraints that influence
the achievement of project objectives. These constraints should therefore be considered
when choosing an appropriate contract strategy. Some of the project constraints are:
• Conditions of contract.
• Method of tender.
• Project size and duration.
• Project location.
• Relationship to other projects.
• Possession of land.
• Number of work packages.
• Target dates of the project.
• Possibility of design changes.
• Availability of construction resources.
• Freedom to choose designers and contractors.
• Adequacy of site investigation.
• Seasonal working.
• Access to the site.
• Number of contractors willing to tender.
• Inflation.
• Exchange rate.
• Union regulations.

1.7.2 Project Delivery Methods

The choice of a project delivery method should be related to project objectives and
constraints, and also to the scope or the portion of the project tasks-design, con-
struction, and finance--that is assigned to the contractor. The various project deliv-
ery methods are summarized as follows:
1.7.2.1Traditional Approach This is the most common approach in civil engineer-
ing projects in which the design has to be completed before construction can start. De-
sign and construction are usually performed by two different parties who interact di-
rectly and separately with the owner. This approach takes two common forms:
a. Owner direct force: In this approach, owners are responsible for the design,
construction, and management of the work using their own forces. This ap-
proach is mostly used by developers who utilize typical designs and then
use employed labor, hired labor, or subcontractors for the construction. De-
spite the cost saving in the use of direct force, it may result in a higher total
cost if the owner lacks construction experience or managerial skills.
b. General Contractor (G.c.): This is by far the most widely used (traditional)
approach in construction. An AlE firm is hired by the owner to complete the
design, then a general contractor is hired by the owner for the construction.
Most often, the AlE firm will act as owner-representative in selecting and
further supervising the general contractor who is usually selected based on a
12 I CHi\.PTER 1

competition among interested bidders. Some of the pros and cons of this ap-
proach are summarized in Table 1-1.
Therefore, this method is fine in many cases where the project is clearly
definable, design is completed, time need not be shortened, and changes are
unlikely to occur during construction.
1.7.2.2 Design-Build In this approach, a single organization is responsible for per-
forming both design and construction and, in some cases, providing a certain
"know-how" for the project. Within the design-build organization, parts of the de-
sign may be subcontracted to specialist consultants. Being responsible for both de-
sign and construction, the design-build contractor carries most of the project risks,
and this can mean additional cost to owner. The owner's role in this approach is min-
imal and is only to express his or her objectives and specifications precisely before
detailed design is started. Some of the pros and cons of this approach are summa-
rized in Table 1-2.
The use of this approach, therefore, should be considered when contractors offer
specialized design/ construction/know-how expertise or when design is strongly in-
fluenced by the method of construction.
1.7.2.3 Turnkey This approach is similar to the design-build approach, but the or-
ganization is responsible for performing design, construction, know-how (if any),
and project financing. Owner payment is then made at the completion (when the con-
tractor turns over the "key"). An example is franchise projects in which a new branch
of a restaurant chain needs to maintain the same design, construction quality, and
food-service quality.

Table 1-1. Prosand Cons of the Traditional Approach

Advantages Disadvantages

• Price competition • The approach takes a long time

• Total cost isknown before • Design does not benefit from
construction starts construction experience
• Well-documented approach used in • Conflicts between owner & G.C. ond
most government projects done for between AlE & G.C.
public works • Changes may leod to disputes
and claims

Table 1-2. Prosand Cons of the Design-BuildApprooch

Advantages Disadvantages

• One contract that may include

know-how
• Cost may not be known until the end of
• Minimum owner involvement
design
• Time can be reduced if the design-
• High riskto contractor and more cost to
build company overlaps design and
owner
construction
• Design-build company may reduce
• Possiblecoordination between
quality to save cost
design and construction
• Due to minimal owner involvement re-
• Easierimplementation of changes
sult may not be to his satisfaction
• Lessadversary relationships
 CONSTRUCTION PROJECT INITIATION 13

1.7.2.4Build-Operate-Transfer (BOT) In this approach, a business entity is respon-

sible for performing the design, construction, long-term financing, and temporary op-
eration of the project. At the end of the operation period, which can be many years,
operation of the project is transferred to the owner. This approach has been exten-
sively used in recent years and is expected to continue. An example of its use is in ex-
press routes and turnpikes. A consortium of companies shares the cost (design, con-
struction, financing, operation, and maintenance) and the profits gained from user
fees, for a stipulated number of years. Afterwards, the project returns to the govern-
ment to become publicly owned. This approach has also been used extensively in
large infrastructure projects financed by the World Bank in parts of the world that
cannot afford the high investment cost of such projects.
1.7.2.5Professional Construction Management (PCM) In this approach, the owner
appoints a reM organization (also known as construction management organization)
to manage and coordinate the design and construction phases of a project using a
teamwork approach. The design may be provided by specialist design firms and in
some cases by the rCM organization. With a high level of coordination between the
participants, innovative approaches of overlapping design and construction (i.e.,fast-
tracking) can be adopted. The reM organization aims at holding a friendly position
similar to that of the consultants in the traditional approach.
The services offered by the reM organization overlap those traditionally per-
formed by the architect, the engineer, and the contractor. This may include: manage-
ment and programming of design; cost forecasting and financial arrangements;
preparation of tender documents; tender analysis and selection of contractors; selec-
tion of methods of construction; recommendations on construction economics; plan-
ning and scheduling construction works; materials procurement and delivery expe-
dition; provision for site security, cleanup, and temporary utilities; supervision of
control of construction contractors; construction quality assurance; cost control; cost-
ing of variations and assessment of claims; and certification of interim and final pay-
ments to contractors.
Although this approach is likely to prove marginally more expensive than the tra-
ditional approach, it offers greater guarantee of performance and the potential to
avoid time overruns and to reduce the cost of claims. The payment to the reM or-
ganization is usually a fixed fee or a percentage of the total project cost. The con-
struction contract is usually a lump sum or a unit price (explained later). Some of the
pros and cons of this approach are summarized in Table 1-3.
The use of reM approach, therefore, should be considered when there is a need
for time saving and flexibility for design changes, and the owner has insufficient man-
agement resources.

Table 1-3. Pros and Cons of the PCM Approach

Advantages Disadvantages

• Utilization of construction skillsat all • Higher owner involvement and

stages with no conflict among responsibilities
participants • Need skilled construction managers
• Independent evaluation of cost and • PCM fees (up to 4%)
schedule to the best owner interest
• Time could be much less
• Principals such as "value engineering"
could be applied in all phases
14 CHAPTER 1

1.7.3 Design/ Construction Interaction

In conjunction with decisions related to a suitable project delivery approach, the
owner generally has three basic choices for the management of design and construc-
tion, as illustrated in Figure 1-6:

Figure 1-6.
Different Design/ Design
Separate
Construction
Interaction Schemes

Overlap among phases

Phase 1 No overlap within each phase

Phased
Phase 2

Phase 3

Fast-Track
Phase 1
Overlap among phases
Overlap within each phase
[.,,,,,,·7~::;.~7?537J
/
Phase 2

Phase 3

Time

a. Separate: In this scheme, design is completed in full before bidding and con-
struction of the whole project starts.
b. Phased: In this scheme, design is divided into phases that are dealt with as a
separate package. Phases can be foundations, ground floor, repetitive floors,
etc. These packages can overlap and, as such, some time can be saved since a
contractor for the foundation phase, for example, can be employed even be-
fore the design for the remaining phases are completed. Within each phase,
however, the design of that phase is completed before bidding and construc-
tion can begin.
c. Fast-Track: This scheme is similar to the previous one with the exception that
a greater overlap is exercised between design and construction even within
each phase. As such, a contractor can be employed early in each phase and is
considered as an important team member who can start the construction as
soon as a group of design details is finalized. In this approach, the potential
for greater time savings becomes high, as illustrated in Figure 1-6.
Phased and fast-track approaches certainly require high levels of coordination
and management to bring them to success. A peM project delivery approach, there-
fore, may become desirable if time saving is a top-ranked objective to the owner. In
general, therefore, decisions regarding the level of design/ construction interaction re-
quired for a project can be facilitated by considering the following aspects:
• Extent to which construction is to be separated from or integrated with design.
• Size and nature of the work packages within the project.
• Appropriate number of design teams to suit the nature of the work.
• Selection of the design teams from in-house resources or external consultants.
• Process of supervision of construction.
• Restrictions on using a combination of contracting strategies within the project.
 CONSTRUCTION PROJECT INITIATION 15

1.7.4 Construction Contract Form/Type

Construction contracts can be broadly grouped into two categories: (1) competitive
bidding contracts and (2) negotiated cost-plus contracts. Specific contract types are
classified according to the method of payment to the contractor. For example, the two
common forms of competitive bidding contracts, lump sum and unit price, explicitly
specify the method by which the contractor's submitted price is paid to him or her.
Similarly, the various types of negotiated cost-plus contracts differ in the way in
which the contractor is reimbursed for his or her cost (rather than price). The various
contract forms are illustrated in Figure 1-7. The three basic factors that favor the use
of a particular type of contract are:
• The need to provide an adequate incentive for efficient performance.
• The ability to introduce changes during construction.
• The allocation of risks between owner and contractor and the cost implication.

Figure 1-7. Construction

Construction Contract Forms
Contract Forms 1.--------1---------,1
1. Competitive 2. Negotiated 3. Combination
Bidding Cost-Plus

Two Main Types: Many Types: New Innovative Types:

Lump Sum (Buildings) Cost + % of Cost Use a combination

Cost + Fixed Fee of contract types in
Unit Price (Heavy) Cost + Fee + Profit Sharing a single project
Cost + Sliding Fee
cost- GMP Teamwork
Complex projects, tunnels, power
plants, process plants

High risk to contractor Risk sharing CM administered

Low risk to owner

1.7.4.1Competitive Bidding Contracts Competitive bidding is the main process for

selecting contractors, particularly for government projects. The process itself is dis-
cussed in detail in section 1.7.5.2(d). Two types of contracts are used under this
process, as follows: .
a. Lump Sum: A single tender price is given to the contractor for the comple-
tion of a specified work to the satisfaction of the owner. Payment may be
staged at intervals of time, with the completion of milestones. Since the con-
tractor is cormnitted to a fixed price, this type of contract has very limited
flexibility for design changes. In addition, the tender price, expectedly, in-
cludes a high level of financing and high undisclosed risk contingency. One
benefit to the owner, however, is that the contract final price is known at ten-
der. But, an important risk to the owner is when not receiving competitive
bids from a reasonable number of contractors who avoid higher risks on
lump sum contract. Generally, this contract is appropriate when the work is
defined in detail, limited variation is needed, and level of risk is low and
quantifiable. It can be used for traditional, design-build, and turnkey proj-
ects. Lump sum contracts are also suitable for building projects since many
items of the work, such as electrical, do not have detailed quantities associ-
ated with them.
b. Unit Price: In this contract type, bidders enter rates against the estimated
quantities of work. The quantities are remeasured during the course of the
16 CHAPTER 1

contract, valued at the tendered rates, and the contract price adjusted accord-
ingly. The rates include risk contingency. Payment is made monthly for all
quantities of work completed during the month. The contract allows the
owner to introduce variations in the work defined in the tender documents.
The contractor can claim additional payment for any changes in the work
content of the contract, but this often leads to disputes and disagreements.
One variation of this type is called a schedule of rates contract, which contains
inaccurate quantities of work, possibly with upper and lower probable lim-
its. Therefore, instead of submitting one total rate for each item of work, con-
tractors submit separate rates for the labor hour, plant hour, and materials
rates. The contract price is then devised by measuring the man-hours, plant
hours, and quantities of materials actually consumed, and then pricing them
at the tendered rates. Unit price contracts are best suited for heavy civil and
repetitive work in which work quantities can be easily estimated from de-
sign documents.
1.7.4.2 Negotiated Cost-Plus Contracts In this category of contract types, project
risks are high and can discourage contractors from being committed to lump sum or
fixed-unit prices. Therefore, the owner shares the project risks by reimbursing the
contractor for his or her actual costs plus a specified fee for head office overheads and
profit. To allow for that, the contractor makes all his or her accounts available for in-
spection by the owner or by some agreed-upon third party. This category of contracts
offers a high level of flexibility for design changes. The contractor is usually ap-
pointed early in the project and is encouraged to propose design changes in the con-
text of value engineering. The final price, thus, depends on the changes and the ex-
tent to which risks materialize. The circumstances that lead to the adoption of this
category of contracts are:
• Inadequate definition of the work at time of tender.
• Need for design to proceed concurrently with construction.
• Work involves exceptional technical complexity.
• Situations involving unquantifiable risks to the contractor such as work below
ground level and the effect of inflation.
• Owner wishes to be involved in the management of his or her project.
Some of the common types of cost-plus contracts, classified by the method of
payment to the contractor, are as follows:
a. Cost + Fixed Percentage: While this contract is simple to administer, it has
no incentive for the contractor to save owner's money or time. Also, prob-
lems may occur if the contractor engages his or her resources in other proj-
ects and delays the work.
b. Cost + Fixed Fee: The fee is a fixed amount of money. As such, the contrac-
tor's fee will not increase if costly changes are introduced. While the contrac-
tor may desire to finish the project earlier, he or she still has no incentive to
save owner's money.
c. Cost + Fixed Fee + Profit Sharing: In addition to the reimbursement of ac-
tual costs plus a fixed fee, the contractor is paid a share of any cost saving
that the contractor introduces into the work.
d. Cost + Sliding Fee: The sliding fee is a fee that increases linearly with the
amount of cost saving that the contractor introduces between the actual cost
and a preset target cost, as shown in Figure 1-8. The fee can also be reduced
when the actual cost exceeds the target.
It is noted that the target tender should be realistic and the incentive
must be sufficient to generate the desired motivation. Specific risks can be ex-
cluded from the tendered target cost; when these risks occur, the target cost is
adjusted accordingly.
 CONSTRUCTlO PROJECT INITIATION 17

Figure 1-8. Sliding

5%
Fee

Fee .• --t---------;--....
3% ;.

0.5T T: Target Cost

Actual Cost

Figure 1-9. Level of 100%

Turnkey
RiskAssociated with
Various Contracts Lump Sum
Unit Price
GMP
Cost Plus
Owner Direct Force
100%

OWNER RISK CONTRACTOR RISK

e. Cost + Guaranteed Maximum Price (GMP): The contractor's cost in this

case is reimbursed with the contractor giving a cap on the total price not to
exceed a preset value.
A brief summary of the level of risk exposed by each of the discussed contract
forms is illustrated in Figure 1-9. As shown in the figure, competitive bidding con-
tracts (Lump Sum and Unit Price) are among the top risky contracts to contractors
and thus present a challenge in estimating their cost and schedule at the bidding stage
and before a commitment is made.

1.7.5 Project Administration Practices

Construction projects no doubt involve many administrative issues that project man-
agers have to be familiar with. These include: contractual relationships among vari-
ous parties, selecting key project participants, contract documents, and project or-
ganization structures. Some details related to these issues are as follows.
1.7.5.1 Contractual Relationships Within each project delivery method, the con-
tractual relationships among the project participants can take various arrangements,
and the owner needs to make a decision regarding the proper arrangement that suits
the project and the parties involved. The two basic contractual relationships with an
owner are: agent relationship, referred to as (A); and nonagent relationship, referred
to as ($). The agent relationship is a contract, such as that between the owner and an
AlE firm. In this case, the agent organization performs some service (e.g., design). in
addition to possibly representing the owner in front of other parties (e.g., supervision
over the contractor). The nonagent relationship, on the other hand, is a regular legally
binding contract to perform a service, such as the contract between the owner and the
contractor. The different contractual relationships associated with various project de-
livery methods are illustrated in Figures 1-10 and 1-11.
18 CHAPTER 1

Figure 1-10.
Contractual
Relations in
Traditional and
Design-Build Projects

Owner's Own Force General Contractor Design-Build and Turnkey

Figure 1-11.
Various Forms of
Construction
Management (CM) NE CM NE

Contracts

Agent CM Design CM Constructor CM

NE

Contractor CM Owner CM Owner/Design/CM

1.7.5.2 Selecting Key Players Selecting key personnel and organizations that will
participate in a project is a major step for the owner and can mean the success or fail-
ure of a project. The selection process depends on the delivery method selected for the
project.
a. The Project Manager: A good project manager is an important ingredient
for a successful project. He or she should have sufficient seniority to exercise
effective control both within and outside the owner organization. The re-
sponsibilities of the project manager normally span design, construction, and
commissioning. His or her function is to control the sequence of events and
decisions leading to the completion of the project. For many projects, the
manager will be supported by a small team experienced in engineering man-
agement. The project management team is responsible for:
• Overseeing the owner's diverse interests.
• Coordinating design and construction.
• Forecasting project cash flow.
• Appointing consultants and contractors.
• Solving problems with local authorities and inhabitants.
 CONSTRUCTJON PROJECT INITlATlON 19

• Coordinating the work of different contractors.

• Project commissioning.
• Transfer of responsibility for completed work from contractor to operator.
• On turnkey contracts, controlling quality of construction.
• On cost-plus contracts, examining construction actual cost.
b. The AlE firm: The owner and his or her project management team will ap-
point a consulting firm in order to prepare the design details, specification of
work, and bills of quantities. Supervision and administration of the construc-
tion contract will be the job of a senior engineer in the firm. On small proj-
ects, the engineer may act as a project manager. The engineer must guard the
owner, through his or her field inspection forces, against deficiencies in the
work. Continuous on-site inspection should be performed during progress
of work to provide quality assurance on the job. The engineer also acts as
agent for the owner in performing the following duties:
• Pre-tender evaluation of contractors.
• Preparation of tender documents.
• Evaluation of bids.
• Recommendation of appointment of contractors.
• Approval of the contractor's plan.
• Review of shop drawings.
• Construction quality assurance.
• Issuing of variation orders.
• Assessment of variations and claims.
• Forecast final cost.
• Evaluation of completed work.
• Certification of contractor's payment requests.
• Final inspection of work.
c. The Resident Engineer: This is the engineer's or construction manager's
representative on-site. The resident engineer has authority to administer the
field operations of a construction project and he or she should be the sole
spokesperson representing the owner's interests. Representatives, known
also as quality assurance supervisors (inspectors), arc needed for different as-
pects of the work. The job of the inspector is identical in all respects to that of
the resident engineer, except for the responsibility of field administration. An
inspector may be involved in several small projects at the same time. The re-
sponsibilities of the resident engineer can be summarized as follows:
• Be familiar with the contract documents.
• Be familiar with the construction schedule.
• Prepare a daily report of the contractor's activities, as-built details, instruc-
tions given to the contractor, any agreements made, and any dangerous
conditions observed on-site.
• Check materials soon after delivery.
• Inspect work as it progresses and give decision on acceptance.
• Notify the contractor if any material or portion of work does not conform
with the requirements and advise the engineer if the contractor ignores the
notice.
• Seek advice from the engineer to solve any problem.
• Assist in obtaining any information required for proper execution of the
work.
• Consider and evaluate the contract suggestions for modification in draw-
ings and specifications and report them to the engineer.
• Report to the engineer any unrealistic tolerance in the contractor's work
and any situation which appears to cause a delay in the completion of the
contract.
20 I CI-L'\PTER 1

• Control site testing laboratory and observes all contractor's tests,

• Follow up daily on any work to be corrected by the contractor.
• Review the application for payment with the contractor.
d. The Contractor: Contractor selection is an important decision for any proj-
ect. By and large, the competitive bidding process has been the main vehicle
for contractors to obtain jobs. The process is required by law for public proj-
ects, which has been the largest percentage of all projects, except in emergen-
cies, such as war or natural disasters. Under this process, a simple quantita-
tive criteria is used to award the bid to the "lowest responsible bidder," thus
potentially obtaining the lowest construction cost. The process, however, has
its drawbacks, including: (1) overlooking important criteria such as contrac-
tor's experience and strength; (2) potentially causing construction delays and
problems if the contractor bids below cost to win the job; and (3) contribut-
ing to adverse relationships between the owner and the contractor.
The competitive bidding process encompasses three main steps (Figure
1-12): (1) owner announcement for the bid; (2) contractors' preparation and
submission of their bids; and (3) owner evaluation and selection of a
prospective contractor.
To announce for a project, the owner should have the design completed
and a bid package prepared with all design information. The owner then an-
nounces a general call for bidders or sends a limited invitation to a list of pre-
qualified contractors. Through the limited invitation, the owner organization
can reduce potential construction problems by avoiding unknown contrac-
tors who intentionally reduce their bids to win jobs, particularly if the project
requires certain experience. Owners, therefore, need to maintain a list of
qualified contractors with whom they had successful experience or by adver-
tising a call for prequalification.
Having decided to tender on a certain work, the contractor shall prepare
a realistic and competitive bid. Following the description in Figure 1-12, a
winner will be selected to be the contractor for the project. Once a contractor
is selected and construction has started, the contractor becomes responsible
for all work on the project whether constructed by the firm's own forces or
by subcontractors. The contractor's senior representative on site is called the
site superintendent. He or she is to be constantly on the site and shall give his
or her full charge to the works. The site superintendent should have ade-
quate knowledge of the methods and techniques required for the work. He
or she is responsible for:
• Ensuring maximum cooperation of site staff in all matters affecting the ef-
ficiency, economy, and smooth running of the construction operation.
• Reviewing proposed design changes to suit particular methods of working
which will result in cost savings.
• Reviewing any requirements of additional resources.
• Identifying and dealing with problems arising at site level which will result
in delays or increase in cost.
• Ensuring compliance with contract documents and the engineer's instruc-
tions.
• Organizing and deploying the contractor's site staff, plant, labor, and all
other resources.
• Operating and maintaining site-testing lab.
• Billing.
• Providing and updating all the schedules, budgets, expenditures, and
other records required by the engineer.
• Administering purchases for the supply of materials and services.
• Coordinating subcontractors' work.
• Protecting persons and property on, and adjacent to, the construction site.
 CONSTRUCTION PROJECT INITIATION I 21

Step 1
I ANNOUNCEMENT I

Owner
2
NE PREPARATIOIN &
CM SUBMISSION

Contractor 3
EVALUATION &
SELECTION
Owner, NE, CM

Time
Buy Bid
Package

Biddin Period Acce tance Period

(30, 60, or 90 days)

Announcement Announcement includes the following information:

• Subject/scope of work, location. type of project;
• Dates: purchase of bid package, bid submission, bid opening, etc;
• Required prequalification documents;
• Bid bond and its amount (0 to 10%)to ensure seriousness;
• Performance bond and its amount (e.g., 100%)to ensure quality;
• Price of bid package: and
• Conditions for acceptance/rejection.
Bid Preparation Contractor responsibilities:
• Receive bid package from the owner. It may contain: drawings; specifications; bill
of quantities; bid proposal form; general conditions; soil report; and addenda
(changes to the bid package):
• Inspect the site and its weather, services, bylaws, and resources;
• Detailed planning, estimating, scheduling, and cash flow;
• Prepare bid bond;
• Complete all forms including bid proposal form;
• Prepare data regarding contractor's organization structure (if needed); and
• Submit bid.
Owner's responsibilities:
• Inform all bidders of any changes in dates or regulations: and
• Answer any questions.
Bid Evaluation • Options for selecting the winner: lowest responsible bidder; average bidder; bidder
closer but below average; or weighted multicriteria.
• Negotiation among top-ranked bidders.
• Analysis of all bids to be passed to the decision committee.

Figure 1-12. The Competitive Bidding Process

The superintendent may be supported by site engineers. Each one of them

has a particular responsibility, such as labor relations or technical matters.
Each site engineer will be allocated a different section of the work. Site engi-
neers may be involved in the design and installation of temporary works, de-
tailed planning, and managing the day-to-day operations.
Specialist engineers or quantity surveyors will be employed to value the
completed works. A general foreman, who is an experienced tradesperson,
will be employed to organize the allocation of tradesmen, labor, machines,
22 I CHi\PTER 1

and materials to the various sections of the job on a day-to-day basis. He or

she may contribute expertise in plant operation and methods of construction.
The site superintendent may also be supported by an office manager to
manage stores and workshops, plant manager and fitters for maintenance of
the plant, and experienced staff to provide site facilities.
Under a contract requiring a contractor quality control program, a con-
tractor quality control representative is also required. His or her primary func-
tion is to assure that all inspections and tests are made and to prevent defec-
tive work. This includes checking all material and equipment delivered to
the site.

1.7.5.3 Contract Documents Once the parties that will be involved in a project are
identified, their legal binding is a set of contract documents. The main goals of the
contract documents are to enable fair payment for the work done by the contractor, to
facilitate evaluation of changes, and to set standards for quality control. Typical con-
tract documents needed for this purpose are:
• Conditions of contract.
• Specifications.
• Working drawings.
• Priced bills of quantities or schedules of rates.
• Signed form of agreement, which confirms the intent of the parties.
• Contract minutes of correspondence.
The basis of a successful contract is the preparation of the conditions of contract
to clearly define the responsibilities of the parties. These conditions form much of the
legal basis of the contract on which any decision by the courts would be made. The
interests of all parties to a construction contract would be best served if the contrac-
tor is required to carry only those risks that he or she can reasonably be expected to
foresee at the time of bidding. This will be less costly lo the owner and better suited
to the efficiency of the construction industry.
The general conditions of contract should prove suitable for the majority of con-
ventional construction contracts, but the owner must satisfy himself or herself that
they are relevant to the owner's particular job. Special conditions of contract can be
added to satisfy the owner's special requirements. Some of the legally binding aspects
included in the conditions of contract are briefly discussed in this section. The contract
period, liquidated damages, and incentives clearly define that if the contractor fails to
complete the works within the contract period, the contractor will pay the liq idated
damages. In case of early completion, the contractor is paid the incentive amount. A
retention amount is an amount that is held back by the owner for each certificate of pay-
ment due to the contractor. Its value is about 5% of each payment as insurance against
defective work and to ensure the contractor has incentive to complete all aspects of
work. The retention money is paid at the end of the contract. Maintenance period is usu-
ally specified as 52 weeks after the contract is completed, in which the contractor must
remedy any defects that may appear in the work. Two types of bonds are required
from the contractor in the form of letters of guarantee given by an approved surety, a
bank, or a company that agrees to discharge the legal duties of the contractor if he or
she fails to do so. The bid bond ranges from 0 to 10% of the tender price to ensure that
the bidder is serious and will maintain his offer when selected. The performance bond,
on the other hand, is required from the selected contractor after award of the contract
to ensure that he or she faithfully performs his or her obligations under the contract.
This bond may be 5 to 100% of the total contract price. Conditions for a valid claim can
also be specified in the conditions of contract. The contractor should read the condi-
tions of contract to ascertain which category of claim is applicable. Construction man-
 CONSTRUCTION PROJECT INITIATION I 23

agers are advised, immediately after the event that is likely to produce extra cost or
delay, to negotiate with the owner the basis for the claim.
1.7.5.4 Project Organization Structure At the early stage of project initiation, one
important decision has to be made by owners on how best to tie the project to the
owner's parent firm. To address this issue, we look at the major organizational forms
commonly used to house projects and discuss some of the critical factors that might
lead us to choose one form over the other.
As shown in Figure 1-13(a), the two extreme ways of organizing a project are
the functional and the project organizations. In between these two extremes are
various forms of matrix (mixed) organization structures. The functional structure
is shown in Figure 1-13(b). It utilizes the firm's normal functional channels, with
each functional manager responsible for a segment of the project. At the other ex-
treme, the project structure is formed by pulling a team of experts from relevant
functional areas and then assigning them to every project manager (Figure 1-13c).
Each of the two extremes has its advantages and drawbacks. With the full author-
ity in the functional structure with the functional managers, an urgent work that is
needed for a specific project might be delayed if functional managers are busy with
other projects. On the other hand, while the project structure is more responsive to
the needs of a construction project, it requires a lot of owner resources since each
project has all the resources it needs. Also, the project structure is likely to exhibit
a stressful work environment and anxiety as compared to the functional structure.
The matrix structure, therefore, is a sort of tradeoff that ensures efficient utilization
of owner resources.
The general form of a matrix organization is illustrated in Figure I-13(d). Among
the various matrix variations, several studies have reported that project-matrix is
most suited to the dynamic nature of construction projects. Its requirement of re-
sources is not a purely project structure and, as such, does not require a large amount
of resources. However, the matrix structure has somepotential problems that are a re-
sult of the fact that several project managers are competing to have the pool of tech-
nical experts under the various functional areas work on their projects before others.
In some cases, political problems may occur between various project managers. In
other cases, there could be a doubt as to who is in command, the project manager or
the functional manager. Careful assignment of the responsibilities, in addition to
proper management practices, are, therefore, important issues for the success of
owner organization.

1.8 Emerging Trends

In North America, 85% of the total construction expenditures are typically spent on
new projects while the remaining 15%are spent on repair and rehabilitation. In recent
years, however, a larger portion of all construction work has been shifting from new
to reconstruction projects. With a currently aging infrastructure, the market for reha-
bilitation and renewal has been growing in North America. On the other hand, the
market for new construction has been growing internationally as various developing
countries around the world, particularly in Asia, Africa, and South America are in
need of a lot of new infrastructure projects. It is, therefore, expected that with the
whole world being converted into a one large village, successfully competing at the
international level is not expected to be easy and requires adapting of the firm's man-
agement practices to new, possibly risky, environments. Contractors need not only to
use efficient tools to improve the productivity of their resources, but also to consider
the cultural and political environments associated with projects.
Figure 1-13. Project is assigned to relevant
Common Forms of Function functional areas.
Orgonizotion
Structure A PM limited authority coordinates
Function - Matrix across diHerent functional areas.

A PM shares responsibility and

Balanced Matrix
authority with functional managers.

Project A PM is in charge of a team of

personnel from functional areas.

(0) Comparison of Organization Structures

Project A Finance
Vice-President Vice-President
Financing Project A
Project N Engineering

Project A Finance
Vice-President Vice-President
Marketing Project B
C Project N Engineering
<Il
"0
·00 Finance
ID Project A
a:: Vice-President Vice-President
Manufacturing Project C
Project N En9ineering

Project A Finance
Vice-President Vice-President
Engineering Project N
Project N Engineering

(b) Function Organization (c) Project Organization

President

Program Financing Manufacturing Engineering I

Manager
1
1 1 1
- - - ~- - - - - - - - - - - r - - - - - - - - - --I
1 1 1
1 1 1
___ ~ L I

1 1 1
1 1 1
1 1 1

(d) Matrix Organization

24
 CO STRUCTION PROJECT INITIATIO 25

In terms of contract management, various trends that have evolved over the last
decade and are expected to grow in the North American construction industry and
everywhere are:
• Growing design/build.
• Growing BOT (includes financing).
• Project partnering.
• Mergers between contractors and engineering firms.
• Internet use: send invitations to bidders, quotation or qualification requests,
linking site to head office.
• Innovative contract practices:
• A + Bbidding method for cost and time;
• Lane rental for highway construction; and
• Incentive/disincentive clauses for contractors.
A lot of information can be found on each of these items either in journal publi-
cations or on websites. Some of the interesting web resources are listed in Appendix
ill "Web Resources."

1.9 Where Do We Go from Here?

This chapter has provided background material on the construction industry and the
various aspects related to project initiation. As discussed in this chapter, a suitable
contract strategy is one that considers the level of risk associated with the project and
how the various parties can share that risk so that no one party is excessively exposed
and the project runs smoothly with few problems during construction. The traditional
design-bid-build remains a major project delivery method in which competitive bid-
ding contracts (lump sum and unit price) are common. These types of contracts rep-
resent a major challenge to contractors as they have to prepare a detailed bid that is
both accurate and competitive and, if lucky enough to win the job, and efficiently
manage the construction to attain a fair profit. The life cycle of a traditional project is
shown in Figure 1-14 with the various functions performed by various parties at each
phase summarized on the figure. Special emphasis is made to the functions per-
formed by the contractor in the bidding and construction stages as these are the main

• Need
• Feasibility • Conceptual Design
• Project • Owner Approval : • Prepare Bid Proposal + Baselines

!.
Definition
• Soil Reports : • Collect Data (site. quantities.
• Owner • Preliminary Design : specs. resources. tasks. etc.)
Approval •
•
Detailed Design
Quantities
: • Planning • Start Construction •. r'blJP15
: • Time & Cost Estimation • Detailed Planning.
'O&M
• Work Documents : • Scheduling Estimating & Resource • Demolition
• Resource Management: Management
at End of
Adjustments for Resource Con- • Schedule Updating Service Life
: straints & Deadline • Progress Evaluation
: • Bidding Strategy & Markup • Time, Cost. & Quality
: Estimation Control
: • Cash Flow Analysis • Commissioning
: • Submit Bid
I

Figure 1-14. Management Functions Made at the Different Phasesof a Project Life Cycle
26 I CHAPTER 1

aspects discussed in the remaining chapters of the book. The ultimate goal is again
the TQM (less time, higher quality, and less cost) in construction projects. In the fol-
lowing chapters, Figure 1-14 will act as our road map, which shows where the mate-
rial in that chapter is applicable in the project. For interested readers, Appendix A lists
many Internet websites with information related to the material in this chapter.

1.10 Bibliography
Cartey, G. (1995). "Construction," Journal of Construction Engineering and Management,
ASCE, Vo!. 121, No. 3, pp. 319-328.
Clough, R. H. and Sears, E. (1979). Construction Project Management, 2nd ed. Toronto:
John Wiley & Sons.
Cook, L. and Hancher, D. (1990). "Partnering: Contracting for the Future," Journal of
Management in Engineering, ASCE, Vo!. 6, No. 4, pp. 431-446.
Fisk, E. (1992). Construction Project Administration. Englewood, New Jersey: Prentice
Hall Inc.
Goldsmith, I. (1976). Canadian Building Contracts, 2nd ed. Toronto: The Carswell
Comp. Ltd.
Gould, Frederick and Joyce, Nancy (1999). Construction Project Management, Upper
Saddle River, New Jersey: Prentice Halllne.
Halpin, D. and Woodhead, R. (1998). Construction Management, 2nd ed. John Wiley &
Sons.
Harris, F. and Srinivasan. R. (1991). "Lane Rental Contracting," Journal of Construction
Engineering and Economics, Vo!. 9, pp. 151-155.
Hendrickson, C. and Au. T. (1989). Project Management for Construction: Fundamental
Concepts for Owners, Engineers, Architects, and Builders. Englewood, New Jersey: Pren-
tice Hall..
Herbsman, Z. (1995). "A + B Bidding Method-Hidden Success Story for Highway
Construction," Journal of Construction Engineering and Management, ASCE, Vol. 121,
No. 4, pp. 430-437.
[araiedi, M., Plum mer, R., and Aber, M. (1995). "Incentive/Disincentive Guidelines
for Highway Construction Contracts," Journal of Construction Engineering and Man-
agement, ASCE, Vo!. 121, No. 1, pp. 112-120.
Kerridge, A. E. and Vervalin, C. H. (Eds.) (1986). Engineering and Construction Project
Management, Houston: Gulf Publ. Co.
Kerzner, H. (2000). Applied Project Management. New York: John Wiley & Sons.
Konchar, M. and Sanvido, V. (1998). "Comparison of u.s. Project Delivery Systems,"
Journal of Construction Engineering and Management, ASCE, Vo!. 124, No. 6,
pp. 435-444.
Nunnally, S. W. (1993). Construction Methods and Management, 3rd ed., Englewood,
New Jersey: Prentice Hal!.
Oxley, R. and Poskitt, J. (1986). Management Techniques Applied to Construction Indus-
try, 3rd ed. Rexdale, Ontario: Granada Publ. Ltd.
PM} Standards Comrni ttee (1996). A Guide to the Project Management Body of Knowledge
Project Management Institute (PMI), rA.
Roman, D. D. (1986). Managing Projects: A Systems Approach. New York: Elsevier Sci-
ence Pub!. Co.
Tenah, K. and Guevara, T. (1985). Fundamentals of Construction Management arid Orga-
nization. Reston Publishing Co., Inc.
 CO~STRLJCTI0N PROJECT INfTlATlON I 27

Teplitz, C. and WorIey, C. (1992). "Project Managers are Gaining Power Within Matrix
Organizations," Pm Network, PMI, Vol. 3, No. 2, pp. 33-35.
Tiong, R. (1990). "Comparative Study of BOT Projects," Journal of Management in En-
gineering, ASCE, Vol. 6, No. I, pp. 107-122.

1.11 Exercises
1. Briefly explain the main types of construction.
2. What are the circumstances that favor the use of: (a) unit price contracts; and
(b) cost-plus contracts? Compare these two types of contracts in terms of: flexi-
bility to owner changes, and the financial objectives of owner and contractor?
3. Briefly explain the various forms of negotiated cost-plus contracts.
4. Briefly differentiate among the various project delivery approaches.
5. What are some of the challenges in fast-track projects?
6. What is the difference between a bid bond and a performance bond?
7. a. Outline the decisions taken by the project manager during the development of
a contract strategy for the execution of a specific project.
b. Explain why a consideration of incentives, flexibility, and risk sharing is vital
when choosing a type of contract for civil engineering work.
c. Comment on the following statement: "The interests of all parties to a con-
struction contract will be best served if the contractor is required to carry onJy
those risks that he / she can reasonably be expected to foresee at the time of bid-
ding."
8. Sketch the various contractual relationships by which an owner organization may
be engaged in the management of projects.
9. Briefly explain five roles of the project manager and the site superintendent.
10. What are the important elements to be included in a call for bidders? Attach a
sample call for bidders from a newspaper.
] 1. What are the components of a bid package?
12. Explain the purpose of the site investigation made by prospective contractors
during the bidding stage. What data do they obtain?
13. What are the various forms of matrix organizations? Which forms most suit con-
struction projects?
14. Compare and contrast the use of a performance bond with that of retention
money in terms of the protection given to the owner.
15. Explain the purpose of prequalification and outline what it involves.
16. List 10 subcontractors that can be engaged in a building project.
17. The use of a cost-based contract has a fundamental effect on the relationship be-
tween the owner and the contractor when compared with a price-based contract.
Explain why this is the case.
18. a. Give three examples of secondary objectives on a construction project that
would exert a major influence over contract strategy decisions.
b. What are the circumstances that favor the use of turnkey contracts?
c. Compare the following types of contract from the point of view of flexibility
for design change and variation: lump sum, unit price, and cost-plus.
19. Conduct an Internet search on one of the project delivery methods and report the
most interesting and informative sites.
20. Conduct an Internet search and discuss the following types of contracts: BOT,
A + B, and lane rental.
 INFORMATION
MANAGEMENT TOOLS

After studying this chapter, you will be able to:

• Manage your company's information using Excel data management tools.

• Understand the simple and powerful spreadsheet functions for managing in-
formation.
• Use Excel pivot tables for summarizing and reporting data.
• Use Excel mathematical optimization tool, the Solver program.
• Use other add-in programs for optimization based on genetic algorithms.
• Experiment with the Microsoft Project and Primavera P3 software.

Need
• Feasibility • Conceptual Design
• Project

--
• Owner Approval
Definition • Soil Reports
• Owner • Preliminary Design
Approval • Detailed Design
• Quantities • Planning Detailed Planning, :. 0 & M :
• Work Documents Time & Cost Estimation Estimating & Resource : • Demolition :
Select Project • Scheduling Management : at End of :
Contract Strategy • Resource Management: • Schedule Updating : Service life:
Adjustments for Resource Con- • Progress Evaluation : :
straints & Deadline • Time, Cost. & Quality : :
• Bidding Strategy & Markup Control : :
Estimation • Commissioning: :
• Cash Flow Analysis , ,,
• Submit Bid ,, ,

29
30 CHAPTER 2

2.1 Introduction
The construction process is heavily information dependent. Well-maintained and or-
ganized data is crucial to support the timely and cost-effective planning, bidding, and
control of projects. With the large amount of information related to resources and op-
erations, it is sometimes difficult to obtain and organize such information either be-
cause of the limited time available or the inefficient methods of data collection and or-
ganization. Thus, improving the quality, integrity, and timeliness of construction data
is a well-recognized need. This chapter, therefore, introduces the basic tools that can
be used to manage construction data. Special emphasis is made on spreadsheet pro-
grams as simple-to-use tools that are customary to almost all construction practition-
ers and also have all the power functions that satisfy the need of construction appli-
cations. Some of the database capabilities in Excel are presented in addition to some
add-in programs that provide optimization capabilities. Two project management
software (Microsoft Project and Primavera P3) programs are then introduced before
being used in the various chapters of this book.

2.2 Excel Data Management Tools

Spreadsheets arc among the earliest software innovations that had a profound effect
on the widespread use of personal computers. Among their strong features arc their
intuitive cell-based structure and the simple interface that is easy to use even for the
first-time user. Underneath the structure and the interface is a host of powerful and
versatile features, from data entry and manipulation to a large number of functions,
charts, and word processing capabilities. Newer spreadsheet versions have also added
many productivity features for Internet connectivity, workgroup sharing, program-
mability options, and a number of add-in programs. With their wide use, spread sheets
have proved suitable as a tool for developing computer models in domains such as
construction, for which case of use, versatility, and productivity are main issues.
Since the core of any management system, such as the one we intend to develop
for construction, is a storage of the data and information for management operations,
a brief review of the database capabilities in spreadshect programs is presented. A few
basic, but infrequently used, spreadsheet features need to be known and can be used
to develop practical and powerful models for construction applications: data lists,
data menu options, basic spreadsheet functions such as "VLOOKUP", and pivot table
reports.

The data list in Figure 2-1 shows an example of an estimate sheet with each row
representing one item in the estimate and its quantity of work, unit, cost, etc. shown
in the various columns. Once the list is formed, the data management tools provided
under Excel's Data menu, such as .sort, filter, and Outline can be directly used to
 INFOlUvlATlON N1ANAGEIvlENT TOOLS 31

One row of data

headings
L.,.j)':::U:
E.(~J'::·C : ;)t,=;(!:tIJ;1 6 .JJ:~rTrench
5,,;.::: .'1]',-',,,,(1,
EjC;;3!:Or.
2,;J~11
F'j

f;~:~
- n!O
)
I

L
i

C.t,;0If::L; llk;> ":;:;(:0; C::.W:~;j.;.:uort !S CiiJ IT :~ 0 61 <

2~-Jf;il
~
..~
51 ":(,: m 'I 60
.,~;
'~",' H, ,; ?F;
~a;ln 4~ F', 'I).l
2a(~f; j~_:iJt:=k~F!~uf:~~cn 87:If,1 07: X f"3 l< ~l)f
<.c"f,p~,ti0" ..k ;:'''''';~33Jn C:~trl),:,:::lOr~ d3 )] rr-3 0 51 ::-.~
[,,:~;,i:j'.:'," ::30.£ n-3 I -r-
1..1.

Y: 4(- rro.? :-:f= )"7 ;";;

Data arranged ::t: :ii) rr.'·' :', }~

with each "1: X T o: --
record in one -r
;:.: ne:; i.J i a ';e~
row " n-]
FIY0::¥~h rr
f i/:;~~"'i:P': :r~:C :~?:
Ri:l(:::A;~1 (it U'
f,g
R~:I~~i:( ! ~~
..;E~;r rr.3
Fe,'r"'",,,, ':-~ ·X: :1',
;;j~2;h:':~",:e- :·.~vr8·~:r.?· / ••1 'J
;::?::.
?::~~:fL'':~~:~:~~::: se c3
~:.{::.xcn~ i!_~~ :.::'i
<,
~';S!l1:R'fI
:·e.:JJ r<

Figure 2-1. Excel Data List(Database)

manage the data in these lists, The data list, as such, becomes an intuitive and simple
way of storing data related to each other, A separate list can thus be used to store sep-
arate data, One list, for example, can be used to store labor categories; another list can
be used to store equipment categories, and so on, Later we can learn how to link all
these separate data lists to use all their data together.

2.2.1 Sorting Lists

Sorting is a valuable way of managing the data in an Excel data list It helps you bring
similar records together for visual inspection or other purposes such as preparing re-
ports and charting the data, You can arrange the list's data in an order that you choose
by sorting the records, Suppose you have the estimate data shown in Figure 2-1. You
want to view the data in Figure 2-1 arranged according to the total cost To do so, fol-
low the steps in Figure 2-2,
32 CHAPTER 2

Figure 2-2. Data Sorting

1. Select one or more cells in the data list range Al:G27;

2. Choose Data-Sort menu option. The Sort dialog box appears as shown;
3. Because you want to sort by total cost, click the column label Total in the Sort by drop-
down box;
4. Because you want the record with the highest total cost to appear first, choose the
Descending option button, as shown. The result is shown in Figure 2-3.

Forms, V"./alls
Pi2CHl'J Conc!"818, \!\/Jlis
Fcrms, Footing
Reinforcing, LJGhtWalls
'nsulanon of l=o,-mdatiOn
Pi2(i1~ Concrere, FIOQ'
F'T.!;102.!i')'1 ,'1 Uti:;;-; T '8n,.;r:

~J:.n".Run GRlvd, t-:!oor:1UOmrn deep

p~):y::t~::{~:{:f.:,'j~+u
3:ni':'
8)::;;"Ji~ A'1Jund FOlinda~on
k~nJj2~ of Farm Footing
ICcr:';<l:ct Around C:oundaLoll !
SL.'-e' !uNel Finish ~>':Tl(-L/Ig

Figure 2-3. Result of Sorting by "Total" Value

After you choose OK, the range Al:G27 appears as shown.

Usually, the order in which the records are sorted is ascending (1, 2, 3, etc.) or de-
scending (Excavation, Compaction, liackfill, etc.). But there are some custom sorting
orders that you can access by choosing the Options button on the Sort dialog box. For
example, if a list contains the names of the months of the year, you can sort it so that
September (month 9) records precede October (month 10) records, even though al-
phabetic order calls for the reverse. The Sort options enable you to choose a custom
sort order and change the orientation of the sort.
 INFORMATION MANAGEMENT TOOLS 33

2.2.2 Filtering Lists

Filtering the data in a worksheet list is a useful way to view a subset of the records
that compose a list. To filter a list is to extract records from it, based on criteria that
you set. You can extract records visually, by causing Excel to temporarily hide records
that do not meet your criteria, or you can extract them structurally, by causing Excel
to move records that do meet the criteria to another part of the worksheet. There are
two menu commands to filter a list, both found in the Filter menu that cascades from
the Data menu: AutoFilter and Advanced Filter, as explained in Figures 2-4 to 2-9.
In Advanced Filter, the List Range edit box defines the list that is subject to the
filtering process. Also, if you check the Unique Records Only check box, the Advanced
Filter ignores duplicate records in the list identified by the List Range edit box.
The Advanced Filter allows you to create more complicated criteria than does the
AutoFilter. In particular, you can use the Advanced Filter to specify:
• More than two criteria, which is the limit of the AutoFilter.
• Computed criteria: For example, "Display only those records whose total cost
value is greater than the average total cost value." This is termed a computed
criterion because Excel must compute, in this case, the average total cost in or-
der to determine whether a record meets the criterion.
You must enter the criteria for record selection in a range on the worksheet, and
refer to that range in the Advanced Filter dialog box's Criteria Range edit box. Addi-
tionally, in all but one situation, you need to repeat the column's headers as the first
line in the criteria range. This is so that Excel knows which column to compare with
which criterion. It is convenient to put the criteria in the same column as their associ-
ated list.

Resi~e.ntial .. 200.000 j
Resid~nt!31 PG (lOO i
Residential 315:000-' .
Office Builcing 145,000 :
~:':':""-=--,-.,.-_-! Restaurant 180,00] i
qffice 8q~!r!ij~g 470,000 i
qffic:B BuH~I!'g .....cc"""'.".~ 'c 600,000 l-
........
·~';i::~~::::·.·.··
..··.·.""·.
R~s;d2:nti.:tj
~~~~~::'21.:.B21
Sir]
~,:OOC.7~OJ~OJ.
c
:"i

()ffl,:e~~!lkjlrg 160,000 1
.q~!ce t?l.~i~,lj!C'g 5~-·(.b)i.J·I
Reslien:lal Grei:lJ T 210000 [
Resid"ntlai Smith c, 360:000 j
Offke 8.t;i!~_?~~'fJ Greer: <; :~ioo,000 !
[3$, ..f.~~s.;~.Y.~?;~~_. . P~\3.? ~ ~~~.~qq.I
y-'l-D4 Wi:'H Office Build",\) June:; . :t 380,000 i
W-OS VVest. , .. :.", .....Res :all('-l!lt .... Davl:, r 14f),,000 i

Figure 2-4. Using AutoFilter

While any cell inside the data list is selected, choose the Data-Filter-AutoFilter menu option.
The AutoFilter puts arrows (calledAutoFilter control) beside the column labels in the header
row to display filtering criteria, Notice in this figure, the drop-down box that appears when
you clickthe control on cell B1,which contains several options in order to define the filtering
criteria,
 Resiclenllal Bill
Resldenllal Smith
Restaurant Smith
UfflCe Building Green
Office Buildillg Jones
Residential Bill
Residential Smith 313U)00

Figure 2-5. AutoFilter Results

Selecting the Central region brings only the subset of the list that meets this criterion (only
the records from the Central Region). When you choose a criterion for two or more columns,
the criteria are treated as connected by an AND- The entries that arc displayed must meet all
criteria that have been set.

Figure 2-6. Custom AutoFilter

You can also use the Custom option in AutoFilter if you have no more than two criteria to
apply. These criteria can be treated as connected by an AND or by an OR (a record is
displayed if it meets either criterion).

Figure 2-7. Using the Advanced Filter

The Advanced Filter command gives you more options than the AutoFilter command.
Choose the Data-Filter-Advanced Filter menu option to activate it.

34
 Figure 2-8. Advanced FilterOptions

If you choose the Filter the List In-place option, the Advanced Filter hides rows containing
records that do not meet your criteria, just as the AutoFilter does. [f you choose the Copy to
Another Location option, the Copy to edit box becomes enabled, and you can click in a
worksheet cell to establish the first cell to contain the copied data.

Figure 2-9.
Applying Advanced
Filter
?fll.O(lO
22t;.OOO
R~:d.~fI-;i~1 SmiH't 34?;o9Q
... _BI?'SJd!?~i?j~l. ::imlti) 3f}tJ..UOO:
R~S~~UI
. -_ O:lt . Smlh 130.009
OHic< B,j~jin.Q Gre::n . 420.000;
8'_j~::1.!~9....
9Hke__ Jorl.)$ 600.000. ....
. _.fl" "id"';li:ll. . 1(15.DOO:
R,.dd"';lioJ .L 210,000
.L 1£0,000:
...... > ?lD,o°9
145.000
: Re5t·~ur,:tfl~ .~. . .. 225)}1'1Q
'-p'-' '-R~sid~;)ti~1 t 2to,uno
. . O!Ii:="eUi'1Ing 1 ... )D(I,;)(II) •...•
t HO.DOO ..
. 31()'Ql)~

35
36 CHAPTER 2

Figure 2-9 displays four options for setting the Advanced Filter criteria. None of
these criteria is possible through the AutoFilter:
a. Criteria range A21: A24 contains three criteria connected by ORs. The three
criteria relate to the column Project Manager and are put in different rows, as
shown in A2l: A24. The Advanced Filter would display only those records
whose value on Project Manager is Bill or Smith or Thomas.
b. The criteria range A26: B27 makes reference to two different columns: Project
Value and Region. To connect multiple criteria by AND, enter them in differ-
ent rows, as shown in A26: B27.Advanced Filter would display only those
records whose value for Project Value is over $250,000and which belong to
the Central region.
c. The criteria range A29: 832 is an example for connecting multiple criteria by
both AND and OR, as both different columns and different rows are used.
Advanced Filter would display only those records that matched (Billand
Residential) or (Smith and Residential) or (Thomas and Residential).
d. The criteria range A34: A35 contains a computed criterion. The formula that
returns FALSEin cell A35 is =E2 > AVERAGE ($E$2:$E$19).The criterion
specifies that only those records whose values on Project Value exceed the
average project value are to be displayed. Notice about this criterion that:
• The use of E2 is a relative reference. As the Advanced Filter scans the
records in the range E2: E19, it adjusts the relative reference to E3, E4, ... ,
E19. On the other hand, the range $E$2: $E$19 is an absolute reference
(shown by the $ sign) which specifies a constant value that does not change
with the records.
• Cell A34's label is not Project Value but High Project Value. It is important to
use a label that is not identical to any column label in the list's row header.

2.2.3 U sing Data Forms

One of the trickiest parts of data management with Excel is seemingly the most triv-
ial: getting the data into a workbook. But entering data into the spreadsheet's native
row-and-column grid is extremely tedious and prone to error. The data form available
within Excel provides a solid way for you to enter, view, and filter data. Figure 2-10
shows one such form, which was generated for the estimate data list behind the form.

Figure 2-10. Built-in

Data Form

Youcan activatethe
form fromany point
in the list using the
Data-Formmenu
option.
 I~FORMATION MANAGEMENT TOOLS I 37

Using this built-in form, we can edit or delete the existing records in the list or add
new records.
If the list contains calculated fields (e.g., colurrm G), the calculations will not ap-
pear in the form but will be automatically added to all new records in the list.
In addition to entering, editing, and deleting records, you can also use an Excel
data form as a filtering tool by following the steps in Figure 2-11.

Figure 2-11. Filtering Data Using the Data Form

• Choose the Criteria command button on the form. Excel displays a blank record.
• Enter your criteria in the appropriate fields. You can enter criteria for as many fields as you
like. The criteria shown here, for example, will find all records that meet the Formwork in
the WBS field with its Total greater than 1000.
• Choose the Find Next and Find Prey command buttons to display the records that match
the criteria. When you choose the Find Next command, Excel will display the next record
in the list that meets the criteria. (The next record is determined by the current record. If
the form displays the fourth record after you enter the criteria, Excel will search from that
point forward when matching records.)

Since you can view only one filtered record at a time, this alternative to filtering data
generally is not as efficient as the AutoFilter or the Advanced Filter. However, it still can be a
useful tool, especially when you are in the middle of a data-entry task and want to ask some
quick questions of your list.

2.3 Useful Excel Functions for Retrieving List Information

Getting data out of a list in a clear and efficient manner is an important part of the
data-management process. Excel has several tools that help you accomplish that task.
The Advanced Filter dialog box has already been introduced, having an option to
copy records that match the criteria you specify to another part of the sheet, where
you can manipulate them without affecting the original list.
In addition to extracting selected data from a list, you can create formulas that re-
turn specific information from the list. The built-in Statistical List Functions calcu-
late statistics for only the records in the list that meet the criteria that you specify. The
LOOKUP functions help you manage large lists of reference data by returning infor-
mation for specific records from specific fields. The MATCH and INDEX functions
give you further control over the data by allowing you to identify a given entry's po-
sition in a list or an array. The OFFSETfunction extends the capabilities of the Index
function by reaching into a worksheet range and returning any number of values
from that range.
38 CHAPTER 2

Figure 2-12. Excel

Statistical Functions
for Data Lists Resldt:ntial ')00.000 ~i?31),Q)oJ
W DJ We~t Residential ' :0.000
C·03 Centra! Revidential Smnh 315,lYO
E·05 East Office Building Smith '45,OOJ
(>,6 ::en.if;jl Restnurant Smrth ;t-'[),OflO
(:···G~; ::::a1I,(j1 Office BUilding ()rlj~ll 420,000
(..:J! ::::'-:'Mal Once Building .Jones GOO,OO)
t ·:.H E;,sl Re5.1l1f.nlJal Inurnas lG5.WlQ
::.::t2 Eaot RcsidentiZlI Thomas $ 21O,)jO
C U! CE!:)t(;j1 Re~.;:~I::;rJ;lt CUI ?!.5 mm
=·03 EaSl OffiCE! 't3uridirrg 8111 $ 'roO,UtJO
E·}! Ea:;1 Omr.e BuilCir,g Jcnes $ 21C,OOO
'N-Jl 'VVesi R~slder.tial Green s 111',000
C·}: Central Residential Smith $ 360.000
w·o:- ·./ve~t 0r.ce :31;1:'~!;I?_ C;~fn $ :::(if~.Il~q

1"·0, East Restaurant Oa-.i~ $ '2:25/j;jJ

W·[)4 ',.:•..•
est :)fflce Building Jooes $ 380,000
W·Oo '';':8£t Res-t2urant 00..15 $ 14Q,DOQ

··:.········tii?N~t·t~~<it·····
C~n!i'al

2.3.1 Statistical List Functions

Excel's statistical list functions, sometimes referred to as the "0" functions (Database
functions), provide an instantaneous way to measure a number of important list sta-
tistics, such as sums, averagcs, and standard deviations.
As shown in Figure 2-12, the most commonly used statistical list function,
DSUM, formula in cell H2 uses the criterion range A21: E22 to calculate the total proj-
ect value in the Central region.
The syntax of the DSUM function is ~ DSUMOist range, calculation field, crite-
ria range).
Because these functions use criteria ranges, you can specify that the calculation
includes only certain records from the list by entering the appropriate criteria. This
structure allows you to make the same formula quickly yield statistics for a number
of different sets of records simply by changing the criteria in the criteria range For ex-
ample, if you entered the criterion "West" in cell B22, the DSUM formula would im-
mediately reflect the total project value in the West region.
Table 2-1 includes a list of Excel's statistical functions that deal with data lists.
Each of these functions has the same syntax as the DSUM formula in cell H2; each
uses the same list, field, and criteria arguments.

Table 2-1. Statistical ListFunctions

Function Returns

DAVERAGE Average
DCOUNT Count of cells containing numbers
DCOUNTA Count of nonblank cells
DMAX Maximum
DMIN Minimum
DPRODUCT Product
DSTDEV Standard deviation
DSTDEVP Population standard deviation
DSUM Sum
DVAR Variance
DVARP Population variance
 INl:'ORlvlATION MANAGEMENT TOOLS 39

You can use these statistical functions to interpret list data and spot potential
problems such as data-entry errors. You can check maximum and minimum values,
compare maximum and minimum values to average, and compare the population
standard deviation and population variance for different criteria.

2.3.2 Looking up Data

Referencing and searching a list is another important part of the data management
process. In realistic systems, where several lists of data are available, a link needs to
be established among them (similar to the relational database concept). One simple
and important spreadsheet function, VLOOKUP, can be used to link separate lists of
information by making a reference to where the original data is.
a. VLOOKUP Function: In Figure 2-13, for example, the top sheet includes a
list that contains various labor categories and their hourly rates. Now con-
sider the situation when a new list is used for estimating purposes (bottom),
and this list refers to the Code of the labor being used. Accordingly, it is pos-
sible to determine the cost by using a VLOOKUP function to search the origi-
nallabor list and determine its associated Rate/hr value, as shown. If the re-
source code specified in cell A4 of the estimate is changed (e.g.. L9 is used),
the costs will be adjusted automatically in cells C4 and 04 of the estimate.
The VLOOKUP function, as such, provide a convenient means of linking the
data stored in various separate lists.
Excel's look up functions, VLOOKUP, HLOOKUP, and LOOK UP, provide
you with different (and sometimes overlapping) ways of finding a specific
piece of information within a structured list of unique records. The match

Figure 2-13.
VLOOKUP Function :;{:::!;'.' './;;t?l :;;.c<;:in:.t'n(":, ,'G'~'''; Onc- tl:"~~j',~ i'~,::.~1 (7; !:,~ f',;',<~"k:~~~ '":,:;nr."" ~~:: 1l~:
:: T~~e
d<:i12 I ;;r (..';-.;.~'::r <; tl;-.~- : /:·B ~. ; ~
~(:~~f.'

J :::.·~~~.f'_:
.~~j;~.:.::(r.t~ln
fef"llda-:~ ','l~! t;'::~:~__
re copied iro-n ,xlf :-1 ..•·' I..) U~t.' ')~-,':"""!I

4 ·i r·,:- :ert>" (;i;1 ,,", C9 !-:,: -"'N[i9" ~ i.58 ]';:j,~S.'"e'·3g=- adursrrnent to the (,,,SIC rste,

Laborer

Sheet Name
Vlookup function in cell "C4":
=VLOOKUP(A4,Labor!A8:EI1,3,O)

-----j--- - -~
_-'-.:.:..::....:..=...::..:-t--'-'N~ ..
-.,--7"---
~~tih:-"r~--'...:..=...c=-="'-"--I
Y.~1·,::
t~
List to be
I
bh.H_---==-=-----'_=JOO "::.-2:
.;;;;53c...-"--:7,L..C.~'-'-_1 searched

Column uumbei of
=B4*C4 the requested data

Exact march
required
40 I CHAPTER 2

and index functions give you further control over the data by allowing you
to identify a given entry's position in a list or an array. OFFSETfunction is
particularly useful when you want to deal with a subset of data in a range by
means of an array formula. The Help system of Excel can be used to obtain
information about the syntax and use of these important functions.
b. Using the MATCH Function to Aid Lookups: When a lookup list grows, it
becomes quite easy to calculate the column offset, thus returning incorrect
information from the list. To avoid this problem, you can use Excel's
MATCH function (Figure 2-14) to calculate the column offset. The syntax of
the MATCH function is:
=MATCH(lookup_value, lookup_array, match_type)
The function returns lookup_value's position within the lookup_array.lf
the lookup_value is the fourth item in the lookup_array, for example, the
match function returns 4. The implication for the Vlookup and Hlookup
function is straightforward. Using the match function, you can specify both
the lookup_value and the column argument as they naturally occur in the
list, rather than figuring out for yourself what integer you should be using
for the column argument.
c. LOOKUP Function: The LOOKUP function (Figure 2-15) comes in handy
in the event that you want to use a lookup_ value in one list, yet return a
value from another list. The syntax of the LOOKUP function is:
LOOKUP(lookup_value, lookup_range, result_range)
• Here, the lookup_value and lookup_range arguments function similarly to
the VLOOKUP function. But instead of comprising an entire list, the
lookup_range includes only one column or row of a list.
• The result range has the same size and dimension as the lookup j-ange, but
it is usually located in a different list.

$4,800

$63,050

Lookup Formuta : $14.20U =VLOOKUP(B11,AW,B14,FALSE)

Ai:., lookup Vlllue:
11IL.·.··.·.·.·..·..-.·.··.·.·... · .
:la Column:~
1~· lil~tchin9Index:LL!=Iv1ATCH(B13,AlI1 ,0)

Figure 2-14. Using the MATCH Function

Figure 2-14 shows a function to return the April's expenditures for Project3. Cell B14holds
the match formula that returns 5, which is the column position of April in the header row
(range AI: Il). The VLOOKUP formula in cell BlO relies on the MATCH function to
determine the column argument.
 I~FORJ.\1ATION MANAGEMENT TOOLS 41

16
245
?l~iC8 1.~r~r;Ua; 115
B<:f.~J:ll,A.fO;1rld r.mlf::t~tf!;) 104
·.~·omr:.:J('tf'.!Oljr_~_ffl:.1fi~a~l)r:. :Q'rmach" Be 0);. m3 54
L.1:t t3r;;jl~f: Exc.ay~t:=)r 265 ea rr:3 3;(
F ~rr~I~-,f t~(';trllj ;:on~w"lMk 30,0 , .foOL
. . . . ~.~r.r:((~~~
..~.~'yO;tf_:·_r~i}t:~.~Q. :: ;J~'r:,->!\"'fJfK ::;n..tc; ~~.fn
Keyway. 50mmx 1OOrnrn . '"F o'rm,,;ork . ~~6r.1J. . f,!
····'-'!.~B2.•

.~;""' -i~LOOkuPCl1emtiit'ALAli,12:12!}

Figure 2-15. The LOOKUP Function

This example contains two lists. The first list is an estimate list, and the second list defines the
actual cost of the tasks. The formula in cell B16,finds the ltem09 position in the lookup range
(range A2: A13) then returns the value from the corresponding position in the result range
(actual cost, range 12: 113). Note here that the first range (A2:A13) has to be sorted
ascendingly for the function to work properly.
In real life, of course, these lists are likely to be located on the separate sheets of a
workbook or even separate workbooks. The lockup function makes it easy to look up
information that is stored in different workbooks. Since the LOOKUP formula returns its
result based on the relative values in the lookup range and the result range, the two ranges
obviously must be of the same dimension and sorted in the same order.

Figure 2-16. The =INOEX(,A2Fl1,2,6)

INDEX Function

The formula in cell

..~~vout 100I:Jay 6'1 "3.( 7
B14 returns the value
... EKC31;':"i8F ("Jndalio!"~~ UtilitV Tr?ncfl 3i9.00 rn'! :3,"1 G
in the second row and 'Eackt1ll Utilitv Tr'j 11I;11 26.DO 1'113 1.22 ...•.-,
.,."I.i..

the sixth column of .:(~om~)ictl)tJlltij'rel' ':r' 26.00 '1 "{-~

range A2: Fll (the Ir,siall V,j88[ln~.T.i!.8 5200

total cost of Fill-1 Yiace Gnnular ,190
excavation). Backflll-2 BOlekflllA.round Foundation 8B.UU
<:;ot"rlP(:jct:2 Camped Around Founosucn 38.00
Grade Lot Gr8dlllQ' ..." .., 26600
Fill-2 :!3~nk Run Gr::;1l81, F}~,or:200rnm dee 31.00-
. .- ,

r . Index formula ;1L:>G.•. 1~7.;;:5 ~ __ ~_!=iNDEX(A2F11 ,2,6)

d. INDEX Function: The INDEX function (Figure 2-16) returns a value from a
list based on the value's position in the list, rather than on a lookup value.
The syntax of the index function is
=INDEX (range, row, column, which_range)
The optional iohidi range argument gives you the opportunity to specify
more than one range in the range argument. (You group multiple ranges in-
side parentheses.) For example, the formula =INDEX«A4:B8,H4:18),3,l,l)
returns the value from the third row and first column of range A4:B8.lf you
42 CHi\l'TER 2

3.',0
8aGf:rll1-1 "\ ,:22
Compact-t Cornp:.cl Ullli~i Trench 26.00 0.6'1
VV8ep-tlle Install ',/V88pinhl Tile ~'::CjO IY\ 4.60 239
Fill-1 Place Granular 4.80 m3 41.66 204
8ackTll1-2 83c~~ljll.A.round Foundation 88.00 1)13 "1.22 107
compact- :' ,:::onl;.::.art t:••.round Founuauon 88.00 rn:3 0.>31 ')4
Grade L'Jt Gr:,ojin~1 2ei:~.oo rn3 I.n 324
Fill·2 Bank I=:un 1,='; r-a'I/e. I. Floor'200rnrn ljBe ~3"1.00 rri3 5.13 180

Offse1 torrnuta : E;{ca\,'ate FOUf'roatlOn D. t1ti!itvTtenc

Figure 2-17. The OFFSET Function

The formula in cell B14 is shown here. It returns the values in a range that is two rows high
and three columns wide. The upper-left cell of the result range (B3) is determined by an offset
of two rows down and one column right of the upper-left cell of the original range (AI). So the
formula returns the values in cells B3:D4.

change the last argument to 2, it will return the value from the third row and
first column of range 114:18.
e. OFFSET Function: OFFSET is similar to INDEX, but it identifies rows and
columns slightly differently, and it can return more than one cell in an array
(Figure 2·-17). The syntax of the offset function is:

OFFSET(range, rows, columns, height, width)

• Range refers to the original range of data.
• Rows is the number of rows to offset, up or down, that you want the upper-
left cell of the result to refer to.
• Columns is the number of columns to offset, left or right, that you want the
upper-left cell of the result to refer to.
• Height is the height of the result rangc, in number of rows, the same height
as the Range if omitted.
• Width is the width of the result range, in number of columns, the same
width as Range if omitted.
You can enter a formula that returns multiple values by means of a special type
of entry that is termed an array formula. To return the offset range in Figure 2-17, you
would begin by highlighting the range that will contain the formula. Then, type the
formula as given, but as you press Enter you should simultaneously hold down
Ctrl + Shift. This instructs Excel to interpret what you have typed as an array formula,
and to return the results to all the cells that you highlighted before entering the for-
mula. More explanation can be found in Excel's Help system.

2.4 Excel Reporting Features: Pivot Tables

Reporting is another essential requirement for obtaining summary data on resources
and operations. In Excel, the pivot table wizard provides an automated and powerful
report generator. Pivot tables enable the user to:

• Summarize long lists in a compact format.

• Find relationships within lists that are hidden by all the details.
 l.'.J:-UK,VLAllUN NlANAGEMENI 1 UUU; I ":1:<)

• See differences in one variable that are associated with differences in another
variable.
• Display data in the form of subtotals, averages, percentages, standard devia-
tions, and so on.
1. Understanding Row and Column Fields: A row field in a pivot table is a
variable that takes on different values. For example, in Figure 2-18, the row
field is the variable called Region, whose values are East and West. For each
value of Region, the pivot table displays a summary of its data field. The
same is true of a column field, which is a variable called Project Type in the
given example.
The basic effect of row and column fields on a pivot table is that each
value, or item, that the field takes on defines a different row or column. So, if
a pivot table has a row field that takes on four items and a column field that
takes on two items, the pivot table has four rows, two columns, and therefore
eight summary cells, exclusive of cells that contain labels, subtotals, and
grand totals.
After creating the pivot table, you can easily change a row field to a col-
umn field, or a column field to a row field, which is called pivoting the table.
You just have to hold down the mouse button on the field you want to move
(shaded cells in the pivot table) and release the mouse button when you
move the pointer into the proper area.
You can specify more than one row or column field in a pivot table; addi-
tional fields are called inner fields. Within one category, or value of the outer
field, there can be several values for the inner field. The data field is summa-
rized first by the value of outer field and then further summarized by the
corresponding values of the inner field, as shown in Figure 2-19.
2. Understanding the Data Field: The data field is the variable that the pivot
table summarizes. For each combination of values in the row and column
fields, the data field takes on a different value: It is this value that appears in
the pivot table's cells. Most frequently, the way the pivot table summarizes
the data field is by its sum, as seen in the previous examples. Or, if it is not a
variable that can be totaled, the summary statistic might be a count or per-
centage of the observations in a list.

Figure 2-18. Simple

Pivot Table

To create a pivot table, ReSICb,",ti::1i

as shown, all you kes!d8:'1tlai
Data
need is a data field (;:ffi::~HtHh-Jng Bnn.Dilil List
and a row and/or
omce F.n:O.nq £14D.OOO

column field. Data

field is the variable
that is to be Column Field
summarized, and the
row/column field is the
variable that controls
the summary.

Row Field Data Field

Figure 2-19. Using
Inner Fields in a Pivot
Table Resldertlal
~;eSldErttal
~[S'der;tlal 1998
Here, a pivot table
E3St Office. Elnlding 1g9~i
was created by using INe::;t Office BUilding 1998
Year as an outer-row East Office EUlldlng 19"8
West ReSidential 1989
field, Region as an
inner-row field, and
Project Type as
column field.
R831dentlal Grancllotal
-----

$210.000 $455.000
$215.000 $2SC, 000

$775000 $1.42C·.000

Figure 2-20. Pivot

Table with a Page
Field Rtsldentlal
Residential
ReSidential
Office Building
Office Building
C:·'fi: c Building
PeSldent[31

Grand Total
$395.000 $800.0CO
$380.000 $62C,000
Total $775,000 $1,1120,000

3. Understanding the Page Field: A page field is useful for adding another
variable to the pivot table without necessarily viewing all its values at once.
Suppose, for example, that you want to focus on project values for different
project types, in different regions, over several years. If you define year as a
page field, you can display project values within project type and region for
all years or for any given year, as shown in Figure 2-20. By choosing differ-
ent values from the page field, you can display different subsets of the data
in the pivot table or all the data if you choose the (All) item in the page
field's drop-down box.

2.4.1 Using the Pivot Table Wizard to Create a Report

There are two main ways to start the wizard: either by selecting Pivot Table Wizard
from the Data menu (Figure 2-21), or by using the Pivot Table Wizard toolbar button.
To install the Pivot Table toolbar. use View-Toolbars menu option and then check the
Query and Pivot checkbox in the Toolbars list box.
When you activate the Pivot Table wizard, the first of the four steps in the wizard
appears. Let's follow these four steps for creating the same report as that in Figure 2-20.
 INFORMATION MANAGEMENT TOOLS I 45

Figure 2-21
Activating Pivot
Table Wizard

Figure 2-22.
Starting a Pivot
Table

Step 1: Choosing the Type of Data Source

Having the data list on the sheet, select cell Al2 and then start the Pivot Table Wizard.
First we define the source of the data as an Excel list, as shown. Hit the Next> but-
ton. Notice the variety of data sources that can be used to generate a Pivot Table.
Step 2: Specifying the Data Source
We then specify the range of the data source (Al: 08) and hit the Next> button, as
shown in Figure 2-22.
46 I CHAPTER 2

Step 3: Designing the Pivot Table

This is the most critical step in creating the table: At this point, you determine which
variables will act as row, column, page, and data fields. Figure 2-23 shows the fields
used to prepare the pivot table in the Figure 2-20.
To drag a field button into one of the field areas, move your mouse pointer over the
field button, hold down the mouse button, and continue to hold it down as you move
the pointer into proper area. Then release the mouse button. Once finished, hit the
Next> button.

Note that while the box in Figure 2-23 is active, you can double-click any field button
(whether or not you have moved it into a field area) to set its options.
Step 4: Setting the Report Location
First of all, you have to choose where to put the pivot table, as shown in Figure 2-24.
Leaving the Pivot Table Starting Cell box blank causes Excel to begin the pivot table
in cell Al of a new sheet.
If you want to change the default settings, you have to click on the Options button
in the dialog box shown here. A new dialog box appears with the options seen in
Figure 2-25.

Figure 2-23.
Designing the Pivot
Table

Figure 2-24. Pivot

Table Location
 II':FOIUvlATION MANAGEMENT TOOLS I 47

Figure 2-25. Pivot

Table Options

2.4.2 Using the Pivot Table Toolbar

When Excel completes the pivot table on a worksheet, it automatically displays the
Query and Pivot toolbar (Figure 2-26). While any cell inside the report is selected, you
can use the toolbar to:
• Choose the Pivot Table Wizard button to start the Wizard, either to create a
new table or to modify an existing pivot table.
• Choose the Pivot Table Field button to change the characteristics of an existing
pivot table field.
• Choose the Un group or Group button to expand or collapse a pivot table coo-
trol field.
• Choose the Hide or Show buttons to display or suppress detail items in a con-
trol or data field.
• Choose the Refresh Data button to show changes that might have occurred in
the underlying data source.

2.4.3 Customizing a Data Field

If you double-click the data field in Step 3 of the Wizard, a dialog box appears as
shown in Figure 2-27. Notice the various summary functions and calculation meth-
ods in which the data can appear in the report. Details on each of these can be found
in the Excel Help system.

Figure 2-26. Pivot

Table Toolbar
48 I CHAPTER 2

Figure 2-27.
Changing Field
Options

2.5 Excel Optimization Tools

Operations research tools such as linear /nonlinear programming are quantitative
methods that can be used to enhance decision making and foster effectiveness in the
management of projects. Such techniques are beneficial because:
• They are applicable to a large variety of practical problems.
• Many software systems like Excel are available inexpensively and have these
capabilities built in.
• These tools can be effectively applied, hiding all the underlying complexities of
the theory and mathematical computations.

2.5.1 Goal-Seek
This Excel feature can be used to determine the proper values for the variables in any
application so that a goal is met.

Suppose your goal is to limit spending on a certain work item to $1,200 and
you would like to determine the proper amount of that item that you can af-
ford to buy given that labor, equipment, and transportation costs per unit are
$100, $140, and $5, respectively.
This simple example has a single objective, which is minimum cost and a
single variable, which is quantity. The systematic approach for solving this
type of problems is as follows:
• Develop a calculation model of this problem using spreadsheets. Basically,
we always represent each variable in a separate cell and give it an iniitial
quantity of 1.
• Always represent each data element in a separate cell. Use another adja-
cent cell to type a label for each data item.
• Write the worksheet formulas to do intermediate calculations.
• Set a single separate cell to represent the Goal.
• Activate Goal-Seek from the Tools menu and define the cells for the vari-
able (changing cell) and the Goal.
Figure 2-28 shows the implementation model and the results of Goal-Seek. No-
tice that the Goal cell is linked to the variable by formulas.
 I~FOIUvL<\TION MANAGEMENT TOOLS I 49

Figure 2-28. Using

Goal-Seek Labour. cost
........... ,
Jfl;t '"

Equiprnanl cost f Unit = 140.

lansportiition cos! I unil '"

l abnur cost =
........ Eq~11Jltn~n~£Il~=
T ranspnrtation cost =

2.5.2 Excel Solver for Mathematical Optimization

Goal-Seek, as explained, is a simple tool which can be used to solve problems that
involve one variable and that involve no constraints on the solution. Another Excel
tool, Solver, which is an add-in program for general linear and nonlinear integer
programming, is very useful for solving multivariable optimization problems. It
uses the Simplex and branch-and-bound mathematical techniques for the opti-
mization.

Using Solver to formulate optimization problems is a simple and straightforward

process. Optimization, in general, tries to maximize or minimize an objective func-
tion (a goal) by determining the optimum values (quantities) for a set of decision
variables so as to meet certain constraints. Using Solver, the user needs to establish
the calculations sheet and then simply define the cells that represent the objective
function, the variables, and the constraints.

This example involves the shipment of aggregates from three quarries to five
projects. The aggregates can be shipped from any plant to any project, but it
obviously costs more to ship over long distances than over short distances.
The problem is to determine the amounts to ship from each quarry to each
project at minimum shipping cost in order to meet the demand, while not ex-
ceeding the supply limit.
Data:
• The three quarries A, B,and C can produce a maximum of 310,260, and 280
truckloads per day, respectively.
• The five projects PR1, PR2, PR3, PR4, and PRS have daily demands of 180,
80,200, 160,and 220 truckloads, respectively.
• The shipping costs ($) from any quarry to any project are as shown in Fig-
ure 2-29.
50 CHAPTER 2

Figure 2-29. i L.
Optimization Model
TOlal
To verify the
spreadsheet model,
any change in the
values of the variables
should result in
appropriated changes
-, Total shipped =SUM(C~:G4)
formula copied down
in the objective
function, Total received =SUM(G4:GG)
A~~-r~~+-~-+ __~~~~
formula corned left
B~~-+--~1-~--+-~-4--7-~
C~~-L __~~~ __~~~ __~~

Shippinq Costs
PRl PR2 PR4
-r-r-r-r-r-r-r-ra

=G4'G"12
formula copied to all range C18:G:20
Cost

Overall Shipping Cost ~I-':fl3-'!}_. _ =SUM(GIS-«J))

----- =SUM(C21G21) formula copied left

Solution:
The solution has to follow the four steps of the systematic approach described
before:
1. Variables are represented in separate cells (C4: G6) with initial val ues of Is.
The variables represent the amount to be shipped from each quarry to each
project.
2. Each data element is represented in a separate cell. These include the max-
imum supply of each quarry (H4: H6); demand amount of each project
(CS: GS); and shipping costs (C12: C14).
3. Worksheet formulas are written to perform intermediate calculations (see
Figure 2-29). This includes actual amount delivered to each project, actual
amount shipped from each quarry, and the associated shipping cost.
4. Formulate a single cell for the Goal or objective function, in our example,
the sum of overall shipping costs (cell E23).
The Solver program can then be activated from the Tools menu and the opti-
mization parameters can be set as shown in Figure 2-30. The optimization objective
is to minimize the total shipping cost (cell E23). The optimization variables are the
quantities in the range C4: G6. The optimization constraints were also set to limit the
values of the variables to positive integers, not to exceed the maximum available
truckloads per day, and to meet the demand for each project. Using Solver, a solution
was reached, achieving a minimum total shipping cost of $3,200, as shown in Figure
2-30.
The variables take their optimum values that result in lowest shipping cost.

2.5.3 Nontraditional Optimization Tool

While Solver is a convenient tool for mathematical optimization, in some situations it
gets stuck and fails to solve the problem, or it gets trapped in local optimum. Alterna-
tively, new software programs have recently been introduced as a result of advance-
ments in the artificial intelligence branch of computer science. For optimization appli-
cations, a new technique, called Genetic Algorithms (GAs) has recently emerged with
random optimization capabilities inspired by the biological systems' improved fitness
 I;-.JFORL'"lATION M..A1 AGEME T TOOLS 51

Figure 2-30. Solver

Solution
Received By:
PR2 PR] PR4
o 0 80
o 180 80
80 20 0

Overall Shipping Cost ~ ~:;~i:±~~:±=Sl:::~=SUM(C~l G211

through evolution. Typically, GAs require a representation scheme to encode feasible

solutions to an optimization problem. Usually this is done in the form of a string called
a chromosome (or gene). Each gene represents one member (i.e., one solution) that is
better or worse than other members in a population. The fitness of each gene is deter-
mined by evaluating its performance with respect to an objective function. To simulate
the natural "survival of the fittest' process, best genes exchange information to pro-
duce offspring that are evaluated in turn and can be retained only if they are more fit
than others in the population. Usually, the process is continued for a large number of
offspring generations until an optimum gene (solution) is arrived at.
The powerful optimization capabilities of the GAs technique are potentially ap-
plicable in situations where traditional mathematical optimization does not work. Ac-
cordingly, the technique has recently been widely used by many researchers in various
science and engineering applications. Without much details on the mathematics of the
GAs technique, various software systems have recently been available commercially
as simplified add-in programs to Excel that hide the underlying complexity. One well
known software for GA-based optimization is the Evolver software from Palisade
Corp. (working copy is included with the CD accompanying this book). More infor-
mation on this software can be found on their websites (Appendix A, on web re-
sources). This software, and others that you may find through a web search, works as
an add-on to Excel, is very user friendly, and is nicely integrated into the Excel envi-
ronment.
Usually most of the Genetic Algorithm software provides you with an interface
that is similar to the Excel Solver. The main screen of Evolver, for example, is shown
in figure 2-31. You need to select the cells that represent the objective function, vari-
ables, and constraints, and can be identical to those that you specify for the Excel
Solver.
The various Genetic Algorithm software products, however, differ in their solu-
tion mechanisms, their options, and their speed. The Evolver software, for example, is
known for its fast processing. It also gives you the option to specify soft and hard con-
straints. From experimentation, however, it requires you to start the optimization with
carefully decided initial values for the variables (can be easily done for the types of
problems dealt with in this book). For example, you may use initial values that meet
the constraints but do not necessarily optimize the objective function. The CenelIunter
52 CHAPTER 2

Figure 2-31. Using

the Evolver Program

software from Ward Systems Group, lnc., on the other hand, gives you the option to
specify a priority level for your constraints (High, Medium, or Low) and can work
without presetting any values for the variables, but is slower than Evolver.
To enable a hands-on experimentation with GA software, an evaluation version
of Evolver is provided with the CD of this book, courtesy of Palisade Corp. This ver-
sion comes with a three-month and SO-variablelimit (enough time for experimenting
with the case studies of this book). A full working copy of their powerful industrial
version is also available at the company's website and comes with lO-day limit
(enough time for you to perform a case study of your own). After installing Evolver,
the first thing you want to do is activate the tutorial session that comes with the soft-
ware to get a quick tour of its capabilities and how to start working with the software.
The interface looks similar to the Excel Solver program.

2.6 Project Management Software

Proper planning and scheduling, as integral parts of this book, are key factors to com-
pleting a construction project within budget, on time, and with few problems. Along
the course of this book, we will be using one of the common software systems that
support project management functions, Microsoft Project 98 and Prima vera P.3.Eval-
uation versions of both software systems are available from their websites (see Ap-
pendix A). Basically,Microsoft Project is a popular easy-ta-use project management
software, and P3 is a high-end software for project management. Both software sys-
tems allow you to put together a project plan, organize resources, assign responsibil-
ities, and follow up during construction.
Neither software, nor any other project management software, cannot guarantee
a successful project plan, but they are invaluable planning tools for:
• Organizing the plan and thinking through the details of what must be done.
• Scheduling deadlines that must be met.
• Scheduling the tasks in the appropriate sequence.
• Assigning resources and costs to tasks and scheduling tasks around resource
availability.
• Fine-tuning the plan to satisfy time and budget constraints or to accommodate
changes.
 INFORLV1ATION MANAGEMENT TOOLS I 53

• Preparing professional-looking reports to explain the project to owners, top

management, supervisors, workers, subcontractors, and the public.
Once work begins on the project, you can use the project management soft-
ware to:
• Track progress and analyze the evolving "real" schedule to see if it looks like
you will finish on time and within budget.
• Revise the schedule to accommodate changes and unforeseen circumstances.
• Tryout different what-if scenarios before modifying the plan.
• Communicate with team members about changes in the schedule (even auto-
matically notify those who are affected by changes!) and solicit feedback
about their progress.
• Post automatically updated progress reports on an Internet website or a com-
pany intra net.
• Produce final reports on the success of the project and evaluate problem areas
for consideration in future projects.

2.6.1 Microsoft Project Software

When you install Microsoft Project in the Windows environment, the Setup program
places Microsoft Project on the Start menu, under programs. To start Microsoft,
choose Start, £rograms, Microsoft Project. The program first displays a new project
window in the background, as shown in Figure 2-32. The following list describes the
choices in the Welcome! dialog box:
• Choose Learn While You Work for a tutorial that displays cue cards from the
online Help system to guide you through setting up a new project document.
This tutorial is divided into 12 basic lessons for creating a project and seven
advanced lessons for managing a project.
• Choose Watch a Quick Preview for a demonstration and tutorial of the major
features of project scheduling with Microsoft Project.
• Choose Navigate with a Map to close the Welcome! window and begin work-
ing in Microsoft Project on your own.

Figure 2-32.
Microsoft Project 98
Welcome Screen
Welcome to Microsoft Project
tII bea-n VVhile Yet, Work ,~ \!yatch a Quick Preview
54 CHAPTER 2

Once you move past the Welcome screen, you see the Microsoft Project title bar
at the top of the screen, along with the Microsoft Project menu, two toolbars, and an
entry bar. On the left side of the screen are the active split bar and the View bar to as-
sist you in moving quickly between views. The status bar is visible at the bottom of
the screen, and the data area in the center of the screen displays the project data,
which can be arranged in a hierarchy (Figure 2-33). On the right side is the default
Gantt chart (or Bar chart), which displays the time scale and shows the start and fin-
ish times of all tasks in the project.

2.6.1.1 The Tool Bar Appearing below the menu bar are the toolbars that contain
buttons you activate with the mouse to provide shortcut access to frequently used
menu choices or special functions. For complete descriptions of the toolbar buttons,
use the Microsoft Project Help menu. Choose Help, What's Ihis? By choosing this op-
tion, your mouse pointer now has a question mark attached to it. Simply click the tool
you are interested in, and a mini-help screen will provide you information on that
tool.
There are 12 toolbars provided in Microsoft Project. The two displayed initially
are the Standard toolbar and the Formatting toolbar. You can add and remove tool-
bars to the display and create your own custom toolbars, by simply choosing Yiew,
Ioolbars.

2.6.1.2 The Entry Bar The entry bar performs several functions:

• The left end of the entry bar displays progress messages that let you know
when Microsoft Project is engaged in calculating, opening, and saving files,
leveling resources, and so on.
• The center of the entry bar contains an entry area where data entry and edit-
ing takes place. During Entry and Editing modes, Cancel and Enter buttons
also appear.

Figure 2-33.
Microsoft Project
Screen

v'

G~!~~;::f:<-_'nt

:-~ Building 1
f:-:' Builc1ing J

Data Default Ganu Chart

Area View

Status Bar
Bar

L
 INfORMATIO ' MANAGEMENT TOOLS 55

2.6.1.3The View Bar The display in the data area is known as a view. The term view
refers to the way the project data appears. The default view is the Gantt chart, which
is divided into two parts: a table on the left shows a list of task names, and a time scale
on the right displays a bar chart showing the beginning and ending of each task. As
there are more than 25 views you can work with in Microsoft Project, the View bar
and the active split bar will help you to quickly access the most commonly used view,
switch between the views, and keep track of which view is being displayed. Scroll ar-
rows on the View bar let you see additional views. At the bottom of the list is the More
Views option, which takes you to a dialog box listing all the views in Microsoft Pro-
ject.
2.6.1.4 A Guided Tour to Microsoft Project Microsoft Project has an extensive on-
line help facility, with many new special aids to help you learn how to use its features.
The learning aids range in complexity from the immediate and briefScreenTips to the
analytical suggestions provided by the Planning Wizard and the step-by-step in-
structions contained in the Getting Started tutorials.
2.6.1.5Accessing Online Help There are many sources of Help in Microsoft Project:
• The Help menu offers access to the online help topics as well as access to the
Office Assistant, a set of online tutorials featured in Getting Started, and Mi-
crosoft on the Web (if you are connected to Internet).
• To access context-sensitive help, choose Help, What's This? Or press
Shift+ Fl. The mouse pointer changes into a question mark and an arrow.
Choose a menu command or point on an area of the screen about which you
want help and click the mouse button.
• Many dialog boxes feature a Help button in the title bar to explain parts of the
dialog box. When you click this Help button, the mouse pointer becomes a
question mark with an arrow. Click a feature of the dialog box to see the ex-
planation of that feature.
• If you access the Internet, Microsoft on the Web offers quick access to the Mi-
crosoft website. Free Software, New Product Information, and Frequently
Asked Questions are among the topics available on line from Microsoft.
2.6.1.6Using Contents and Index As shown in Figure 2-34, with the Contents and
Index options on the Help menu, you can browse or search the entire contents of

Figure 2-34. Help

Topics

Gadng ~'!e!p
~ If\:,;~dhr:g ~r:d Rt?f"l'o:t'lmg t·-.'!;:;ro~Otl: PfQj8d

• CI's.:1:!l.Hnq
aProi~c~
• AS$IJn:;~,g Pp.c;::;ie eoo [.qU!pm~m 11)Tocks
• CIB~!'ni} Cl. ~'f"I8C11'1'B<::uc!~y l)'H"1J O:;IE!;lng
~ Printing and Repor1mg
•. Worklnq will I Views. Tables. end Filters
~v-..'U.'j.:.mr;..,-ti!h(':n!::;.

• At'dy(:i~g !1(ld .~:j;;'Jsting the SChedule

• Tr<1.~.kilt~PJ~lWHb>;l
• Working with Multiple Projects
• Using E'mcil ond the Internet to MonO,ye '(our Project
• Shoring Informo.tionwith Eeruer vereione. Detetieses. end Other Progroms
•• Working with Microsoft Team Manager end Micf-:)soft Otuce
6: Cestomizmq Microsoft Project
• Copying,. Moving.. end Shaung Text end Gropbrcs
• AutometingTosks
.., ""-'''-c .,~~"c"~,,
56 CHAPTER 2

Microsoft Project Help. Microsoft Project dialog box has three avenues for getting
help: a table of contents, an alphabetical index, and a text search capability.
2.6.1.7 Getting Started Microsoft has added three new help features for new users
to Microsoft Project and project management. To access the new help option, you can
use the options on the welcome screen of Figure 2-32 or select the Help, Getting
Started menu option. A submenu appears with three menu choices, as follows:
• Quick Preview: Choose Quick Preview to access a brief tutorial that provides
an overview of the capabilities of Microsoft Project (Figure 2-35a). This tuto-
rial is an excellent way to introduce new users to Microsoft Project.

Welcome!

:~.':,ll re newrc proiec! manaqament or

you" pr e•..•eJw MJI;TO$oflPrujtsd. >iItl ~"'J', puwm'ul, ~··j(J[~-::ol1Ptojsct, VIR' may have many (. :"7,~~:'I~;Y~
IIl1d fle.wl~ ptujuct mClIlage1mrnt 1uul thtd pc..rh. yuu
~U~:;"ons scout t",ow10attIJra!elylrack antns ~!~F:~~'i-~"'!~i!
In control 01 your crcrects, hdps you keep elleryone
=let;;.:::) olvou. 'Nor,: 11you roecc. the ~Ii(?'.~t.i:).~'().!O
InfOftned Ind InuolLl~ and IS eomp~e with the
:e••.~::;mendal1 sequence In rus tutorial, YOl:
woyyou work 1od9'j.
t":l~ it ern nowto create your proleclatrectr(elv

:ii !~:~rosc·ft PrOISc.1

rn.'b",·,. .••'M{~?'" ;;;,:;::~:,~~":;.:~f;~.
to ;~!ua sour own prOJect, cuck tne
cscceccres In eacn secucn oums nncnar in
:.:I!·.)ll::ncc ana 'Jllowlhe steps to emer enur

J1~~
yICi':~1 data Click Neet tc !;t:gin
OT. ifVOu don', have Clcrorectvou need to
beglr:. S~leCi Onlyt:10!:O€ lessons mat mteresr
vou Click Next I) neqin

.:. Ah\~~ y::IU i~I'I~~;' i':u~ ?! ~jfCt. (IJr.:, dil::~

?I' "':.' ~~I ~I.I:.l.il, .'.II.~.~.
I~.I?:'. !.l.l.:":-!.H~,lr:,
H:.t,: :~!~.::.rl:~:

(a) (b)

(c) (d)
Figure 2-35. Planning Wizard Screens
 INFORMATION MANAGEMENT TOOLS 57

• Create Your Project: Choose Create Your Project to access a step-by-step tuto-
rial to assist you in creating your first project (Figure 2-35b). This tutorial pro-
vides 12 lessons guiding you through the creation process. It also includes
seven advanced lessons for managing your project.
• Microsoft Project 101:Fundamentals: This feature is designed to assist new users
in working with the software and designed to answer six specific questions
(Figure 2-35 c&d). The screens are interactive. When you click a caption, more
information appears on the screen.
2.6.1.8Working with the Planning Wizard There are still more learning aids than
those accessed with the Help menu. The Planning wizard continuously monitors
your use of the program and offers tips of techniques that might be more efficient or
warns you about potential problems you might create for yourself as a result of cur-
rent action. The Planning wizard is automatically turned on in Microsoft Project, and
its options are controlled on the General tab of the Options dialog box. To access the
Options dialog box, choose Iools, Options.

2.6.2 Primavera P3 Software

After installing Primavera software, as shown in Figures 2-36 and 2-37, you activate
the P3 software and load one of the existing project examples. The main screen of Pri-
mavera P3 is similar to the main screen of Microsoft Project. Before actually working
with the software, it is a good idea to activate the tutorial session under the main help
menu, shown in Figure 2-38. This will give you a good idea on the software capabil-
ities and features that we will use in later chapters.

Figure 2-36.
Primavera Files
P R I fJ.. 'V
The MPX Conversion
program under
PROJECT PLANNER ®

Prima vera group can

Install working model of Primavera Project
convert to and from Planner· ....
Microsoft Project files. (TO better
vour orgar
I P3 ~
authorized
!f5i,mfiverfi: Primavera Primcvem P3 ReBdme Endpoim Web WizBrd

features to
L~:';~;~~J Draw Look Help Manager

InterprO)8d M8tBnle
9
P3 Setup Help
If
Uninstell
RelBtionsh;ps Viewer
58 CHAPTER 2

A. MA

~ GDl(RAl COHOITlOllS

.,CLEARSIH

I PLACE ltMP. MAnKING TAPE

M",E~ PlACl "((MP. CONST. OARRI[f!

10

HEMOVl
.~':~X:''{. n.MP. CONSI. BARRli:R

Jjf:;.'T 011lERT TRAFFIC ONTO TEMP. ROAD

j'CJ'REMOV[ rEMP. MAHKING TAPl: ~

~ PlACE CONST. BARRIER s . fMr, STAIP ..IHG.' .1lA.". P

• REMO [THIP ..CO~~l R. OARRIER

.G..~~" PLACE TH-1P, STHIPIN(, & OIVF.nT mnr nr.

~ir ~!.Au. i..;O!<i~;.B~i.um:H

Figure 2-37. Primavera P3 Main Screen

Figure 2-38. Help

Options and Tutorial
Screen

2.7 Summary
In this chapter, spreadsheets have been presented as an ideal platform with diverse
tools that can be used for creating comprehensive models in construction. Many of the
simple yet powerful features of Excel have been introduced, in addition to some add-
in programs for optimization capabilities. In addition to Excel, one commonly used
 I~H)~\L\T10N NL'\NAGEMENT TOOLS 59

software for project management, Microsoft Project, has been briefly introduced so
that both tools can be used in the remaining chapters of this book. For interested read-
ers, Appendix A lists several Internet websites with information related to the mate-
rial in this chapter.

2.8 Bibliography
Evolver reference manual (1998).Newfield, NY: Palisade Corp.
Microsoft Excel (1997).Reference Manual, Project 98 Windows. Microsoft Corporation,
One Microsoft Way, Redmond, WA.
Microsoft Project (1998).Reference Manual, Project 98 Windows. Microsoft Corporation,
One Microsoft Way,Redmond, WA.
Premavera (1995). Reference ManuaL, Ver. 1.0 for Windows. Prima vera, Two Bala Plaza,
Bala Cynwyd, PA 19004.

2.9 Exercises
1. Use the Advanced Filter option of Excel on the data of Figure 2-39 and apply the
following criteria:
a. Project Type is Office Building or Restaurant
b. Project Value is less than $200,000in East Region
c. Project Value is greater than twice the minimum project value
Print a screen capture of the criteria range and the resulting data. Note: use the
Print Screen button to capture the Excel screen and then use Edit-Paste in a Word
document.
2. a. Sort the data of Figure 2-39 by the Project Value using a descending sort.
b. Use the VLOOKUP and MATCH functions to look for the project value of the
project coded W-02.
c. Find the value of the project coded C-06 using the iNDEX function. Print the
formulas and the result spreadsheet.
3. Use the following statistical features of Excel and apply these functions on the
data of Figure 2-39:
DSTDEV: Find the standard deviation of the project value for the residen-
tial projects in all the regions.
DSUM: Find the summation of the project value for the office building
projects in the central region.

Figure 2-39. Excel

Ustfor Exercises 2
end 3. ._t::E'_f\t_r~I ... .??'.~..Q~W
C ••nh."l 3«'>.(,X
;:;::~J]~ C.fntrJI 5rrMh $
. ·······3g·iJ~.()oG··
Cc; Ce~~y.~I. Smith $ 180.000
,~"..~:.~::~
.. CE'ntr.ai... .. H , qH.i(:51 ~'.J}}~!f~9 ~~ ••'"!": .............
J. 4Z0.000
~X:QO(i·
'

........9·(;, ...........~.?!~.~r.~ ......Off.\<~!;lu'ld"'9 Jor!~r- .t

E-OI (£·iOt f1~$jd*ntjal ThcrnJ.z ~ .. ··::·~i~.QQ!?
E-02 E.a5~ R'1.'&j,j.:-ntial Tho!ti';'$ $ 210.000
E·03 East ..... qff.l?)i ?,IJjl<ling: 8i!i f .... 1'-').000
S·Y4 E.sl QHici' ~t!lt(J.in~ ..7~:!.rl~:: $ ? I(;.f)::~fJ
t=.·05 Eas:\ OfficE' BUIlding Smith $ 145.000
E. uc East R.~5.4~Jrd.nt D;:.vis $ 22~,.OOO
\".Q; \lleoS[ Residemi-al Green t 2~('(;'~~
V-C: ""est {Jffic~~uil;jif!;J . Gr~(>n t 2X,oJ0f;
V·03 t.;."?-~>. R~~ilj€<p.t;::ll 1"ho11),,$ $ 170.000
V-04 Ve-st Off.ice 8lJil~in9 cones $ 380.l100
V-05 Vest Re-st~lJrant 03','i5 s 140.000
60 CHAPTER 2

DMAX; Find the maximum project value for all projects in the central re-
gion that have Mr. Smith as the project manager.
Print and submit the Excel spreadsheet showing the formulas used and the
results of each case.
4. Given the cost data in the top part of Figure 2-40, answer the following:
a. Add formulas to the column, Total.
b. Write a VLOOKUP function in cell FIO so that when the reference (cell EIO)is
changed, the appropriate material cost is shown.
c. Write a VLOOKUP function in cell F14 so that when the reference or the type
of cost (cells 014 and E14) is changed, the appropriate cost is shown.
d. What is the value that results from the formula shown in cell F17?
e. Write the two missing parameters in the formula of cell F20 so that it produces
a result of 10000.
5. Prepare an Excel sheet with the data as shown in Figure 2-41.
a. Write MATCH and VLOOKUP functions in cells K2 and K3. The MATCH
function returns the column number of the field Actual. The VLOOKUP func-
tion then returns the actual cost of Item6 (BackfiJIAround Foundation).

Figure 2-40. Excel

Sheet for Exercise 4.
Foundatron 1 ~:JOO
BaCk1U 400[1

Possible
Tas~d
T;,SKL

laSk~. '---.j.:: ~~~~~ill~~~==E~~=Z:3~iC}

- I ask I 1< Lquunnenl
r;::-....,,-;-:-;-,-. - I
Po«ible v.,ueS:!l
Labo{ ~O'U?i·FJu~~IIJn·lilHo.O) I(d)
EqlJipme:'11
Material
I

~~~==~===+~~~~~~~~~~~~~~=+ ~a)
~~~~--~~7+~~7+~~~~~~+==-~--~b)

(c)

Figure 2-41. Excel Sheet for Exercise 5.

 I>-lFORlvlATION MANAGEMENT TOOLS I 61

b. Use the INDEX function in cell K4 to find the Planned Cost of Item11.
c. Use the DMIN function in cell K15 to find the minimum Total Cost for all items
that apply to the criteria range in cells A15:I16 (WBS is Formwork and Quan-
tity is more than 100 m2).
d. Use the DSUM function in cell K18 to find the summation of the Actual Cost
of all items that apply to the criteria range in cells A18:I19 eWBSis Formwork
and Unit Cost is more than 10).
e. Use the DSTDEV function in cell K20 to find the standard deviation of the
Planned Cost for all items that apply to the criteria range in cells A20: 121.
f. Use the OFFSET function in the shaded range (G23:K25) to return the same val-
ues shown in the shaded range (D8:HIO).
6. Summarize the data shown in Figure 2-42 using the Pivot Table option in Excel.
Use the Year and Project Type as row fields, the Region as a column field, and the
Project Value as a data field.
Show and print the following data on the pivot table:
a. The sum of project value for the 1998-East Region-Office Building projects.
b. The sum of project value for the 1999-Residential projects.
c. The total value of all projects.
d. The average value of the 1998 Office Building projects.
e. The average value of all projects.
f. Modify the pivot table by using the Year as a page field. Display the project
value for all years and for the year 1999 only.
7. Prepare three Excel sheets as shown in Figure 2-43.
a. In Sheet 3, write VLOOKUP formulas in columns I and J (Problem and Cause)
to show the corresponding data from sheets 1 and 2. Print the sheet and show
the formulas.

Figure 2-42. Excel

List for Exercise 6.
Residp.I1IiClI $135,000
·We·',t Residential $215.000
E"st ReSidential $210,000
E;:,st (;'r;cs Building $160,000
()J1rce Building $240.000
F.%1 !~:fn::~8uH~J:n~1 1 9!~H3 $1\5,000
)''\;es; Residential 1999 $165.000

Figure 2-43. Excel Sheet J Sheet 2

Sheets for
::xercise 7.
;,u;,;.;;;.;.;";;.,,,~:!:P;r::O._l:cJI:tl:m (jescr!pti~rl
____ 4!jWr:Jng :i!sr;ount
6'Incorrecl ~hipTo
S;Wrongproducl

Sheet 3

;;'Irec
-;'»~er
62 I CHArTER 2

b. Construct a pivot table in a separate sheet using the Date as a column field, the
Problem lD and the Cause ID as row fields, the Office, Rep, and Product as
page fields, and the Cost as a data field. Experiment with the resulting pivot
table and print the following:
1. The grand total cost of Office2 in which John is the Rep.
2. The grand total cost of all the offices, all products, and all reps.
3. The grand total cost of product Timber on 6/15/95 in Officel with Peter as
the Rep.
8. Develop an Excel model of the following optimization problem and use Excel
Solver to determine the optimum values of the variables Xl and X2 and t e value
of the objective function:
Maximize 6 Xl + 4 X2
Constraints: (2 Xl + 4 X2) less than or equal to 13;
(2 Xl + X2) less than or equal to 7; and
Xl and X2 are integer and nonnegative values.
9. The equipment workshop for a large earth-moving company has a backlog of five
trucks (A, B, C, 0, and E) needing engine overhaul. The five trucks are expected
to take 22, 16, 35, 12, and 28 hours of work, respectively. Only a single crew can
work on one job at a time. The service manager's performance is judged, in part,
on the average time a truck spends in the shop awaiting or receiving mainte-
nance. The service manager, therefore, needs Loproperly sequence available jobs
so as to minimize the average time spent on the job. Prepare an Excel model of the
problem and use Solver to determine the proper sequence of the jobs.
10. A concrete manufacturer is concerned about how many units of two types of con-
crete elements should be produced during the next time period to maximize
profit. Each concrete element of type I generates a profit of $60, while each cle-
ment of type II generates a profit of $40. Two and three units of raw materials are
needed to produce one concrete element of type J and H, respectively. Also. four
and two units of time are required to produce one concrete clement of type I and
It respectively.
If 100units of raw materials and 120units of time are available, how many units
of each type of concrete element should be produced to maximize profit and sat-
isfy all constraints? Use Excel Solver for the solution.
11. A building contractor produces two types of houses: detached and semidetached.
The customer is offered several choices of architectural design and layout for each
type. The proportion of each type of design sold in the past is shown in the fol-
lowing table. The profit on a detached house and a semidetached house is $1,000
and $800, respectively.

Design Detached Semidetached

Type A 0.1 0.33

Type B 0.4 0.67
Type C 0.5

The builder has the capacity to build 400 houses per year. However, an estate of
housing is not allowed to contain more than 75%of the total housing as detached.
Furthermore, because of the limited supply of bricks available for type B designs,
a 200-house limit with this design is imposed. Use Excel to develop a model of
this problem, and then use Solver to determine how many detached and semide-
tached houses should be constructed in order to maximize profits. State the opti-
mum profit.
 PLANNING
Part I-Network Diagrams

A fter studying this chapter, you will be able to:

• Understand the basic requirements of good project planning.

• Break down the project into activities.
• Identify the logical relationships among project activities.
• Draw a project network.
• Understand the difference between Activity-on-Arrow (AOA) and Activity-on
Node (AON) representations of project networks.

Need
• Feasibility • Conceptual Design
• Project • Owner Approval
Definition Prepare Bid Proposal + Baselines
• Soil Reports • Collect Data (site, quantities,
• Owner • Preliminary Design
Approval specs, resources, tasks, etc) • Evaluate
• Detailed Design : • Start Construction ~
Bids and
• Quantities
• Work Documents
Select f;~·:,if.!@t9I!~~J~1q~,~I~;@J1\1;i~
: ge~~lition :
• Time & Cost Estimation General : estimating & Resource tE d f
• Select Project , Management a no.
• Scheduling Contractor
Contract Strategy • Schedule Updating Service Life
• Resource Management:
Adjustments for Resource Con- • Progress Evaluation
straints & Deadline • Time, Cost, & Quality
• Bidding Strategy & Markup Control
Estimation • Commissioning
Cash Flow Analysis
• Submit Bid

3.1 In troduction
In the previous chapter, you learned simple ways to set up a basic information sys-
tem for storing resource data and various methods of construction. In this chapter,
63
64 I CHAPTER 3

you will be introduced to the project planning process. Planning, in fact, is a general
term that sets a clear road map that should be followed to reach a destination. The
term, therefore, has been used at different levels to mean different things. In con-
struction, for example, plans may exist at several levels: corporate strategic plans, pre-
tender plans, precontract plans, short-term construction plans, and long-term con-
struction plans. These plans are, in fact, different from each other; their inputs are
different and so are the computations needed to produce their outcome and the final
usage of these plans. All these plans, however, involve four steps:
1. Performing a breakdown of major work items involved in the project (called
activities or tasks).
2. Identifying the proper sequence by which the activities are to be executed.
3. Representing this information in a simple manner.
4. Estimating the resource, cost, and time needs of the individual activities.
The fourth step, in fact, deals with the estimating function that is a necessary part
of planning. Because estimating can be applied differently according to the type of
plan being generated, it is a large subject by itself and deserves one chapter of its own.
In this book, therefore, this chapter is concerned only with the first three steps of plan-
ning mentioned above and is considered as part 1 of planning, In essence, this chap-
ter deals with the individual ingredients of a project plan. Chapter 4 will then be ded-
icated to "Estimating" to determine the time and cost associated with the individual
activities of a project plan, as part 2 of planning. Chapter 5 will deal with "schedul-
ing" computations that are applied on the project plan as a whole. Chapters 6, 7, and
8 will also deal with important topics that help in modifying the schedule under re-
source constraints and other conditions.

3.2 Planning: A Challenge

Planning is, certainly, the most crucial, knowledge-intensive, ill-structured, and chal-
lenging phase in the project development cycle. It is highly sensitive to the project en-
vironment, the technology used, and the existing management and industry prac-
tices. Planning is the process of representing the project scope by its identifiable
components. It involves the breakdown of the project into definable, measurable, and
identifiable work tasks/activities, and then establishes the logical interdependence
among them. Planning answers three main questions:
1. What is to be done?
2. How to do it (logical order)?
3. Who does it?
It accomplishes the definition of work tasks/ activities and their sequence. Plan-
ning could be viewed as detective work, starting with an end (i.e., a project) and syn-
thesizing the means or the steps required to yield this end.
Planning is a difficult task that can only be efficiently done through a good work
team. The creative and highly experience-based nature of this task restricts it to human
planners, with little or no help being provided by even the fastest computer available.
Systematic and structured planning techniques are, therefore, important for:
• Minimizing the potential to overlook something.
• Sharing of team-work ideas.
• Having a clear definition of project scope and desired level of detail.
• Building confidence and commitment into team workers.
• Effectively communicating the plan to site personnel.
Detailed planning for tendering purposes and the preparation of construction
needs to be cond ucted through brainstorming sessions among the planning team. The
inputs and outputs of the planning process are shown in Figure 3-1.
 PU,NNING PART 1 65

Figure 3-1. Input Output

Detailed Pre-Tender
Planning
Contract information

Drawings Breakdown of project into tasks

Specifications Logical relationships among tasks

Available resources Site layout & organization

Bills of quantities Method statement

Site reports Responsibility & reporting levels

Organizational data Project network diagram

Alternative construction methods

Planning requires a rigorous effort by the planning team. It is not expected that
each member of the team knows every aspect of the project; however, a planner must
know the different categories of work and be familiar with the terminology and
knowledge used in general practice. The team should include or solicit the opinion of
experts in all aspects including actual construction experience. This helps produce a
realistic plan and avoids problems later on site. Along the course of planning, the team
may consider some assumptions and has to have an open mind with regard to alter-
native construction methods. The most useful planning tool available to the planning
team is the experience gained in previous projects. In addition to the planning team ex-
perience, the work breakdown structure, checklists, handbooks, software programs,
and standard company procedures are also useful tools that can support planning and
help prevent overlooking key items that may have cost or schedule implications.

3.3 Planning Steps

As mentioned in the introduction, the first part of planning, covered in this chapter,
involves three main steps, as shown in Figure 3-2:

Figure 3-2. Planning Steps

Planning Steps
--11. Perform Work-Breakdown-Structure (WaS) I
The details of these
steps are described in f- Production Tasks?
the following f- Procurement Tasks?
f- Management Tasks?
subsections. L- Dummay Tasks?

H 2. Logical Relations Among Tasks, I

f- Paralell?
f- Preceeding?
f- Succeeding?
~ Removing Redundancy

y 3. Draw the Project Network I

HActivity-on·Arrow(AOA)
f- Add StarVFinish Activities
I- Draw Network
f- Add Dummy Activities
L- Numbering Nodes

-1Activity-on-Node(AON) I
I- Add Start/Finish Activities
f- Calculate Sequence Steps
Draw Network
66 CH,\PTER 3

l . Breakdown of project activities.

2. Identifying the logical relationships among activities.
3. Drawing the project network.

3.3.1 Step I: Project Breakdown

Project breakdown determines what is referred to as a project's work breakdoum
structure (WBS), which is basically a breakdown of the whole project into compo-
nent parts. The WBS is created as a logical hierarchical decomposition of the project
into different levels of detail, from a broad level (definable areas), down to a very de-
tailed level (work packages), usually of reasonable and manageable size and dura-
tion (Figure 3-3). The smallest element in the decomposition is the "activity" or
"task." An example activity is to install column formwork in Area2 of the project
shown in Figure 3-3.
As shown in Figure 3-3, WBSelements at various levels relate to the contractor's
organization breakdown structure (085), which defines the different responsibility
levels and their appropriate reporting needs. The figure also shows that work pack-
ages are tied to the company unified code of accounts and the databases of resources,
unit cost, and productivity data. The unified code of accounts allows cataloging, sort-
ing, and summarizing of all information. It is also suitable for computerized process-
ing and can be used by typical operating personnel. The activity of installing columns
formwork of Area 2, for example, which is the responsibility of the general contrac-
tor's formwork foreman, has a unique code that represents all its data. This activity
has a quantity of 1,200 m2, an estimated duration of five days, an estimated cost of

Figure 3-3. Work WBS (Work Elements)

Breakdown l,igf91~ij'l
Structure (WBS)
8
Project Areas

Linked to the
r
:-
1 ---.-.··p..-r..•.••.•------.---1
e-+·I:t-;!!-
Organization ---,-----,
Breakdown
Structure (OBS)

1
1
J I ControljAccount
O'i
oS - - - - -1- - - - - -t - - - -0 ----
(; 1 1 1
c.
I 1 1
a:
'" 1 1 1
o!I
1 ControllAccount 1
~
:c
'0;
- - - - -:- - - - -c::J - - - -:- - - - -
1 I 1
c:
o
C. I I 1
III
Controll Account 1 1
'"
!S 1 I 1
VI - --j - - - - -1- - - --
ID
o 1 I
I I

Control Account
PIOjCCT Wart< paclulge Task Resource OBS level
A~A,.......-'-.,....A-,
Activity Code: 001·0311380550·001 -1FLA1 . GFF
Activity: Install Column Formwork Area 2
Responsibility: General coruractor's Formwork Forman
Quantity: 1200 sq. m
Estimated Duration: 5 days
Estimated Cost: $1200
Expected Crew Productivity: 20 sq. m I hr
Material: Prefabricated Column Forms = 1200 sq. m
 PL\NNING PART I 67

$1,200, and an expected crew productivity of 20 m2/hr. The WBS, as such, facilitates
integration of cost and schedule information for planning, budgeting, and controlling
operations.

• Guidelines for Constructing a WBS: The building block of a WBS is the ac-
tivity, which is a unique unit of the project that has a specified duration. In
other words, an activity can be any function or decision in a project that con-
sumes time. In performing a WBS for a construction project, we need to be es-
pecially concerned with five types of activities:
• Production activities: activities that involve the use of resources such as labor,
material, equipment, or subcontractors. This type of activities can be easily
identified by reading the project's drawings and specifications. Some exam-
ples are: excavation, formwork, reinforcement work, concreting, and so on.
Each production activity can have a certain quantity of work, resource needs,
costs, and duration.
• Procurement activities: activities that specify the time needed to procure for
materials and/ or manufacture equipment that are needed for any production
activity of the project. Special attention paid to these activities ensures that the
work is not delayed waiting for materials or equipment. To facilitate the iden-
tification of these activities, the list of production activities may be reviewed
along with the drawings and specifications. Examples of such activities are
brick procurement, boiler manufacturing and delivery, etc.
• Management decision activities: activities that are related to management
decisions such as vacations, special delays, approvals, etc. For example, an
"Approval" activity of one week may be used to delay the pile cap concreting
activity until the client approves the results of a pile test.
• Hammock activities: activities that depend on other activities and are not
needed for themselves. An example of this type of activities is a dewatering
activity that is required as long as excavation and subsurface activities are pro-
gressing.
• Dummy activities: activities needed for presentation purposes to maintain
logical relationships among activities. These are explained later in detail.

Among these types of activities, production activities are usually the first to be
identified. Having a list of these production activities, the planning team can then re-
view them and define their requirements of the other types of activities. Accordingly,
a complete list of the activities in the project is defined.
To help planners in performing the WBS and identifying the project activities,
checklists based on past company records may prove beneficial in preventing omis-
sions. Also, for building projects, the MasterFormat list developed by the Construc-
tion Specifications Institute (CSI) is very useful and includes almost all tasks that may
be encountered in building construction. The CSI list (Figure 3-4) incorporates 16
main divisions covering tasks from general requirements to mechanical and electrical

Division 1: General Requirements Division 9: Finishes

Division 2: Site Work Division 10: Specialties
Division 3: Concrete Division 11: Equipment
Division 4: Masonry Division 12: Furnishings
Division 5: Metals Division 13: Special Construction
Division 6: Wood and Plastics Division 14: Conveying Systems
Division 7: Thermal Moisture Protection Division 15: Mechanical
Division 8: Doors and Windows Division 16: Electrical

Figure 3-4. The Main Divisions in the MasterFormat Listfor Building Projects
68 CHAPTER 3

work. Each division has many subitems (a detailed list is included in Appendix E) and
can be used as a useful checklist that prevents omissions of necessary items.
In general, there are no firm rules that determine the proper level of detail for a
WBS.Planners must decide for themselves what is appropriate and what is not. There
are, however, some guidelines, which might be used to assist in this task:
1. Define the type of breakdown, whether it is by definable project areas or by
definable functions such as civil, architectural, electrical, and mechanical.
2. Break down activities according to the job classifications of resources. For in-
stance, activities such as concrete block masonry and exterior brick masonry
might represent two activities.
3. Break down a project according to its various elements. Examples of this pro-
cedure are activities such as construct footings, construct columns, install
machine base, or prepare budget.
4. Define and separate the areas on site that are repetitive in nature. An exam-
ple WBS for a typical high-rise building is shown in Figure 3-5.
Although all projects contain activities of the types discussed in this section, the
degree of breakdown of the project is controlled by the intended purpose of the plan
and who is going to use it. At the working or production level, the detail must be ex-
tensive. Upper levels of management, on the other hand, will find rather broad activ-
ities acceptable.
For the purpose of demonstrating the process followed by a planner to establish
a satisfactory set of activities, consider the following project:

A contractor has the bidding documents, including the drawings and speci-
fications, for a certain project. Within a certain area in the project's WBS, a
concrete foundation work package is included and the planning exercise for
it is considered here. The first list of activities that might be put together for
this work package is shown in Table 3-1. The activities shown in the list are
representative of the production activity category.

Figure 3-5. Typical WBS for a High-rise Building

 PLANNING PART 1 I 69

Table 3-1. Initial Activity Listfor Example Project

Activity Description

A Site clearing
B Removal of Trees
C General Excavation
o Grading general area
E Excavation for utility trenches
F Placing formwork and reinforcement far concrete
G Installing sewer lines
H Pouring concrete

Table 3-2. Preliminary Activity Listfor Example Project

Activity Description

A Site clearing
B Removal of Trees
C Excavation
o Grading Production
E Excavation for utility trenches activities
F Placing formwork and reinforcement for concrete
G Installing sewer lines
H Pouring concrete
Obtain formwork and reinforcing steel
Additional
activities
{! Obtain sewer lines
Obtain concrete
Steelworker availability
}

}
Material Procurement
activities
Labar procurement
activity

This list is then reviewed to make sure it includes all the activities needed
to accomplish the work. The activity "placing formwork and reinforcement
for concrete" suggests that there will be some formwork and reinforcing steel
to lay. An additional activity, "obtain formwork," is therefore added to the
list. Similarly, the activities "obtain sewer line," "obtain other utilities," and
"obtain concrete" are also added to the list. All these activities are of the pro-
curement type. The contractor may also realize that all the steelworkers are oc-
cupied on another project and, therefore, another activity "Steelworker avail-
ability" is also added, representing a labor procurement activity. Table 3-2
shows the revised list after incorporating these changes.

3.3.2 Step 2: Identifying Logical Relationships Among Activities

ill order to identify the logical relationships among activities, the planning team

needs to answer the following questions for each activity in the list:
1. What activities must be finished before the current one can start?
2. What activity(ies) may be constructed concurrently with the current one?
3. What activity(ies) must follow the current one?
The answers to these questions will help establish the activity interdependencies
and, accordingly, identify the logical relationships. To illustrate how the logical rela-
tionships among activities are identified, let us consider the preliminary activity list
of the previous example (Table 3-2). The first activity (A) of Table 3-2 does not de-
pend on any other activity and, therefore, can start right away. Activity Balso can start
70 I CHAPTER 3

Table 3-3. Activity Listwith Dependencies for Example Project

Activity Description Dep(~nds

Upon

A Site clearing
B Removal of trees
C Excavation JI..
D Grading A. El,C
E Excavation for utility trenches A. El,C
F Placing formwork and reinforcement for concrete B, C. J, M
G Installing sewer lines B, C, D, E, K
H Pouring concrete D, E, F, G, L
J Obtain formwork and reinforcing steel
K Obtain sewer lines
L Obtain concrete
M Steelworker availability

independently from site clearing. It is assumed that activity C (excavation) cannot

start until activities A and B have been completed. Also, activity D (grading) can start
only when activities A, B, and C are complete. Similarly, activity E (excavation of util-
ity trenches), can not start before the site is cleared, trees are removed, and the exca-
vation is completed. These preceding activities (A, B, and C) are thus inserted after
activity E in the list. This process continues until the dependency for each activity has
been identified, as illustrated in Table 3-3.

3.3.2.1 Removing Redundant Relationships When the planning team defines all the
logical relationships among the various project activities, sometimes some duplicate or
unnecessary relationships may exist in the list. It is desirable, therefore, to identify
these redundant relationships and remove them. A typical situation causing a redun-
dant relationship is shown in hgure 3-6. The figure shows a situation in which the list
of relationships (second column) includes one redundant relationship. Since A, B, and
C are in sequence, only two relationships: "B depends on A,N and "C depends on B"
arc necessary, while the relationship "C depends on AN is redundant. Although the last
relationship is true, it is implied in the two relationships specified earlier. By removing
this redundant relationship, therefore, we can define what is called the list of Immedi-
ately Preceding Activities (IPAs), as shown in the third column.
Defining redundant relationships in a systematic manner is straightforward and
begins with the original activity list such as that shown in Table 3-3 or the first two
columns of the table in Figure 3-6. We proceed by taking each activity in the list one
by one. Starting from activity A, we look at its list of dependents. Since activity A has
no dependents, we skip it. We then proceed to activity B, which has A as a depen-
dent. Since that dependent has nothing in its list, we also skip it. We then come to ac-
tivity C, which has two dependents in its original list: A and B. We look at those de-
pendents one by one. The first dependent (A) has nothing in its list, so we skip it. The
second dependent (B) has A in its own list. Since A also appears in the list of C (the ac-

Figure 3-6. A B c
Removing
Redundant
Relationships
Existing Relationships:
Activity Depends Upon Immediately Preceding Activity (IPA)
A
B A A
-C ..A'B B
 PLANNING PART 1 I 71

Table 3-4 Activity ListAfter Removing Redundant Relationships

Activity Description IPAs

A Site clearing
B Removal of trees
C Excavation A
o Grading fA,B, C
E Excavation for utility trenches ~ B, C
F Placing formwork and reinforcement for concrete B, C, J, M
G Installing sewer lines ,B, ~, D, E, K
H Pouring concrete ,0, i, F,G, L
J Obtain form work and reinforcing steel
K Obtain sewer lines
L Obtain concrete
M Steelworker

tivity being considered), we remove A from the list of C, leaving B only. The result of
this process is the IPAs list.
Following the process of removing redundant relationships for the example proj-
ect we have, we can obtain the list of IPAs shown in Table 3---4.

3.3.3 Step 3: Drawing the Project Network

The next step after identifying the logical relationships among activities is to represent
these activities in a network diagram. Before doing that, we do one more step to ensure
that the project has a unified starting point and a unified end point. These are as follows:

• Checking the Need for a Start Activity: Wc may need to add a dummy Start
activity to unify the beginning of the project. The need for this dummy activ-
ity arises only when there is more than one activity in the project that has no
predecessors (i.e., no IPAs). For example, in our foundation project, activities
A, B, J, K, L, and M (Table 3---4) are all at the beginning of the project and thus,
more than one starting point needs to be unified by a Start activity. To add this
new activity at the beginning of the project, we need to change the data in
Table 3---4 to reflect the new logical relationships. In our case, each of the ac-
tivities A, B, J, K, L, and M will have, instead of no lPAs, one IPA which is the
Start activity, as shown in Table 3-5.

Table 3-5. Adding Start and FinishActivities

Activity Description IPAs

ST Start Activity
A Site clearing ST
B Removal of trees ST
C Excavation A
D Grading B. C
E Excavation for utility trenches B. C
F Placing formwork and reinforcement for concrete B. C. J. M
G Installing sewer lines D. E. K
H Pouring concrete F. G. L
J Obtain formwork and reinforcing steel ST
K Obtain sewer lines ST
L Obtain concrete ST
M Steelworker availability ST
FN Finish Activity H
72 I CHAPTER 3

• Checking the Need for a Finish Activity: We may need to add a dummy Fin-
ish activity to unify the end of the project. The need for this dummy activity
arises only when more than one activity at the end of the project. For example,
in our foundation project, only activity H in Table 3-4 does not show at all in
the IPAs column, meaning it is never a predecessor to other activities. Since H
is only one activity, we can conclude that we do have a unified end to the proj-
ect and no need for a dummy Finish activity. However, for demonstration pur-
poses, if we still add a Finish activity, as shown in Figure 3~5, then its prede-
cessors (lPAs) should be set as the identified list of activities with no
predecessors.

Once the activity list is finalized, there are two ways that are commonly used to
draw a network diagram for a project:
1. Activity on Arrow (AOA) representation.
2. Activity on Node (AON) representation.
Each method is discussed in detail in the following subsections followed by an
explanation of how a network is constructed for the small project example we have.

3.3.3.1 Activity on Arrow (AOA) Method of Network Drawing This method of

drawing a network diagram uses nodes that are linked with arrows. The arrows rep-
resent activities while the nodes represent the start and the end of an activity. The fol-
lowing are some basics that must be known before starting the drawing of a project
network using the AOA method (Figure 3~7):

• The length of the arrow has no significance and may be straight, curved, or
bent.
• Each activity has a definite beginning and end represented by nodes that are
commonly called events.
• For a given activity, the event at the head of an arrow is called the j event while
that at the tail is the i event, as shown in Figure 3~7(a).
• Two activities that are independent of each other will be indicated as two sep-
arate arrows having no connection [Figure 3-7(a)].
• When one activity depends upon another, both appear in the diagram as two
arrows having a common node. For example, activity B of Figure 3-7{b) de-
pends upon the completion of activity A. Other dependency situations are il-
lustrated in Figure 3-7(c), (d), and (e). In Figure 3~7(c), activity C depends
upon the completion of both activities A and B, which appears in the diagram
as a merge. Similarly, both activities Band C cannot start until activity A is com-
pleted, forming a burst in the diagram, as shown in Figure 3~7(d). Figure
3-7(e), on the other hand, illustrates a cross situation where activities A and B
must be completed before activities C and D can start.

In addition to the above, the following are some rules that need to be followed
while constructing an AOA network diagram:

• Each activity must have a unique i - j reference numbers, where the number
at the tail of the arrow (i) is smaller than that at the head (j) (i.e., i < j).
• It is recommended to leave a gap between numbers (e.g., 5, 10, IS, etc.). This
will allow for the accommodation of forgotten activities.
• Use horizontal parallel lines (preferably time scaled).
• Avoid back arrows and crossing of arrows, where possible.
• If the network size is large and cannot fit in a single sheet, preferably cut at a
"milestone."
• Use subnetworks if needed.
 PLANNING PART 1 73

Figure 3-7. Basic

Logic Patterns for
AOA Diagrams
Event i
~~A_c_ti_Vi~~_A
Event
.~
i
j> i
GI-__ Ac_t_iv-,itY_B • G
(a) Independent Activities

~I- A • ~ B depends on A

(b) Dependent Activities

~
~ CdependsonA&B

(c) A Merge

B depends on A,
C depends on A

(d) A Burst

C depends on A & B
D depends on A & B

(e) A Cross

While constructing an AOA diagram, a number of situations will need special

treatment, particularly adding dummy activities to preserve the required logical re-
lationships. Examples of these situations are:
• When one activity depends upon two preceding activities and another activ-
ity depends upon only one of the preceding activities, the cross is not an ac-
curate representation of the logic. Let us assume that activity C depends upon
completing activities A and B and activity 0 depends only upon activity B.
The logic can be represented using a dummy activity, as shown in Figure 3-8.
A dummy activity is a fictitious activity that has no time duration and requires
no resources.
---------

74 I CHAPTER 3

• When two or more activities have the same predecessors and the same suc-
cessors also. Figure 3-9(a) shows an example of two activities, A and B, that
begin and end on common events numbered 10 and 20. To describe both ac-
tivities by the numbers 10-20 is against the rules defined earlier. The solution
for this problem is to establish a new event with a dummy activity connecting
the new and original events Figure 3-9(b).

When all the redundancies have been eliminated, the AOA network diagram for
the project can then be drawn. The planner starts by putting down the activities in an
approximate order. Both the i and j events are added for each activity (numbering).
The dependencies are then established by connected all related events with dummies.
The resulting diagram is then reviewed and all unnecessary dummies are removed.
The resulting AOA diagram for the example project is shown in Figure 3-10.

3.3.3.2 Activity on Node (AON) Method of Network Drawing This method is also
called the precedence diagram method. An activity in an AON diagram is represented by
a name, to identify the activity, and a corresponding number enclosed in some kind
of a symbol. The symbols are usually circular, but they may also be square, hexago-
nal, or any other convenient shape. The relationships among activities are expressed
by a connecting line or a link from one symbol to another.

Figure 3-8. A
Dummy Activity to
Observe Logical
_c_--e:
::0--~-~0--
Dummy C depends on A & B
Relationships
o depends on B only
::G-_-B-_~.G D • GX:

Figure 3-9. A A
~ A
Dummy to Maintain 10
.> 20(
Unique Activity
-, -,
Numbering 10 -, B
Dummy

B 15

(a) Incorrect Representative (b) Correct Representation

Figure 3-10. AOA L

Representation of a
Twelve-activity J
,-----------------<~I 25
Project Dummy _ ~~

___
---M----@-//// F

/ Dummy
OF~ICr:\
~--=---------<~120
E
~-~
~oyJ 0

K
 PLANNING PART 1 I 75

Using the AON method, some basics must be known before starting to draw a
project network (Figure 3-11):

Figure 3-11. Basic ~ctlvlty number

Logic Patterns for
AON Diagrams
-~ctiVity name

(a) Independent Relationship

Link B depends on A

(b) Dependent Relationship

C depends on A & B
30 40
o depends on C
C D

(c) A Merge Relationship

-0)-- B depends on A
C depends on B
o depends on B

(d) A Burst Relationship

A l-------{ D

C )--------{ E

(e) Start and Finish Dummy Activities

• Independent activities appear on the diagram as a separate symbols without

a connecting line [Figure 3-11(a)].
• If the two activities are related, their symbols should be linked. Figure 3-11(b)
illustrates a case where activity A is to be completed before activity Bcan start.
• The diagram can contain a merge relationship, as in Figure 3-11(c) and a burst
relationship as in Figure 3-l1(d).
76 I CHAPTER 3

Figure 3-12. A
Rough Network
Diagram for the
Example Project

To dearly understand the logic of the AON network before drawing it, some kind
of ordering for the activities becomes necessary. This objective is met by placing the
activities in sequence step order. A sequence step may then be defined as "the earliest
logical position in the network that an activity can occupy while maintaining its proper
dependencies." Once the sequence step number for each activity is determined (as ex-
plained next), we can easily assemble the finished network with the activities arranged
in their sequence step order. Afterwards, the activities can be numbered.
To illustrate the process of placing activities in sequence step order and drawing
the AON diagram, let us consider our small project. Given the information in Table
3-5, a rough diagram is first drawn from the available activity list, as shown in Fig-
ure 3-12. Sequence step 1 (shown between brackets in the figure) is assigned to the
start activity. The sequence step number is then increased by one and put as a label at
the end of the links leaving an activity. When all the links entering an activity have
been labeled, the largest step number from the entering links is chosen as the se-
quence step number for that activity.
It is also possible to determine the sequence steps without drawing a rough dia-
gram for activities. Using a table format such as that of Table 3-6, the sequence steps

Table 3-6. Determining the Sequence Steps

Sequence Step (SS)

Activity IPAs Cycle 1

ST SS(Sl) = 1
A ST 2 1 + SS(Sl)
=
B ST 2= 1 + SS(Sl)
C A 3= 1 + SS(A)
D B, C 4 = 1 + Highest of [SS(B), SS(C)l
E B, C 4 = 1 + Highest of [SS(B), SS(C)l
F B, C, J, M 4 = 1 + Highest of [SS(B), SS(C), SS(J), SS(M)l
G D, E, K 5 = 1 + Highest of [SS(D), SS(E), SS(K)l
H F, G, L 6 = 1 + Highest of [SS(F), SS(G), SS(L)l
J ST 2 = 1 + SS(Sl)
K ST 2 = 1 + SS(Sl)
L ST 2 = 1 + SS(Sl)
M ST 2 = 1 + SS(ST)
FN H 7 = 1 + SS(H)
 PLANNING PART 1 77

Figure 3-13. The

r
Sequence Step:
Final AON Diagram
for the Example
Project
1

r 6 7

35
L

are calculated through cycles. At the first cycle, the start activity is assigned a se-
quence step 1. We then take all the activities one by one on the list, look at their IPAs,
and then assign a sequence step that equals to the highest sequence step of all IPAs
plus one. When every activity in the list has been considered, the process is repeated
until no changes to the sequence steps are made. In our example project, no changes
in number will occur after the first cycle and, therefore, there is no need for any fur-
ther cycles.
After all the sequence step numbers have been assigned, the final AON diagram
can be drawn and permanently numbered. In Table 3-6, the largest sequence step
number was 7, which was assigned to the Finish activity and, therefore, the diagram
is arranged in seven vertical columns, one for each sequence step. Each activity is po-
sitioned on its individual sequence step to allow for drawing the connecting links
with as few crossed lines as possible. The last step is to assign the permanent activity
numbers. Figure 3-13 shows the final AON diagram for the example with activity
numbers assigned in intervals of five.
Difference Between AOA and AON While both the AaA and the AON representa-
tions can be easily performed, it is worthwhile noting the major differences between
the two, particularly the benefits of AON representation. In terms of presentation, you
may have noticed in AON representation that the use of dummy activities to control
the logical relationships was not needed. The sequence step calculation also made the
AON to look more organized and clearer to read. The technique is also well suited to
computer implementation. On the technical side also, the AON has a major advantage
in terms of the types of logical relationships it allows. In AaA networks, any activity
(arrow) can only Start after all its predecessors have Finished, which is called a Finish-
to-Start relationships among activities. In practical situations, however, sometimes we
need more diversity in the relationships. For example, we may need to specify that an
activity can Start after two days from the start of its predecessor (i.e.,a Start-to-Start re-
lationship with a two-day lag time). Another example is when an activity can Finish
after five days from the Finish time of its predecessor. In all these situations, the AOA
representation can hardly be adapted to allow the relationship to be specified on the
network. Therefore, while the AOA representation works well for the Finish-to-Start
type of relationships among activities only, the AON allows for any of the four types
of relationships Finish-to-Start, Start-to-Start, Start-to-Finish, and Finish-to-Finish,
Simply, the links in the AON diagram can be labeled with its relationship type and the
78 CHAPTER 3

lag time between each two activities. The relationship between activities F and H in
Figure 3-13, for example, shows a Finish-to-Start relationship with zero lag time (de-
fault relationship). This feature is simply not possible in AOA representation.

3.4 Case Study Project

Let's now consider a small case study project and apply the planning concepts to it. In
the following chapters, we will also continue on the same case study and apply the var-
ious project management concepts, following the systematic procedure in Figure 3-14.
In this section, we will deal with the first step of the process which is planning.
(highlighted box in Figure 3-14). In the following, a description of the case study proj-
ect is given and detailed planning is then performed.

Figure 3-14.
Analysis Procedure
- Resources. WBS, OBS, &
construction methods
(Chapters 3 & 4)
Microsoft Project,
- Scheduling Primavera, or Excel
(Chapters 5 & 6)

- Resource Constraints
(Chapter 7)

- Time Constraints (Chapter 8)

- Cash Flow Constraints (Chapter 10) Excel Model

- Actual Progress Data (Chapter 11) (Chapter 10)
 PLANNIN(; PART 1 79

3.4.1 Project Description:

The case study is a small multihouse project. The project management team identified
the main segments of a single house (house1), the levels of responsibilities, and the
logical relationships between the activities as follows:
Project description:
• 11 work packages (activities) are involved: A, B, C, D, E, F, G, H, I, J, and K.
• Civil activities are: Aand B (Substructure) and C, D, E, and F (Superstructure).
• Electrical activities are: G (Interior work) and H (Exterior work).
• Mechanical activities are: I (HVAC), J (Elevator), and K (Plumbing).
Supervision personnel:
• Substructure is supervised by Mark (activity A) and Peter (activity R).
• Superstructure is supervised by Hossarn (activities C and F) and Sam (activi-
ties D and E).
• All electrical work is supervised by George.
• Adam is responsible for all HVAC and plumbing work; and Wang is respon-
sible for the elevator work.
Logical relationships:
• Activities E and F follow activity B.
• Activity C precedes activity G.
• Activity I follows the completion of activity E.
• The predecessors to activity K are activities H and 1.
• Activity D follows activity A and precedes activity H.
• Activity J is preceded by activities F and G.
The questions that relate to planning and we need to answer in this chapter are:
a. Construct an AON and an AOA network of the project.
b. Use an Excel list to input the WBS and OBS data.
c. If the cost of each task is assumed to be $1,000, construct a pivot table re-
port that can show a summary of the costs.

3.4.2 Planning
a. From the planning information available to us, we can form the relation-
ship table and the network diagrams as shown in Table 3-7, Figure 3-15,
and Figure 3-16.
b. From the project information, the WBS and its link to the OBS are shown
in Figure 3-17. A simple Excel list that shows all the information about the
activities, the WBS, the OBS, and cost information is shown in Figure 3-18.
80 I CHAPTER 3

Table 3-7. Activity Dependency Table and Sequence Step Calculation.

Sequence Step (SS)

Activity IPAs Cycle 1

ST SS(Sl) = 1
A ST SS(A) '" 2
B ST SS(B) = 2
C ST SS(C) = 2
D A SS(D) = 3
E B SS(E) = 3
F B SS(F) = 3
G C SS(G) = 3
H D SS(H) = 4
I E SS(I) = 4
J F, G SS(J) = Highest of [SS(F), SS(G)I + 1=4
K H, I SS(K) = Highest of [SS(H). SS(I)I + 1= 5
FN J.K SS(FN) = 6

Note: A Start (ST) and a Finish (FN) activities have been added.

Figure 3-15. AOA D

2 3
Network of the Case
H
Study A

F
K
9)
G
7

r r
Figure 3-16. AON Sequence Step:

I
Network of the Case 1
Study
T T
A

G
 PLANNING PART 1 81

Figure 3-17. WBS

end ass of the
Case Study

~ ..

I George 1 .. --.·.·· .. ·--

IHossaml· ..·;

aBS

Figure 3-18. An
::xcel ListThat Links
me WSS to the aBS

Nc)tiCe tile
arrangement of.the ..' Pag£\
Fields
. data incelumnsc.J "", ,
levels of wns and one
.··level<ifOnS

c. A pivot table is shown in Figure 3-18. By selecting the appropriate values

from the comboboxes (page fields), the appropriate costs are summed and
shown in the pivot table. This Excel feature, therefore, can be used to pro-
vide various cost reports at all levels of the WBS and OBS of the project.
Other Excel options to summarize the data is the Data-Subtotals menu
option, which provides the screen shown in Figure 3-19 and can automati-
cally adjust the data list to show cell total costs.
82 CHAPTER 3

B CIvil HOJse" SJbstruct ~EtEr

C Civil House'; Sup2rstrllcL Hosam

0 Civil House i Superstruct. Sam
E Ciyil Ho'-,ce SUf8r~:!'~J(:~ 5::;tr~ 1UC'O
'
r CIvil HOuse' Superstrucc Hosam 1000
Civil Tot.1 6000
o Electrical House1 lr.terior George 1000
H Elecm:::-:j ~+',:J;::;'\ Exte~,nr George 1000
Electrical Total 2000
9 I Mechar;lc;:;1 HO·Jse' l-fVAC Adarn 1000
10 J Mechanical HO.Jse ~ Elevator \,l\,lang 1~OO
11 K Mechanical House; Plumbing ArJarr 1)00
Mechanical Total 3000
Grand Total 11000

Figure 3-19. Usingthe Data-$ubtotals Menu Option to Summarize Data

3.5 Summary
In this chapter, we have started to get deeply involved into the planning process. The
end product of the information in this chapter is that you are able to draw a network
diagram such as that of Figure 3-13 for any project and link it to a complete work-
breakdown structure and the organization breakdown structure. In subsequent chap-
ters, the use of project plans in estimating, scheduling, resource management, and
project control will be discussed.

3.6 Bibliography
Ahuja, H. N. (1976). Construction Performance Control by Networks. New York: John Wi-
ley & Sons.
Halpin, D. and Woodhead, R. (1998). Construction Management, 2nd ed. John Wiley
& Sons.
Harris, R. (1978). Resource and Arrow Networking Techniques for Construction. New York:
John Wiley & Sons.
Rasdorf, W. and Abudayyeh, O. (1991). Cost and Schedule-Control Integration: Issues
and Needs, Journal of Construction Engineering and Management, ASCE, Vo!. 117, No. 3,
pp. 486-501.
Postula, F. (1991). WBS Criteria for Effective Project Control, 1991 AACE Transactions,
AACE, pp. 1.6.1-1.6.7.
 PLANNING PART 1 I 83

3.7 Exercises
1. Remove the redundant dummies from the following AOA diagrams, without
changing the logical relationships:

CY-O-iY-O /

(Y-O/
(Y-O-{Y-O
CY-O~-(~

2. Make any necessary corrections to the following AOA representation:

a. C depends on A and B, while D depends on B only.
b. E depends on A and B. C depends on A. F depends on B.

A c
4
A
~0F-@
I
3 2 I
B 0 B I

2 5 6 F~@
(0) (b)

3. Calculate the sequence step numbers for the following project:

Activity Depends on Sequence Steps

A J, L P
B H
C 8, G
D H, L
E AC, K
F -
G 0
H -
I N,Q
J 8, N
K J, M, P
L -
M D
N F
0 -
P H, N
Q F
84 I CHAPTER 3

4. Construct AOA and AON networks according to the activity descriptions below.
Remove redundant relationships. For the AON network, arrange activities in
proper sequence steps. Show all calculations.
Activity B depends on activity A.
Activity G follows activities E, F, and D.
Activity E depends on activities B and A.
Activity F can start when activities D and B are completed.
Activity C is followed by activity F and follows activity A.
Activity D depends upon activities A and B.
5. The set of activities to be considered in the plan for the construction of a concrete
foundation is as follows:

Activity Description

A Layout foundation
B Earth excavation
C Obtain concrete materials
o Place concrete
E Obtain steel reinforcement
Fl Cut and bend reinforcement part 1
F2 Cu1and bend reinforcement part 2
Gl Place reinforcement part 1
G2 Place reinforcement part 2
H Obtain formwork
I Erect formwork
J Remove formwork
K Cleanup
---------------------------------------------------------.-----
In this project, a crew of steel fixers is used for cutting and bending reinforce-
ment and another crew is used for placing reinforcement. The first part of rein-
forcement can be placed during formwork erection while the second part should
wait for completion of formwork erection. Tabulate the predecessors of each activ-
ity and draw an AON network of the work.
6. Construct an AON network according to the activity description below. Label ac-
tivities by their letters and node numbers. Remove redundant relationships and
arrange activities in proper sequence steps. Show all calculations.
Activity H is followed by activities V, X, Land Z.
Activity C precedes activity P and follows the completion of activities Q, Land E.
The predecessors to activity N are activities E, K, and F.
Activity 0 follows activities 0 and N, and precedes activity P.
Activity J is preceded by activities T, D, and L.
Activity I follows activity U and precedes activity Q.
Activity U can start when activities V and X are completed.
Activity D follows activity U.
Activity E depends on activity Land H and precedes activities T, N, and J.
Activity M is preceded by activities X, L, and Z and is followed by activities K
and F.
 PLANNING PART 1 85

7. Consider the construction for a reinforced concrete culvert together with the grad-
ing of the approaches to the culvert on either side. The culvert consists of a base
slab carrying wing walls and a roof. The list of activities to be considered in the
plan of the works together with their durations is as follows:

Activity Duration (weeks)

Construct base slab 4

Construct north apron slab 4
Construct south apron slab 4
Construct north section of side walls 7
Construct south section of side walls 7
Construct north wing walls 6
Construct south wing walls 7
Construct north section of roof 14
Construct south section of roof 14
Grade north approaches 15
Grade south approaches 10

The following information is extracted from the contract method statement:

• Aprons will be constructed after construction of the base slab and before grad-
ing of the approaches.
• Side walls, wing walls, and roof slabs will be constructed in the north side and
then in the south side to economize with formwork.
• Wing walls will be constructed after side walls.
Prepare the complete plan of the works using the precedence diagram method.
8. Consider the WBS-OBSshown in Figure 3-3. Develop an Excel list containing the
WBSelements shown. The list should be a good representation of the WBShierar-
chy and involves fields to specify all the data associated with each element as a
control account (code, description, responsibility, quantity, ... etc.). Once the list is
developed, design a pivot table that summarizes the data. Print the data list and
two pivot table screens showing: the total estimated cost for Area2; and total esti-
mated cost of all the work supervised by the Concrete Foreman. Make reasonable
assumptions of missing data.
9. Consider the WBSshown in Figure 3-5. Develop an Excel list containing the WBS
elements shown. Assume that the building has 10 repetitive floors. Make reason-
able assumptions about a cost value for each element in the WBS and design the
list to be a good representation of the WBS hierarchy. Once the list is developed,
design a pivot table that summarizes the data. Print the data list and a pivot table
that allows the user to select and view the total cost associated with any level in the
WBS.
 PLANNING
Part 2-Time & Cost Estimation

After studying this chapter, you will be able to:

• Understand the basics of cost estimation.

• Identify with standard references for cost estimation.
• Establish a simplified estimating system on Excel.
• Modify the project network to show resources, costs, and durations of
activities.

Need
• Feasibility Conceptual Design
• Project • Owner Approval
Definition Prepare Bid Proposal + Baselines
• Soil Reports • Collect Data (site, quantities,
• Owner • Preliminary Design
Approval specs, resources, tasks, etc)
• Detailed Design • Start Construction ~
Quantities • Detailed Planning, :. 0 &M :
• Work Documents Estimating & Resource : • Demolition :
• Select Project • Scheduling : Management : at End of :
Contract Strategy • Resource Management: deadline: • Schedule Updating : Service Ufe :
resource constraints, TCT.etc : • Progress Evaluation ' ,
• Bidding Strategy & Morkup : • Time, Cost & Quality : :
Estimation : Control : :
• Cosh flow analysis : Commissioning: :
• Submit Bid :, , ,
, ,, ,,

87
88 CHAPTER 4

4.1 Introduction
To complete the planning task, in this chapter we will estimate the resources, costs,
and time requirements of the individual activities of a project. The objective of this
step is to refine our network diagram by adding information related to the resources,
time, and cost associated with the activities of a project network. Activity D of our
case study project (shown in the figure below), for example, shows the estimate data
for a given method of construction, indicating that it can be constructed in eight days
by a crew that involves two L1 (labor category) and one £3 (equipment category), for
the total direct cost of $18,000. One possibility during the estimation process is to de-
fine for each activity a set of possible methods of construction with different re-
sources, durations, and costs. The various construction methods may provide us with
options to choose from if we need to speed certain activities to meet a given deadline
or resource constraints. These topics will be dealt with in detail in Chapters 7 and 8.

Expected Result of 3
H
This Chapter after A
Applying Cost
Estimation Concepts
E

F
CD 6
K
0)
C
J

4.2 Construction Estimating: Types and Challenges

Cost estimation is probably the most crucial function to the success of construction or-
ganizations. Cost estimating needs to be done in different manners at different stages
of a project (Figure 4-1). At the early stages where project budgets are to be decided,
detailed information is not available and parametric cost estimating techniques are
most applicable. With the ever increasing budget restrictions, accurate estimating be-
comes crucial to the setting of appropriate project budgets. Despite its great impor-
tance, the estimating task is neither simple nor straightforward because of the lack of
information at this early project stage and to the existence of many external factors
that affect a project including political, site, environmental, and technological risks.
Once budgets have been approved and project scope becomes well defined, detailed
cost estimating methods become necessary for construction bidding and project con-
trol. On the one hand, accurate bid proposals maintain contractor's success and es-
tablish his potential profits while inaccurate estimates could result in either signifi-
cant monetary losses, if the estimates are too low, or no jobs at all if too high. On the
other hand, estimating realistic costs and schedule baselines is certainly important for
efficient job control.
The main differences between parametric and detailed estimating methods are
summarized in Table 4-1. Essentially, parametric estimating (either preliminary or
elemental) is made without working drawings or detailed specifications. The esti-
mator, who often works on behalf of the owner or the designer, may have to make
such an estimate from rough design sketches, without dimensions or details and
from an outline specification and schedule of the owner's space requirements. The
 PLANNING PART 2 89

Figure 4-1.
Estimate Types Project Preliminary Detailed
Through Project Phase Design Design

Phases

Estimate Preliminary Elemental

Type &
±25% ±15%
Accuracy

Table 4-1. Parametric VersusDetailed Estimating

Parametric Estimate Detailed Estimate

• At the early stage of the project • During the planning and scheduling of a
• A rough estimate project
• Easyto perform • An accurate estimate
• More important to the owner • Requires a lot of effort
• Lessexpensive than detailed estimate • More important to the contractor
• Based on two or more project • Can cost from 0.5%to 2%of total proj-
parameters ect cost
• Accuracy can be improved by • Based on quantity take off from draw-
applying variation factors ings and specifications
• Suitable for decisions related to • Based mainly on real cost data of work
budgeting and the (go / no-go) items
decision for the project. • Suitable at the bidding stage

preliminary cost estimate, as such, can serve several purposes, including feasibility
analysis, budgeting, preparing owner's funding, and a baseline for evaluating con-
tractors' bids.
The preliminary estimate can price the whole project as a function of some proj-
ect parameters such as the square footage of floor area or linear foot, etc. In the ele-
mental estimate, on the other hand, the project is first divided into convenient func-
tional elements that are separately priced to improve accuracy. As such, the elemental
estimate can reveal the costs distribution of the project components to enable a cost
comparison of each element in different projects. This enables the owner to determine
how costs could be allocated to obtain a better project. The approach used to conduct
a preliminary or elemental estimating is illustrated in Figure 4-2. Basically, we start
from stored cost data (e.g., $/floor area) related to some existing projects that most
closely resemble the one at hand and then modify these costs, by means of variation
factors, to suit the environment of the new project. It is essential, therefore, to keep de-
tailed historical cost records related to past projects or use one of the published refer-
ences such as RS. Means, which includes cost data relevant to almost all types of proj-
ects in North America.
RS. Means publishes two notable reference books: Square Foot Costs, which can
be used for preliminary estimating; and Assemblies Costs, which can be used for ele-
mental estimating. Both references were developed based on an average of over
11,500actual projects reported to RS. Means from contractors, designers, and own-
ers. The two references are easy to use and can generate an estimate within minutes.
90 CHAPTER 4

Figure 4-2.
Parametric
Estimating
Approach

Total Cost of an
Existing Project

They simply provide tables for the cost per square foot of various projects, in addition
to cost adjustment factors for project size and city indexes.
The main difference between parametric and detailed estimating is that detailed
estimating can be performed only when work items are identified and a take off of
their quantities is possible. A detailed estimate requires analysis of the method of con-
struction to be used, the quantity of work, the production rates of resources, and the
factors that affect each subitem. The key to the quantity take off is a structured work-
breakdown structure (WBS) with a proper code of accounts for all work items. The
most common code, as discussed in Chapter 3, is the 16 divisions of the Masterf'or-
mat. it should be noted that job planning has a great influence on the detailed esti-
mate. For example, estimating an accurate unit price (e.g., cost per cubic yard) for an
excavation task, to be used for bidding purposes, requires careful consideration of all
the details such as dewatering, available excavators, drivers, weather conditions, and
so on. As such, detailed cost estimating is feasible only in conjunction with the over-
all planning and scheduling of the project. It is the purpose of this chapter, therefore,
to focus on detailed estimating and its relationship with the overall planning, sched-
uling, and control of projects.
In general, estimating is not a simple task and the different estimating methods
have different associated degrees of accuracy (Figure 4-1). Many mistakes and errors
in judgment can happen during the process. Added to the limited time usually avail-
able for estimating and bidding, there are three main reasons for the difficulties asso-
ciated with detailed cost estimation. First, collecting cost data is a difficult task be-
cause such information is the confidentiaJ property of each construction firm. Second,
each construction firm uses its own unique cost estimation approach and most firms
do not like to share their approaches or their experience and cost data with other com-
peting construction firms. Third, most Finns believe that such information usually
makes a difference in being more competitive in the market. Under such environ-
ment, contractors devise their own methods for cost estimation based solely on their
own experience and, as such, are often inaccurate and unstructured. There is a need,
therefore, for a simplified methodology for organizing cost data and effectively uti-
lizing it to develop accurate cost estimates. With cost estimating being one of the ma-
jor functions in project management, many professional engineering societies had es-
tablished expert groups specialized in cost estimation, like the American Association
of Cost Engineers (AACE).

4.3 Cost Components

Before describing the process of detailed cost estimation for a project, let's have a look
at a contractor's point of view of the various cost categories associated with a project
and its relation to the bid price that he/ she decides. Figure 4-3 shows the main compo-
nents of a bid price being the direct cost, indirect cost, and markup. These are as follows:
 PLANNING PART 2 91

Figure 4-3.
Anatomy of a Bid
Price.

Labor
Equipment
Crews
Material
Sub-Contractors

4.3.1 Direct Costs (70 to 90% of total cost)

Direct costs are the costs attributed to the production activities of a project. They are
estimated based on detailed analysis of the contract, the site conditions, resource pro-
ductivity data, and the method of construction being used for every activity. The di-
rect costs are the summation of the cost of the labor, equipment, crews, materials, and
subcontractors used in all the activities in a project's WBS. The estimation of the di-
rect costs are discussed in the next sections in detail.

4.3.2 Indirect Costs

These costs are of two categories:
4.3.2.1 Project Overhead (5 to 30% of total cost) These include the cost of items which
cannot be directly charged to a specific work element. These include the costs of utili-
ties, permits, supervisors ... etc., which service many elements in the project's WBS.
4.3.2.2 General Overhead (0 to 15% of total cost) These are costs that cannot be di-
rectly attributed to a single project and include items such as head office expenses,
taxes, etc. The current project's share of these costs can be estimated to be propor-
tional to the project's value as compared to the total yearly volume of the contractor's
organization.

4.3.3 Markup (0 to 20% of total cost)

This bid component represents the contractor's added fees (percentage of direct plus
indirect costs) that cover two aspects:
Profit: Depending on the business objectives of the contractor organization. This
item can be decided based on the level of competition and the contractor's need
for winning this particular project.
Risk Contingency: Used to provide a safeguard against uncertain circumstances
that are anticipated to affect the project such as weather, labor problems, soil con-
ditions, changes ... etc.
In estimating these bid components, contractors are faced with various degrees
of difficulties. The relative difficulty in estimating appears to be combined with the
level of uncertainty involved in the process, being lowest in estimating the direct cost
and highest in estimating the markup, as shown in the dotted line of Figure 4-4. As
the estimating difficulties increase from direct cost to markup, so does the expected
variability among bidders' estimates of these cost items. The solid black range on the
figure shows the approximate contribution of each cost element to a total bid. It is
92 CHAPTER 4

Figure 4-4. Relative

Difficulties variations
Associated with Approximate among
range of contractors'
Estimating Bid
Components
70-
90%
contribution
to total cost
estimates
-,

0-·
10%

Direct Project General Markup

Sources of Cost Overhead Overhead
Uncertainty: L Indirect Cost ~ Requires accurate
Possible variation Requires accurate assessment of the
in production rate Requires accurate market, competition,
assessment of the
and/or quantities assessment of the and business
company's multi-
total project duration environment
project business

evident that the direct cost, which has the largest contribution to the total bid, ex-
hibits the least variation among contractors' estimates of this item. This is a conse-
quence of the low level of difficulty involved, the well-developed procedures avail-
able, and the possibility that all bidders have access to the same resource pool. On
the other extreme, contractors' markup estimates, which often have the smallest con-
tribution to total bid, exhibit a high degree of variability among bidders, probably
because they include a number of qualitative factors that arc difficult to assess. As
such, it is likely that the contractors' bid prices, and accordingly their chances of
achieving profit/loss, are functions of the markup strategy they select to cope with
anticipated project uncertainties. With the markup properly estimated, it can make
the bid low enough to win the job and still high enough to ensure a fair profit. Many
researchers in the literature, therefore, have been interested in developing bidding
strategy models to help contractors decide on the optimum markup value to allocate
to a project.

4.4 Detailed Estimating

Detailed estimating for large jobs takes weeks and involves many people from many
different disciplines. A general contractor who is preparing a bid will request pro-
posals from subcontractors and material suppliers, and will quantify "take off" and
price work that will be done by its own work forces. Where quotes cannot be ob-
tained, contractors will utilize company records and published cost data. The esti-
mate preparation process is shown in Figure 4-5.
Detailed cost estimation, therefore, is as much of an art as it is a science. A good
estimator is a person who can use his or her communication and negotiation skills to
get the cheapest quotes from suppliers and subcontractors. Good estimators are also
the ones who use their experience on past projects to anticipate the impact of a new
project situation on the production rates of resources. They are also the ones who are
organized and can simplify and possibly computerize or automate some of the tasks
involved to facilitate speedy production of estimates without omissions or errors. De-
tails on estimating the various cost components are discussed in the next subsections.
 PLilli'NING PART 2 93

Figure 4-5. - Analyze contract documents

Detailed Estimating - Visit the site
for Bidding Purposes - Perform detailed WBS
- Take off the quantities for WBS elements
Direct Costs - Analyze quotes from suppliers
- Analyze quotes from subcontractors
- Estimate resources' production rates
- Assess of the project's schedule
- Compile the direct cost

-Estimate project overhead

{
- Estimate general overhead

-Consider project uncertainty

- Consider the market and company needs
~--r=r----' { -Estimate a percentage markup to cover
for profit and risk contingency

-Associate the direct costs with contract

I Finalize the Bid I - items

Divide the total of (indirect cost + markup)
among the contract Items
{
- Finalize unit prices by balancing or
unbalancing the bid

4.4.1 Direct Cost

The steps needed to estimate the direct costs associated with project activities are
shown in Figure 4-5. In this process, however, it is important to understand the basic
relationships among the three elements that constitute a method of construction for an
activity: resources, time, and direct cost. Let's describe these relationships through
simple examples. From there, we can understand the characteristics of a good esti-
mate and determine the important estimate-related information that we need to store
and organize.

If the daily production rate of the crew (CR-06)that works in activity D of our
case study project is 175 units / day (e.g., fe/
day) and the total crew cost per
day is $1,800. The material needed for daily work is 4.5 units of Ml
($100/unit).
a. Calculate the time and cost it takes the crew to finish 1,400units.
b. Calculate the total unit cost. Consider an eight hour work day.
Solution:
Quantity
a. Duration (Units of time)
Production per Unit of time
1,400
--= 8 days
175
Cost ($)= Duration (Units of time) x Cost per Unit of time (4.2)
= 8 days X $1,800$/day = $14,400
Then, Total Cost = $14,400 + 4.5 M1 units X 8 days X $100/unit = $18,000
Total Cost $
b. Unit Cost = = (4.3)
Quantity unit
94 I CHAPTER 4

$18,000
= 1400 = $12.86/unit (e.g., $/ft2)

Equations 4.1 to 4.3 become the basic relationships we need in detailed esti-
mating based on quantity take off. They give us the duration, total cost, and
the unit cost. While Equation 4.2 directly relates time and cost, all equations
include variables that directly relate to the resources. The production rate per
unit of time in Equation 4.1, for example, depends upon the size of the crew
being used. Also, the cost per unit of time in Equation 4.2 is a function of the
hourly rates of the resources that constitute the crew. ow, let's take a rnore
detailed example to emphasize the important relationships involved.

A small concreting subcontractor keeps track of his resources by creating ta-

bles to store information related to his labor, equipment, material, and crew
resources. In a separate table, the subcontractor also keeps information re-
lated to his frequently used concreting methods, as shown in Figure 4-6.
The subcontractor is currently preparing an estimate for Cl new concreting
job in which he has to pour 500 cubic feet (cu Et)of concrete using pumps . .1\
normal working day is eight hours. The rate for the labor overtime per hour
is considered to be 1.5 X normal rate. The crew production during an over-
time hour is 90'1.,of their production in a regular hour.
If the subcontractor is free to use either of the two methods of construc-
tion, Md4 and Md6, calculate the following:
a. 'Iotal cost and time required to finish the job in both cases.
b. Plot a graph showing the duration versus total cost for the two methods
of construction.

Solution:
a. Estimating Direct Cost and Duration:
a.l Method Md4: One of crew C16 in addition to material M12 are used
under normal working conditions to produce 100 cu ft/day. The daily
costs relate to the crew hourly rates and the amount of material needed for
the production. Then,

Quantity Cu ft 500
Duration (days) = ---- = --= 5 days
Production per unit of time Cuft/day 100 ~

Total Cost ($) = Duration (days) x Cost per day

= 5 days X (daily cost of crew C16 + cost of 100 M12 material)
= 5 days X 2L1 X $15 X 8 = $240
3L4 X $25 X 8 = $600
1E2 X ($40+$10) X 8 = $400
2E14 X ($15+$5) X 8 = $320 + 100 X $]7
= 5 X ($1560 + $1,700) = $16,300
 PLANNING PART 2 I 95

L1 General Laborer 15
L4 Concrete Worker 25

::Juipment:

E2 Crane & Bucket 40 10

E14 Pump & Tool 15 5

::::ews:

·.\aterials:

\'ethods of Construction:

Md4 Concreting by Pump - 8 hrs/day cu ft 1 C16 + M12 100 Normal Hours

Md6 Concreting by Pump - 14 hrs/day cu ft 1 C16 + M12 ? 6 overtime hours/day

Figure 4-6. Resources Used by a Concreting Subcontractor

a.2 Method Md6: One of crew C16 and one of M12 are used under a 14-
hour day (six overtime hours). The daily costs relate to the crew hourly
rates and the amount of material needed for the production. Then,
Production per day = 100 for working hours + (0.9 X 100/8) X 6 for overtime
= 100 + 67.5 = 167.5 cu ft/ day (note the "l" in Figure 4--6)
Quantity 500
Then, Duration (days) = = -- = 3 days
Production per unit of time 167.5
Total Cost ($) = Duration (days) X Cost per day
= 3 days X (daily cost of crew C16 + cost of 167.5 M12 material)
= 3 days X 2Ll X $15 (8 + 1.5 X 6) = $510
3L4 X $25 (8 + 1.5 X 6) = $1275
1E2 X ($40+$10) X 14 = $700
2E14 X ($15+$5) X 14 = $560 + 167.5 X $17
=3 X ($3,045 + $2,847.5) = $17,677.5
96 CHAPTER 4

b. Cost and Time Relationship:

Figure 4-7. Activity Cost

Direct Cost Versus
$18,000
Activity Duration

$17,000 •
$16,000
•
3 4 5 Duration (days)

The two examples above serve to demonstrate several important points:

• We can change our resource types, working hours, or the construction tech-
nology associated with a certain activity and will obtain a different method of
construction that has specific resources, time. and cost.
• The more resources we use in an activity, the less time it takes to construct the
activity, but the more costly it becomes (as depicted in Figure 4-7).
• Organizing our resource and estimate data in the form of tables facilitates the
estimating task and speeds the process.
• The essential data needed for detailed estimating arc the resources' rates, the
composition of various construction methods, and the production rates of the
resources in various construction methods. All this information is project in-
dependent and can be collected and stored based on historical records. To es-
timate the cost for a new job, a reference to one or more of the stored methods
of construction is the only thing needed along with the quantity of work to be
done. The rest is simple calculations, as presented in Example 2.
• Using a proper coding system for the resources and methods of construction
is important in organizing the estimate. The code also facilitates the link be-
tween the estimate and the project's WBS and OBS.

One important note to generalize the basic Equation (4.1) for detailed estimating
is to introduce a unitless productivity factor (f), as follows:
Quantity
Duration = (4.4)
Production rate X f
The productivity factor (j) adjusts the duration estimate for an activity to account
for many of the practical aspects that describe the environment under which the ac-
tivity resources have to perform the work. Some of these aspects are:

• Local weather conditions.

• Learning curve.
• Labor unrest.
• Crew absenteeism.
• Economic activity level (recession vs. boom).
• Space congestion.
• Regulatory rules and cultural habits.
• Design changes and rework.
• Overtime.
• Uncertainty (owner attitude, project location, management conditio s, etc).
 PLANNING PART 2 I 97

It is very difficult, however, to assess the impact of these individual aspects, or a

combination of them, on the production rate of a working crew. Estimating the factor
(f), therefore, has concerned a large number of researchers who studied the impact of
these aspects, particularly local weather conditions, as the most influential aspect.
One simple approach to use for weather-sensitive activities is a different value for (f)
associated with each month of the year (e.g., 0.7 for January to represent bad weather
conditions and 1.0for August to represent favorable conditions, etc.). As such, the fac-
tor (f) in Equation 4.4, reduces the production rate under bad weather conditions, re-
sulting in increased duration of the activity. To use this simple adjustment, however,
the month in which the activity takes place must be estimated.

4.4.2 U sing Published Cost Data

A lot of published cost data is available commercially and can provide support dur-
ing the estimating process. One important source is RS. Means references, which
publishes several publications, including:
• R.S. Means Forms Book.
• R.S. Means Building Construction Cost Data Book.
• R.S. Means Heavy Construction Cost Data Book.
The forms book provides various forms that can be used during the estimating
and construction stages. For example, a "Site Analysis Form" can be used to collect
data from the site to ensure that no items with cost implications are overlooked. The
latter two cost books are very important pricing guides and provide data related to
crew formations, hourly rates, and production rates of crews in various tasks related
to buildings and heavy construction, respectively.
The KS. Means cost books are readily usable for estimating purposes. The books
are organized in accordance with the Construction Specifications Institute's 16 Divi-
sions of the Masterformat. Under these 16 main divisions, the book contains infor-
mation about more than 21,000 items (construction methods). These items use a total
of 345 predefined crew configurations provided in the book. An example page of
some of the items in the Building Construction Cost Book is shown in Figure 4-8.
The coding system is composed of three sets of munbers to classify items. Con-
sidering one of the items in Figure 4-8, for example, 022-246-0100,which represents:
022 Earth work (part of CS}coding 02 for site work)
246 Excavation, bulk, scrapers
0100 Elevating scraper 8.4 m3, sand and gravel 450-m haul
Each item in the list of Figure 4-8 includes information related to the crew code,
which describes the crew composition in terms of labor and equipment categories.
Crew production rate is also included with the item. It is noted that crew production
is represented in two types of information in separate columns: the daily production
in units/day; and alternatively, labor hours/unit of production. Both representations can
be derived from each other (example shown in Figure 4-9). The basic difference be-
tween the two representations is that the daily production in units/day can be
achieved only by a prespecified crew configuration. In the estimating job, therefore,
the estimator can develop the estimate very easily (as demonstrated in Example 2 ear-
lier) given that he or she is using the exact crew configurations. The labor hours per
unit, on the other hand, is more general and can be used with various crew configu-
rations that can be decided at the time of the estimate. For example, if a concreting job
requires 0.51abor hours per cubic feet, then, the estimator may estimate the duration
to pour 100 cu ft (requiring a total of 100 X 0.5 = 50 labor hours) in various ways: a)
using a crew of 4 labors. 8 hours/ day will take a duration of about 1.5 days; or b) us-
ing 5labors, 10 hours/day will take a duration of 1 day.
98 CHAPTER 4

Figure 4-8. Typical

Building
Construction Cost DAILY lABOA
CREW OUTPUT HOURS UNIT

Data

•
3040 C'ay B-IOW 294 .c-n
'" 3200 45mol,Jl. s.aoo.$ re-o- 237 .051
'2' 1.75 3.03 3.68
3220

3240
Ccm'TIoo

Ciao,'
earl!: 206

130
0.058

0.092
."
2.31
2.01

318
l..18

551
.-l.'I7

1.10
ID
:=; 3:lOO 00 m haul. sand i. gra~'e '07 112 2.63 367 &.7C es
m
::;: 3320
3340
(;(;rr,:nUflcilrlh

Cla'i
9175
16<6
."
157
303
3,96
.151

540
7.8\
9.3€
'0
12.05
0
::tJ 4000 t ••9KW, 15 ,,,haul, san:l6 9(0)\,,,1 8·106 1.070 011 1.06
:><
4020 ComI"1O~ earth 940 013 "
32 "
B9 12.

4()olD Cl':], se. oao SI '.41 ,;2

24. ""10 EXCAVA1ION. BULK, SCRAPERS
'"
01(lO El€-llaLIr!. oa 68 17t.l 2. n o 3.01
0.50 "17 7..03 260 3.42

1>200 / 459
036 93 246 3.39
2.0 .•
4.12
3.47

/
78 2.06

0350 900 mhau 105 035 .88 234 ·.;N· ">3

0400 15G{)mh~ul / 042 1.07 2.82 :,:.y, ~
0500 Clay. ,1;0 '" ~,aUI/ 267 1.25 ).30 .l :,.~,
"!';.:;'
0550 900 m ,M,'"'/ 252 056 1.42 3.76 5.18 6.30

0600 ,500 m t:HJ 210 D£7 1,71 4.51 6.22 7.55

woo Soli propelled screcer. 10_, 731!~ DlJSh oozer. sand

lOSO And rave.. ':$0 m MLI <\·33D 703 020 rl13 51 l,64 3.15
Important: See the Reference Se~ion for critical supportfog data -/Referenc~Nos .. Crews & Cttv Costmdexes

i
Cu~w
/ Det;;;ied
Code

Figure 4-9. Two

Alternative
Representations of
Production
Information

e.g., 100 Cu ft/Day e.g., 0.5 Lhrs/Cu ft

Applies to a given crew 01 Applies to any crew

5 labors working 10 hrs/day. formation and work hours.

Then, Now, if we decide to use a

crew of 4 labors, 8 hrs/Day:

Lhrs/Day = 5 x 10 = 50 Lhrs/Day = 4 x 8 = 32

Lhrs/Unit = 50/100 = 0.5 Units/Day = 32 1 0.5 = 64

CREW IS FIXED CREW IS FLEXIBLE

In addition to work items and their crews and production rates, the R.S. Means
cost data books include details on the cost of labor, equipment, and material of each
item, as shown in Figure 4-8. Added to that are various cost adjustments such as in-
dexes for cost adjustment for 305 cities in North America.

As shown in Figure 4-10, various construction methods for rough carpentry

are listed.
We assume that the method with code 061-114-2720 is used for carpentry.
This method uses crew F-2 which produces a daily production of 1.49
units/day. The composition of the F-2 crew and the hourly rates are shown
in Figure 4-11.
 PLANNING PART 2 99

Figure 4-10.
:::onstruction
'v1ethods for Rough
11~ 1)100 FRAMING, .JOISTS 114
:::arpentry 2550 .JOi5i5~ 2" x 4"
RO&I
-010 f-2 83 1'9.277 t1.B.f 550 485 22 LOS7 1..4Clu
2&55 sneumor.c nOlh?a ROE·l F-2A .9& 16.&67 550 ;20 7' 1,040 U50
26;131) 2" x f," -030 F-2 1.25 12.8-00 525 325 1-4.70 S64.70 1.100
2685 pneumor! c ne!ted F-2A L44 11 111 525 280 52 8S7 1,075
2700 2" x 8" r-z 104& 10.959 5,,5 276 12.00 653.60 1.075
2705 pneumo ttc ocueu F-2A 1.6B 9.524 565 240 44.50 3-t9.S0 1~O5(1
2721) ~" x 10" f-2 L49 I073~ 655 271 12.35 93-':1.35 1,175
2725 PneIJtncrr-j.: t"lCtiled. F-2A 1.71 9.:;57 655 236 ~~ 935 1,1~O
2740 2" x 12" f-2 1.75 9.143 705 230 10.50 945.50 1,150
27.ol5 PneurnCiTic nctiled F-2A 2.01 7.960 705 201 37.50 94350 1,125
2761) 2" x I":;" f-2 1.79 a.939 730 225 10.30 965.30 1~175
2765 Prieumcrt! C nCli led F-';:A 2.06 7767 730 196 36,50 962.50 1,150
27B.(I ;" x 6" F-2 1.39 11511 1,:200 2'~O 13.25 1,503.25 1,800

Figure 4-11. Data

"or Crew F-2
Incl. Cost
Cn;>w NO. 5ar'€ costs 5UbSO&P Per lWlor,Hour
Bvf':i Incl.
Hr. e',lily cosrs O)&P
$40.25 $6HOO ;>25,,'0 $~O,25
20.2~ 1.15 1.27

$€.64.25 $2635 $41.52

for the purpose of estimating direct costs, we divide the quantity of the
work by the production (L49/day) to determine the duration in days, Also,
quantity multiplied by unit cost ($1,175)determines the total direct cost.

4.4.3 Indirect Cost

As explained earlier, the two components that comprise the indirect costs for a proj-
ect are the project overhead and the general (head office overhead), According to the
CSI format, which is followed by R.5. Means, overhead is classified as general re-
quirements and is covered in the Division 1 (see Figure 3-4 in Chapter 3, and Appen-
dix E),The RS, Means approach to estimating overhead and profit is basically to add
10%on all materials, 10%on equipment, 10%on subcontractor costs, and an average
of 58,8% on labor bare costs, As such, the overhead associated with labor is the great-
est of any of the cost categories, The bare costs covers the worker's take-home pay
plus fringe benefits, vacation, and paid sick days, The 58% overhead charges will then
cover workers' compensation insurance (19%); federal and state unemployment
costs, social security taxes, builder's risk insurance, and public liability insurance
(16,8%);general overhead (13%);and profit (10%),
With the O&P added to the estimate as a percentage of labor, equipment, mate-
rial, and subcontractors costs, the O&P become roughly estimated, Alternatively, we
can estimate detailed project overhead and general overhead costs as follows:
4.4.3.1Project Overhead These are field-related costs that are incurred in achieving
contract completion, but which do not apply directly to any specific work item, A de-
tailed analysis of the particular demand of the contract is a reliable way to arrive at
an accurate estimate of these costs, Companies develop their own forms and check-
list for estimating these costs, One example is included on the CD of this book as an
100 CHAPTER 4

Excel template. The file Indirect.xls has a user-friendly interface and formulas that
help the user estimate the five main components that comprise the project overhead
(Figure 4-12):

• Variable lndirects:
i.e., costs that depend on project duration, including wages and salaries of su-
pervisors, medical and safety personnel, etc .
• Fixed Indirects:
A. Project office expenses (equipment, supplies, etc.);
B. Site installations (cranes, temporary facilities, etc.); and
C. Operations of site installations (to maintain the operation of part 13).
Each of these components includes many sub items (see Table 4-2). The variable
part of the indirect cost (e.g., supervisors, cranes, and financing costs) is highly de-
pendent on the project duration and as such requires accurate assessment of the proj-
ect schedule. It is important, therefore, to finalize the indirect costs after accurate as-
sessment of the project schedule and its impact on direct cost (will be covered in detail
in Chapters 8 to 10).

4.4.3.2 General Overhead These are fixed indirect costs unrelated to a specific con-
tract, rather to the operation of the contractor's head office. These costs can be esti-
mated using the following formula:

Project Direct Costs X Total Head-Office Overhead in a Year

General Overhead = ----'------------------------
Expected Sum of Direct Costs of All Projects during the Year
In the template of Figure 4.12, also Table 4.2, these costs can be added under item
O. Others.
It is noted that the equation used here is a direct function of proper estimation of
direct costs.

Figure 4-1 2. Excel

Template For INDIRECT
Project
COST
J~=~-~~'=---
ESTIMATION
. "-1
Indirect Cost
Estimation L .•.............. CC.. , , S I Day

Summary area:
Use these
buttons to access
the appropriate
indirect cost.

Input
cells Calculations

to
Top
Table 4-2. Listof Project Overhead Costs

Variable Cost ($/day): Fixed Cost: Fixed Cost: Fixed Cost:

WAGES Se A. OFFICE B. SITE C. OPERATION OF
SALARIES EXPENSES INSTALLATIONS SITE INSTALLATIONS

SUPERVISION OFFICE EQUIPMENTI EQUIPMENT ERECTION ROAD & YARD MAINTENANCE

• PROJECT MANAGER SUPPLIES NONPAY ROADS & YARDS • COST OF SURFACE MAINTE-
• PROJ. SUPERINT. • FURNITURE & FURNISHINGS • CONSTRUCTION OF SITE NANCE. DUST CONTROL,
• GEN. SUPERINT. • EQUIPMENT HAUL SNOW REMOVAL, DRAINAGE
• ASS. SUPERINT. (e.g., COMPUTERS) • PREPARATION OF CAMP SITES MAINTENANCE
• TRADE SUPOERINT. • SUPPLIES & STATIONARY • YARD AREAS, & STORAGE PROJECT OPERATION &
• MASTER MECHANIC • POSTAGE SITES MAINT.
• ASSIST. MECHANIC • BADGES. TENClLS • CONSTRUe. OF DOCKS. PIERS • TRAILOR LOT RENTALS
ENGINEERING • PAYROLL & ACe. COMPUTER • LOADING PLATFORMS. etc. • BUILDING REPAIRS & MAINT.
• PROJECT ENGINEER ENGIN. EQUIPMENT/SUPPLIES • CONSTRUCTION OF FENCES • BUILDING INTERNAL SERVICES
• OFFICE ENGINEER • SURVEYING EQUIP. & SUPPLIES BUILDING ERECTION & DIS- • JANITORIAL SERVICES
• COST ENGINEER • REPRODUCTION EQUIP. MANT • GARBAGE PICKUP
• SCHEDULE ENGR. & SUPPL. • OFFICE. WAREHOUSE. etc. • FUEL SUPPLY
• DESIGN ENGINEER • DRAFTING EQUIP./SUPPLlES • CAMP AND HOUSE TRAILERS SERVICES, OPERATION &
• FIELD ENGINEER • COMPUTER EXPENSES • WORKSHOPS MAINT.
• ENGR. TECHNICIAN • PHOTOGRAPHIC EQUIP. • EXPLOSIVES MAGAZINES • WATER SYSTEM
OFFICE & CLERICAL & SUPPL. • WORK PLATFORMS • SEWAGE SYSTEM
• PERSONNEL MANAGER • CONSULTING. TESTING • MATERIAL WEIGH SCALES • DRAINAGE SYSTEM
• PURCHASING AGENT &INSP. SERVICES INSTALL. • AIR SUPPLY AND DISTRIBUTION
• ACCOUNTANTS LEGAL & PUBLIC RELATIONS & REMOVAL • HEATING AND DISTRIB. SYSTEM
• PAYMASTER • LEGAL/AUDIT FEES • WATER SYSTEM • STANDBY GENERATORS
• WAREHOUSE CHIEF • DONATIONS / PR • SEWAGE SYSTEM • POWERLlNES. LIGHTING
• GENERAL HELP MEDICAL & SAFETY SUPPLIES • DRAINAGE SYSTEM SYSTEM
• EQUIPMENT CLERK • MEDICAL EXAMINATIONS • AIR SUPPLY AND • ELECTRICAL HOOK UPS
MEDICAL & SAFETY • MEDICAL SUPPLIES DISTRIBUTION • COMMUNICATIONS
• SAFETY SUPERVIS. • SAFETY & WEATHER WEAR • HEATING AND DISTRIB. INSTALLATION
• FIRST AID MEN • SIGNS & BARRICADES SYSTEM INDIRECT TRANSPORTATION
• NURSES • FIRE PROTECTION • STANDBY GENERATORS • PICKUPS. CREW CABS. CREW
• SECURITY MEN • SUPPLIES • POWERLlNES. LIGHTING TRANSPORT. CREW BUSES. etc.
EMPLOYEE BENEFITS EMPLOYEE MOVE IN, SYSTEM WAREHOUSE OPERATIONS
• WORKMEN'S COMPENS. MOVE OUT • ELECTRICAL HOOK UPS • VEHICLE AND DRIVER
• SOCIAL SEe. & PEN. PLAN • HOURLY EMPLOYEES • COMMUNICATIONS • PICK UP SERVICES
• UNEMPLOYMENT INS. • SALARIED EMPLOYEES • INSTALLATION • YARD EQUIPMENT
• HEALTH. WELFARE. • HEAD OFFICE VISITS SHOP EQUIP, & SHOP TOOLS SERVICE & MAINT. EQUIPMENT
GROUP INS. • EXECUTIVES • PURCHASE/INSTALL. OF • SHOP SUPPLIES (e.g .. BOLTS)
• VACATION/HOLIDAY PAY • FAMILY MOVE IN/OUT HOISTS • WELDING SUPPLIES
TRAVEL TIME PAY CATERING COST • SMALL TOOLS. WINCHES. • GENERAL SHOP LABOR
• TRAVELLING EMPLOYEES • ROOM AND BOARD JACKS. etc. EXPENDABLES
LABOR ADJUSTMENTS • ALLOWANCE FINAL CLEAN UP • COST OF MACHINE
• SHIFT PREMIUMS • LIVING EXPENSES • COST OF LABOR. EQUIP .. OR ATIACHMENTS THAT UN-
• HIGHT PREMIUMS NON RECOVERABLE INS. MATERIAL TO CLEAN UP THE DERGO WEAR (e.g .. BITS)
• UNDERGROUND PREMIUMS COSTS SITE AT COMPLETION ELECTRICAL POWER
• COMPRESSED AIR PREMIUMS • INSURANCE CLAIMS CHARGES
• PRODUCTION BONUS (e.g .. AUTO) PROJECT SMALL TOOLS
• EQUIPMENT PREMIUM INSURANCE, TAXES & BONDS
• INSURANCE
• TAX (PROPERTY & BUSINESS) Fixed Cost: D. OTHERS
• BONDS (PERFORMANCE)
• EQUIPMENT TAXES FINANCING
• EQUIP. & VEHICLE LICENSE • COST OF FINANCING THE JOB CALCULATED AT CURRENT !~,::~-
COMMUNICATION EXPENSES EST RATE
• LONG DISTANCE CHARGES HEAD OFFICE SUPPORT
• TELEX FAX LINE CHARGES • MONTHLY OR % CONTRIBUTION TO MAINTENANCE OF HEAD C =-
FREIGHT EXPENSES FICE FACILITIES & STAFF
• FREIGHT AND EXPRESS COST CONTINGENCIES
• HANDLING. PACKING • ESTIMATED COST OF INTERFERENCES INCLUDING FLOODS. TAX
MISCELLANEOUS INCREASE. EARTHQUAKES, STRIKES
• PARTIES/ENTERTAINMENT BONUS OR PENALTY
• DUES. LICENSES. PERMITS ESCALATION
• YARD. OFFICE RENTALS

101
102 I CHAPTER 4

4.4.3.3 Total Indirect Cost Once the template of Figure 4.12 is filled, the total indi-
rect cost is obtained by adding up the project overhead and the general overhead
components. The total indirect cost can then be expressed in the following straight
line relationship:

4.4.4 Finalizing a Bid Proposal

When the O&P is added to the estimate as percentages for labor, equipment, material,
and subcontractors costs, as in the RS. Means approach, the O&P become fairly dis-
tributed among the contract items and the final bid can be easily summed. On the
other hand, when the direct and indirect costs are calculated separately, as explained
in the previous section, two more steps are needed to finalize the bid: (a) estimating
a proper markup percentage to cover for profit and risk contingency; and (b) adding
all the cost components to formulate the final bid.
The markup is usually assessed at what is considered to be possible in the pre-
vailing market conditions. However, the following factors should be taken into con-
sideration when deciding the mark up:

• Competition.
• Contractor's desire for work.
• Level of project uncertainty.
• Project type, size, and complexity.
• Contractor's experience on similar projects.
• Market conditions.
Estimating Cl percent markup is more of an art than it is science and relies heavily
on experience and the gut feeling of contractors. Many statistic-based models have
been developed in the literature to support contractors' decision on bid/no· bid and
markup estimation (covered in Chapter 9). The key to theses models is storing infor-
mation related to past bids and analyzing the bidding behavior of competing compa-
nies. One approach is also to analyze the behavior of the lowest bidder in past bids.
This analysis helps in determining an optimum markup value that makes the bid low
enough to win the job, yet high enough to attain a fair profit.
Once a markup percentage is decided, the total of direct cost, indirect cost, and
markup form the total bid price. This works fine for lump-sum contracts because the
contractor is obliged to submit only one figure of his final bid. However, in unit price
contracts, the contractor is required to submit unit prices associated with the bid
items, which embed all the costs. While direct cost are estimated for each item inde-
pendently, contractors need to distribute the total of the indirect cost plus markup
among the items to determine the final unit prices. Generally, there are two ways by
which the contractor can allocate the indirect cost and markup to the bid items. A
straightforward method is to distribute these costs to all items according to their rel-
ative direct costs. This is known as "balanced bidding." Alternatively, a contractor can
perform "unbalanced bidding" by raising the prices on certain bid items and de-
creasing the prices on others so that the total bid price remains the same. There are
two main reasons for unbalancing:
1. Improving project financing; and
2. Adjusting the bid under expected quantity change.
 PL'\NNING PARI' 2 103

To improve project financing, a contractor can raise the unit prices for the bid
items that come early in the schedule and also reduce the prices for later items. This
enables the contractor to charge more for early work and accordingly will receive a
higher owner payment such that his own financing cost is less. Also, when the con-
tractor knows by experience that the bid quantities are inaccurate, he or she can ad-
just his or her prices to attain a competitive edge and possibly a more potential profit.
For example, when a certain item is expected to have much less quantity than stated
in the bid package, the contractor may reduce the bid price on this item to produce a
competitive bid, yet without much loss since the item is going to have less quantity
than specified. Also, when the contractor expects that a certain item will increase in
quantity, he or she may increase the unit price on such an item to increase his or her
potential profit. In all cases, however, bid unbalancing is a risky task to the contrac-
tor. Some owners analyze the bids to detect bid unbalancing and disqualify the bid-
ders who employ this approach.

4.5 Commercial Estimating Software

Computers have clearly added speed, power, and accuracy to construction cost esti-
mation. A wide variety of software systems for estimation have been developed t\..=-
commercial use (Table 4-3). Many of these systems also provide integration with \'a.~-
ious modules for quantity take off, scheduling, and CAD.
These software tools can organize the estimate, link it to resource databases. Ffe--
vide reports, and possibly integrate with other systems. In principal, they do the SiUT."
functions as the Excel estimating system presented in this chapter. They, however
vary in their strengths and weaknesses. Also, in many situations, they involve a ri:;:'::
structure that is different from what the user is familiar with. A thorough investiga-
tion of their capabilities is, therefore, highly recommended before purchasing sort-
ware. Experimenting with a working demo version may be a good evaluation for tile
suitability of certain software to the requirements of the user. A good Internet search
can also be helpful in this regard (see Appendix A of web resources).

Table 4-3. Cost Estimation Software Systems

computer Software Description

Win Estimate Building construction estimator assignsWBStags to each item.

Success Cost estimation and cost management with a link to scheduling software.
Design 4/Cost Preliminary estimate based on square foot system.
Microfusion for Windows An advanced integrated planning, estimating, proposal preparation, and per-
formance management system.
Timberline A cost estimating software with modules for CAD and scheduling.
G2 Estimator Cost estimation based on previous experience.
Best Estimate Cost estimation software.

4.6 Back to Our Case Study Project

In terms of the road map to our case study, the material in this chapter continues the
planning (shaded box) by estimating the resources, durations, and costs of the activ-
ities' methods of construction.
104 CfL'\PTER 4

Figure 4-13. Case

Study Outline
- Resources, WBS, OBS, &
Construction Methods
(Chapters 3 & 4)

- Scheduling
(Chapters 5 & 6)

- Resource Constraints
(Chapter 7)

- Time Constraints (Chapter 8)

- Cash Flow Constraints (Chapter 10) Excel Model

- Actual Progress Data (Chapter 11) (Chapter 10)

4.6.1 A Spreadsheet- Based System

With our knowledge of the basic equations for cost and time estimation, this section
presents you with a simplified Excel system that uses the Excel functions discussed
in Chapter 2, TI1esystem represents an integrated approach for planning, estimating,
schedule optimization, and project control (see Figure 4-14). The whole system fits
into a single Excel file Case-Study.xls, which comes on the CD of this book. All the
data in this file belong to our case study project but you can use the same file as a tem-
plate for other projects. You can experiment with the various sheets of this Excel file
and view the underlying formulas (shaded cells). The two main components of the
system are:
a. a depository of project-independent data.
b. a project management system for estimating, scheduling, and project control.

Figure 4-14.
Components of the
Excel Project
Management
System

The Methods sheet

defines default
I \
construction methods / ~1~--\ ----
to be used in any ,~ I
activity. I Prd{ect
I Managpment
/ Syst~m
The methods are the
direct link to the
activities in a project.
For each activity, you
can select (through a
reference code) up to
three optional
methods to construct
the activity.
-WBS&OBS
- Activities with 3 Methods of Construction
- Estimate, Schedule, & Reports
 PLJ\.t'JNING PART 2 105

4.6.1.1 Data Depository The data depository of the system is needed to provide data
for the project management system in a manner that reduces redundancy, saves time
and cost, and increases productivity. Similar to the way we did in Example 2 before,
the design of the data depository in Excel involved setting up several data lists, es-
tablishing relationships among them, and designing related reports. As shown in Fig-
ure 4-14, it incorporates the following six worksheets. A description is these sheets is
provided next along with various screen shots:
• 5 Resource Sheets: Labor, Equipment, Crews (combination of labor and equip-
ment), Materials, and Subcontractors;
• 1 Construction Methods Sheet.
Labor: The labor list (Figure 4-15) contains five fields: code; description; total
hourly rate (Rate/hr); basic hourly rate; And availability constraints (not used
here). Basic rates are obtained by a means-based average of wage rates from 30
major US. cities. The total rate (rate/hr) is then calculated by multiplying the ba-
sic rate with a constant, 1.58, which is an average of the adjustments used by
means to the basic rate for workers' compensation, overhead, and profit (O&P).
Equipment: The equipment basic rate (Figure 4-16) includes not only rental cost,
but also operating costs such as fuel, oil, and routine maintenance. An average of
10% is added to the basic rate for O&P to calculate the rate/hr.
Crews: Crews were defined by assigning up to five labor and equipment re-
sources, using their codes as reference (Figure 4-] 7). Accordingly, the calculations
in columns N to R use the VLOOKUP function to determine the individual costs
per day of the five resources. These costs are then summed in column C to deter-
mine the total crew rate per day, Rate/ d.
Material: The material basic unit cost (Figure 4-18) includes delivery to the site,
without including the sales tax or allowance for wasted material. An average 10'1"
is added to the basic unit cost for O&P to calculate the Cost/Unit.

Figure 4-15. Lobar

Sheet

Figure 4-16.
Equipment Sheet
106 CHArTER 4

Figure 4-1 7.
Crews Sheet

The easiest approach

to add new crews is to
copy the last row to a
new one and then
modify its data. I':, CH·IX)

fiieR.Cl
rtt: (:1<-0-1
[t£ CR~S ,-'.'~'-~-r-
ft~CR-C-5 .f··
1l\ :R~7
··11~·
...CR.~a ::1:;:.-

1 ft~ ::r{..{·~ .c-r-.

tyC';;,·lG ,., ."
Ij~'CR-" .'"''
IZO<R-II!"
:iLcR-13
r2.~/::R-14
I:~~:~:
~:.:.,:!
;i~.CRF
t'i&\CR"'8
I!TH·)". .'-.,:.,

Figure 4-18.
Materials Sheet

unit
unH
unit
Material "4" Urlil
Material "S" uoil

Subcontractors: The subs sheet (Figure 4-19) defines various subcontractors, pro-
viding their unit cost (SubCost) for the required tasks. An average of 10% is added
to the SubCost for O&P to calculate the Cost/Unit.
Methods of Construction: Various methods of construction were defined in a
separate worksheet, Methods, following the R.S. Means approach (Figure 4-20)
so that they become ready for use in any project estimate. The Methods sheet de-
fines the resources used in each construction method (crews and material, or sub-
contractor), the overtime strategy they use, daily production rate, and assumed
seasonal productivity factors. To facilitate user input of the resources used in each
method, some screen elements such as combo boxes are used on the sheet, as
shown in Figure 4-20. The same coding system of the means can be used in this
worksheet. The regular daily production rate RegPr/d is obtained directly from
the means or input by the user according to experience and/ or company records.

Three seasonal productivity rates (winter, spring, and fall) can be specified to
each method. These factors adjust the daily production rates, depending on the sea-
son in which the activity planned to be constructed. For activities that are insensitive
to weather conditions, the user can use a value of 1.0 for the three factors. It is noted
that the use of these factors becomes advantageous when the estimate is integrated
with a scheduling module. These factors, as such, make it possible to refine the cost
based on the scheduled time of the activities.
 PLANNING PART 2 107

Figure 4-19.
:";bcontroctors
:;,eet

~
Type of Work 1 ~3,637.0 LSUM
Type of Work 2 S3.273.6 lSUM
The lump sum
Type a~ Work :3 $19.4 LSUM
values can be T YPi* o~!.NO~k -4 1~1~idli.JPlJ--r;;;.g·QJJlOI!llrQitJ~i.w~-[:':·-4.lL"_· ---<~ LSUM
quoted directly ;) --;ype5r~\!ork'-" ~"...------ Sub-contractor "5" $18.2 LSUM
Type (lfWOd( ~ Sub· contractor "6" $11.6369 LSUM
from local
Type of Work 7 S:Jb-cont"'C~t;f -r- $11,455.1 LSUM
subcontractors. Type of Work S Sub-contractor '8" $14,363.8 LSUM
Type of Work 9 sub-contractcr "9" $6.909.5 LSUM

J -
, ~Si.~
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..~
'lCSHI1-3 Mc ~.12
'." 'r.SI.{)2·! Md
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'~: CSI ,!l3,~ ':c)) -Jj} ·f'.i~
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~='C~jt.{ll'~ eR-I; sa ·O.!:.i.io iw

j CSI·{jl·Z t:::F~!6 "?.! 1:;7
t: I,UO
:~ ..C51Ulli qi';S,;: UG/ ~l/:' .;:i~· n;;::
:!' t::3Htd 2: CQ-l& . 51 i'UiOOJ i.o:
:'~ : r::::l!·Oll ') ~":J:,~ CR-li 52 ~ I 00

Figure 4-20. Construction Methods Sheet

When the user specifies working hours per day (hrs/d field) that are greater than
8, the total daily production, TotPr/d, and the total daily cost, Cost/d, are automati-
cally adjusted for the overtime. The assumptions made are as follows:
• Normal working hours are 8 hours/day.
• Overtime hour has 90% productivity of a regular hour.
• The hourly rate of the first 4 overtime hours is 1.2 the normal hourly rate, Af-
terwards it is 1.5 of the normal hourly rate.
• Two methods can be identical except work hours are different.
It is noted that the methods that involve subcontractors may need special care. As
shown, the regular production rate, RegPr/d, is a fraction that is determined based on
the duration quoted for the job. For example, if the subcontractor is doing a lump sum
job (i.e., quantity = 1) that takes him 10 days to finish, then his production should be
1/10 or 0.1 units per day. Here, Regular Production = 1 / Duration.
4.6.1.2 Project Management System Added to the six worksheets of the data deposi-
tory, the Case-Study. xls file incorporates various other sheets that form a comprehensive
system for estimating, schedule optimization, and project control. The latter sheets relate
to the specific project being analyzed. The first sheet that needs to be set up is the Esti-
mate sheet. This sheet, in addition to the Reports sheet, are described in this chapter
while the others will be described in the various chapters that come.
108 CHAPTER 4

The "Estimate" Sheet This sheet defines the activities of the project being studied
and their data related to: the work breakdown structure (WBS) of the project, the con-
tract items, and the responsibility levels of the organization breakdown structure
(OBS). The row data that we need to input into this sheet was discussed previously in
Chapter 3. The project network, the WBS, and the OBS are shown in Figures 3-·15 and
3-17. Using this data, in the Estimate sheet we add each activity in a new row and
then enter its data in the white cells, as shown in Figure 4-21, including a reference to
the methods of construction for each activity.

Part of user inputs

lX~t Ct~'l 5..;bwI)Cl. h-ld 3 600.0, Md4

C::1}(f; un:j c.,,:,,' H::J.;,~~:i :\t~ ..;t, ..d:
l,~(((( 1.<:";; C,~, H.•
'l<.<;~~·s ~;w;X'.r..:::r;.d

9JJ.(t '..;:-,;1 c.~.• ~.~..i·e =~;~~i("K:t

:;1('0 e-st G~i i-I';;~';'<;f;'j :u)tf:,;',:Jct Ho~n 1~<13 ;')[10

b '.lU i..:::!.k C::!::i::!:-A
E:::::;;',·,;;a
~",~~l I,,~;.;< G'::Ci'g~ ",13 W Md 11) I 00
'"d r:
U;"$) LSt~,- ~~.!'~~' s.'~'·:~'Cf Geoc-g~ 00 lod l.••id
H
;«1 !D.I-". .!~--:••.<':,-:~~~~.!'J
;h;~d H'/A:: ,\1..,..
tvd
"
t/.d 15 L(O
Ij 1 00
"
'.tt) LSLf,' <"~".Y'~'::d ,,,,,,I £!e V$,( I/d 1, ! ro
I.f:d 17 1 00 Md IS

WBS of the case study, as discussed in 3 methods of construction for every activity. For
Button to automatically -,,:Illl
Chapter 3. To add new Items, last row is example, activity K call be constructed by either of:

. D
the estimate data to a
copied to a new one and then modified. method mdI7 or mdI8. Quantity IS I because it is a schcdulins software ruscd in
subcontracted Lump Sum acnvity. Chapters 5 & Id).

Going backward to the Methods sheet, we can copy and add two rows f or methods md 17 and
mdi8. We then specify what resources will be employed in these methods. Therefore. we may
need to go back to the resource sheets and add these resources if they are not included yet. e.g .. a
new subcontractor, crew. or equipment etc. Notice here that method mIll employs subcontractor
S2 and crew eR-l7. The composition of the crew can also be found 111 the crews, labor. and
equipment sheets.

Figure 4-21. The "Estimate" Sheet

 PLANNING PART 2 109

The Estimate sheet is a large one, involving five parts and Figure 4-21 shows only
the first part. The formulas used in this estimating sheet are complex due to their link
with all other sheets, however, they are based on the same data management tools of
Excel described in Chapter 2. The various parts of the sheet are:
Part A: Data Input (Columns A to R): This part is the part that relate to Figure
4-21 and discussed. Based on this part, a pivot table can be easily constructed to
automatically generate the bid proposal form of the project. It can also be used to
provide summary reports pertaining to unit costs, cost of resources, and the total
costs at the different WBSlevels, as explained later.
Part B: Calculations for the Selected Methods of Construction (Columns T to
An: The ceUsin this part automatically calculate the cost and duration of the con-
struction method being selected for each activity. This part has links to the re-
sources' sheets and the Methods sheet to calculate the time and cost of activities,
considering the seasonal productivity factor (PrFactor). The PrFactor (column AG
of the Estimate sheet) references the productivity factor of the selected construc-
tion method based on the season in which the activity is planned to be executed
(the season indicated by the PlanMonth value in Part A).
Part C: Time and Cost Calculations for Three Construction Methods
(Columns AK to AQ): In this part, the cost and duration of three candidate con-
struction methods for each activity are calculated. This part, therefore, allows
for quick what-if analysis regarding time and cost. By simply changing the
value in the method index (column 0 in Part A), related calculations can also be
viewed in Part B.Also, the calculations related to the time and cost of the vari-
ous methods of construction give an indication of the time-cost relationship
within each activity.
Part D: Daily Demand of three Key Resources (Columns AR to AV): This part
calculates the daily amount of three user-defined key resources that are needed
to perform the selected methods of construction for the activities. This resource
calculation may help the user forecast the problems that may arise if some of these
key resources are limited. Furthermore, this part can be used for resource sched-
uling purposes (subject of Chapters 7 and 8).
Part E:Tasks Planned versus Actual Performance (Columns AW to BJ):TI1ispart
provides the planned versus actual performance, regarding time, cost, and qual-
ity of the selected method of construction for an activity. This analysis may help
the contractor not only in updating the production data of the resources based on
the actual performance, but also in investigating the factors that contributed to
any failure/lack of performance.

The "Reports" Sheet Reporting plays a vital role in the efficiency of any manage-
ment system. Different levels of reports that summarize the data stored in the system
become essential for supporting decision and for identifying important trends that
can be used as basis for corrective actions. In our Excel system, the pivot table feature
of Excel was used for reporting purposes. Using the data stored in various sheets,
such as those of the resources and the estimate sheet, various sample reports were
generated to provide the contractor/subcontractor with summary information re-
lated to time, cost, and resource use. The Reports sheet provides the following three
reports to summarize the data in the Estimate sheet (Figure 4-22):
a. Bid Proposal Report: This report [Figure 4-22a] summarizes the data in Part
A of the estimate sheet, providing details of the direct cost estimation of the
various items: item number; item description; quantity; unit; unit price; and
the total bid price. At this stage when indirect costs are not yet estimated and
110 I CHAPTER 4

(b) Summ.r; WBS Report. {cl Method$ of Con sttucttcn R~W·«~.

Sum of TotalCQst
Uibll:2 ··i['~;fi;·;tl':"H~Q··';iri~.-iE01.·.·~T.;;i~I·
.•
':\1 " -' t y";:l, t:t.Uv)

Gr~fld Total

Figure 4-22. Pivot Table Reports in the "Reports" Sheet

the schedule sheet is not used, the report automatically sums the direct costs
associated with each contract item and the overall project total cost (cell
BT21). When these issues are addressed (by the end of Chapter 10), this re-
port will provide the bid prices that can be readily used for bid submission
purposes.
b. Summary WBS Report: This report [Figure 4-22b] summarizes the data in
Part A of the estimate sheet, considering user-defined WBS and OBS data.
For that purpose, the report was configured with four fields (3 WBS and 1
OBS), shown as drop-down boxes created by the pivot table wizard (cells
B026 to BP29). By choosing different values from the drop-down boxes, dif-
ferent subsets of the data are aggregated and displayed. For example, the to-
tal direct cost for the Civil-Superstructure work in Housel supervised by
"Hosarn" is shown to be $19,000. Similarly, the sum of the cost associated
with the various areas in a project can be presented and may also be graphed
to facilitate decision making.
c. Methods of Construction Report: This report [Figure 4-22(c)] summarizes
the data in Part C of the Estimate sheet, providing the time-cost relationship
between the three methods of construction associated with the selected activ-
ity (Activity B). This may be used to facilitate time-cost trade off analysis
(discussed later in Chapter 8).
In addition to these reports, the powerful capabilities of pivot tables can be
utilized for automatically generating multiproject reports. When data for several
projects are available, pivot tables can be designed to analyze various aspects
such as unit price deviation in contract items from one project to the other.
 PLANNlNG PART 2 I HI

4.7 Summary
In this chapter, you have been introduced to the basics of cost estimation with em-
phasis on detailed estimating. By the end of this chapter, we are now able to use
industry-standard references for cost estimation and accordingly modify our project
network to show resources, costs, and durations of activities.
In this chapter, you have also been presented with a simplified estimating system on
Excel. This system can support small/medium subcontractors and possibly contrac-
tors in effectively managing their resource and cost information of various projects.
In addition to facilitating the estimating process, one of the benefits of the spreadsheet
system is its being transparent, yet including powerful capabilities that can satisfy the
needs of most users. At the end of this chapter, the resources, costs, and durations of
the activities in our case study project were determined. As such, the project network
showing the activities' durations associated with the cheapest methods of construc-
tion is shown in Figure 4-23.

Figure 4-23. A
Revised Network of A(4) E(4)
the Case Study
Showing Activities'
Durations

K(10)

4.8 Bibliography
Black, J. (1982). Cost Engineering Planning Techniques for Management. New York:
M. Dekker Ine.
Campbell, W. and Ahuja, H. (1994). Estimating: From concept to completion. Englewooc
Cliffs, NJ: Prentice-Hall Inc.
Clark, F. (1978). Applied Cost Engineering. ew York: M. Dekker Inc.
Ellis, M. (1989). "A Model for Prediction of Highway Construction Production Rate"."
Ph.D. thesis, University of Florida.
Fayek, A., Duffield, C; and Young, D. (1994). "A Review of Commercially Availab.e
Cost-estimating Software Systems for Construction Industry." Engineering Mnlh<';c"-
meni Journal. 6(4),23-33.
Goldman, J. (1990). Means Estimating Handbook Kingston, MA: R. S. Means Co.
Could, F. (1997). Managing the Construction Process: Estimating, Scheduling, and Proie.:
Control. Upper Saddle River, NJ: Prentice Hall Inc.
Creer, W. (1990). Cost analysis and estimating: tools and techniques. New York: Springer-
Verlag.
Hegazy 1. and Ayed, A., (1998). "A Neural Network Model for Parametric Cost Esti-
mation of Highway Projects," Journal of Construction Engineering and tvuinagement ,
ASCE, Vol. 24, No. 3, pp. 210-218.
112 I CHAPTER 4

Hegazy, T. and Moselhi, O. (1995). "Elements of Cost Estimation: A Survey in Canada

and The United States," Cost Engineering, AACE International, Vol. 37, No. 5,
pp. 27-33.
Hegazy, T. and Moselhi, O. (1994). "ESTIMATOR: A Prototype of An Integrated Bid
Preparation System," [ournal of Engineering Construction and Architectural Management,
Vol. 1, No. 1, pp. 51-57.
Hollman, J. (1994). "A parametric building cost estimating system." AACE Transac-
tions. EST.4,1-7.
Lee, H. (1992). "Automated Interactive Cost Estimating System for Reinforced Con-
crete Building Structures." Ph.D. thesis, The University of Michigan.
Lopez, O. (1993). "Forecasting Construction costs in Hyper-inflated Economies."
PhD thesis, The University of Texas at Austin.
Melin, J. (1994). "Parametric estimation." Cost Engineering, AACE International, 36(1),
19-23.
Neil, J. M. (1982) Construction Cost Estimating for Project Control. Prentice-HaJl Inc.,
N.]., 1982.
RS. Means (1999). Building Construction Cost Data. Kingston, MA: R. S. Means Co.

4.9 Exercises
1. a. Why should the estimator visit the construction site before producing the cost
estimate?
b. Discuss the procedures which might be followed with respect 10 adding time
contingency allowances into construction networks.
c. Comment on the following statement: "If the contractor adds a cost contin-
gency allowance into his tender price, he will lose the tender."
2. The following table gives the work items of a certain contract together with their
estimated quantities and total direct cost. Total of indirect cost and markup is
$140,000.

Work Estimated Estimated

Item Quantity Unit Direc~Cost

Common excavation 500,000 m3 $475,000

Rock excavation 200,000 m3 $2.400,000
Structures Lump Sum $400,000

a. Develop a balanced bid.

b. If you, as a contractor, have a reason to think that rock excavation quantities
are considerably less than estimated and common excavation is higher, de-
velop an unbalanced bid to maximize profit.
3. Enter the data of Figure 4-6 into a spreadsheet program and print the answer to
the example. Use separate sheets for the labor, equipment, material, crews, meth-
ods, and the estimate.
 PLANNING PART 2 I 113

4. A grout curtain is to be formed underneath a dam. This involves drilling through

the underlying rock. A total of 388 grout holes will be drilled with a total depth of
21,390meters. The following table shows the work divided into five activities to-
gether with the resources used.

Total No. of Drill

Activity Description No. of Holes Depth (m) Units per Rig

100 Grout 1 154 7400 4

200 Grout 2 53 2870 2
300 Grout 3 55 3130 3
400 Grout 4 79 4510 4
500 Grout 5 47 3480 3

Assume that the drilling rate is 20 m/ day and the grouting rate approximately
equals the drilling rate. The drilling rig can drill more than one hole at a given po-
sition; however, it must be moved from the hole position before grouting and this
requires 0.5 day for each move. With a six-day week, estimate activity durations
in weeks. Also, estimate the unit cost of drilling and grouting given that the cost
of drilling is $2,300/week/drill-unit and the cost of grouting is $S.SO/m.
5. a. Give a reason why minimum material content does not necessarily result in
minimum cost.
b. In the process of producing a cost estimate for bidding purpose the contractor
should identify the risks he is going to carry and give responses to deal with
them. Give your views, as a contractor, on the possible responses to the fol-
lowing risks:
• Client's indecisions or delays.
• Troubles encountered with different public services.
• Late supply of materials.
• Equipment breakdown.
c. Determine the duration and the direct cost rate for an excavation activity. The
material to be excavated is estimated to be 3360 m". Use an excavator with an
output of 1200 rrr' / week loading three trucks. A small bulldozer will be needed
at the dump site to spread excavated material. Two helpers will be used to
guide the operators. Use the following weekly rates:
rate of one excavator - $I,OOO/week
rate of one bulldozer - $750/week
rate of one truck - $450/week
rate of one driver - $120/week
rate of one helper - $lOO/week.
6. Consider a single activity "Wood Gym Floor" under the "Finishing" item of a cer-
tain project. Assume that the quantity of this activity is 1250 m2. Use the following
data for item CSI 095 SOl0100 from the R.S. Means cost book to estimate the con-
struction cost and time to finish this activity. It is noted that using locallabor, you
estimate the bare hourly rates for a tile layer and a tile layer helper to be $30 and
$23, respectively.
114 I CHAPTER 4

1998 BARE COSTS

DAILY LABOR lOTAL
095 800 I Wood Comp. Flooring CREW OUTPUT HOURS UNIT MAT. LABOR EQUP. TOTAL INCL O&P

801 0010 WOOD COMPOSITION

0100 Gym floors 0-7 13.9 1.148 m2 48.5 27 75.5 4/'3.50

57 mm x 175 mm
x 100 mm,

0200 Thin set on concrete 23.23 0689 44 16.20 60.20 72.50

0300 Sanding and finishing, 1 Carp 18.58 0.431 6.45 11.40 17.85 25
add on 51 mm grout
setting bed

The details of the crew D-7 are:

Crew no. Bare costs Incl. Subs O&P Cost per lobor-hour

Bare Incl.
Crew D-7 Hr. Daily Hr. Daily Costs O&P

1 Tile Loyer $26,10 $208.80 $38.60 $308,80 $22,55 $34,83

1 Tile Loyer Helper $21.00 168,00 31,05 248,40

16 L,H" Doily Totals $376,80 $557,20 $23,55 $34,83

7. a, Comment on the following statement: "The existence of a realistic cost esti-

mate against which tenders can be compared is a vital factor in the quality of
a decision made by the engineer with respect to selection of the best bid."
b. Suggest a regime for evaluation of bids when the contractors are invited to
specify their preferred contract duration.
8. Set up spreadsheets to model the data in Question 5(c) using functions to perform
the calculations and to provide the answers to the question. Use separate lists for
Iabor, equipment, crews, methods, and estimate,
 CRITICAL- PATH
ANALYSIS FOR
NETWORI< SCHEDULING

After studying this chapter, you will be able to:

• Perform CPM and PDM analyses for AOA and AON networks.
• Calculate the early / late times that an activity can start/finish.
• Determine the total project duration, activity floats, and the path of critical ac-
tivities.
• Represent the schedule using bar charts (Gantt charts).
• Use Microsoft Project Software to schedule projects.
• Experiment with a spreadsheet model for network analysis.

• Need
• Feasibility • Conceptual Design
Project • Owner Approval
Definition Soil Reports
• Owner Contractor
• Preliminary Design
Approval • Detailed Design : • Start Construction .,:j:lliltiiI.
Quantities : Detailed Planning. :. 0 &M
Work Documents : Estimating & Resource : • Demolition
• Select Project : Management : at End of
Contract Strategy • Resource Management:
Deadline. Resource Constraints. !l;~~;ll~~~,~Ml;~~i~,~!.~i;F,~!
Service Life
TCT.etc : • Progress Evaluation :
• Bidding Strategy & Markup : • Time. Cost. & Quality :
Estimation : Control :
• Cash Flow Ano'vsis : • Commissioning :
,, ,,
• Submit Bid

us
116 I CHAPTER. 5

5.1 Scheduling Objectives

In the last two chapters, you were i.ntroduced to the project planning process. In
Chapter 3, we used AOA and AON representations to develop a picture of the inter-
relationships within a project. In Chapter 4, also, we calculated the time and cost of
individual activities based on our estimation of the resources and methods of con-
struction to be used. However, we do not know how long the total project duration is.
Also, we need to evaluate the early and late times at which activities start and finish.
ill addition, since real-life projects involve hundreds of activities, it is important to

identify the group. of critical activities so that special care is taken to make sure they
are not delayed. In addition, since the construction environment is always exposed to
constraints and changes, it is important to be able to evaluate the implications of
changes in start and/ or finish times of activities on the overall project duration. All
these statements, in fact, are the basic objectives of the scheduling process, which, in
essence, adds a time dimension to the planning process. In other words, we can
briefly state that: Scheduling = Planning + Time. In fact, the schedule is very impor-
tant for the contractor to know when and how much labor is needed; vendors to know
when to deliver materials; and subcontractors to know when they can do their work.

5.2 Network Scheduling

---=----

The inputs to network scheduling of any project are simply the AOA or the AON net-
works with the individual activity duration defined. The network scheduling process
follows the Critical Path Method (CPM) technique. Applying the CPM technique for
AOA and AON networks, however, is slightly different. In AOA networks, we use the
traditional CPM and in AON networks, we use the CPM with slight modifications
and will refer to it as the Precedence Diagram Method (PDM). To demonstrate CPM
and rDM analyses, let's consider a simple five-activity project, with activity A at the
start, followed by three parallel activities B, C, and D, which are then succeeded by
activity F. The AOAor the AON networks of this example are presented in FigureS-l.
Detailed description of the CPM and rUM analyses of theses AOA or the AON net-
works are presented in the following subsections. It is noted that the example at hand
involves only simple finish-to-start relationships among activities.

figure 5-1. Network

Example: (a) Activity B (3)
CB . dl
on arrow (AOA); •..
(b) Activity on node
CD A (3) . 3
C (4)
~
9
E (5)
@
CAON) 0(6) d2/

0)/
B
(3)

A
(3) ~ (4) (5)

0
(6)
 CIUTICAL-PATH ANALYSIS FOR NET\'VORK SCHEDULING 117

5.2.1 Critical Path Method (CPM)

The CPM is a systematic scheduling method for AOA network. The CPM involves
four main steps:
• A forward pass to determine activities early-start times.
• A backward pass to determine activities late-finish times.
• Float calculations.
• Identifying critical activities.
5.2.1.1Forward Pass The forward pass determines the early-start times of activities.
Before explaining the detailed calculations involved, let's add two boxes on each node
to put the calculations inside them, as shown in Figure 5-2. The forward pass pro-
ceeds from the left-most node in the network (node 1) and moves to the right, putting
the calculations inside the shaded boxes to the left.
Each node in the network, in fact, is a point at which some activities end (head ar-
rows coming into the node), as shown in Figure 5-3. That node is also a point at which
some activities start (tail arrows of successor activities). Certainly, all successor activ-
ities can start only after the latest predecessor is finished. Therefore, for the forward
pass to determine the early-start (ES) time of an activity, we have to look at the head
arrows coming into the start node of the activity. We then have to set the activity E5
time as the latest finish time of all predecessors.
In our example, the forward pass calculations are as follows:
1. We begin at node I, the start node of the project, and assign it an early-start
time of zero. Here, all activity times use an end-of-day notation. Therefore, the
ES of activity A being zero means that activity starts at end of day zero, or the
beginning of day 1 in the project. Using this notation, as well, the calculations
are performed irrespective of the actual project start on the calendar.
2. We now move to node 3. This node receives one head arrow, and as such, it
has one predecessor, activity A. Since the predecessor started on time zero
and has 3 days duration, then, it ends early at time 3 [Early-Finish (EF) =
Early-Start (ES) + d]. Accordingly, the ES time of all successor activities to
node 3 (activities B, C, and D) is time 3. This value is, therefore, put in the
shaded box on top of node 3, as shown in Figure 5-4.

Figure 5-2
Preparation for the r>.
Forward Pass B (3) ,~2-)
IlL] IlL] d1 11[] I£J
CDr----'A...:...(>..::.3)'---.~1 3 t---__ C~(4L..) --.....,'" 9 l---=E::...!(C!5),--_@
D (6) d2 f

01£]
Figure 5-3. A Node Predecessor 1
in an AOA Network Successor 1

p,,,,,,,~ .
~ Successor 2
Predecessor 3
118 CHAPTER 5

Figure 5-4. Forward

Pass Calculations in
AOA Networks

Project
start-O

lID
8-

3. We now move forward to successor nodes 5, 7, and 9. However, since node

9 is linked to nodes 5 and 7 by dummy activities, we begin with nodes 5 and
7. Node 5 receives one head arrow from its predecessor activity B, and we
evaluate the EF time of B as 6 [ES (3) + d (3)]. Successor activities to node 5,
therefore, can have an ES time of 6. Similarly, the ES time at node 7 is calcu-
lated as time 9.
4. Moving to node 9, we evaluate the Ef times of its three predecessors (d l , C,
and d2) as time 6, 7, and 9, respectively. Accordingly, the ES time of successor
activities is the largest value 9. Notice that only the largest EF value of prede-
cessor activities is used to calculate the ES of successor activities, and all
other values are not used. As such, only ES values can be directly read from
the calculations in Figure 5-4. EF values, on the other hand, can be calculated
as EF = ES + d.
5. We now move to the last node 11. It receives one head arrow, activity E,
which has an ES value of 9. The EF time of activity E, therefore, equals 9 + 5
= time 14. Since node 11 is the last node, the EF of this node becomes the end
of the project, reaching a total project duration of 14 days.

5.2.1.2 Backward Pass The backward pass determines the late-finish (LF) times of
activities by proceeding backward from the end node to the starting node of the AOA
network. We put the LF values in the right side boxes adjacent to the nodes, as shown
in Figure 5-5. Putting Figure 5-3 in mind again, certainly, we can allow predecessor
activities to be delayed so that they finish no later than the earliest late-start (IS) time
of successor activities. Therefore, for the backward pass to determine the late-finish
(LF) times of activities and put them on the shaded squares of Figure S-5, we look at

Figure 5-5.
Backward Pass
Calculations in AOA
Networks
9-3~6.
9-4=5, or
3-3~O 9-6~3 B
d1
[OJII 3
8}--":'d~-':3---+(
 CRlTICAL-PATH ANALYSIS FOR NETWORK SCHEDULING I 119

the successors (tail arrows) going out of the node, evaluate their smallest late-start
(LS) value, and then use this value as the LF time of predecessors. For the example at
hand, we do the following:
1. We begin at the last node of the network (node 11) and we transfer the early-
finish value from the left box to be the late-finish (LF) value at the right-side
box.
2. We then move backward to node 9, which has only one tail arrow of activity
E. With the LF time of E being time 14, its LS time becomes LS = LF - d = 14
- 5 = time 9. At node 9, therefore, time 9 becomes the LF time of the prede-
cessor activities of this node.
3. Move backward to predecessor nodes 5, and 7. Node 5 has one tail arrow of
the dummy activity dl, and, as such, the LF time value to be used at node 5
becomes 9. Similarly, the LF time value of node 7 becomes 9.
4. Moving to node 3, we evaluate the LS time of its three successor activities B,
C, and 0 as 6,5, and 3, respectively. The LF time at node 3, therefore, be-
comes the smallest value 3. With other LS values not used, the values in the
calculation boxes, as such, directly show the LF times of activities. LS times
can be calculated as LS = LF - d.
5. We now proceed to the first node in the network (node 1). It connects to one
tail arrow of activity A. The LS time of A, therefore, is LS = LF - d = 3 - 3 =
0, a necessary check to ensure the correctness of the calculation.

5.2.1.3 Float Calculations Once forward-pass and backward-pass calculations are

complete, it is possible to analyze the activity times and find interesting conclusions.
First, let's tabulate the information we have as shown in Table 5-1. One important as-
pect is Total-Float (TF) calculations, which determine the flexibility of an activity to be
delayed. Notice in Table 5-1 that some activities, such as activity A, has ES time = LS
time, and also its EF time = LF time, indicating no slack time for the activity. Other ac-
tivities, such as B, can start early at time 3 and late at time 6, indicating a three-day to-
tal float. Float calculations can be illustrated as shown in Figure 5-6 for any activity.
Figure 5-6 shows two ways of scheduling each activity using its activity times.
One way is to schedule its as early as possible (using its ES time). The other way is as
late as possible (using its LS time). The activity float can, therefore, be represented by
the following relationships:
Total Float (TF) = Total Slack = LF - EF
= LF -ES

Figure 5-6. Float ~ N_a~m_e fj\

Calculations V duration =d V
~ Dill
ES Total Float
- - - - - - - - - - - - - - - - - - - - - LF

ES Total Float LS = LF - d
LF

Total time available for the activity = LF - ES

120 I CHAPTER 5

Table 5-1. CPM Results

Results of Forward
and Backward Pass

Activity Duration Early Start Late Finish

(d) (ES) (IF)

A 3 o 3
B 3 3 9
C 4 3 9
o 6 3 9
E 5 9 14

Also, with the ES and LF times directly read from the boxes used in forward and
backward pass calculations, the total time available for the activity is LF -- ES, as
shown in the figure. Subtracting the activity duration, the activity total float becomes
TF = LF - ES - d. Using these relationships, activities total floats are calculated as
shown in Table 5-l.
Another type of float often used in network analysis is the Free Float, which can
be calculated as:

free Float = ES (of succeeding activity) - El' (of activity in question)

The free float defines the amount of time that an activity can be delayed without
taking float away from any other activity. With free float available for an activity, a
project manager knows that the float can be used without changes in the status of any
noncritical activity to become critical.

5.2.1.4 Identifying Critical Activities The total float values of activities are very
useful for practical scheduling of the activities and in responding to the many changes
that occur on site. Activities with zero floats mean that they have to be constructed
right at the their schedule times, without delays. These activities, as such, are consid-
ered to be critical. They deserve the special attention of the project manager because
any delay in critical activities causes a delay in the project duration.
One interesting observation in the results of CPM analysis is that critical activi-
ties form a continuous path that spans from the beginning to the end of the network.
In our example, activities A, D, and E (excluding dummy activities) are critical and
the critical path is indicated by bold lines on Figure 5-5. Notice that among the three
paths in this example (A-B-E; A-C-E; and A-D-E), the critical path is the longest one,
an important characteristic of the critical path. In real-life projects with many activi-
ties, it is possible that more than one critical path are formed. By definition, the length
of these critical paths is the same. It is noted that the example we used here to demon-
strate the CPM analysis is very simple and involves only finish-to-start relationships.
More involved examples will be given in Section 5.3.

5.2.2 Precedence Diagram Method (PDM)

Precedence Diagram Method (PDM) is the scheduling method used for AON net-
works. It basically follows the CPM method, however, with slight variation to suit
AON networks. The PDM follows the same four steps of the CPM.

5.2.2.1 Forward Pass

To prepare for the forward pass, the AON network of Figure 5-1 can be modified by
adding four boxes to each activity to put their related calculations, as shown in Fig-
ure 5-7. The top two boxes are used in the forward pass.
 CRITICAL-PATH A.•.
'JALYSIS toOR NETVVORK SCHEDULING I 121

Figure 5-7. Forward

:lass in PDM Analysis Sequence
Step

Early start Early finish

Name (duration)

To generalize the calculations and make them suitable for computerization, for-
ward pass can proceed from one sequence step in the network to the other. In our ex-
ample, the process is as follow:
1. At sequence step 1is activity A (£irst activity in the network). We give it an
early-start (ES)of 0 in the left top box. Adding the activity duration, we de-
termine the EF time o£ the activity, and we put it in the top right box.
2. We move forward to sequence step 2 with activities B, C, and O. These three
activities have only A as a predecessor with time 3 as its EF.As such, all three
activities can start as early as time 3 (ES = 3). Each activity, accordingly, cal-
culates its own EF time based on its duration.
3. Moving forward to sequence step 3 is activity E. This activity has three pre-
decessors (3 head arrows) of activities B, C, and 0 with their largest EF time
being 9. The ES of activity E, thus, becomes time 9. Adding its duration, the
EF becomes time 14.
5.2.2.2 Backward Pass Once the forward pass is finished, the backward pass can
start, moving from the last sequence step backward to the first, putting the calcula-
tions in the bottom two boxes of each activity, as shown in Figure 5-8. The process is:
1. We start at the last sequence step, activity E and we trans£er the early-finish
value to become the activity's late-finish (LF)time. Then, subtracting the ac-
tivity's own duration, the late-start (L5) time is calculated as time 9 and put
in the bottom left box of the activity.
2. Moving backward to sequence step 2, activities B, C, and D all have one suc-
cessor (activity E) with LS time of 9. The LF of all these activities becomes
time 9. Each activity then calculates its own LS time, as shown in Figure 5-8.
3. Moving to sequence step 1 is activity A. The activity is linked to 3 tail arrows
(i.e., has 3 successors) of activities B, C, and D. The LF of activity A, thus, is
the smallest of its successors' LS times, or time 3. Activity A then calculates
its own LS as time zero.
5.2.2.3 Float Calculations Notice that by the end of the backward pass, all activity
times can be read directly £rom the boxes of in£ormation on the activity, without ad-
ditional calculations. This also makes it simple to calculate the total float of each ac-
tivity using the same relationships used in the CPM analysis, basically,
Total Float = LS - ES = LF - EF = LF - ES - d.
5.2.2.4 Identifying Critical Activities Critical activities can also be easily deter-
mined as the ones having zero float times, activities A, 0, and E. The critical path is
122 CHAPTER 5

Figure 5-8.
Backward Pass in Sequence
Step
PDM Analysis

Early start Early finish

Name (duration)
Late slarl Late finish

then shown in bold as Figure 5-8. The PDM analysis, as explained, is a straightfor-
ward process in which each activity is considered as an entity that stores its own in-
formation. The analysis in fact lends itself very well to the recent advancements in
object-oriented progranuning (OOP). In oap concepts, objects are independent enti-
ties that store information and values, incorporate calculation procedures, and can
send messages to other objects.
Using OOP concepts, forward pass, for example, can be implemented by letting
each object (activity) wait until it receives messages from all its predecessors about the
time they finished. The activity, as such, calculates its own start time as the largest
predecessor finish time. The activity also can calculate its own duration at that time
using its stored information about resources and production rates. Then, it calculates
its own finish time and then sends that time to its predecessors so that they can start
their own calculations. One major benefit of OOP concepts is that it lets the program-
mer focus more on problem-solving issues related to his or her problem and Lesson
programming issues.

5.2.3 Schedule Presentation

After the CPM and PDM calculations are made, it is important to present their results
in a format that is clear and understandable to all the parties involved in the project.
The simplest form that has been used for decades is the bar chart or Cantt chart,
named after the person who first used it. A Gantt chart is pLotted using either early or
late activity times, as shown in Figures 5-9 and 5-10. The early Gantt chart is drawn
using the ES times of activities, while the late Cantt chart is drawn using the LF times.
The chart in fact shows various interesting details. Float times of activities, for exam-
ple, can be shown, thus informing practitioners of the range of permissible changes
to the schedule. Critical activities can be shown in a different calor or pattern, as
shown in Figure 5-9 and 5-10. The Cantt chart can also be used for accumulating to-
tal daily resources and/or costs, as shown at the bottom part of Figure 5-11. One ad-
ditional benefit of the Cantt chart is its use on site to plot and compare the actual
progress in the various activities to their scheduled times, as shown in Figure 5-11
with actual bars plotted at the bottom.
 CRlTICAL-PATH k ALYSIS FOR NETWORl( SCHEDULING 123

Figure 5-9. Early Activity

3ar Chart 'd=3:

A ES = 0 :d-";3j tF=3 -, .'

B
_. .. ~_S=3 W@//XWL~':~::::~'::~'::~
.__~. ~_._ < _

:d=4: T.F=2
c ----.. -~-S,=3W&~Al::'::~::~~~~~
--:- ---"i-

; , , 'd=6' "
_., gS=3tw//M-/&Iffi'AW2<W.00d _ -.
o d=5 :
----,- .. _;--- -, ---,------ - _ ~___
ES=9
E ,

0 2 3 4 5 6 7 8 9 10 11 12 13 14 Time

Figure 5-10. Late Activity

3ar Chart
A ..... ,---

B
,
c "i"--
,

o - ~ - - - -I- _

, d=5 :
E ,. ~~~~~~~LF=14

o 2 3 4 5 6 7 8 9 10 11 12 13 14 Time

Figure 5-11. Using Activi

a Bar Chart to I , , I

2 2 2 Labor amount / day

,
Accumulate A ~ ..
~
...
~
....
~
....
6
..---}----.
,-- .---. "'" ---,-----,
,

Resources 22: 2
8 1z222~w.<Z.«<ZY.a. .... ~.... i.
1 : 1 : 1 1:
c .~ -; v/z V??22?(???? 222224 ~__ . _
- -" - -- - ~

6
5
4
3
2
124 I Cf-LAl'TER 5

5.3 Manually Solved Examples

For the project data shown in Table 5-2, complete the following steps or an-
swer the questions:
a. Draw an AOA network of the project.
b. Perform forward pass and backward pass calculations?
c. What is the effect of delaying activity D by three days?

Table 5-2. Data for Example 1

Immediate
Activity Duration Predecessor

A 2
B 6 A
C 3 A
D 1 B
E 6 B
F 3 C,D
G 2 E,F

Solution
a, b. The solution is shown in Figure 5-12.
c. Total float of activity D = LF - ES - d
= 11- 8 -1 = 2.
Then delaying activity D by 1 day more than its total float will cause a net de-
lay in the whole project by 1 day to become 17 days.

~
[Iilifil
A
}-----:;~-+10
2

4
----+
Critical path ~orillill
Figure 5-12. Solution to Example 1
 CRITICAL-PATH ANALYSIS FOR NETWORK SCHEDULING I 125

Perform PDM calculations for the small project below and determine activ-
ity times. Durations are shown on the activities. The solution is shown in
Figure 5-13.

A
(1 )

Solution

7 I 9
1(2)
12 I 14

:--115 5 I 6 6 I 7
8(4) I-- 0(1) I-- G(1)
1 I 5 5 I 6 6 I 7 9 or
9 or
12 or 14
7
o I 1 I 7 I 14 14 I 16

o I
A(1)
1 7
J (7)
I 14
- L (2)
14 I 16
10r
6
1 I 2 2 I 4 4 I 5
C(1) ~ E(2) I---
H (1)
6 I 7 7 I 9 9 I 10
70r 5 or
8 4
I ES I EF 2 I 4 5 I 9
IName (duration) F(2) K(4)
I LS I LF 8 I 10 10 I 14

Critical path

Figure 5-13. Solution to Example 2

126 I CHAPTER 5

Perform PDM calculations for the small AON network shown here. Pay spe-
cial attention to the different relationships and the lag times shown on them.
Solution

2 I 5
8(3)
55=2 4 I 7
5,7 or
(9+2-5)

013 3 I 7 7 I 12
A(3) C(4) E(5)
013 3 I 7 7 I 12
40r
3 or
(4-2+3)
3 I 9
FF 2
D(6)
4 I 10
ES EF
Name (duration)

LS LF

Critical path

Figure 5-14. Solution to Example 3

5.4 Criticisms to Network Techniques .~--------~~-------------------------------

The CPM and PDM analyses for network scheduling provide very important infor-
mation that can be used to bring the project to success. Both methods, however, share
some drawbacks that require special attention from the project manager. These draw-
backs can be summarized as follow:
• Assume all required resources are available: The forward pass and backward
pass calculations do not incorporate resources into their formulation. Dealing
with limited resources, therefore, has to be done separately after the analysis,
as described in Chapter 8.
• Large resource fluctuations can result: Since CPM and PDM formulations deaJ
mainly with activities durations, not resources, most often they result in large
fluctuations in the total resources, from one day to the other. Special
resource-leveling effort has to be done, therefore, to reduce the hiring and fir-
ing of resources. This is covered in Chapter 8.
• Ignore project deadline: The formulations of CPM and PDM methods do not
incorporate a deadline duration to constrain project duration. This aspect is
covered in Chapter 9.
• Ignore project costs: Since CPM and PDM methods deal mainly with activities
durations, they do not deal with any aspects related to cost minimization of
the project. This is covered in Chapter 9.
 CRlTICAL-PATH ANALYSIS FOR NETWORK SCHEDULING 127

• Use deterministic durations: The basic assumption in CPM and PDM formu-
lations is that activity durations are deterministic. In reality, however, activity
durations take certain probability distribution that reflect the effect of project
conditions on resource productivity and the level of uncertainty involved in
the project.
• Do not consider realistic productivity factors: With CPM and PDM analyses
determining the start times of activities, it is possible to convert these start
times to calendar days and accordingly identify the time of the year in which
each activity is planned for construction. Based on that, it is possible to mod-
ify activity durations and costs to reflect the impact of productivity related fac-
tors such as weather conditions. For example, if January productivity is 0.7, an
activity constructed in January can be modified so that its duration becomes:
d1 (modified duration) = d (original duration)/productivity factor
cl (modified cost) = c (original cost)/productivity factor
Accordingly, total project duration becomes longer but more closely reflects ac-
tual construction conditions. This is covered in Chapter 9.

5.5 Scheduling with Microsoft Project Software

Let's now use the commercial scheduling software (Microsoft Project) and apply it to
our case study project which resulted from the planning stage in Chapter 3. We first
activate Microsoft Project to start a new project. In starting any project, let's follow the
systematic steps shown in Figure 5-15 to 5-26.

Figure 5-15. Initial

Setup of Microsoft A(4) E(4)
Project

Once a new file is

open, use the Tools-
Options menu item to
start setting up the
Microsoft Project
software.
128 CHAPTER 5

Figure 5-16. Setup

Default Options

With the Schedule tab,

adjust default options
as shown. Important
ones are: scheduling
from start date,
duration entered in
days, default task type
is "Fixed Duration",
and new tasks are not
effort driven.
The last two options
will not let the
duration change
automatically when
resources are added
or removed.
Click the Set as
Default button, then
the OK button.

Figure 5-17. Setup

Project Start Date

Now, use the Project-

Project Information
menu option to
specify the project
start date as August 1.
When finished, click
the OK button.
Figure 5-18. Setup
.'larking Times

Lse the right mouse

button on the Cantt
chart calendar and
select Change
Working Time. Then,
as shown, select the
Saturday and Sunday
columns and specify
them as Working
Time, This gives us a
:--day working week.
You may also specify
my day as off or
change the work
hours on any day.
Then, click OK.

Figure 5-19. Setup

Time Scale

Use the right mouse

button on the Cantt
chart calendar and
select Time Scale. Set
the major scale uni ts
as months labeled as
shown. Also, set the
Minor scale units as
days labeled as
shown. Use the
Enlarge text box to
adjust the view of the
Gantt chart as desired.

Figure 5-20. Set up

the Layout

Use the format-

Layout menu option
to select how the bar
chart will look.

129
130 CHAPTER 5

Figure 5-21. Input

Project Activities into
Gantt Sheet

To input the activities

4dayS~~
of the project, let's
enter their names one- F 10 days
by-one in the Cantt G 16 days
sheet with their H 800ys

durations in the two 600ys

columns shown. C<RW2

I( 10days

Stert-to-Stert ('J'j)
Fnlh-\()-f!Jish (FFi
<)t<Kt-lo..fini~h ('=iF)
("'orc)

(0)

·--t, .-\ 4 devs . 5..\..g' ,!..u94

0 Gd:iY..l .~.l.g" ;').J9G

FtI~is.i1-to-~.art
~(;l~.
0 "rom fimsh Of;
E To St3rtot; the mouse
f 10d:; .•..s Aug' .1I~q 10
G 16 deva .A.ug ~ AJ.Oll>

~ eoja\'~ ,A.l.g 1 ,,,,,3

(b)

(c)

Figure 5-22. Specifying Relationships

There are several ways to specify the relationships among the tasks.
a. Move the divider bar until you see the Predecessors column. Then type the row numbers
of the predecessors separated by commas and hit the Enter key. A relationship will be
inserted (arrow) and task 2 is made to follow task 1, as shown. If you double-click the
mouse on the relationship arrow, a window for specifying the relationship type and lag
time appears.
b. Another simple way to insert a relationship is to drag from the middle of one task (Course
turns into four arrows) into another task. Automatically, a relationship will be inserted
and predecessor ID is written into the Predecessors column,
c. A third approach is to select two tasks using (use the Or! key) and then link them using
the toolbar buttons or the Edit-Link Tasks menu option.
 CRITICAL-PATH fu"1ALYSISFOR NElWORK SCHEDULING 131

1(J days

Figure 5-23. The Schedule

Once relationships are entered by any method, a 32-day schedule will result. You can adjust the project data to fit the
screen as described before.

(a)

J<.:.kJ2'5 (;~'i'~.
;!.lJo;,1c. COOcy.; 2 :W1~

.~..I:;12 o days o doys

.~:.f..l1~. Ddays 2;.-"
;.:,;...!~ ': 2001'S , doys

;·.~t;j'll· '4d<:iye 11 days

;«,~". '!;~~ u~ye o days

(b)

Figure 5-24. The Schedule Data

To view activity times such as Early-Start or the Total Float (called Total Slack), you have two options:
a. Use the divider bars to view all the columns in the Cantt sheet. Select the top part of any column and then use Insert-
Column menu option to add a column in the selected position. Now, select the type of information you would like to
view. Here, we select the Total Slack and hit OK. Continue doing the same to view all desired data.
b. View one of the software's preset tables. Use the View-Table-Schedule menu option to show all schedule data, as
shown here.
132 CHAPTER 5

Figure 5-25. Viewing the Project Network

Use View-PERT Chart menu option to view the project network. Notice that critical activities have bold borders. To
specify what data to view in the box of each task, use Format-Box Styles menu option. Experiment with this option and
then view the project Cantt chart.

• .k....... ---;
•
~gl

•
• •

Figure 5-26. Modifying the Bar Chart

Use the Format-GanttChartWizard menu option to format the bar chart. Show the critical path, and put custom task
information (task name) on the right side of the bars. You can also use Format-Bar Styles to change the pattern of critical
tasks as shown. Now you can print your schedule and save the file. Compare the results with our manual solution of
Example 3. The file of this example (CPM-Ch05.mpp) is provided on the CD accompanying this book.
 CRITICAL- PATH ANALYSIS FOR NE1WORI( SCHEDULING 133

5.6 Scheduling with P3 Software

We can use P3 software on the case study project by either starting a new P3 file or
converting the Microsoft file we generated in the previous step into P3 format. In per-
forming these options, we will follow the steps shown in Figures 5-27 to 5-29.

Figure 5-27.
Starting a New P3
Project

From the P3 main File

menu, start a new
project. Note that the
process of creating a
project is well
described in the
tutorial under the
Help menu.

I'.ellvity
ilCllC1il'tiOll

2 B
3 C
4 D
5 E
6 F
7 G
8 H
9 1
10 .1
11 K

Figure 5-28. Activity lDs, Descriptions, & Durations

Now, add activity IDs, descriptions, and durations as shown and the bars will all look parallel. To adjust the time scale,
right-click the mouse on it and adjust the options as shown. Now, to add the logical relationships, we can simply access
the PERT view (Network diagram) from the toolbar and add them by dragging from each predecessor task to its
successor.
134 CHAPTER 5

[Ej]------~-

4
Activity Actlvlry Orlg
ID DesCtlfltl~__ Dm 1 2
;2 _.. ~_. _
1 1 o 1
- ~-·--------~IA
2 B
------------'7 C
I-----;-+C ----t---~~, >--' ;-.-
z..
D a:s: ' "-.-"'7-------------vD
E
10 !.~::;;.~~:;;.;;:==~~:::;;;;;.:;;.:::;;_---v
F
G 15 LfBlSUL:i -:i:'::L:S:)~:Ei::i2is:i::;;i:;l0i:J;;ij:t:o;::: :::::::;<¥i!&i!J%'iW?§1iV G
6 H ~-:--'-c'-, ,-----=::s;--.s::r H
9 I
-ib-.f-.-----+- u0~~~~~~1
6 ~~"~~-_-_,-.
__
-=P~-----------9J
11 I< 10 A.lcY",',·!n·'!-!N~·,,,·;;:®.t!:··',:,<,n -t···-, ,..

Figure 5-29. Adding Relationships and Calculating the Schedule

After adding the relationships, the schedule button on the toolbar calculates the schedule. Then, we can view the bar
chart which shows critical activities and float times as lines. Total project duration is 32 days.

5.7 Back to Our Case Study Project

Following the case study road map, we will consider the result of planning and pro-
ceed to schedule the project (shaded box) by performing critical-path analysis on the
project network

5.7.1 Manual Solution

For the AOA network of our case study project in which each activity uses its cheap-
est method of construction, we need to do the following:
 CRITICAL-PATH ,-\..:."l.-\LYSIS
FOR NETWORKSCHEDllLING 135

figure 5-30.
'oe"Work
:.::xulations for the
~Study

Table 5-3. Activity Times

Activity Duration ES LF TF ::;LF- ES- d Critical

A 4 0 15 10
B 6 0 6 10
C 2 0 16 14
D 8 4 22 10
E 4 12 26 10
F 10 6 18 2
G 16 6 22 0
H 8 16 26 2
I 6 24 32 2
J 6 2 22 14
K 10 22 32 0

Agure 5-31. Early

3ar Chart A
. ." ~ ..
B ~
- .. .... "; .... ~.. ; ••• j ..• ;- ••• ,;----:-_ ..•

C . "' .... ~..- .;. .... ~.....

. ~. . :-.. ~-.. - -:- _ .. -:- ..
o
E ~ 6&'
_. ... ",". .., _..-.~... ~.... I . -- <:. .• . - -,.. - .:. ".; ..•. !. .......
-. ····/·"l· .: .. ..- .:... .
-~

F ~====~~==n~~~LS='O~ .:._ :'.. ,,:._ .. : v".

G ( f
~~~
.-- ., - . " .',- " ;.. .
.. - . "
.. ..
H g;w,;;mmnw'S..... '3t~
." i,.• "' -:--. _:'_0. ~ .••. i·- ---:-.... :.... :.... :--.. ~.. '~" "';'" "?" ..' . --: '-' i. . r." ',,_,,"

I ~
.............. -~.- .. ... -:- ... : ...~.~
.. ......J . i ~
J ...... ,'-',",.

K !

• Calculate ES, LF, & TF for all activities. Identify critical ones.
• Draw an early bar chart for the project.
• Ascertain the effect of delaying activity H by two days on project duration.
Solution
First, we perform forward and backward pass calculations as shown in Fig-
ure 5-30. Critical activities are highlighted with dark arrows. Project duration
is 32 days, similar to MS Project and P3 solutions. The calculations related to
activity times and total floats are shown in Table 5-3, and an early bar chart
for the Case Study is shown in Figure 5-3l.
Since the total float of activity H is 2 days, delaying its start two days will not af-
fect the project duration.
136 I CHAPTER 5

5.7.2 Critical Path Model on a Spreadsheet

To experiment with critical path analysis in a transparent manner, let's try to model it
on the familiar spreadsheet format. Using a small four-activity network (Figure 5-32),
forward pass and backward pass calculations can be modeled using spreadsheet
functions. We will introduce one small change to the calculations for the purpose of
becoming more general. Each activity has a delay time, which can originally be set to
zero. The benefit of these delay values is to allow any desired adjustments to the
schedule as will be explained in Chapter 8. Considering these delays, forward pass
calculation determines the early-start time of each activity. Activity E in Figure 5-32,
for example, has three predecessors (PI = A, P2 = B, and 1'3 = C). Accordingly, ac-
tivity E can start only after the latest of those predecessors has finished and the De-
laYEtime has passed. Thus, the early-start (E~) of activity E becomes the largest of
Fl, F2, and F3 values calculated in the forward pass table of Figure 5-32.
Backward pass calculation, on the other hand, determines the late-finish time of
each activity. Activity A in Figure 5-32, for example, has three successors (SI = B,52
= C, and 53 = D). Accordingly, activity A may finish no later than the earliest of its
successor's late-start times. Thus, the late-finish (LFA) of the current activity A be-
comes the smallest of Tl , T2, and T3 values calculated in the backward pass table of
Figure 5-32. Putting the forward pass and backward pass calculations together, a
complete CPM model is obtained. In fact, the calculations in the cells of the forward
pass and backward pass tables lend themselves well to application on a spreadsheet.
Developing such a spreadsheet model for CPM analysis will be demonstrated on our
case study project that was calculated manually under Example 3 of the solved ex-
amples discussed earlier. A CPM model of the case study was implemented on Mi-
crosoft Excel, as shown in the spreadsheet of Figure 5-33. The spreadsheet file

Figure 5-32. Table DelaYB

Format for CPM
Calculations
Considering Activity
iD ES

LS
B

3
EFB

LF

Delay
Delayc DelaYE
ES A EF ES C EFc ESE E EF
f--- --
LS 3 LFA LS 4 LF LS 5 LF

-i}---""- LS
D

6
EFo

LF

Forward Pass: ESE= Largest of (EFs+DelaYf, EFc+DelaYE or EFD+DelaYE)

Predecessors
ID Duration P1 P2 P3 Fl F2 F3 Delay ESE
E 5 B C D

Successors
ID Duration Sl S2 S3 T1 T2 T3 Delay LFA
A 3 B C D
 CRITICAL-PATH A."lALYSISFOR NETWORK SCHEDULING I 137

4
6 6 7
2 10
8 1
4 4
10 2
6 16 2 11
H 8 6 9
1 6 5 8
J 6 3 11
K 10 7 10

~
- Shaded and colored cells are lables or include formulas
and calculations. White cells are user inputs.
- Cell "Cl" is named "dur"
- The whole data range (A4V14) is named "data"

Figure 5-33. Excel CPM Model of the Case Study Project

(CPM.x1s) comes with the CD of the book and represents a template for CPM analv-
sis with one row for each activity- The data for an activity are represented in columns.
The shaded cells include formulas, while the white cells are user inputs pertaining to
the activity ID, Name, Duration, Cost, IDs of three predecessors, IDs of three succes-
sors, and a Delay value. The total project duration (32 days) is also included in a sep-
arate cell at the top of the spreadsheet.
The spreadsheet formulas for a typical activity in the CPM model of Figure 5-33
are shown in Table 5-4. The formulas are simple and use the VLOOKUP function to
identify activity-related data in the whole table. These formulas are written once in
the cells of one row and then copied several times according to the number of activi-
ties in the project. The spreadsheet, as such, represents a transparent CPM model that
allows for quick what-if analysis. Any change in the duration of any activity or the
logical relationships automatically changes the project duration along with all the
CPM data regarding the activities' early and late times as well as the total floats.
which identify critical and noncritical activities. Experiment with different options
and see their impact on the schedule.
We can benefit a great deal by using the CPM model on Excel and we can expand
it in various ways. One way is to include a bar chart with the schedule, as given in the
second sheet of the CPM.xls file (Figure 5-34). Another way of expanding this model
is to use the Delay values in column K to intentionally delay the start times of some
values. This can be a helpful feature to avoid overallocation of our resources (this
topic is discussed in Chapter 7).
Most importantly, we can add a schedule sheet to our Excel-based project man-
agement file Case-Study.xls and, as such, we can link the estimate data to a schedul-
ing sheet, as discussed in the next subsection.
138 I CHAl'TER 5

Table 5-4. Spreadsheet Formulas for Activity 1 in Row 4

Cell Description Data/Formula

A4 Activity ID User Input

B4 Activity description User Input
C4 Activity duration User Input
D4 Activity Cost User Input
E4 ID of ]'1 predecessor User Input
F4 ID of 2"CJ predecessor User Input
G4 ID of 3'd predecessor User Input
H4 ID of 1st successor User Input
14 ID of 2"d successor User Input
J4 ID of 3'd successor User Input
K4 Delay (log time in days) User Input
L4 EF'of 1sI predecessor =IF(E4="", K4,VLOOKUP(E4,data, 19) + K4)
M4 EF of 2"d predecessor == IF(F4=" ", K4,VLOOKUP(F4,data, 19) + K4)
N4 EF of 3'd predecessor =IF(G4="", K4,VLOOKUP(G4,data, 19) + K4)
04 LS of 1sI successor = IF(H4 = "" .dut VLOOKUP(H4, data, 20)-
VLOOKUP(H4,data, 11))
P4 LS of 2nd successor = IF(14="" .dut VLOOKUP(14, data, 20)-
VLOOKUP(14, data, 11))
Q4 LS of 3'd successor == IF(J4=" ",dur, VLOOKUP(J4,data,20)-
VLOOKUP(J4,data,11))
R4 ES of current activity =MAX(L4:N4)
S4 EF of current activity =R4+C4
T4 LS of current activity =U4-C4
U4 LF of current activity = MIN(04:Q4)
V4 TF of current activity =U4-R4-C4
----

Figure 5-34. CPM

Model with Bar
Chart

The sheet CPM-

BarChart extends the
CPM to view a bar
chart of the schedule.
The formula in cell
X4, shown, is made
once and then copied
to all the bar chart
range. Row 3
indicates the working
days in the project
and a "1" in the bar
chart indicates that
the activity is
scheduled in this day.
 CRITTCAL- PATH ANALYSIS FOR NETWORK SCHEDULING 139

5.7.3 Tying the Estimate to the Schedule

In Chapter 3, we entered all the activity data in the Excel system for Project Manage-
ment (Case-Study. xIs file). Now, it is possible to build upon this estimate data and
generate a schedule for the case study project without reentering the tasks and their
durations. We can do this as illustrated in Figures 5-35 to 5-38.
In the Estimate sheet we make sure that: various construction methods are spec-
ified for the various activities, three key resources are identified with their daily lim-
its, and the cheapest construction method selected. Afterwards, we are ready to send
the estimate data to Microsoft Project automatically using the Up button.
Activities' names, durations, and resources are automatically entered into a new
Microsoft Project file and become ready for you to specify the logical relationships, as

E.:

! {{~ L~::-~_~·i E~-:::"'::!(j~~ h~~);}~: :~-l'!;H~Y (li-::--i::;-U "·~·1:5= "'Id 10 I :)J ~.~~ 1 ;.~(j

~-! ~0; l5<.j··; E~'f.~~n::::Z' ~~;Y..r-::-'"l· ;" {:-,<.<;, G{>",'-t·:{~ ~.--;,'J 11 ;-..{;J n I r~) Hi.~ iiJ
"
L:·:)..:'\-; ;:/i:'f~.~::<:c~·:;:,l ;">.:;.)~.<,>, F).~.',~~,;;~ ":(.:':(':9 i'A·i H~

: ,,"<-" l:::L>--, :"j"';:'~~:'t-_:;·.::d H.:: .~n:,: }"='h

•.l:;-:be_9 '::;'~<'1",,": ;~~-1 r:

Figure 5-35. Finalizing the Estimate Dato

Figure 5-36.
Automatically
Generated
Microsoft Project File
Based on the
Estimate Sheet
G
H
I
J t ,jJY:;
,( ~u.:by:;
140 I CHMTER 5

Figure 5-37.
Adding Activity
Relationships to the
Activities in MS
Project

Figure 5-38. The Schedule Sheet with Automated Setup Buttons

discussed earlier in Figure 5-22. If we follow the steps in Figures 5-22 to 5-26, we will
end with the project network shown in Figure 5-37.
We are not yet finished with the Microsoft Project file, and we can still continue
using the software features to improve the schedule under resource constraints. This
issue is covered in Chapter 7. In that chapter, we will obtain the best schedule of the
software, then transfer that schedule back to the Schedule sheet of the Excel system
using automated buttons that link the schedule to the estimate (Figure 5-3Ei). The
Schedule sheet follows the CPM model described in Section 5.7.2 and will be used to
optimize the schedule under various work constraints.

5.8 Advanced Topics

In addition to the basic scheduling concepts we experimented with in this chapter,
Microsoft Project, and other software systems, provide you with other advanced fea-
tures that you might need in the management of your projects. Some of these include:
• Scheduling from the end date. In this case, you input the project deadline and
select the Schedule From End Date option under project information;
• Experiment with Effort-Driven tasks (refer to the help system of Microsoft
Project for more details on using this option).
• Experimenting with activity constraints (refer to the help system of Microsoft
Project for more details on using this option).
• Use the Microsoft Project toolbar for PERT (Program Evaluation and Review
Technique) to consider uncertainty in activity duration. PERTuses three duration
estimates for each activity (optimistic, pessimistic, and most-likely) to schedule
the project and provide probabilistic assessment of project completion (refer to
the help system of Microsoft Project for more details on using this option).
 CRITICAL-PATH ANALYSIS FOR NETWORK SCHEDULING I 141

5.9 Summary
Time in construction means money and the best 'way to manage time is through
scheduling. The schedule is both a powerful management and communication tool
among project participants. Without a schedule, it becomes almost impossible to co-
ordinate the diverse activities in a project. Through network scheduling, we can de-
termine the start and finish times of activities, determine which activities are critical
and need not be delayed, and the amount of freedom or slack we have in case a delay
has to be introduced. No doubt, network scheduling is becoming a standard practice
in almost all projects, not only at the preconstruction phase but also during construc-
tion. In addition, a comparison of as-planned versus as-built schedules can show the
impact of various delays on the project and thus can be used for claim analysis.

5.10 Bibliography
Ahuja, H. N. (1976).Construction Performance Control by Networks. New York:John Wi-
ley & Sons.
Harris, R. (1978).Resource and Arrow Networking Techniques for Construction. New York:
John Wiley & Sons.
Hendrickson, C. and Au, T.(1989).Project Management for Construction: Fundamental Con-
cepts for Owners, Engineers, Architects, and Builders. Englewood Cliffs,NJ: Prentice Hall.

5.11 Exercises
1. For each of the project networks shown below (activity durations in brackets):
• Calculate ES, LF, & TF for all activities. What are the critical activities?
• Draw an early bar chart for the project.
• What is the effect of delaying activity H by two days on the total project
duration?

A(9) F(5)

8(8) l--_-=G'-O..(3:.L) (5

Network (a)
C(6) H(7)

H(8)

Network (b)
l-- E~(1_4~) ~7

F(6)
C(5) 1(3)
142 I CHAPTER 5

2. Calculate the schedule for the following network:

Activity

Overlap
between finish
/ of X and start of Y
3

Activity (Overlaps and durations in weeks)

3. Prepare a schedule for the small project in Exercise 7 of Chapter 3.

4. Draw an AON network for the following activities, showing all planning and
scheduling steps. Calculate the ES, EF, LF, and TF for all activities and show the
critical path.
Activity Duration DependsUpon

A 2
B 6 A
C 3 A
D 1 B, A
E 6 B, A
f 3 A D,B,C
G 2 C, D, F, E

5. Using Microsoft Project software (or Primavera), follow the guidelines in this
chapter to set up a new project file. Enter the data for the solved Example 1 in Sec-
tion 5.3 into the software, then:
• Show critical activities with a different pattern. Put the duration of each ac-
tivity on the right side of its bar.
• Show columns for task ID, Name, Start, Finish, Predecessors, Successors,
and Total float.
• On the network (PERT chart), show tasks' start times, tasks' finish times,
durations, and total floats.
Print two sheets: one sheet for Cantt chart showing the activity data and the bar
chart, and another sheet for the PDM network.
6. Repeat question 5 for the solved Example 2 in Section 5.3.
7. Repeat question 5 for the solved Example 3 in Section 5.3.
8. Use Microsoft Project software and follow the guidelines in this chapter to set up
a new project file. Add two tasks, "Part 1" and "Part 2," to the project then enter
the data of networks (a) and (b) in question 1 as subtasks of Part 1 and Part 2, re-
spectively. Part 2 has a finish-to-start relationship with Part 1 with a five-day lag
time. Print two sheets: Cantt chart and the PDM network showing project dura-
tion and critical activities.
9. Modify the spreadsheet file for CPM calculations, CPM.xls, for the data of the
solved Example 1 in Section 5.3. Print the spreadsheet showing project duration
and critical activities.
10. Repeat exercise 9 for the solved Example 2 in Section 5.3.
 SCHEDULING OF
LINEAR AND
REPETITIVE PROJECTS

After studying this chapter, you will be able to:

• Identify the unique requirements of projects that involve repetitive activities.

• Differentiate between a resource-driven and a duration-driven schedule.
• Understand the basics of the Line-of-Balance (LOB) technique.
• Determine a balanced mix of resources and keep them fully employed.
• Perform integrated CFM-LOB calculations.
• Experiment with the BAL program.

Need
• Feasibility • Conceptual Design
• Project
Definition
•
•
Owner Approval
Soil Reports ··· Prepare Bid Proposal + Baseines
• Owner
Approval
• Preliminary Design ··· • Collect Data (site. quantities,
specs, resources, tasks, etc.)
•
•
Detailed Design
Quantities
, ·· • Planning • Start Construction
: Time & Cost Estimation , • Detailed Planning, : ·O&M
• Work Documents Estimating & Resource : • Demolition
• Select Project r'§Dll!1
•• lIW_; Management : at End of
Contract Strategy : Resource Management:deadline :
• Schedule Updating : Service Ufe
: resource constraints. TCl etc. :
: • Bidding Strategy & Markup : • Progress Evaluation :
: Estimation : • Time, Cost. & Quality :
: Cash Flow Analysis : Control :
:, • Submit Bid :, • Commissioning :
, , ,,

143
6.1 Introduction
In the previous chapter, you were introduced to the network techniques (CPM and
POM) for project scheduling. In this chapter, we willleam a new technique, Line-of-
Balance (LOB) for scheduling linear projects that involve a recognizable number of
repetitive activities. Examples of this category of projects include highways,
pipelines, and high-rise buildings. Being a resource-driven technique, the objective of
the LOB technique is to determine a balanced mix of resources and synchronize their
work so that they are fully employed and non interrupted. As such, it is possible to
benefit from repetition, and the crews will likely be able to spend less time and money
on later units once they develop a learning momentum. Another benefit of the LOB
technique is its interesting representation of the schedule, given the large amount of
data for the repetitive units. This chapter introduces integrated CPM-LOB calcula-
tions that combine the benefits of CPM network analysis of a single unit and the
resource-driven LOB analysis and representation. This enables us to effectively
schedule projects with repetitive activities.

6.2 Linear Projects

Linear projects are projects involving repetitive activities. They take their name from
either: (a) involving several uniform units of work such as multiple houses or typical
HOOTS in a building; or (b) being geometrically linear such as highway, pipeline, and
utility projects. In both categories, however, some nontypical units could be involved
such as a non typical floor in a high-rise building or a nonstandard station in a high-
way project. The activities in these nontypical units may certainly involve higher or
lower quantity of work than their counterparts in the typical units. To simplify the
scheduling task in these situations, we can assume that the project is comprised of (n)
typical units, with the activities in each unit having average quantity of the work in
all units. As the number of units in a project increases, eventually the project becomes
more complex and more challenging.

6.3 Resource-Driven Scheduling: How Is It Different

------
As we have seen in network scheduling, the basic inputs to critical-path analysis are
the individual project activities, their durations, and their dependency relationships.
Accordingly, the forward-path and backward-path calculations determine the start
and finish times of the activities. The CPM algorithm, therefore, is duration driven. Ac-
tivities' durations here are functions of the resources that are required (rather than
available) to complete each activity. The CPM formulation, therefore, assumes that re-
sources are in abundance and cannot be used to determine what resources are needed
in order to meet a known project deadline duration.
Resource-driven scheduling, on the other hand, is different and is more focused on
resources. Its objective is to schedule the activities (determine their start and finish
times) so that a project deadline is met using predefined resource availability limits.
The LOB technique dealt with in this chapter is resource driven.

6.4 Basic LOB Representation

Let's consider a medium-sized high-rise building of 40 typical floors. The construc-
tion of each typical floor, undoubtedly, involves various interrelated activities. If a
CPM network is to be developed for the whole project, certainly it will be so complex
and will be composed of copies of the activities in a single floor. A bar chart of the proj-
144
 SCHEDULING OF LINEAR AND REl'ETITVE PROJECTS 145

Agure 6-1. Basic Project

_=~Representation
.
....•... -,
'
End Date

5 ... ," , ,
....• ---

o 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30
Time

Figure 6-2. LOB

:'::heduie with Crew
::::etaiis rJ) 11
.'!::
c
::)

o 2 4 6 8 10 12
Conflict
14 16 18 20 22 24 26 28 30
BuHer Time

ect will still be so complex and will not serve the purpose of a good communication
tool between planners and execution personnel.
A schedule representation that suits projects with repetitive activities is shown in
Figure 6-1 between time on the horizontal axis and units on the vertical axis. This rep-
resentation shows the following information:
• Each sloping bar represents one activity (A, B,C, or D) in the projectand the width
of the bar is the activity duration of one unit, which is uniform along all units.
• Activities (slopped bars) are sequential with no interference or overlapping.
This is dictated by the sequential logical relationships involved. These se-
quential activities could be the activities of any continuous path in a CPM
network that is repeated for several units.
• A horizontal line at any unit intersects with the activity bars at the planned
start and finish times of the work in that unit.
• A vertical line at any date (time) shows the planned work that should be com-
pleted/started before and on that date.
• The slope of each activity represents its planned rate of progress and this is the
direct function of the number of crews involved in the activity. The slope of
the last activity is the rate of delivery of the various units.
• The finish time of the last unit in the last activity represents the end date of the
project.
It is possible also to add more details to the basic LOB schedule as shown in Fig-
ure 6-2. The modified figure shows interesting information, as follows:
• The number of crews employed in each task is graphically represented with
each crew indicated by a different pattern. As such, the movement of the crews
from one unit to the other is shown.
146 I CH,A,.PTER 6

• The three crews employed in activity (A) have different work assignments.
Crew 1 works in four units (numbers 1,4,7, and ]0) and leaves site on day 12.
Similarly, Crew 2 works on four units (numbers 2, 5, 8, and 11)then leaves site
on day 13. Crew 3, on the other hand, works on three units only (numbers 3,
6, and 9) and leaves site on day 11.
• Each crew moves to a new unit as soon as it finishes with the previous one,
without interruption. As such, work continuity is maintained and the learn-
ing phenomenon can lead to some savings in cost and time.
• To prevent interference among the sequential tasks of the LOB schedule in
case an activity is slightly delayed, a buffer time may be introduced as shown,
to act as float.
• When a slower activity is to follow a faster activity (e.g., C follows B), the ac-
tivity C can be scheduled starting from unit 1, immediately following the
predecessor B.Because interference can happen at unit 1, buffer time may be
added to the start of unit 1 (potential conflict is at the bottom unit) to avoid
any overlap.
• When a faster activity is to follow a slower activity (e.g., Bfollows A), the activ-
ity B needs to be scheduled starting at the top unit. If buffer time is to be added,
it will be added at the top. Notice that the start of unit 1 in activity Bhas been de-
layed to allow the task to proceed at its desired high rate without interruption.
• Changing the production rate (slope) of any activity changes the project du-
ration. Even speeding one task may prove to be harmful to the project when
the conflict point changes from bottom to top.
• [f speeding an activity or relaxing it may result in a delay in the project, a good
scheduling strategy is to schedule the activities as parallel as possible to each
other and also parallel to a desired project delivery. This, in fact, is one of the
objectives of LOB scheduling.

6.5 CPM-LOB Calculations

Having the LOB representation in mind, the objective is to achieve a resource-balanced
schedule by determining the suitable crew size and number of crews to employ in each
repetitive activity. This is done such that: (1) the units are delivered with a rate that
meets a prespecified deadline; (2) the logical CPM network of each unit is respected;
and (3) crews' work continuity is maintained. The analysis also involves determining
the start and finish times of all activities in all units and the crews' assignments.
The CPM-LOB formulation that achieves the above objective involves four main
issues, which are discussed in the next sections:
• Crew synchronization and work continuity equation.
• Computation of a project delivery rate that meets a given deadline duration.
• Calculating resource needs for critical and noncritical activities.
• Drawing the LOB schedule.

6.5.1 Crew Synchronization

A simple relationship between the duration taken by a crew in one unit (D) and the
number of crews (C) to employ in a repetitive activity can be derived from the illus-
tration in Figure 6-3. In this figure, we have a five-unit activity and three crews to use.
Only one crew is assumed to work in a single unit and the crew spends time (D) 011
the unit before moving to another unit. Certainly, the duration (D) is a direct function
 SCHEDULING OF LINEAR k'\lD REl'ETITVE PROJECTS I 147

Figure 6-3. Crew Crew 2

Synchronization 5

3 I···········,··········j

2
No. of Crews
(C) = 3 :
Time
o 1 2 3 4 5 6 7
\--. 0 = 3 days--l

of the quantity of work (in man-hours) needed for each unit and the number of re-
sources forming the crew, as follows:
Quantity of work in one unit Man hours
D (days) = (6.1)
(Number of crew members x hours per day) Man hours/day
Using Equation 6.1 and knowing that the quantity of work is the same for each unit
(i.e., the numerator is constant), a different choice of crew formation (the denominator,
number of crew members) results in a different duration (D) for the unit. 111emore
people assigned to a crew, the less the time they take to finish the work of one unit.
Now, having three crews available for this activity, it is possible to schedule their
movements in and out of each unit, as shown in the figure, so that they are not inter-
rupted and the work progresses at a rate (R). For that work synchronization to hap-
pen, the following simple relationship applies:
Number of Crews (C) = D x R (6.2)

In the example shown, C = 3; D = 3 days; then, R becomes 1 unit/day, according

to Equation 6.2. Therefore, it is possible to achieve work continuity given any change
in the number of crews (C) or crew formation (affects D) by adjusting the rate of
progress (R). For example, if four crews become available, we can apply the same
Equation 6.2 to determine a faster progress rate of 1.25 unita/' day will be achieved.
Driving the relationship of Equation 6.2 is simple. By enlarging part of Figure 6-3
and dividing the duration (D) among the (C) crews, the slope of the shaded triangle
in Figure 6-4 becomes:
1
R=-- (6.3)
(DlC)
and the time 0/ C becomes:
1
D/C= - (6.4)
R
Both equations lead to our formulation of C = 0 X R. Equation 6.4 also means
that work continuity is achieved by shifting the start of each unit from its previous
one by a time 0/ Cor 1/ R. This shift also has another practical meaning. Because each
crew has part of its duration nonshared with other crews, the chances of work delay
are reduced when two crews need the same equipment, or other resource, such as a
crane on site.
148 CHAPTER 6

Figure 6-4. Deriving Crew 3

Equation 6.2 3

Crew 2

No. of Crews
(C) = 3
Crew 1

0 2 3

I· DIC
·1· DIC
·1· D/C
.j
= 3 days
I· D
·1
6.5.2 Meeting a Deadline Duration
A basic objective in CPM-LOB calculation is to meet a given deadline for finishing a
number of (n) repetitive units, each having its own CPM network of component ac-
tivities. Using the illustration in Figure 6-5, it is possible to formulate a strategy for
meeting the deadline by calculating a desired rate of delivery (Rd) for the wilts, as fol-
lows:
n -1
Rd=--- (6.5)
TL -- TJ

where TL is the deadline duration of the project and T] is the CPM duration of the first
unit. The delivery rate determined from Equation 6.5 is, in fact, the minimum rate re-
quired to meet the desired deadline. Any higher rate can expectedly produce a shorter
project duration, however, more crews may need to be used and the schedule can be
more costly.

Figure 6-5.
Calculating 0 n
Desired Rate of
Delivery

n-1
2

I.T1 :: CPM Duration of Unit ~ I Time

TL = Project Deadline Duration

I· ·1

6.5.3 Calculating Resource Needs

Once a minimum delivery rate (Rd) is calculated, it is desirable to enforce this rate on
the schedule of the repetitive activities to determine the resources needed to complete
the project on time. Equation 6.2, therefore, needs to be applied particularly to the crit-
 SCHEDULING OF LINEAR AND REPETITVE PROJECTS I 149

Figure 6-6.
_"'"jitzation of Float in
_JB Calculations
o
Unit n

:n-1

.~ TL -Tt
................................. ..,
,

Unit 1
Of----=-A--:-::(S:-:-) ---i~~U
~~~
~_1 c (S)

0(2) TF::: 3

ical activities, which are the sequential tasks that take the longest path in the CPM net-
work of each unit. Noncritical activities, on the other hand, have float (TF) times and
as such, we can afford to relax them according to their float times to reduce cost. It is,
therefore, possible to modify Equation 6.5 and generalize it to determine a desired
rate (RJ for any repetitive task (i), as follows:
n-l
Ri= ------------ (6.6)
(Tt - T1) + TF;

The formulation of Equation 6.6, therefore, applies to both critical and noncritical
tasks, as a function of the activity's total float value. For critical activities, total floats
are zeroes and Equation 6.6 is reduced to Equation 6.5. The physical meaning of Equa-
tion 6.6 is illustrated in Figure 6-6. In this figure, a five-unit project is shown with each
unit consisting of a simple four-activity network. Three of the four activities, A, B, and
C, are sequential and have five-day durations each. The fourth activity 0 runs paral-
lel to B and has a duration of 2 days only. Accordingly, A, B, and C are critical activi-
ties where as activity 0 is noncritical with Total Float (TF) of three days. As shown in
Figure 6--6, the slopes of activities A, B, and C are the same and are steep. The slope
of activity 0, on the other hand, has been relaxed by simply starting unit 1 of task 0
as early as possible while starting the last unit as late as possible (notice the difference
in the CPM networks of the first and the last units).ln this manner, simple analysis of
the slope of activity 0 in the figure leads us to the formulation of Equation 6.6. Using
this approach, the relaxation of noncritical activities can be performed without vio-
lating any logical relationships or crew work continuity requirements.
With the desired rates calculated for the individual activities, a generalized form
of Equation 6.2 can be used to determine the necessary number of crews (Ci) to use in
each activity (i), as follows:
(6.7)

Another important consideration is that, in most cases, the number of crews cal-
culated using Equation 6.7 is not an integer value. Because a fraction of a crew is not
possible, the number of crews (C;) has to be rounded up to determine the actual num-
ber of crews (Ca;). As a consequence to that, the actual rates of progress in the activi-
ties (Rai) need to be adjusted, as follows:
Cai = Round Up (C;) (6.8)

R. = Cai (6.9)
al D,
ISO I CHAPTER 6

Equations 6.6 to 6.9, therefore, become the necessary and sufficient basis of inte-
grated CPM-LOB calculations.

6.5.4 Drawing the LOB Schedule by Hand

A LOB schedule becomes simple to draw when all activities run with an exact simi-
lar rate (i.e., activities run parallel to each other). However, because of the rounding
of number of crews in Equation 6.8, the activities' actual rates (Ra') calculated using
Equation 6.9 will not be parallel. Drawing the LOB schedule as such requires extra
care, as conflict points, either at the top unit or at the first unit, will be introduced due
to the difference in progress rates from one activity to the other. As explained earlier,
sometimes speeding an activity will cause a net delay in the whole project, if work
continuity is to be maintained. Therefore, some noncritical activities may end up be-
ing delayed in some situations, violating the logical relationships or becoming criti-
cal themselves. Also, in some situations, the end schedule may slightly extend beyond
the deadline. In this case, a simple approach to use is to reschedule the project with a
deadline duration that is slightly (one or two days) shorter than originally desired.
Therefore, the LOB schedule should be carefully made.
To draw the LOB schedule using the activities' actual rates (Ra')' we need to pro-
ceed in a forward path, following the logical relationships in the CPM network. When
an activity is considered, its predecessors are first examined to identify their largest
finish times, which are then considered as a boundary on the start of the current ac-
tivity. Drawing the schedule by hand is simple when the network is small and can be
done with varying levels of detail, as shown in Figures 6-1 and 6-2.
In terms of presentation, showing all the activities on the same grid results in a
crowded schedule and can be confusing even for a small network. Two interesting ap-
proaches can be used to circumvent this problem. One approach is to draw the criti-
cal path on one grid and draw the other paths, each on a different grid. The benefit of
drawing these paths is to help visualize the successor / predecessor relations for any
given task, and accordingly facilitate any desired changes to rates or crews. The sec-
ond approach is to extend the LOB representation to show the noncritical activities on
a mirrored grid as shown in Figure 6-7. From that schedule, the start and finish times
of each unit in each activity can be read and crew assignments can be shown.

rtgure 6-7. Critical Activities

.':'cI8-rotive LOB Unit 5 ; , z •••••••••• ' •••••••••••

~8:)f8Sentotion
4 I·· , < ,.. , ;

3 I··;··,···."·",·;

2 I······'·····'······'·

5 L , ..•.. , ' .-.. ,._ ; .

Noncritical Activity
with its boundary lines
 SCHEDULING 01:' LINEAR AND REPETITVE PROJECTS I 151

6.6 Back to Our Case Study Project

In terms of the road map to our case study, we will continue the effort towards es-
tablishing a realistic schedule of the project considering the activities with repetitive
nature.

- Resources, WBS, OBS, &

Construction Methods
(Chapters 3 & 4)

- Scheduling
(Chapters 5 & 6)

- Resource Constraints
(Chapter 7)

- Time Constraints (Chapter 8)

- Cash Flow Constraints (Chapter 10) Excel Model

- Actual Progress Data (Chapter 11) (Chapter 10)

6.6.1 Detailed Calculation Procedure

Now, let's describe the systematic CPM-LOB procedure and apply it our case study
project. Consider that the project involves five typical units. The CPM network of the
activities in a single unit is shown in Figure 6-8, which is the one we determined
based on our planning task in the previous chapters.
Activity durations, in days, are shown inside the brackets. The owner wants the
contractor to finish all the work in 50 days. Calculate and draw a LOB schedule that
helps the contractor meet the deadline. Also, determine how many crews are needed
and show on the LOBschedule how the crews move from one unit to the other.
Solution:
The solution to this case study follows three typical steps, as follows:
Step 1: Perform CPM Calculations for a Single Unit
In this step, we determine the duration of a single unit and identify the critical path.
As shown in Figure 6-9, the CPM duration (T) of a single unit is 32 days and the crit-
ical path is B-G-K.

Figure 6-8. CPM

Network of a Single
Unit
A(4)
o2
0(8)
• 3 E(4)

8(6)
1
C(2) G(16)
K(10)
7 J(6) 8
152 I CHAPTER 6

Figure 6-9. CPM

Calculations for a
Single Unit

Step 2: Construct LOB Calculations Table

In this step, we construct a table for calculating the desired rate of progress in each ac-
tivity, apply the continuity equation (Equation 6.2) to determine the number of crews,
and then determine the actual rate of progress in each activity. The calculations are
shown in Table 6-l.
Given that a project duration (Td of 50 days is desirable, the 32 days taken by the
first unit (T1) will leave only 18 days (Tt - T1) to deliver the remaining four (i.e., 11 -
1) units. This gives a rate of delivery (4/18 = 0.222 units per day), or simply one unit
every 4.5 days. As discussed before, this rate will be applied to the critical activities
as a desired rate required to meet the deadline. Noncritical activities, on the other
hand, will have smaller rates depending on their float times (column 4 of Table 6-1).
The two shaded columns in Table 6-1 represent the necessary calculations that enable
us to draw a LOB schedule.

Table 6-1. LOB Calculations

Activity Total Desired Rate Required

Duration Float (R) = Crews
Activity (D) (TF) (n - 1) I (Tt - Tl + TF) (C) = D x R

A 4 10 0.143 0.572
*8 6 0 0.222 1.332
C 2 14 0.125 0.250
D 8 10 0.143 1.144
E 4 10 0.143 0.572
F 10 2 0.200 2
*G 16 0 0.222 3.552
H 8 2 0.200 1.6
I 6 2 0.200 1.2
J 6 14 0.125 0.75
*K 10 0 0.222 2.22

t, = deadline duration = 50 days; T] = CPM duration of a single unit; • = Critical activity

Step 3: Draw the LOB Schedule

In this step, we draw the LOB schedule, following the procedure described in Section
6.5.4, and accordingly determine the project completion date. Let's start with the crit-
ical path. First, we construct an empty grid and then plot the activities one by one as
a four-point parallelogram (Figure 6-10). The two points on the left side represent the
line connecting the start times of all units whereas the right side line connects the fin-
ish times. We start with activity B, the first critical activity. The first unit starts at time
o (lower-left point) because this is the first activity in the path. The finish time of the
 SCHEDULING OF LINEAR AND REPETITVE PROJECTS I 153

Figure 6-10. LOB

Schedule for the
Critical Path

first unit (bottom-right point), therefore, is at time 6 because the activity has a dura-
tion of six days. Knowing the two bottom points of B, the top two points are then de-
termined, considering the actual progress rate of this activity (R = 0.333, see Table
6-1). As discussed in Section 6.6, each unit starts after (l/R) days from the start of its
previous unit. Therefore, the last milt (unit 5) starts after 4 X (1/0.333) days from the
start of unit 1 (0), or 12 + 0 = day 12, as shown in Figure 6-10. The finish time of unit
5 (top-right point) then becomes 12 + 6 (duration) = day 18.
Once an activity is plotted, we proceed with its successor, activity G in our case.
Because G depends only on B,its start is bounded only by the finish line of activity B,
which is the line between day 6 on unit 1 and day 18 on unit 5. Now, because G has a
slower progress rate (0.25) than the boundary line (0.333), we can start the first unit
of G (lower-left point) right after the work in activity B has finished, which is day 6
(notice that conflict point is at bottom). The finish of unit 1 (lower-right point of G),
then, becomes day 22 (starts at day 6 + a duration of 16 days). Following that, simi-
lar to what we did for activity B, we can plot the top two points, considering the
progress rate of activity G.
After plotting activity G, we continue with the last activity on the critica Ipath, ac-
tivity K. Because K depends on both G and J, the start of K has to be bounded by the
largest finish times of G and J. For G, the finish times are connected by the line be-
tween day 22 on unit 1 and day 38 on unit 5. For J, on the other hand, simple calcula-
tions have to be made to determine its finish times. As illustrated in Figure 6-11, J fol-
lows C and has a slower rate than C. Then, without doing any calculations for C, we
sketch the duration of Cas 2 days, then proceed with J at unit 1 with 6 days duration,
then we draw the sloped line of J's finish times, from day 8 to day 32, which are
smaller than those for activity G. As such, the start of activity K is bounded by day 22
on unit 1 and day 38 on unit 5.

Figure 6-11 . Unit 32 38

Determining the
Boundary Line on
Activity K

o 2 8 22
154 I CHAPTER 6

Figure 6-12. LOB

Schedule for Path A- Unit 5,",", '"""","","":"",""'
D-E-I

Figure 6-13. Unit 36 44

Determining the
Boundary Line on
Activity I

o 6 16 26

Activity K has a higher progress rate than that of its boundary line, and as such,
is expected to have a conflict point at top unit. Therefore, we start plotting that activ-
ity starting from the top unit and then subtract the slope of this activity to determine
the start of unit 1 (lower point), as shown on Figure 6-10, Following that process, we
can see that the project is planned to end at day 48, thus meeting the 50-day deadline,
Also, after drawing the lines representing the activities on the LOBschedule, it is pos-
sible to show the activities' crew assignments and their movement along the different
units, Activity B in Figure 6-10, for example, shows the work assignments for its two
crews, Each crew can be given a different pattern or color to be easily identified,
Let's now investigate other paths in the CPM of this example, We will consider the
path connecting activities A-O-E-I and will use the same procedure described for
drawing the LOB schedule of the critical path, Activities A, 0, and E are sequential,
have no more than one predecessor, and have identical progress rates, As such, they
can be easily plotted as shown in Figure 6--12.Activity I, on the other hand, has two
predecessors, E and H. The finish line of activity E is shown in Figure 6--12and spans
from day 16 till day 32. The finish line of activity H, however, can be calculated con-
sidering the B-F-Hpath, as illustrated in Figure 6-13, Accordingly, the start of activity
r is bounded by activity H (not activity E). Now, because the activity being considered
(I)has a higher progress rate (0.333)than its boundary line (0.25),we need to draw the
activity starting from the top point at day 44. The resulting LOBschedule of this path
(Figure 6--12)extends the project duration till day 50, which still meets the scheduling
goal. The significance of this change in project duration is that the critical path has also
changed for unit 5 (all other units end before day 48). This change in the critical path
is caused by the relaxation of the slopes of noncritical activities and the unavoidable
rounding of the crew numbers. As demonstrated by this example, extra care has to be
taken when drawing the LOBschedule to determine the planned project duration.
 SCHEDULING OF LINEAR AND REPETITVE PROJECTS 155

6.6.2 Schedule Modifications

Whereas the relaxation of noncritical activities may cause a change in the critical path
and extension to the project duration, one might question the feasibility of using the
activity total floats to relax the slopes of noncritical activities. The expected cost sav-
ings, however, justify its use. The fewer crews that result from the relaxation are ex-
pected to cause less site congestion and avoid problems related to limited availability
of resources. In view of these pros and cons, a compromising modification to Equa-
tion 6.6 may prove beneficial. Using the activities' free float values rather than the to-
tal floats is expected to relax noncritical activities moderately and reduce the impact
on the critical path. In our example, when using the free floats to recalculate Table 6-1,
only activity F has changed to involve three crews rather than two. Consequently, the
project duration remained 48 days and the critical path remained the same.
Regardless of the formulation used to initiate a LOB schedule, many situations in
practice may require changes to the schedule due to fewer available crews or even a
tighter deadline. Let's, for example, consider some modifications to the 20-day sched-
ule of Figure 6-7. Analysis of this schedule clearly indicates that the fast rate of
progress in activity B and the slow rate of progress in activity D are responsible for the
project duration being extended till day 20. If it is desired to reduce the project dura-
tion without completely rescheduling, several scheduling options are possible, in-
cluding slowing activity B and/ or speeding activity 0 by using different crews than
originally decided. However, in some situations, changing crew sizes or number of
crews may not be possible or may produce undesirable results. In these situations, it is
still possible to improve the schedule by introducing interrupts into fast activities and
increasing the rate of slower ones. These two strategies are illustrated in Figure 6-14.
To slow activity B, a layoff and recall strategy is applied to it. In this strategy, the
start of unit 4 is delayed for two days (measured from the scheduled start determined
by continuity equations). In this case, the crew is laid off after unit 3 and later recalled
to start unit 4. This strategy is beneficial only when one or more fast activity(ies) (c.g..
B) are trapped between two slower ones (A and C). This strategy makes it possible to
start the first part of activity B earlier than its original schedule. Accordingly, activity
C is possible to start earlier. The reduction of the project duration achieved through
this strategy, however, comes at the expense of continuity and learning. This loss in

Figure 6-14. Critical Activities

Improving the LOB Unit 5 ....•. Crew Layoff
Schedule . and Recall for
Activity B.
4

3 l Speeding activity 0
/ starting at Unit 3.

+-:-::-"-+-+-+~-~.;-+:-:-:Time
16 18

21···,···;······:···,

4 I··· : ... ; c·····;··:

5l.. .. c .•••• : .. , .. c ... c ..•... c ........•......• ,.

Noncritical Activity
with boundary lines
156 I CHAPTER 6

continuity may become negligible when a large number of units are involved and the
layoff and recall strategy is not extensively applied. The second strategy that can re-
duce project duration is speeding the rate of progress in the slow activity 0, starting
after unit 3, by employing more crews in the activity. It is worth noting that the two
strategies are most beneficial when applied to critical activities. It is also understand-
able that the changes caused by these strategies to the critical activities may conse-
quently affect the start and finish times (boundary lines) of noncritical activities. Some
changes to the progress rates of noncritical activities may thus become necessary.

6.6.3 The BAL Program

While it is simple to calculate and draw the LOB schedule by hand, performing these
calculations for even a moderate-size project can be time consuming and complex. It
is desirable, therefore, to automate the calculations and integrate them with a com-
mercial scheduling software such as Microsoft Project. A program that does this task
is included with the CO that comes with this book. The program BAL is a VBA macro
attached to a Microsoft Project File (CPM-LOB.mpp). Some of BALcharacteristics are:
• lt works on a Microsoft Project file containing the CPM of a typical unit.
• The current version considers only finish-to-start activity relationships (zero lag).
• The LOB algorithm of BAL uses the free float rather than the total float in its
implementation of Equation 6.6.
• It allows the user to specify the number of repetitive units and the desired dead-
line duration. It then automatically calculates and draws the LOB schedule.
• It uses calor codes to show the different crews.
• It allows the user to easily change the number of crews for an activity to re-
spect any crew constraints.
• It allows the user to apply a layoff-and-recall strategy at any unit.
• It allows the user to easily generate a Microsoft Project file with the start and
finish times of all units taken from the finalized LOB schedule.
Using BAL, you can experiment with various options to optimize the schedule,
determining optimum layoff and recall strategy, and accordingly minimize project
cost. Also, once you generate a Microsoft Project file of your LOB schedule, you can
use all the powerful tracking and control features of the software to bring the project
to success. To demonstrate program BAL, a step-by-step guide is provided with the
screen views shown in Pigures 6-15 to 6-25.

6 days

C 2 days

D 6 clays

E <I days

F 10 days

G 16 clays
H 8 days

6 days

6 days
f( 10 days

Figure 6-15. Activating BALprogram

 157

figure 6-16. The

LOB Schedule

Now, type in the

number of units (5)
and the deadline
duration (50) into the
two text boxes and
then hit the Start lOB
key to perform the
calculations. With this
very little input, the
resulting schedule is
automatically
calculated and
presented on the
screen as shown in
this figure. The top
pane shows the
critical path, and the
bottom pane can
show all the paths,
one at a time, using
the shown scroll bar.

To experiment with program BAL, first copy the file CPM-LOB.mpp from the CD
to your working directory. Then, run Microsoft Project and use the File-Open menu
option to load the file. The Cantt chart shown is for the same example that we solved
manually earlier. To activate the macro program, use the Tools-Macro-Macros menu
option and select the macro lob from the list of macros and hit the Run key. The main
screen will appear.
Now, add a third task called Finishing and specify a 50-day duration for it. With
these three activities in our new project, let's add simple start-to-finish relationships
among them. Automatically the repetitive subproject will adjusts itself to start on No-
vember 3, after the Basement is finished, as shown in this schedule. Using all the fea-
tures of Microsoft Project, you have full access to the subproject, as shown here in ex-
panded form.
 Figure 6-17. View Options

Using the scroll bar, the second path is shown in this figure. Also, the total project duration
(48 days) is indicated on the top-right corner. The different colors indicate the number of
crews in each activity. To view the data related to any activity, the small checkbox at the
bottom of the LOB schedule is selected, as shown here. Notice the message that appears at
the bottom-left corner asking the user to click on any activity to view its data.

Figure 6-18. Showing Activity Data

By clicking on unit 2 of the second activity, as shown in this figure, the data of this activity
appears at the bottom. Cursor location is also shown. Notice that two buttons become active
and both apply to the selected activity: one to change the number of crews; and the other to
158 introduce interrupt time (layoff-and-recall strategy). Also, a checkbox appears to show fhide
the activity boundary lines.
Figure 6-19.
Showing Activity
Border Lines

ill this figure, the

Show Border Lines

checkbox is selected.
Also, the Change
Crews button was
used to change the
crews for activity (F)
to 2 instead of 3. The
result, as shown, is a
50-day project
duration, similar to
the manual
calculations. Notice
that the top pane
shows 48 days for the
path B-G-K, which is
the original critical
path.

Figure 6-20. Layoff and Recall

Now, let's try the layoff-and-recall option. ill all the paths of this example, you will not find a
fast task between two slower ones, which is a good candidate for this strategy. However, for
demonstration purposes, a 2-day interrupt to unit 3 of activity H has been introduced by
clicking on the Interruption button and entering the amount. The resulting schedule is still
50 days, as shown. Notice that the bottom part of activity H (units 1 and 2) is shifted to
the left, closer to the predecessor.
 Figure 6-21. Generating a Microsoft Project Fileof the Resulting Schedule

To generate a Microsoft Project file, the user clicks on the Create Microsoft File button. A
screen for the information about a new project file will be displayed, as shown. The user
enters the start date of the project. In our case, we can start our project at May Ist, for
example.

Jadays

• ,
L« ,.t 4&{?:::

00; ~·B 6.",1!

l.Inl ~.( 2tfu:J':i.{
,
L""·D a~~n; Un.l·U

tri l-E ~c.l:.'~: Unn l-E

1Jr.t1.f
I
io c.':(•:.~(
May 13
Un.'·F
ii\E;n,:g Crew 1~

May 7 g%Mt2,:~t~mg8]:ll£@Crew {.'l'

I,):'.t ':.:) Unit 1,{j
May 1 nnlil@!:mIMW'i#'ii!!HI'@@[d%%1 Crew 1!4
Ur\lt1.H Unl!l-H

UM1-l Unit 1.1

Mg~:U!:m@?&Cr~ 1,0'2

lJriIl~ Un.,-J
May l ttW@±K1w11H CfeYI 1/1
llli!i·ll \fltilH~
Miy 25 W&lr£1:'Wh!1WWgm-fu'l' Crew tn

• urut2·A
•
Mrlji fhif"t#] Crew 11"1
Unit l..-U
{Mi.<V:; ~E£¥'Jt~:J.:~
Cfew 212
liniHe

Figure 6-22. Looking at the Gantt Chart

According to the start date you specified, a complete schedule is generated for you, grouped by unit number. The start
of each activity is derived from the LOB schedule, relative to your selected start date (May 1st). Notice that the schedule
is generated with 7 working days per week. However, if you change the project start date and / or specify weekends as
non working time, the schedule will adjust itself correctly.

160
 lS,,!l Jun I

Mlj ~l:;
• 1 (r!'<!£ 1>-0:
•
. Ulltt-A

<;'~'i'~ 1;{j/t l :.::~.~~.

1a

;;':~"1 1 M:h- c j ()"~,..;ljl

5
:>~~~ ~tlr IFS~i,;::i;l{~ r;!~;:", 1rJ

~${D ~~{~$~r'>l2':1~"; tse« 1.:1 IJniII-f

Ma}! n W01~";EJCrew 1"1
M~y1 f.',{j,'f !~::If-S;t 6)~ ::J.~.,,;' H2 l Unit 1·F
May1 ~~~~.gr~ Crew f'1
M..
rl (.:.~\",' li4 ~':
w,'i ~9 }';"i 15:~f<;....~cj~!'!. ::rt"l';- P":-
J
MiI\I19

..~,~1 , "} ':bA3~U~{~

,~;;~ iJe:l;~;: G'

;,.~::j:{ J S ~FS< ~:.'t,/~,

~,>,~~. <>':!<·i:.' It!

!N:•.~ S .>.,j;;: ,:f:~?.j f;'?

""<: O",'.:-!'" :;3

MWl JUll IU

~:~~~( 5 gxj 5 ~f$~~~rt t:;t?:' ~ ~}

• Or'" l·A
t~~S tfu""&f£w (rew 1ft
~~i$'J' . ~·:~·;ri1::~FS,~,~{~ ';"f,;';:' ac

Figure 6-23. Looking at the Project Data

Now, let's have a look at the spreadsheet part at the left of the Gantt chart. By moving the vertical divider lines to the
right, we find important schedule data. The two right-most columns, for example, show the crew number assigned to
each activity and the interrupt time used. The predecessors column also shows a link between each activity and the
project start date at row 1.

Figure 6-24.
Summarizing the
Project View

Interestingly, we can
use the outline
buttons to view the
summary tasks for
each unit. Notice that
the project duration is
50 days and that the
units follow the LOB
rate of delivery
(slope). Once we are
finished with
viewing, let's save the
project file.

161
162 CHAPTER 6

. .
NO\:3 Nov S

38 doys 11001 Dee 10 .f •

~~: Unit 2 39 doys 110. ~ Dee 11 ~
:!I UIlr13 4<Jda,s 1Iov7 ucc 16

," Un~ ~ 41 doys 110.9 uec 19 + •

C?~: Unit 5
l="inisMi'lg
42 d'll'
60 d3'/S
I~ov11

Dec 23
Oee 21.

Mo: 15
• •

Figure 6-25. Utilizing the Generated Project

The project file we have is certainly the best schedule for the repetitive activities involved. We can utilize this schedule
efficiently by incorporating it as a subproject of a larger project. To demonstrate that, let's make a new project file and
give it a September 1st start, for example. Use the Insert-New Task option to add a Basement activity of 45-days'
duration. Then use the Insert-Project option to add a subproject, which is the one we saved in the previous step.
Automatically the project will be inserted, with May 1st being the start of this subproject.

6.7 Summary
The line-of-balance (LOB)technique introduced in this chapter is advantageous to bar
charts and network techniques for planning and scheduling projects with repetitive
activibes. The calculations needed to merge the capabilities of the LOB technique with
those of CPM network techniques are presented in this chapter to offer a better plan-
ning and scheduling tool for real-life construction projects. The CPM-LOB technique
synchronizes the resources needed for the repetitive activities, maintains work conti-
nuity, preserves the logical relationships in every unit, achieves a desired production
rate, and provides a legible presentation of the large data included in a schedule. A
prototype PC-based computer program (BAL) is also presented to automate the
CPM-LOB calculations and integrate it into Microsoft Project software. BAL calcu-
lates activities' start and finish times as well as the number of crews to be employed
in each activity. It then presents the LOB schedule, showing crews' movements along
the repetitive units and enables fast and simple updating of schedule data to meet the
project deadline. The capabilities of the prototype are demonstrated through an ex-
ample application.

6.8 Bibliography
Al Saraj, Z. (1990). "Formal Development of Line of Balance Technique." Journal of
Construction Engineering and Management, ASCE, 116(4), 689-704.
Eldin, N., and Senouci. A. (1994). "Scheduling and Control of Linear Projects." Cana-
dian Journal of Civil Engineering, 21,219-230.
 SCHEDULING OF LINEAR AND REPETITVE PROJECTS I 163

El-Rayes, K, and Moselhi, O. (1998). "Resource-Driven Scheduling of Repetitive Ac-

tivities." Journal of Construction Management and Economics, 16, 433-446.
Harris E, and McCaffer R. (1989). Modern Construction Management, 3rd ed. Oxford:
BSP Professional Books.
Hegazy, T, Moselhi, 0., and Fazio P. (1993). BAL: An Algorithm for Scheduling and Con-
trol of Linear Projects. 1993 AACE Transactions, AACE International, C8.1-C8.14.
Laramee, J. (1983). "A Planning and Scheduling System for High-Rise Building Con-
struction." Master Thesis, Center for Building Studies, Concordia University, Mon-
treal, Canada.
Lumsden, P. (1968). The Line of Balance Method. London: Pergamon Press.
Moselhi, 0., and El-Rayes, K (1993). "Scheduling of Repetitive Projects with Cost Op-
timization." Journal of Construction Engineering and Management, ASCE, 119(4),681-697.
Reda, R. (1990). "RPM: Repetitive Project Modeling." Journal of Construction Engineer-
ing and Management, ASCE, 116(2),316-330.
Russell, A, and Wong, W. (1993). "New Generation of Planning Structures." Journal of
Construction Engineering and Management, ASCE, 119(2), 196-214.
Senouci, A, and Eldin, N. (1996). "A Time-cost Trade-off Algorithm for Nonserial Lin-
ear Projects." Canadian Journal of Civil Engineering, 23, 134-149.
Suhail, S., and Neale R. (1994). "CPM/LOB: New Methodology to Integrate CPM and
Line of Balance." Journal of Construction Engineering and Management, ASCE, 120(3),
667-684.

6.9 Exercises
1. The following network diagram represents the activities involved in a single
house. Each activity shows the man-hours needed and the number of crew mem-
bers. You are to construct five houses in 24 days.
a. Manually calculate the number of crews that need to be involved in each ac-
tivity. Draw the schedule and define the day numbers in which each crew en-
ters and leaves the site;
b. Solve the same problem using BAL program. Print the LOB schedule of BAL
and the Microsoft Project schedule. Note: Use the Alt + Print Screen buttons
to capture the screen of the LOB schedule and then paste it into any word pro-
cessing program for printing; and
c. Using program BAL, use only two crews for each activity. Afterwards, experi-
ment with the layoff-and-recall option to determine the shortest project dura-
tion possible.

Sanit. Main Footina 2

48 Mhrs - 64 Mhrs
3 Men 2Men

Excavation Footina 1 Wall 1 Wall 2

48 Mhrs I-- 64 Mhrs - 72 Mhrs - 72 Mhrs
3 Men 2Men 3 Men 3Men
164 I CHAPTER 6

2. Answer questions (a), (b), and (c) in exercise I, considering the following network
diagram. Consider the construction of six units within 35 days.
H
32 Mhrs
2 Men

F G
32 Mhrs 16 Mhrs
2 Men 1 Man

A 8 ~ E
48 Mhrs 80 Mhrs 80 Mhrs 72 Mhrs
2 Men 2 Men 1 Man 3 Men

3. The construction plan for a house is as follows, with activities' durations in days:
a. Calculate a weekly target rate to be used for scheduling a project of 30 repeti-
tive houses, if all crews are working five S-hour days per week and the project
has to be delivered in 85 days.
b. Given a desired target rate of four units per week, what is the number of crews
to be employed in activity B.
c. Using the same crews obtained in (b), activity B has to be sped-up to a target
rate of five units per week. Calculate how much time a crew needs to cut from
the duration of each unit. Work continuity and crew synchronization has to be
maintained.
d. Solve part (a) using BAL program.
0(2)

O A~(5~)__ ~'Or__ B~(5_) 'O C~(_7) .!r__ :b E_(_3)~

__ F_(~5) •.O

4. For the six-activity house shown below, each task in the network shows the man-
hours needed, the number of crew members, and the end buffer times in days. If you
are to construct these tasks for six houses in 27 days, calculate the number of crews
to be involved in each task and draw the schedule. Assume eight work hours per day.

8 0
f--
72 Mhrs 64 Mhrs
3 Men 2 Men
Buffer = 1 day Buffer =- 0 days
A
64 Mhrs
2 Men
Buffer =- 1 day
-- C - l- E r-- F
48 Mhrs f--- 48 Mhrs - 72 Mhrs

_ ....
3 Men 2 Men 3 Men
Buffer =- 1 day Buffer =- 2 day

5. Solve question 4 using BAL program, considering all buffers to be zeroes.

6. Use BAL program with the network of Exercise l(a) of Chapter 5, using 20 units
and a project duration that is 50% more than the duration of a single unit. Com-
ment on the resulting schedule.
7. Use BAL program with the network of Exercise 1(b) of Chapter 5, using 100 units
and a project duration that is twice the duration of a single unit. Comment on the
resulting schedule.
 RESOURCE
MANAGEMENT
Part I-Resource Allocation and Leveling

A fter studying this chapter, you will be able to:

• Understand the resource management needs of projects.

• Use common heuristic techniques to reschedule projects that suffer from lim-
ited resources so that project delay is minimized.
• Utilize any multiskills of available resources to compensate for resource
shortages.
• Understand the basis for leveling the fluctuation in daily resource demands.
• Use Microsoft Project software for resource allocation and levcling.
• Experiment with a spreadsheet model for resource allocation and leveling.

• Need
• Feasibility • Conceptual Design
• Project • Owner Approval
Definition Prepare Bid Proposal + Baselines
Soil Reports • Collect Dato (site, quontltles,
Owner Preliminary Design
Approval specs. resources, tasks, etc)
Detailed Design : • Start Construction
• Planning
• Quantities • Time & Cost Estimation : • Detailed Planning. 'O&M
• Work Documents • Scheduling : Estimating & Demolition
• Select Project : Resource Mcmagement : at End of
Contract Strategy
: • Schedule Updating : Service Life
: • Progress Evaluation :
• Bidding Straregy & Markup : • Time. Cost, & Quality :
Estimation : Control :
• Cash Flow Analysis : • Commissioning :
,, ,,
• Submit Bid

165
166 I CHAPTER 7

7.1 Resource Management Objectives

In Chapters 5 and 6, we dealt with the CPM and LOB analyses for scheduling proj-
ects. In these chapters, we discussed that one of the main assumptions used in the
analyses is that we have all the resources needed for the schedule. This assump-
tion, however, is not always true for construction projects. Under resource con-
straints, the schedule becomes impractical, cost and time are not accurate, and re-
sources may not be available when needed. To bring the schedule to practical
terms, special adjustments have to be made to the schedule to properly manage
available resources and meet project constraints. Three types of analyses, therefore,
may be applied:
1. Smoothing Resource Profiles (Resource Leoeling): Applies when it is desired to
reduce the hiring and firing of resources and to smooth the fluctuation in the
daily demand of a resource, as shown in Figure 7-l.
In this case, resources are not limited and project duration is not to be de-
layed. The objective in this case is to shift noncritical activities within their
float times so that a better resource profile is obtained.
2. Scheduling with Limited Resources (Resource Allocation): Applies when the origi-
nal schedule shows that several activities require a certain resource at the
same time. If the resource is limited, one of the activities has to be delayed,
thus delaying the whole project. The objective in this case is to properly se-
lect which activities to delay and which one to start so that the total project
delay is minimized.
3. Meeting a Deadline Duration (Time-Cost TradeoJ!):Applies when the project du-
ration determined by the CPM and PDM analyses is unacceptably large and
extends beyond a desired deadline. The objective in this case is to apply
overtime strategy, or any other strategy, to crash the project duration so that
the total project cost is minimized and the deadline is met.
It is noted that the second type of analysis, which deals with limited resources,
has been referred to as "resource allocation," "resource-constrained scheduling," or
"resource leveling." The latter name, however, has been used for both resource
smoothing (first analysis) and resource allocation (second analysis) and resource
smoothing. To prevent a mix-up of the terminology, the term "resource leveling" will
only be used to refer to resource smoothing.
The first two types of analysis are dealt with in this chapter, and the time-cost
tradeoff analysis is covered in Chapter 8, within the context of project time-cost opti-
mization.

Figure 7-1. Resource Resource

Resource-Leveiing
Objective

L..L --'- Time TimE!

Resource profile with high less hiring and firing
resource fluctuation (More stable work conditions)
(High hiring and firing)
 RESOURCE MAt'lAGEMENT: PART 1 167

7.2 Smoothing Resource Profiles (Resource Leveling)

The problem of resource fluctuation appears after the initial CPM or PDM analysis is
conducted and a bar chart is drawn. The peaks and valleys in the resource profile in-
dicate high day-to-day fluctuation in resource demand (Figure 7-2). Although a proj-
ect may not suffer from limited resources, our objective as project managers is to hire
the minimum number of resources, to reduce daily resource fluctuation, and to en-
sure better utilization of our resources. Typical situations include the full utilization
of a rented piece of equipment that needs to be returned early, also reducing the num-
ber of skilled workers who need to be hired for the job. To do that, various resource-
leveling techniques have been applied in the industry with the sole objective of re-
ducing peak requirements and smoothing out period-to-period fluctuations in
resource assignment. With this specific scope, such techniques do not address re-
source limits and consider the project duration as satisfactory and does not require
shortening. With the complexity of the resource-leveling problem particularly in a
multiresource environment, however, optimal solutions that use mathematical pro-
gramming such as the Simplex method could only work for small-sized construction
projects. Heuristic algorithms based on rules of thumb and experience are therefore
needed.
In essence, resource-leveling heuristics shift noncritical activities within their
float times so as to move resources from the peaks to the valleys, without any project
delay (i.e., area underneath the resource profile remains constant). Usually, project
managers have desired resource profiles that they try to get their resource profiles to
match. Desired resource profiles for human resources, however, differ from equip-
ment and material profiles, as shown in Figure 7-3. Accordingly, the resource-Ieveling
strategy becomes different. All strategies, however, will eventually produce a sched-
ule that is somewhere between the early-start schedule and the late-start schedule
(critical activities remain unchanged and noncritical ones shifted within their float
times).

Figure 7-2. Daily Activi

Resource
2 2 2
Fluctuation A ---, -------_. ---
,
1 1: 1 Daily demand of labors
, ..... ,b???i??????????j __ .: .... .,
B
I

, I, I
,
C
,..
o ,
2 2 2
E

Day No.
Total tabors

- - - r - - - -,- . - - ~ 6
.., - . - I· __ • _ • _5
,
4
3
/' h-rr;'7T777TT7"""""~rT777'7-;-r;7T"7'7'777777~ 2
1
168 CHAPTER 7

Figure 7-3. Resource Resource

Resource-Leveling
Strategies Desired Profile for Labor Resource:

- Slow progress in beginning (small number hired); - Good for arranging storage needs: &
- Steady progress midway (full number hired); & - Good utilization of the resource.
- Slow progress at end (slow resource release).

Procedure: n
Cumulative Uoesired Profile
Resources (constant slope)

Late Peak Early

Start Start

"""'- Time
- Schedule all critical activities first; - Plot the three cumulative resource iines for
- At start of project, delay noncritical activities the Early-Start, Late-Start, and the Desired
to their late start to create the initial slope; resource profiles;
- Once a peak daily amount of resource is - Shift noncritical activities within their floats
attained, start noncritical activities as early as to get closer to the desired line.
possible to maintain peak.

7.2.1 Manual Heuristic Solution: Method of Moments

A well-known heuristic algorithm is the Minimum Moment Algorithm. The objective
in this algorithm is to minimize daily fluctuations in resource use. The algorithm uses
the moment of the resource histogram around the horizontal axis (time) as Cl good
heuristic measure of the fluctuations in daily resource demands. This is illustrated in
Figure 7.4a where Histogram 1 and Histogram 2 are two alternative resource his-
j

tograms, both having a total area of 40 resource days (i_e_ equal total resource de- j

mands). Histogram 1 is an ideal one with a constant daily demand of 4 resource units,
no day-to-day resource fluctuations, and the resource will be released after clay 10.
Histogram 2, on the other hand, exhibits high resource fluctuation with daily demand
in the range of 2 to 6 resource units, and the resource will not be released until the end
of day 12. The moment (MJ of both histograms around the horizontal axis (days) are
160 and 166 respectively, representing a better resource leveling of Histogram 1. The
j

moment Mx is calculated by summing the daily moments, as follows:

M_\ = j~ [(l X Resource Demand) X ~ Resource Demand II (7.1)

where n is the working-day number of the project's finish date. Or, for comparison
reasons, Equation 7.1 becomes:
n

Mx = 2:CResource Demand/ (7.2)

1=1
 RESOURCE MANAGEMENT: PART 1 169

Figure 7-4.
Resource Histogram
vi
and Moment 7r-------------~==========~ Histogram 1: Mx= 160; My= 220
6
Calculation 'E
Histogram 2: Mx= 166; My= 255

g5
E
C\l4
Cl)
l:
~3
o
~2
Cl:
1

o
(a) 2 3 4 5 6 7 8 9 10 11 12 Days

1Histogram 3: Mx= 160; My= 3161

(b) 2 3 4 5 6 7 8 9 10 11 12 13 Days

v t V1
7r-----+-----------------------------,
'E 6 Resource Utilization Period .,
~ ,
~ 5 ,
:4
o
'
'
:; 3 I

o ,

£:l -IIII.IIIIII-__-J~
Project
t 1
-r-'

2 t
Resource
3 4 5 6 7 8 9
Resource
t 10 11 12 Days

Start Day Start Day Release Day

(c) IK=31

7.2.2 Modified Heuristics: Double Moments

Although the minimum moment (MJ method can be used to compare among his-
tograms in terms of resource fluctuation, it does not take into consideration the re-
source utilization period. The latter is very important to minimize, particularly for
equipment resources that are shared among projects or rented from external sources.
Figure 7-4b, for example, shows a resource histogram having the same 40 resource
days (total area), a maximum resource demand of 4, and a utilization period that ex-
tends until the end of day 13. Its Mx is 160, the same as that of Histogram I, indicat-
ing similar resource fluctuation as Histogram 1 and better than Histogram 2, re-
gardless of its 3- and 'l-dav extensions beyond the two histograms, respectively. The
single moment Mx' therefore, does not consider for the extended assignment of the
resource. To overcome that, the moment My (around the vertical axis, resource
amount) is computed as follows:
n
My = 2:[ (1 X Resource Demand) X j)] (7.3)
j=!
170 I CHAPTER 7

Using equation 7.3, the M values calculated for the three resource histograms of
1j

Figure 7.4a and bare 220, 255, and 316, respectively. The value of My, as such, gets
higher as the resource remains employed in the project till a later date. Accordingly,
My can be used as a good indicator of the resource release date in the project. Also, a
simple modification to Equation 7.3 can be used to calculate the moment My around
a vertical axis that corresponds to the first day the resource is employed in the project
(k, Figure 7--4c).In this case, the value of My represents the resource utilization period,
irrespective of when the resource is employed or released, expressed as follows:
11

My = L:I(1 X Resource Demand,) X (j - k)1 (7.4)

i=k
Having the moment calculations defined, a project manager may use them as
modified heuristics in four ways, according to his or her resource management ob-
jectives: 1) minimize the M.\ alone when the focus is on reducing daily resource fluc-
tuations; 2) minimize the M'j of Equation 7.4 alone when the focus is on reducing the
resource utilization period; 3) minimize the My of Equation 7.3 alone when the focus
is on releasing the resource at an early date; or 4) minimize the double moments (Mx
+ My) when the focus in on both aspects.

7.3 Scheduling with Limited Resources (Resource Allocation)

Shortage of resources is a major challenge for construction projects. Often, the num-
ber of skilled tabor is limited, expensive equipment is shared among several projects,
material quantity is limited, and/ or a limited space is available for storage. Schedul-
ing under these resource constraints becomes a complex problem, particularly when
more than one resource is limited.
A resource conflict occurs when, at any point in the schedule, several activities
run in parallel and the total amount of their required resource(s) exceeds the avail-
ability limit. The situation is illustrated in Figure 7-5, with activities A, B, and C re-
quiring a total of 5 labors in day 3, while only 4 are available per day.
The simple solution to that situation is that we can prioritize the parallel activi-
ties, give the resource to higher priority activities, and delay the others until the ear-
liest time the resource becomes available again, thus potentially delaying the whole
project. Notice that if we delay an activity at time 3, we may end up with another
resource conflict later in time. Continuing with identifying next conflict points and
resolving them determines the new schedule and the new project duration.
Now, for efficient resource management, the essential question we have is:

Is there an optimum wily to prioritize the activities that compete for

the limited resource at any time so that the net project delay is
minimized?

In general, however, scheduling with limited resource is a difficult problem that

mathematicians refer to as a "large combinatorial problem." Since the 19605,various
models were developed in an attempt to answer this question, and thus optimize re-
 RESOURCE MANAGEMENT: PART 1 171

Figure 7-5. Activit

Resource Conflict at
Oay3 A .. ,
, ___ -1
, ,
;..._

B
2 2 2 2
C • '. - - - - - - _,' ~ - •• ,. - - - - 0j __ •

'222:2:2'
_, • kz/tU???? )2222)2222222224. _ .
D , ,
, I I 2 2 2
I I I I ' • ,

E '"T ---'----T----,--- r----'----.-----)

Day No.
To\allabors

Maximum available labors =0 4 ,

source allocation decisions. Early efforts used mathematical optimization, dynamic

programming, and linear programming. These models, however, were applicable
. only to very small-size problems. Alternatively, heuristic solutions for this problem
have been developed since the 19605.Heuristic solutions, in general, use simple rules
of thumb to provide approximate but good solutions that are usable for large-scale
problems. An example of these rules of thumb is that the resource can be assigned to
activity(iesl that have smaller total float values than others (indicating a desire not to
delay the critical and close-to-critical activities). In this case, we are resolving resource
conflicts using the least total-float (LTF) heuristic rule to prioritize the parallel activi-
ties that compete for the limited resource.

7.3.1 Manual Heuristic Solution for Our Case Study

Different heuristic rules have been used since the 19605.Also, a single rule or a hier-
archy of heuristic rules may be used to prioritize competing activities. Almost all
heuristic rules are based mainly on an activity characteristic, such as duration, total
float, number of successors, etc. The two most effective and commonly used heuris-
tic rules are the least total-float (LTF) and the earliest late-start (ELS). These two rules
have been proven to provide identical results, with the ELS rule being advantageous
compared to the LTFrule. This is because the value of the late-start derived from the
original CPM calculations, unlike the total-float values, need not be changed every
time an activity is rescheduled due to insufficient resource availability. As such, the
ELS rule can be applied with much less computational effort than the LTF rule. All
heuristic rules, in general, have the advantage of being simple, easy to apply, and can
be used for large-size projects.
The scheduling process using heuristic rules is outlined in Figure 7-6. It starts
from the project start time and goes through cycles (shaded area) of identifying eligi-
ble activities according to the network logic and resolving the overrequirements of re-
sources using the selected set of heuristic rules. Most commercially available sched-
uling software provide resource allocation capabilities (sometimes referred to as
resource leveling) utilizing proprietary heuristic approaches.
172 CHAPTER 7

Figure 7-6. Project Network;

Resource Allocation Resource Requirements;
Resource Limits; &
Procedure CPM Data (LS times).

Step:

Current Time ~
Smallest finish
time of eligible
tasks

NO

YES

®
The heuristic procedure of Figure 7-6 for resource allocation is demonstrated on
our case study project. Until now, we discussed planning and cost estimation in
Chapter 4 and then performed scheduling in Chapters 5 and 6. As mentioned in
Chapter 4, we are using the cheapest method of construction for each task because, at
this stage, we have no reason to use more expensive ones. Accordingly, durations and
costs of activities were calculated on the Estimate sheet of the Case-Study.xls file
(Figure 4-21). The part of that sheet that shows the amount of resources needed per
day is shown in Figure 7-7 and will be used in this chapter. The network in Figure 7-7
shows the activities' durations on top of activity arrows and amount of resources be-
low the activity arrows. initial schedule data, specifically the late-start times of activ-
ities, is also shown on the figures for use in the calculations.

The project is scheduled to be 32 days (discussed in Chapter 5) when we did

not consider any resource limits. With the current limit on the availability of
the three key resources for this project, we need to determine how the re-
sources are allocated to the various activities so that resource limits are not vi-
olated and the total project duration is minimized.
Solution
Applying the heuristic procedure of Figure 7-6, we will reschedule the proj-
ect in a completely different manner than the CPM technique, with more fo-
cus on the resources. Calculations are performed manually in a table that is
set up as shown in Figure 7-8. The first seven columns of the table represent
activities' data, whereas the last two columns are the scheduling decisions
made at each cycle. At the beginning of the project (current time = 0), the only
 RESOURCE MANAGEMENT: PART 1 173

Key Resources

A
8
Resource Limits:
o A(4)
Ll =6
2.0.0 E3 == 1
L2=2
G
H C(2) K(10)
2.0.0 2.0.0

Figure 7-7. Case Study Data in the Estimate Sheet

Figure 7-8. Table Step (Figure 7~): Case Study Data

Setup for the 1 2 r-------------~---~3~------~, 4
Manual Solution Required Resources
Late Duration Finish
ES=1 L2=2 Start Decision Time

0.5 0
o 0
o 0
Start lime of the
currenl cycle Ascending sort of
(0 at start of eligible activities. Resources are
enough to Note:
project) Late-start values
Smallest value
are from CPM start all Ihree
becomes the time
- Activities having their preds. finished by this time activities
of next cycle (2)
- Activities delayed from previous cycle
- Activities continuing from previous cycle

eligible tasks were A, B, and C, which were sorted by their late-start values,
putting B on top, i.e., activity B has the smallest late-start and as such has a
higher priority of getting the resource when the resource is limited.
Considering these three activities in their priority order, available re-
sources were enough to start activity B, remaining resources were enough to
start A (next in order), and the remaining resources were enough to start C.
As such, activity B was scheduled to start at time 0 and to end at time 6 (du-
ration = 6 days); activity A to start at time 0 and to end at time 4; and activ-
ity C to start at time 0 and to end at time 2. Having these decisions made and
put in columns 8 and 9, the earliest time more resources became available is
day 2, in which activity C finishes (i.e., the smallest finish time in this cycle).
As noticed, the three activities A, B, and C run in parallel, and we have
enough resources to start them all.
174 I CHI\PTER 7

At day 2, activity C is finished, and as such, its immediate successor (ac-

tivity J) becomes eligible for scheduling (unless it has other unfinished pred-
ecessors), in addition to B and A, which were continuing from the previous
cycle. Because the amount of resources needed for the eligible activities at this
cycle are available, activity J can start and is scheduled to end on day 8. The
smallest finish time at this cycle is day 4, then the process is repeated at time
4. At this cycle are available, activity A is finished while activities B and J are
still continuing. Activity 0, a such, becomes eligible as it succeeds A. At this
cycle, however, activity 0 cannot start as the total amount of E3 will exceed
the limit (1.5 compared to 1). Next cycle then proceeds at time 6, right after
the finish of B.Accordingly, eligible activities are: J (continuing from previous
cycle); 0 (delayed from previous cycle); and G and F (successors of B). After
sorting with respect to the late-start values and considering these tasks one
by one, G and F could start, while 0 was delayed. The process, therefore, was
continued from one cycle to the other as shown in Table 7-1 until all activi-
ties were scheduled. Activity I was the last activity and was scheduled to fin-
ish at day 40. Project duration, as such, becomes 40 days; an eight-day exten-
sion beyond the original CPM duration of 32 days. Notice that at any cycle,
the total amount of resources used by the starting and continuing activities is
less than or equal to the resource availability limit.

Table 7-1. Complete Manual Solution of the Case Study

Required Resources
Eligible Priority Rule Finish
Time Activities L1 = 6 E3 = 1 L2 = 2 (Late-Start) Duration Decision Time

B 2 0.5 0 0 6 Start 6
0 A 2 0 0 10 4 Start 4
C 2 0 0 14 2 Start 2
B 2 0.5 0 Continue 6
2 A 2 0 0 Continue 4
J 2 0 0 16 6 Start 8
B 2 0.5 0 Continue 6
4 J 2 0 0 Continue 8
D 2 1 0 14 8 Delay
J 2 0 0 Continue 8
G 2 0.25 0 6 16 Start 22
6 F 2 0 0 8 10 Start 16
D 2 1 0 14 8 Delay
G 2 0.25 0 Continue 22
8 F 2 0 0 Continue 16
D 2 1 0 14 8 Delay
G 2 0.25 0 Continue 22
16 D 2 1 0 14 8 Delay
H 2 0 0 18 8 Start 24
H 2 0 0 Continue 24
22 D 2 1 0 14 8 Start 30
K 2 0 0 22 10 Start 32
D 2 1 0 Continue 30
24 K 2 0 0 Continue 32
K 2 0 0 Continue 32
30 E 2 0 1 22 4 Start 34
32 E 2 0 1 Continue 34
34 I 2 0 0 26 6 Start 40
 RESOURCE MANAGEMENT: PART 1 I 175

Using the table format, as you have seen, simplified the solution process
and made it very much systematic. The same table format can also be used
with any heuristic rule. The only change you need to do is to replace the val-
ues in the "Late-Start" column with the values of the heuristic rule you
choose, and accordingly sort the eligible activities before making decisions at
each cycle. If, for example, you would like to give the resource to the activi-
ties with longer duration, you would put the duration values in that column
and sort the eligible activities in a descending order (top activities have
higher priority of getting the resource first). The rest of the calculations re-
main the same.

The question now is how to minimize the project extension. In the next subsec-
tions, we will try various methods: assigning biased priorities to activities, and multi-
skill resource scheduling. To demonstrate such methods, we will discuss a bigger ex-
ample so that the concepts become clear. Later, we will come back to our case study.

7.3.2 Another Example

Now, let's apply the same resource-allocation procedure on a project of 20 activities
and six resources. The project data including activities' resource requirements and
daily limits on the six resources is presented in Table 7-2. The CPM network of the
case study is also shown in Figure 7-9, showing a project duration of 32 days, with-
out considering the resource limits. Applying the heuristic procedure of Figure 7-6 to
schedule the project considering the given resource constraints was performed man-
ually in Table 7-3, showing a 49-day duration (17-day delay from the original CPM
duration of 32 days).

Table 7-2. Project Data

Resource Requirements per Day

Activity Duration Predecessor
Name (days) Activities RI R2 R3 R4 R5 R6

A 6 5 2 2 2 7 4
B 3 3 5 2 3 9 6
C 4 A 2 4 4 2 3 1
D 6 5 4 3 5 5 4
E 7 AB 3 5 2 3 8 0
F 5 C 4 1 4 9 2 5
G 2 D 4 1 4 3 9 8
H 2 AB 5 5 4 0 9 1
I 2 G, H 3 2 4 3 4 2
J 6 F 1 5 4 6 7 3
K 1 C,E 3 3 2 4 5 1
L 2 E, G, H 3 2 2 8 3 4
M 4 LK 2 2 2 2 4 8
N 2 F, L 1 4 4 3 4 1
0 3 L 5 5 4 6 2 3
p 5 J,M, N 3 2 3 4 7 8
Q 8 0 4 5 4 2 3 4
R 2 D,O 5 3 3 3 7 8
S 6 p, R 2 4 6 2 3 4
T 2 Q 1 6 2 7 5 2

Daily Resource Limits 7 10 10 16 18 13

Table 7-3. Complete Manual Solution for the New Example

Resources
Eligible Late Finish
Time Activities Rl=7 R2=10 R3=10 R4=16 R5=18 R6=13 Start Duration Decision Time

A 5 2 2 2 7 4 0 6 Start 6
0 B 3 5 2 3 9 6 6 3 Delay
D 5 4 3 5 5 4 7 6 Delay
B 3 5 2 3 9 6 6 3 Start 9
6 C 2 4 4 2 3 1 6 4 Start 10
D 5 4 3 5 5 4 7 6 Delay
C 2 4 4 2 3 1 Continue 10
D 5 4 3 5 5 4 7 6 Start 15
9 E 3 5 2 3 8 0 9 7 Delay
H 5 5 4 0 9 1 13 2 Delay
D 5 4 3 5 5 4 Continue 15
E 3 5 2 3 8 0 9 7 Delay
10 F 4 1 4 9 2 5 10 5 Delay
H 5 5 4 0 9 1 13 2 Delay
E 3 5 2 3 8 0 9 7 Start 22
F 4 1 4 9 2 5 10 5 Start 20
15 G 4 1 4 3 9 8 13 2 Delay
H 5 5 4 0 9 1 13 2 Delay
E 3 5 2 3 8 0 Continue 22
G 4 1 4 3 9 8 13 2 Start 22
20 H 5 5 4 0 9 1 13 2 Delay
J 1 5 4 6 7 3 15 6 Delay
H 5 5 4 0 9 1 13 2 Start 24
22 J 1 5 4 6 7 3 15 6 Start 28
K 3 3 2 4 5 1 16 1 Delay
J 1 5 4 6 7 3 Continue 28
I 3 2 4 3 4 2 15 2 Start 26
24 K 3 3 2 4 5 1 16 1 Start 25
L 3 2 2 8 3 4 17 2 Delay
I 3 2 4 3 4 2 Continue 26
25 J 1 5 4 6 7 3 Continue 28
L 3 2 2 8 3 4 17 2 Delay
J 1 5 4 6 7 3 Continue 28
26 L 3 2 2 8 3 4 17 2 Start 28
M 2 2 2 2 4 8 17 4 Delay
M 2 2 2 2 4 8 17 4 Start 32
28 N 1 4 4 3 4 1 19 2 Start 30
0 5 5 4 6 2 3 19 3 Delay
M 2 2 2 2 4 8 Continue 32
30 0 5 5 4 6 2 3 19 3 Start 33
0 5 5 4 6 2 3 Continue 33
32 p 3 2 3 4 7 8 21 5 Delay
p 3 2 3 4 7 8 21 5 Start 38
33 Q 4 5 4 2 3 4 22 8 Start 41
R 5 3 3 3 2 8 24 2 Delay
---
Q 4 5 4 2 3 4 Continue 41
38 R 5 3 3 3 2 8 24 2 Delay
R 5 3 3 3 7 8 24 2 Start 43
41 T 1 6 2 7 5 2 30 2 Start 43
43 S 2 4 6 2 3 4 26 6 Start 49

176
 RESOURCE lviANAGEMENT: PART 1 177

Figure 7-9. Project

\Jetwork

5
~
~

T
~
~

KEY·~ ES::o early start; EF::o early finish; LS= late start; LF= late finish; and Critical Path: ---+
.U§Jill

7.4 U sing Microsoft Project

Let's now use Microsoft Project on our example project. We need to start a new proj-
ect and then enter the data of Table 7-2 into the software, following the same general
steps described in Chapter 5. The project will look as shown in Figure 7-10, with a 32-
day duration. The process used to assign resources, perform resource leveling, and
perform resource allocation is shown in Figures 7-11 to 7-17. You can follow these
steps or load the Sch-Level.mpp file from the CD.
If you do not want to redo the leveling options each time you make changes to
the schedule, you can set the "Leveling Calculations" option in Figure 7-16 to Au- If

tomatic."

Figure 7-10.
Microsoft Project
Schedule with 32-
day Duration
Now, to input our
resource information
and their daily limits,
we use the View-
Resource Sheet menu
option.
Figure 7-11.
Specifying
Resources

First, let's view the

resource sheet and
specify the resource
types. For resource-
leveling purposes, we R 30 $O.OO~lr lOOO/h, $OOQ Pm rated star>j.,d

specify a high Max, R 30 lO.OO.Jhr ~Ooonlf' $0.0) Proreteo staf)jord

Units, indicating that R 30 $O.OOh, lOOOIt,' 10.00 P,o,ated Slacdarfi

we have enough R 30 $OOOl1"lr iO.OO/hl $[100 Prr".!ed Star;jord

resources. R 30 $O.OOll1r $000;11, $O{l.) Prorated star.::Je:rcl

R 30 $O.oO,h, SO.OO.'hr $000 Prorateil st.cdard

Figure 7-12. Assign

Resources to Tasks

From the Cantt chart,

select each activity,
push on the toolbar
button shown, and
type the units of each
resource. Click on the
Assign button and
continue to next
activity, and so on.
Once finished, you
will notice that project
duration is still 32
days.

178
 3S

30,t ..· ·········· .

2S .

20

15

10

Peak Unrts:

Figure 7-13. Using the Resource-Leveiing Option

We now view the resource graph of Rl (use View-Resource Graph). The grapb shows that Rl fluctuates between a
minimum demand of 2 RI units to a maximum of 13 units. We will now apply resource leveling and try to smooth this
profile.
Now, we use the Tools-Resource Leveling menu option. Select the Level only within available slack option. This
ensures that project duration remains unchanged. Push the Level Now button and then select the Selected resources
option to smooth only the RI resource.

Figure 7-14. input

Data for Resource
Allocation
Now, let's view the
resource sheet again
and specify the
resource limits we
i"( ';~UI!H!! iP.Wt~H \).ID f'r0f.'il~~d Si.(~~H.tlff.t
have. This is important
g iU 'HU!iHif -~.{I:{l:i.1~f ,:HO P'H':.f·~l;~~) ~t{~fid<~H~
before we start
R i(; ;gJHnl~ ·~·nj'i.;tf $f.~·~nl.l:!~
d
resource allocation to
account for these R il; {;gifUF HL.tl+hr qU}) FH" .,le,1 S</:jnu~nj

limits. Once finished, R iD ~+.,~,t:n.t\r H~,J,l:t:f ~~J.UJPfcr}1.i~d S~~nsj~rd

L: ~~!)jlj~'rl~ ~n,M,:ti! '~-(un (r,;.r,:i:'1erJ $~"~in,(b:f
d
return back to view
the Gantt chart.

179
Figure 7-15.
,t;'
Viewing
Overallocated
Resources

With resources and

their limits specified
while the duration is
unchanged, let's view
the Resource Graph.
Notice the over-
allocation in RI,
indicating the need to
perform resource
allocation calculations
to resolve this
problem. After
viewing, return to the
Gantt chart.

Figure 7-16.
Resource Allocation
Option

10 use resource
allocation, we use the
Tools- Resource
Leveling menu
option. Select the
Standard leveling
order. Keep the option
boxes unselected and
push the Level Now
button to start. I.".t""·

180
 RESOURCE MANAGEMENT: PART 1 181

Figure 7-17. Extended Schedule due to Resource Limits

Project duration becomes 51 days. Now retry using the other Leveling Order options such as
ID Only in Figure 7.16. It will give you a 54-day schedule. Thus, our best solution so far is
the 51-day schedule shown here. Notice that this schedule is two days longer than the 49-day
manual solution of Table 7-3, which shows that software systems do not exactly follow the
manual approach.

7.5 Using PrimaveraP3

Now let's apply resource allocation and leveling options using Prima vera P3 software.
The simplest approach to enter the project data in P3 is through MPX conversion. First,
we save the Microsoft file as a MPX format (Figure 7-18) and then use the conversion
program that comes within the Primavera group to convert the MPX file into P3 for-
mat. Once conversion is done, the P3 project file looks as shown in Figure 7-19.
After conversion, the project is 32-days' duration before resource allocation or
leveling are applied. The next steps are to specify the resources (Figure 7-20) and then
assign these resources to the various activities (Figure 7-21).
We proceed with resource assignments by selecting the activity details form (bot-
tom of bar chart) and selecting the resource tab. Now, we specify the resource cate-
gory and the number of daily units.
As shown in Figure 7-22, we activate resource leveling from the toolbar and set
the options. To apply resource smoothing, we set the Smoothing option to become
Time Constrained, which does not allow extension or delay to the project. We also
may extend the resource limits before smoothing.
To apply resource allocation, we set the Smoothing option to Non-Time Con-
strained to allow the project to be delayed as needed. We also select the prioritization
rule (Late Start) and select all the resources to be leveled. Notice the diverse number
of prioritization rules available in P3. The result of resource allocation (Figure 7-23)
is a 49-day duration, similar to the manual calculations.
 -il'tJ .)Mi;kup
.,2iObases .)JVeans-G"l:ie
::';Ii>-W(.1<sCql .:JM:lharre:j
.:::JEgypt ::JOIdBAL
.j!'1M:l .:JOrigBaI
:,j(ssam ~)Probd
..,jEss.am-system ...JPfOiJrarns
":':8;[ ~jShell
~exB~qU9 ::_1Ss
:)If-lhen ~SuperVIS

Figure 7-18. Converting Microsoft Project File into P3 Format

Activlly Activity O,ig

Da
o

c;::::9 yK
0013 M 4 is. . ...'iJ---------V r~
&ifi!R!'~J
i~!.}.~£lO
0014 N 2 ~N
0017 Q .-----g
C018 R 2 ,,,: -- .- Si'- <;] R
0016P 5 ~p
0019 S 6 i.illi!!'S%lWW!!W!W1iJW1P S
I--'-OO'-2_DL' -'---=2'-1 . .. __ . _.. _._._ .. --"f!FJ.J§f'fl,~·--'1'-- -1

Figure 7-19. P3 File Converted from Microsoft Project Format

182
Figure 7-20.
Specifying
Resources

The MPX conversion

feature did not
properly convert the
resources, so we have
to respecify the six
resource categories of
this example.

ACIMly Activity ;Olig

ID Description ! Du, .l,' L ~ .".1 9, !'J2,3, .....I....! ~ ,1 ,19, . L_ I .J_~.I..:"

DDOl
C ,
l---iDDO~5'iE;,------+- 7

0007 G
OOE H
DD09 I

0011 K
0013 M
0010 J
0015 0-
001.01 N
------
0017 Q
0018 R
00:5 P
0019 S

Figure 7-21. Assigning Resources to Activities

183
184 CHAPTER 7

Lete finiah
Milestone
Percaut (X1mlllf:lte
IOriginal duration
-JRemflining dur etiou
lt otet Hoat
Vrnionce ttuge. I eo.rly ~h1lt

Figure 7-22. Activating Resource Allocation/Leveling

-'-'-'---1
ID Description [)ur'" -45-. -1---' -141S1Gl't-uJ19--,.-:T2 zs 37 3 40 1 4 H 44 5 46
x'Ol ~\ I 2; ......
,.~.,~ •.__ ,i .. -----.---.-.---.- ..-- ..--------"1 A
Xfl2B ~.---------- --..
-..- .- ---------\78
JOO3 c u.....
__.:.•_.. :\'. . --------------- -------'\lC
X04li-'~--- £l~.:::::::::.:.::: 51·- ..·----------- ------ ..------'1 D
00J5 E r -=-__ n -----'';;' E
ms f 11:::';":"::;
:::::::2 I7F
[fl17 G. c.: .-;---·----------'17 G
!llJ8 H 2 :,\='-.f-'; ------'\\71'
Iiii3 -, -- ..'2 !~f--' ------\',
OOlC:3 -----,-[; ~::::::.:·:;·.:_-
..
;:_Vf--------I7J
----
0011 1< , ~... ,'K
0012 L i 2 fr.::.-:;SJ 17 L
00:3 t.1 0. ...:.:.... -::::;s '1 M
f'O.-::::::::'.J '1N
00150 '-;---:-r.- -o u
0015 P t~ ,_.:_u.w~.~ 'V- _ --\,i p
00'/ Q /'::':'::'::::;'::::::';':::':':="'-:":~~:,:,-n - - --':f 0
CJJi3 R J;fEJ!!J!l1[Jn
0013 S .&:~~~~~ $::':.:
t...;,.,-;;.:::i?-------- ", .... ~--9'T

Figure 7-23. Resultof Resource Allocation - Duration = 49 days

7.6 Improving Resource Allocation

As mentioned before, almost all commercial software for planning and scheduling
utilizes heuristic rules to provide resource allocation capabilities. The Standard op-
tion used by Microsoft Project, for example, is based on the common least total-float
(LTF)rule. As demonstrated by the various examples of this chapter, heuristic rules
are easy to apply. Despite these benefits, however, heuristic rules perform with vary-
ing effectiveness when used on different networks and there are no hard guidelines
that help in selecting the best heuristic rule to use for a given network. They, as such,
cannot guarantee optimum solutions. Furthermore, because of the heuristic nature of
the solution, there is a large inconsistency among the resource-constrained capabili-
ties of commercial project management software, as reported in recent surveys, and
demonstrated in this chapter. Although Primavera P3 provided a better solution than
Microsoft Project 98, no one software always produces better results than others.
 RESOURCE IvlANAGEMENT: PART 1 185

7.6.1 U sing Biased Priorities

Because it is not possible to select an optimum heuristic rule for a given project net-
work, one possible approach is to try a series of heuristic rules and then select the
schedule with minimum duration. This procedure, however, has little diversity ba-
cause the number of effective rules to enumerate is small and it is not expected that less
effective rules will change much when effective rules are not improving the schedule.
Therefore, without introducing new rules or changing the mechanics of heuristic pro-
cedures, a simple approach of forcing random activity priorities is used to improve the
schedule. The concept is demonstrated on the example project we have.
First, let's set the "Leveling Calculation" option of Microsoft Project 98 (Figure
7-11) to" Automatic" to get the 51-day duration as in Figure 7-17, using the software's
standard set of heuristic rules. It is noted that this solution was produced using the
same default priority level for all project activities (set to Lowest). To view these pri-
orities on Microsoft Project 98, let's insert a column on the Cantt chart left side, as
shown in Figure 7-24.
Microsoft Project 98 software allows users to select among eight priority levels
("Highest" to "Lowest"), and assign it to every task. The software also provides a sec-
ond set of heuristic rules for resource allocation in which activity priority takes prece-
dence over its "standard" set of heuristic rules (Figure 7-25).
Let's then introduce some bias into some activities and consequently monitor
their impact on the schedule. As an example, consider the case when only activity (R)
in our case study is given Highest priority while all others are set to Lowest. With this
Limited change to the original schedule, the project duration decreased to 47 days
(figure 7-26). This simple approach can, therefore, be used to improve the results of
existing heuristic procedures.
Surely, it is not possible to readily identify from a given network which activities
to assign higher priorities than others to improve the schedule. Therefore, a simple it-
erative procedure may be used. First, we keep the software setup as shown in Figure
7-24. Afterwards, we manually pick an activity at random, change its priority level
anywhere from Highest to Lowest and observe the consequent project duration. If the
project duration decreases, we retain that change in priority level, otherwise wc dis-
card it. Through this process, the default schedule of commercial software systems
can be much improved. Certainly with Microsoft Project 98, we can write a simple
macro program and then assign the macro to a toolbar button for quick and auto-
mated access to this procedure.

Figure 7-24. Insert

'Priority" Column

To have Priority as
the third column,
highligh t the third
column and then use
the Inset-Column
10 Not Leve!
menu option. .. H'~hest
V~r'l High
Higher
Hicj1
Mi::dil,ll'T:
Lov.
Lowel
Vervlm\'

M 4 devs

2 j;:,'(S

Move the divider bar to view all columns.

186 CHAPTER 7

Figure 7-25.
Resource Allocation
Option under Biased
Priorities

Shown here are the

Resource Leveling
options to use when
changing the
priorities of some
activities. The
purpose is to
investigate if
changing the
priorities will provide
a better schedule.

~ d:;lf'; t,o...••.
'est
D 6 d6}'S Lowest

E 'r uavs LO...•.

zest!

F 5 d.,.(~ Lowest
G 2 d3YS Lo\•..
-e~
H ') d",ys Lowest

:2 CluY.S
6da~

K 1 df:t)'

2 day,;

.; ,jute
'N" 2d3"y"e

0 3 days
p 5 days

2 ceve

Figure 7-26. Improved 47-day Schedule with Highest Priority Assigned Only to Activity R

7.6.1.1 Optimizing the Process:

Can we determine the optimum set of activities' priorities that
minimizes the total project duration under resource constraints while
also minimizing the appropriate momentis) of selected resources?

To answer this question, a macro program is included with the Microsoft Project
file (Sch-Level.mpp). The program was developed based on the concepts of genetic
algorithms to automate the moment calculations and incorporate them into Microsoft
Project. The CA macro, in essence, generates a random population of solutions and
keeps exchanging their information to produce offspring solutions that are evaluated
until an optimum solution is achieved. In the present program, the user is given the
flexibility to specify the population size (initial random solutions, 50 to 100 is reason-
able) and the number of offspring generations (100 increments is reasonable). Using
the CA program, you can experiment with various resource allocation and leveling
options to obtain a desirable schedule. To demonstrate the program, some screens are
provided in Figures 7-27 to 7-29.
First, open the file Sch-Level.mpp, and the Cantt chart will appear. Notice that a
column of activity priorities is already inserted with only activity R having a Highest
Figure 7-27. Activating the "Scheduling_Leveling" Macro

Evaluation
Criteria C%)

Optimization
Parameters

Figure 7-28. Optimization Parameters

187
188 CHAPTER 7

..
3 cl
4 d
6 C Ye')' High'
7 (i !.(lwr.s! .4 ed
5 U iil9h 2 ed
2d Lowest 11 ed
2d High 2,d
2d High o ed
6 d High o ed
1d Hrgher Il ed
2d High 1 ed
" . ........
4 d Very High (I ed
2d Medium 2 ed
3 d Very High. o ed
Med:um I ed
" d ..
;

801 Lowest 2 ed ;

201 Ver'l High (I ed

6 d Low o ,d
2d HIHhp.r o ed
.:.1

Figure 7-29. Activities' Delay Values Associated with the Best Schedule (45 Days)

priority, thus producing a 47-day project duration. Now, use the Tools-Macro-Macros
menu option and select the macro Scheduling Leveling from the list of macros and
click on the Run button. An introductory screen will appear.
For simplicity, only one resource (R4)of the six resources in the present project is
assumed to be critical and requires smoothing of its profile, in addition to minimizing
the project delay associated with the resource limits we have in this project. Therefore,
we input our criteria for evaluating solutions (50'10 weight for reducing project dura-
tion and 50% for reducing R4 fluctuation) in the next set of windows shown in Figure
7-28. Notice that the weights for resources Rl, R2, R3, R5, and R6 are set to zeroes. Ac-
cordingly, the process continues and the resulting schedule is shown in Egure 7-29.
A 45-day duration is obtained. The moment of R4 is also improved from 2405 to
2265.The process took almost 50 minutes on a Pentium 233 MHz machine. Note that
because of the random nature of the process, exact results may not be obtained each
time you try the program. This result shows a much improved schedule that is 4 days
shorter than that produced by any software currently available on the market.
Applying the genetic algorithms technique to this complex problem has been
demonstrated to be efficient because it arrives at solutions by searching only a small
fraction of the total search space. With 20 activities, each having eight options for its
priority, the total search space is 820. It may take about 1000 offspring solutions (in-
volving a search space of 20,000) to arrive at near-optimum results.
After resource allocation is completed and the best schedule is determined (in this
example a 45-day duration), it is possible to see how the software could resolve re-
source overallocation. Let's insert a column into the Gantt chart called Leveling De-
lay, as shown in Figure 7-29. As shown in the figure, the values in this column spec-
ify a start delay for each activity so that daily resources do not exceed the availability
limits. These values will be used later in our spreadsheet model that tries to improve
the schedule even further.
The use of the biased-priority procedure on Microsoft Project 98 software bene-
fited from the software's feature of allowing user-specified priorities to activities.
Other software, such as Prima vera P3, for example, does not directly allow for that
and, as such, requires some manipulation. The user, for example, can specify a cus-
tom activity code called "priority" to contain a number representing the priority level
of each activity. This code can then be used as the leading heuristic rule to implement
the procedure, as shown in figure 7-30.
 !ActiviiyllO fl.J:l . ",1.8
iActivitylDescri ptio n 188S!Leh iAJiul.8
5.~O:Flight lAJiBI.B
~aiiliiiiiiii•••
•.•• liOrigIDUr
axtl 10.~OjLBh 'AJiBI.O
iRemlDur 5.00!Rjghl jAJ",1.8
!% 6.JJ'l'li'lhl !AJial.8

}.;}ttI4t¥:§·:Jt:*~)0f~t4;m)m~~u:~:t~:·;~

Figure 7-30. Adding Biasnessto Resource Allocation Using P3

Using the Format Column toolbar, we insert a column for the Textl field, which can contain user-defined data. Then, we
specify values of 1 for low-priority activities and values of zero for higher priority (e.g., activity R only). Afterwards, we
change the rules used for resource allocation to become Textl, then Late Start, thus forcing the priority levels to take
precedence. Accordingly, when resource allocation was performed, a 46-day schedule was obtained, as shown in the bar chart.

189
7.6.2 Advanced Topic: Improving Resource Allocation Utilizing
Multiskilled Resources
Scheduling with constrained resources, particularly skilled labor, is a major challenge
for almost all construction projects. One of the promising solutions to this problem is
to develop methods that optimize or better utilize the skilled workers already in the
industry. Most resource allocation techniques, such as the heuristic procedure de-
scribed earlier, assume single-skilled resources. To improve existing solutions, we
will introduce some modifications to this heuristic procedure to consider multi-
skilled resources.
Microsoft Project 98 software does not consider for multiskilled resources. Al-
though some software vendors indicate that their systems incorporate multiskill
scheduling capabilities (Table 7--4), details on most of their procedures are proprietary.
Two steps are carried out to modify the described single-skill resource allocation
process to be used for multiskill resource allocation: (1) Storing the information about
the multiskills of resources; and (2) Modifying the procedure of Figure 7-fJ to utilize
the stored multiskill information.
The ability of a resource (e.g., a steel fixer) to substitute another (e.g., a carpenter)
provides a good representation of the multiskill ability of this resource. Certainly, the
steel fixer in this case may not be proficient in carpentry, and as such, his productiv-
ity is expected to be less than that of an original carpenter. In some cases, it may take
two, three, or any other number of steel fixers to substitute one carpenter. Therefore,
a simple representation of the multiskill of resources can be in the form of a substitu-
tion rule, as follows: 2 R4 = 1 R2; meaning that two of resource R4 are required to sub-
stitute a shortage of one R2 resource. One important assumption made here is that a
rule applies to all members of its resources (e.g., if 2 steel fixers = 1 carpenter, then
any two steel fixers can substitute one carpenter). This assumption becomes reason-
able when a training mechanism is implemented for resources to be used in multiskill
work assignments.
Having the multiskill information defined in terms of substitution rules, this in-
formation can be used to modify the heuristic procedure of Figure 7-6, replacing its
highlighted part with a multiskiIl checking procedure of Figure 7-31. This procedure,
instead of delaying an activity due to shortage in resources (as in Figure 7-6), checks
to see if enough substitute resources exist to start the activity. The multiskill checking
procedure starts, first, by checking if there is one or more substitution rule(s) that can
solve the resource conflict. For example, if the shortage in resource RI = 2, and 2R2
= lRl; 3R3 = lRl, then either 4 (2 X 2) units of resource RI or 6 (3 X 2) units of re-
source R3 can substitute the shortage in resource RI. Also, in case the free amount of

Table 7-4. Multiskill Scheduling Capabilities of Software Systems

Single-skill Resource Multiskill Resourc,a

Software Allocation Allocation
(1) (2) (3)

Artemis Views Yes Yes

Autoplan Yes Yes
Micro Planner X* Yes No
Microsoft Project Yes No
MPS-Team Mgmt. Yes No
Perception Yes Yes
Primovera P3 Yes No
Project Scheduler 7 Yes No
Project Workbench Yes No
SAS/OR' Yes Yes

• Examined from a trial version

 REsOURCE MANAGEMENT: PART 1 191

Figure 7-31. Multi-

SkillChecking
Procedure Identify over-allocated
resource(s) & pick the first one

Calculate the shortage amount

Read the substitution rule(s)

Select next Can a single NO Can several NO

over-allocated rule cover the rules cover the
resource shortage? shortage?

NO All over-allocated
resources
considered?

either resource (R2 and R3) is not enough to substitute for the whole shortage, a com-
bination of resources R2 and R3 together, according to their availability, can be used
to substitute the shortage in RI. When a substitution takes place, the resource pool is
adjusted accordingly and the resource allocation procedure is continued without de-
laying the activity in question, thus saving project time. If, during the multiskill
checking procedure, a resource conflict could not be solved, then the activity will be
delayed.

We now apply the multi skill procedure on the project using one substitution
rule (2 R5 = 1 RI). Applying the proposed procedure manually is shown in
Table 7-5, resulting in a 39-day project duration, with a single substitution
rule. The last column in Table 7-5 indicates when the substitution rule was
used to schedule the activities. At the beginning of the project (current time
= 0), the only eligible activities were A, B, and 0, which were sorted by their
late-start values (column 9). Considering these three activities in order, activ-
ity A could start and accordingly, not enough resources will be available for
either B or D. As such, activity A was started at time 0 and could end at time
6 (duration = 6 days). Before delaying activities Band 0, the multiskiIl check-
ing procedure of Figure 7-31 was applied using the substitution rule (2 RS =
1RI).
Accordingly, activity B could start at time 0 because the shortage of one
resource in RI (out of the 7 available, 5 were used by A and 3 are required for
B) could be covered by two free RS resources. Notice here that the substitu-
tion information of activity Bis shown in colunms 3-8 of Table 7-S.ln colunm
Table 7-5. Manual Scheduling of Case 1 Using Multiskilled Resources

Resources
Eligible Late Finish Substitution
Time Activity Rl=7 R2=10 R3=10 R4=16 R5=18 R6=13 Start Duration Decision Time RulElUsed

A 5 2 2 2 7 4 0 6 Start 6
0 B 3-1 5 2 3 9+2 6 6 3 Start 3 2 R5 = 1 Rl
D 5 4 3 5 5 4 7 6 Delay
---
3 A 5 2 2 2 7 4 0 6 Continue 6 2 R5 = 1 Rl
D 5-3 4 3 5 5+6 4 7 6 Start 9
D 5 4 3 5 5 4 7 6 Continue 9
6 C 2 4 4 2 3 1 6 4 Start 10
E 3 5 2 3 8 0 9 7 Delay
H 5 5 4 0 9 1 13 2 Delay
C 2 4 4 2 3 1 6 4 Continue 10
9 E 3 5 2 3 8 0 9 7 Start 16
H 5 5 4 0 9 1 13 2 Delay
G 4 1 4 3 9 8 13 2 Delay
E 3 5 2 3 8 0 9 7 Continue 16
10 F 4 1 4 9 2 5 10 5 Start 15
G 4 1 4 3 9 8 13 2 Delay
H 5 5 4 0 9 1 13 2 Delay
E 3 5 2 3 8 0 9 7 Continue 16
15 G 4 1 4 3 9 8 13 2 Start 17
H 5 5 4 0 9 1 13 2 Delay
J 1 5 4 6 7 3 15 6 Delay
G 4 1 4 3 9 8 13 2 Continue 17
16 H 5 5 4 0 9 1 13 2 Delay
J 1 5 4 6 7 3 15 6 Start
K 3 3 2 4 5 1 16 1 Delay 22
J 1 5 4 6 7 3 15 6 Continue 22
17 H 5 5 4 0 9 1 13 2 Start 19
K 3 3 2 4 5 1 16 1 Delay
J 1 5 4 6 7 3 15 6 Continue 22
19 I 3 2 4 3 4 2 15 2 Start 21
K 3 3 2 4 5 1 16 1 Start 20
L 3 2 2 8 3 4 17 2 Delay
I 3 2 4 3 4 2 15 2 Continue 21
20 J 1 5 4 6 7 3 15 6 Continue 22
L 3 2 2 8 3 4 17 2 Delay
J 1 5 4 6 7 3 15 6 Continue 22
21 L 3 2 2 8 3 4 17 2 Start 23
M 2 2 2 2 4 8 17 4 Delay
22 L 3 2 2 8 3 4 17 2 Continue 23
M 2 2 2 2 4 8 17 4 Start 26
M 2 2 2 2 4 8 17 4 Continue 26
23 N 1 4 4 3 4 1 19 2 Start 25
0 5 5 4 6 2 3 19 3 Delay
25 M 2 2 2 2 4 8 17 4 Continue 26
0 5 5 4 6 2 3 19 3 Start 28
26 0 5 5 4 6 2 3 19 3 Continue 28 2 R5 = 1 Rl
P 3-1 2 3 4 7+2 8 21 5 Start 31
p 3 2 3 4 7 8 21 5 Continue 31
28 Q 4 5 4 2 3 4 22 8 Start 36
R 5 3 3 3 7 8 24 2 Delay
31 Q 4 5 4 2 3 4 22 8 Continue 36 2 R5 = 1 Rl
R 5-2 3 3 3 7+4 8 24 2 Start 33
33 Q 4 5 4 2 3 4 22 8 Continue 36
S 2 4 6 2 3 4 26 6 Start 39
36 S 2 4 6 2 3 4 26 6 Continue 39
T 1 6 2 7 5 2 30 2 Start 38
 RESOURCE MANAGEMENT: PART I 193

3, the shortage in one RI resource was subtracted, and two of R5 resources

were added to column 7. This approach made it possible to maintain a total
amount of used resources at any cycle that is less than or equal to the resource
availability limit.
After scheduling activity B, the multiskill checking procedure was used
for activity 0 but failed to resolve the conflict in resources RI, R2, R5, and R6,
thus delaying 0 until the earliest time more resources became available (day
3). At day 3, activity B was finished, and the eligible activities were A (con-
tinued from previous cycle) and 0 (delayed from previous cycle). After sort-
ing and considering these activities one by one, 0 could start only after the
given substitution rule was applied. Accordingly, the shortage of three RI re-
sources could be covered by six R5 resources. The process was then contin-
ued until all activities were scheduled (project duration = 39 days). As
shown, using just one rule of substitution resulted in a 12-day saving in proj-
ect duration (from 51 to 39 days).

The manual process shown in Table 7-5 undoubtedly indicates the benefit of uti-
lizing the multiskills of resources to minimize project duration. It also shows that the
calculations add little computational burden on the scheduling process. Once the
multiskill scheduling procedure is finished, the calculation table can be used to read
the multiskill strategy that specifics when, how long, and what resource substitutions
should take place. Table 7-5, for example, directly shows the strategy used in case 1
as follows:
• Two of the free R5 resources are to join RI resources in the period from time
o to time 3, to help in activity H.
• Six of the free R5 resources are to join Rl resources in the period from time
3 to time 6, to help in activity D.
• Two of the free R5 resources are to join Rl resources in the period from time
26 to time 28, to help in activity P.
• Pour of the free R5 resources are to join Rl resources in the period from time
31 to time 33, to help in activity R.

Let's now apply the multiskill scheduling process to a more involved situa-
tion with several resource substitution rules. We will use the following sub-
stitution rules on the project (2 R5 = 1 Rl; 2 R4 = 1 R2; 2 R5 = 1 R4; 2 R4 = 1
R5; and 2 R6 = 1 R5). The manual solution of this case is shown in Table 7-6.
The first two cycles are similar to those in Table 7-5. Afterwards, the process
continues to the third cycle (day 6), which includes four eligible activities: ac-
tivity 0 (continuing till day 9); and three more activities: C, E, and H. Activ-
ity C could start because enough resources were available. As such, activities
C and 0 consumed a total of 7, 8, 7, 7, 8, and 5 of resources RI through R6, re-
spectively. Now, considering activity E, its resources are checked one by one.
Activity E requires three of RI resource while none were available because all
7 RI resources were used in D and C. The multiskill checking procedure
was then used and a substitution rule (2R5 = 1 RI) was applied to utilize six
free R5 resources to replace the missing 3 RI resources. Accordingly, the
substitution amount of 3 was subtracted from column 3, and at the same
time, an amount of 6 was added to R5 (column 7). Using this substitution, the
total amount of R5 requirement becomes 22 (5 for activity 0; 3 for activity C;
8 originally required for activity E; and 6 for the substitution), thus leaving a
Table 7-6. Manual Scheduling of Case 2 Using Multiskilled Resources

Resources
Eligible Late Finish Sub!.titution
Time Activity Rl=7 R2=10 R3=10 R4=16 R5=18 R6=13 Start Duration Decision Time Rul,eUsed

A 5 2 2 2 7 4 0 6 Start 6
0 B 3-1 5 2 3 9+2 6 6 3 Start 3 2 R5 = 1 Rl
D 5 4 3 5 5 4 7 6 Delay
3 A 5 2 2 2 7 4 0 6 Continue 6 2 R5i= 1 Rl
D 5-3 4 3 5 5+6 4 7 6 Start 9
D 5 4 3 5 5 4 7 6 Continue 9 2 R5i= 1 Rl
6 C 2 4 4 5 3 1 6 4 Start 10 2 R6 = 1 R5
E 3-3 5-3 2 2 8+6-4 0+8 9 7 Start 13 2 R4 = 1 R2
H 5 5 4 3+6 4 1 13 2 Delay 13
C 2 4 4 2 3 1 6 4 Continue 10 2 RS,= 1 Rl
9 E 3 5 2 3 8 0 9 7 Continue 13 2 R4 = 1 R5
G 4-2 1 4 3+8 9+4-6 8+4 13 2 Start 11 2 R6,= 1 R5
H 5 5 4 0 9 1 13 2 Delay
E 3 5 2 3 8 0 9 7 Continue 13
10 G 4 1 4 3 9 8 13 2 Continue 11
F 4 1 4 9 2 5 10 5 Delay
H 5 5 4 0 9 1 13 2 Delay
E 3 5 2 3 8 0 9 7 Continue 13
11 F 4 1 4 9 2 5 10 5 Start 16
H
-----------
5 5 4 0 9 1 13 2 Delay
F 4 1 4 9 2 5 10 5 Continue 16
13 H 5-2 5 4 0 9+4 1 13 2 Start 15 2 R5 = 1 Rl
K 3 3 2 4 5 1 16 1 Delay
--._--
F 4 1 4 9 2 5 10 5 Continue 16
15 I 3 2 4 3 4 2 15 2 Start 17 2 R5 = 1 Rl
K 3-3 3 2 4 5+6 1 16 1 Start 16
L 3 2 2 8 3 4 17 2 Delay
I 3 2 4 3 4 2 15 2 Continue 17
16 J 1 5 4 6 7 3 15 6 Start 22 2 R5 = 1 R4
L 3 2 2 8-1 3+2 4 17
._. __ ._--
2 Start
---_ ..
18
----_ .... --- .-_.-- -
..

J 1 5 4 6 7 3 15 6 Continue 22
17 L 3 2 2 8 3 4 17 2 Continue 18
M 2 2 2 2 4 8 17 4 Delay
J 1 5 4 6 7 3 15 6 Continue 22
18 M 2 2 2 2 4 8 17 4 Start 22 2 R4 = 1 R2
N 1 4-1 4 3+2 4 1 19 2 Start 20
0 5 5 4 6 2 3 19 3 Delay
J 1 5 4 6 7 3 15 6 Continue 22
20 M 2 2 2 2 4 8 17 4 Continue 22
0 5 5 4 6 2 3 19 3 Delay
22 0 5 5 4 6 2 3 19 3 Start 25 2 R5 = 1 Rl
P 3-1 2 3 4 7+2 8 21 5 Start 27
p 3 2 3 4 7 8 21 5 Continue 27
25 Q 4 5 4 2 3 4 22 8 Start 33
R 5 3 3 3 2 8 24 2 Delay
---
27 Q 4 5 4 2 3 4 22 8 Continue 33 2 R5 = 1 Rl
R 5-2 3 3 3 2+4 8 24 2 Start 29
29 Q 4 5 4 2 3 4 22 8 Continue 33
S 2 4 6 2 3 4 26 6 Start 35
33 S 2 4 6 2 3 4 26 6 Continue 35
T 1 6 2 7 5 2 30 2 Start 35

194
 RESOURCE MANAGEMENT: PART 1 I 195

shortage of 4 in resource R5 (limit is 18). To substitute for the missing R5 re-

sources, a search through available rules reveals that rule (2 R6 = 1 R5) can
be used and requires the use of eight free R6 resources. Adding these eight to
the resource requirements of R6 makes a total of 13, which is the resource
availability limit, thus making the substitution possible. Once the assignment
conflict of RI is resolved through the two nested rules, the process is contin-
ued with R2, which also exhibited a shortage of 3 that was substituted by the
rule (2 R4 = 1 R2). Activity E can then start. Moving to activity H, the substi-
tution rules did not solve the conflicts in RI, R2, R3, R5, and R6 and thus ac-
tivity H has to be delayed till the earliest time more resources become avail-
able (day 9). It is noted that at the beginning of a new cycle (e.g., at time 9),
all the resource substitutions that took place at the previous cycle are released
so that the activities can be scheduled using the original resources.

The fourth cycle at day 9 includes four eligible activities: C and E (continued from
previous cycle till days 10 and 13, respectively); H (delayed from previous cycle); and
one more new activity (G). The resources used by activities C and E were 5, 9, 6,5, 11,
and] for RI through R6, respectively. Activity G can start because the available sub-
stitution rules can solve the conflicts in RI (4 of R5 substituted 2 of RI) and R5 (8 of
R4 plus 4 of R6 substituted 6 of R5). It is worthwhile to note that the shortage of 6 R5
resources is covered by two resources (8 from R4 and 4 from R6)as long as there is not
a single resource that can cover the shortage totally. Activity H is delayed because the
available substitution rules still could not solve the conflicts in RI, R2, R3, R5, and R6.
The process is continued through all the cycles of Table 7-5 until all activities are
scheduled (project duration = 35 days; only 3 days' extension beyond the original
CPM duration of 32 days).

7.6.3 A Macro Program for Multiskill Resource Allocation

Performing the multiskill scheduling calculations can be tedious when the project
size gets bigger. It is desirable, therefore, to automate the calculations and incorpo-
rate it into Microsoft Project. A macro program was developed for that purpose and
is included in the CD accompanying this book. The program name is MURSA,
which is an abbreviation MUltiskill ReSource allocation Algorithm. MURSA is a
VBAmacro attached to a Microsoft Project file (Multi-Skill.mpp). This program uses
the ELSheuristic rule and follows the manual steps described earlier. Using MURSA,
you can experiment with various resource substitution rules to obtain a desirable
schedule. To demonstrate program MURSA, step-by-step screens are provided in
Figures 7-32 to 7-37.
It is noted that to clear the schedule and return to the original CPM analysis of
Microsoft Project, you can activate the macro "ClearLeveling."
 !-I

K 1 day est
LO\II ..•

L 2 days Lowest

M 4 devs Lovvcst

N 2 d8YS: Lowest
0 3 days
p 5 (jay~;
Q 8 days

R 2 d8ys

S 6 days

20ays

Figure 7-32. Activating MURSAProgram

----
First, open the file Multi-Skill.mpp from where you installed the CD; use the File-Open menu option to load the file
(Figure 7-32), and the Cantt chart of our case study will appear. Notice that a column of activity priorities is already
inserted. In fact, you can use this file to experiment with the various scheduling options described earlier. Now, use the
Tools-Macro-Macros menu option and select the macro MURSA from the list of macros and click the Run button. An
introductory screen will appear.

Figure 7-33.
Defining Resource Till S opti on performs
Substitution Rules si nglc-skilled resource
allocation USJl1g the Early

If you choose the Late-Start rule.

multiskilled resource
allocation, you need
to specify the resource
substitution rules
from the shown
screen. Choose two
resources from the Substitution Rules
two combo boxes,
then type the
substitution amounts
in the text boxes, then
use the Save This
Rule button each
time. The five
substitution rules
used in case 2 are 01: R4
Choose resource
already input. When
finished click on the
OK button. of: RS substitute rnf :

196
 Figure 7-34. Multiskill Resource Allocation Calculations

The calculations proceed and provide you with a message box of the decision made at each
cycle of the process. Starting at time 0, this figure shows that activities A and B are started,
while activity 0 is delayed. The calculations follow the manual process shown in Table 7-6.
Click on the OK button to continue to the next cycles. After the last step, some background
processing will take a little while before a message appears.

Figure 7-35. Multiskill Resource Allocation Results

The calculations result in a 35-day duration, as shown here. You may now change the schedule accordingly. The final
note refers you to other macros you may use.

197
 6 units of res, Re,5 substitute 3 units of res, Res! in task E, from day 6 to day 9.
6 units of res. Res'! substitute 3 units of res. Res2 in taskE, from day 6 to d~y 9.
8 units of res. Res6 substitute 4 units of res. Res5 in task E, from day 6 to day 9.

figure 7-36. Report on Resource Substitutions

After the multiskill resource allocation process is ended, you may activate the
Show_Substitutions macro to view the window shown here. You can scroll to view all
activities and their related substitution strategy. A complete report can also be obtained by
printing the file c:\SkillReport.txt.

Figure 7-37.
Revised Resource
R1 Histogram
Histograms
3
Because the multiskill 7
scheduling process 5
has changed the 5
.~ 4
resource assignments ::>

on activities, you can

not depend on the
default resource ~ m
~ RI CD CD ;;:; ~
er,
histograms of '"
TImeldavsl
N N

Microsoft Project. To
view the revised
R2 Histogram
histogram of any
resource (showing no 12
overallocation), You
can activate the 8
Show _Histogram l!l
.~ 6
macro to view an
~
Excel sheet
c:\ rveshis togram.xls 0
generated by the ~ ~ ~ ~1 ~ eo". r;; ~
scheduling process.
'"
Tim.tdays)
""

198
 RESOURCE MANAGEMENT: PART 1 199

7.7 Optimization of Resource Allocation and Leveling on Excel

To consolidate our understanding of the resource allocation and leveling concepts,
let's try some experiments on a spreadsheet model for CPM analysis. We will follow
the steps shown in Figures 7-38 to 7-41. First, activate Microsoft Excel and use the
File-Open menu option to load the spreadsheet file Sch-Level.xls from where you in-
stalled the CD of this book. The file is a workbook containing three sheets that will
take us step by step to developing an optimization model for resource allocation and
leveling combined.
With few changes to the Excel bar chart sheet, it is possible to add calculations for
accumulating daily resources so that resource profiles can be plotted and total de-
mand is compared with the maximum available. In addition, moment calculations
can be incorporated as shown in the CPM-Res sheet (Figure 7-39).
To resolve the resource overallocation of the original CPM analysis, we need to
change the schedule so that resource limits are not exceeded. We do that by specify-
ing proper values in the Delay column. If we specify any value of delay to any ac-
tivity, the bar chart automatically changes, and accordingly, so do the resource us-
age and profile. As shown in Figure 7-39, we can directly copy the delay values
from Microsoft Project (Figure 7-29) as the values that achieve a 45-day duration
without exceeding resource limits.

A
B
C 6 I;

0 I 19

E 1 2 11 I<
F 10 l~

G 9 11
H 9 11
I IJ
J 16

K !3

L ;
M
N
0
?
Q
R ~ 15 ;9
S 1& 18
T 11

Figure 7-38. CPM Model

The second sheet, shown here, is a CPM model with a bar chart of the example project. Notice that the Delay column
shows zero values, meaning that activities are to start exactly at their Early-Start times.
 The delay values that
Several columns inserted to specify
correspond to the 45-day
daily resource needs.
solution (Fi . 7.29).
----------~~---------

A
B
C
0
E 1 1
F 3 10
G
H
• ~9
3

"
I '7 110
J s ~ 16
K
L
3
5 a
'13
14 15
I ·f--+- ..
T'I
M 9 11 16
~.f--+-iSI
•• s
0 12
" 16
17 18
P 10 1314 19
Q 20
,
1\
R
,." il'

-.
S liS !
T 17

·$h.ad.d andcololi':Jc"I$.:~l.ablfSC! ~..,:lldi"o·lT.d~s

andc~kl,j~t~n). ',,/hilt> c~s Mf'un! irf'\l~
·Ctn"cr'jsn;;med"du,'
. Thtwhol!> dm :lng.. !A.4V21)is n'f»o:d··d.~(a"
. V., reec to d@(trmw·h?(~i4mC\l.y.cfdMa; t-:ll eecn tir5~
S!31h.;1 f~u:cttmits ·an not t%(;E'.d!'o.
.. ·US!rgsa..V£R.st"I' .•\t.h~titt."t~d eIaJ'14Iu('!t.

Histogram of resource Calculated resources Moment Daily resource amount

R4, showing no OH,·- do nor exceed the calculations. (one row for each
allocation. maximum available. reso urce),

Figure 7-39. Excel Model for Resource Allocation and Leveling

Figure 7.40. Solver

Failed to Provide a
Solution

200
 RESOURCE MANAGEMENT: PART I 201

J
K
L
Variables range
N 2
o
Resource constraints

Figure 7-41. Evolver Optimization Setup

In fact, this sheet becomes an interesting model for performing resource alloca-
tion and leveling. Now we can carry out several experiments:
• Resource Leveling: manually introduce delay values only to noncritical ac-
tivities (activities with zero values for their total floats) and monitor changes
to the shape of the resource profile. Project duration will not change.
• Resource Allocation: manually introduce delay values to any activity (critical
and noncritical) and monitor the peak resources used compared to the limit.
Monitor also the project duration. Can you arrive at the least duration with-
out exceeding resource limits?
202 I CHAPTER 7

• Use the Excel Solver tool to try arriving at the optimum delay values. In fact,
if you activate Solver, you will see that the parameters have already been
input (Figure 7-40) and ready to solve. Before starting Solver, however, it is
recommended that you put arbitrary values (0 to 15)for the delay so that proj-
ect duration is extended. Afterwards, let Solver minimize project duration for
you. It is highly likely, however, that Solver will stop without being able to
solve this problem.
• Use the Evolver tool to try arriving at the optimum delay values and accord-
ingly the minimum-duration schedule. In Evolver, for example, you may set
the optimization parameters as shown in Figure 7-4l. The objective function
is to minimize the duration cell and the variables are the values in the delay
column (should be an integer from (0 to 12). The constraints, on the other
hand, are to limit the daily resources used to the maximum available. One ad-
dition constraint is also used to minimize the sum of delays. Once these are
set, you can let the optimization proceed for some time. One possible option
is to add other constraints to minimize the moment of any resource and as
such the optimization can run with multiple objectives: resource allocation
and leveling. It is noted that because the 45-day schedule is a near-optimum
solution, optimization may take a long time to reach a better solution.
• To view the optimum solution of this particular example, copy the delay val-
ues given at the far right side of this sheet (column CE, after the bar chart) to
the variables in column K. A 43-day solution will result (our manual heuristic
solution of Table 7-3 gave 49 days).

7.8 Back to Our Case Study Project

Based on the various approaches we discussed in this chapter regarding resource al-
location and leveling, we can follow the systematic approach and apply it to our case
study project, as follows:

- Resources, W8S, 08S. &

Construction Methods
(Chapters 3 & 4)

- Scheduling
(Chapters 5 & 6)

- Resource Constraints
(Chapter 7)

- Time Constraints (Chapter 8)

- Cash Flow Constraints (Chapter 10) Excel Model

- Actual Progress Data (Chapter 11) (Chapter 10)
 RESO URCE MANAGEMENT: PART 1 I 203

7.8.1 CPM / LOB Analysis

The CPM analysis was discussed thoroughly in Chapter 5 and the project duration of
the case study is 32 days. We will assume that the project is not repetitive and thus the
LOB schedule of Chapter 6 is not required for the sake of simplicity.

7.8.2 Dealing with Resources

This part involved the following steps in sequence:
• We continue working on the Case-Study.xls file after generating a Mi-
crosoft Project file and specifying the activity relationships (Section 5.7.3 in
Chapter 5).
• ill Microsoft Project, resource limits will be automatically transferred to the Re-

source Sheet from the Estimate (Figure 7-7). The 32-day schedule will have re-
source overallocations. The Microsoft Project file name of our case study is
CPM-Ch07.mpp.
• We now try resource leveling on Microsoft Project with delays limited to float
times (similar to Figure 7-13). This resulted in no improvement to the sched-
ule nor solved the resource overallocation.
• We consider the manual resource allocation solution we did in Table 7-1. This
resulted in a 40-day duration with all our resources being within their avail-
ability limits.
• We try resource allocation on Microsoft Project, similar to what we did in Fig-
ures 7-14 and 7-17, still resulting in a 40-day duration;
• We then try using biased priorities in some tasks and see if this can improve
the schedule and produce a shorter one without violating the resource limits
(similar to Figures 7-24 to 7-26). For our small case study, however, this
process still did not improve the 40-day duration of our schedule. In larger
networks, such as the 20-activity example discussed earlier, substantial im-
provements can be achieved.
• One last option we can try is to see if we have multiskilled resources that can
be used to improve the schedule (as discussed in Section 7.6.2). For our case
study, however, we will not consider this option for simplicity.
• Lastly, we finalize the best schedule we can get out of Microsoft Project and
the experimentation with the various options in this chapter. The result is a
schedule of 40-day duration (Figure 7-42). Notice that the leveling delay val-
ues that resolved the resource conflicts are shown in the figure.

7.8.3 What is Next?

We are now ready to send the best solution found so far to our Excel project manage-
ment system (the Case-Study.xls file). By proceeding to the Schedule sheet of the Ex-
cel file, we can use the first two buttons. Button 1 automatically sets up the Schedule
sheet based on the estimate data, and button 2 imports your saved Microsoft Project
file of your resource-leveled schedule (Figure 7-43).
During the file import, you can automatically activate resource leveling and re-
source allocation with biased priorities if you have not done that manually in Mi-
crosoft Project.
After using the first two buttons, the schedule sheet is shown in Figure 7-44. We
will try to use optimization tools to see if we can improve the schedule even further.
Figure 7-42. Best
Solution of Microsoft
Project

Case study project

(CPM-Ch07.mpp ).
Notice the leveling
delay values of the ...................•. - .
activities (2 days in D tJlI!~,1
... .' ,', . . .....
and 8 days in G). :·;i·:~: !J.r.wsl [I eQ&~S
.. ,'iit4hfu,1:m!!
~"',:k--
.~... ..... :
.....
.. ::
'. ::. ..
G j ~~~<;L(.~tsl

~ dais LweSI
...~rt¥¥i~~%r~~":. '. :u
F 10 day> LiI!l~s! 1

G IGda)S L,III"!
Bdals lcv~sl
boals LO"'I'ESl

L>'i~::j
10 oays LG\\\st o edJys

This button resets the sheet. Use this button to try

To set up the sheet again, we improving the Schedule
use the first two buttons. This using random changes to
button is used to redo the the optimization
Schedule when changes are variables. Does not need
introduced to the estimate. Evolver or Excel Solver.

Figure 7-43. Schedule Sheet Automated Setup Buttons

204
 RESOURCE MAt"'lAGEMENT: PART I 205

Imported delay values

Figure 7-44. SChedule Sheet after Importing Microsoft Project File

7.8.4 Random Improvements

Let's now try to improve the schedule using the automated button on top of the
Schedule sheet. Select the proper optimization objective (as shown) and then let the
program introduce random values in the delay column. Although this process may
not arrive at the optimum result, it substitutes manual process and, if used with large
number of random trials, can produce excellent results. After some experimentation,
various good solutions were obtained.
206 I CHAPTER 7

7.8.5 Genetic Algorithm Optimization

To demonstrate the use of Evolver for optimizing the schedule under resource con-
straints, we can conduct some experiments, as discusses in Section 7.7. We do this ex-
periment on the Case-Study.xls file in Figure 7--44 or the simplified Excel file
(CPM.xls) which involves a schedule sheet only, without links to an estimate sheet.
Starting with the leveling delay values imported from Microsoft Project (2 days in D
and 8 days in G), the Evolver program produced a 40-day schedule. Although the du-
ration is not reduced, the final solution is different from the initial one (delays are 2
days in A and 8 days in C). This shows the ability of the CA software to generate var-
ious alternative solutions that may result in better resource profiles and lower cost.
This solution certainly assumes that a 40-day duration is acceptable. In Chapter 8, we will deal
with project crashing to a meet a given deadline.

Figure 7-45. Alternative Solution Provided by Evolver: Duration = 40 Days (best solution so far)

7.9 Advanced Topics

In dealing with resources and trying to optimize their use, project managers may en-
counter special circumstances that require the use of more advanced strategies. Some
of these situations include:
• Scheduling resources in a multiproject environment. In this regard, Microsoft
Project provides some guidelines and tools for sharing resources across proj-
ects. You may refer to the Help system or a dedicated book on the software for
more information.
• Using resource calendars to specify unusual work hours for the resources.
This may also be used to consider a variable resource availability limit, which
is assumed constant per day in all the calculations made in this chapter. Most
scheduling software; including Microsoft Project, provides this capability.
• Applying resource allocation and/or leveling for only a group of activities or
between two specified dates (a feature in most scheduling software).
• Resolving resource constraints by allowing tasks to split (a feature In some
scheduling software).
 RESOURCE MANAGEMENT: PART I I 207

7.10 Summary
In this chapter, you have been introduced to the basics of resource allocation and lev-
eling. You also have learned four ways to improve the resource management of proj-
ects: 1) an improvement to resource allocation heuristics using random activity prior-
ities; 2) a procedure for utilizing multiskilled resources; 3) a modification to resource
leveling heuristics using double moments; and 3) a multiobjective optimization of both
resource allocation and leveling using the Genetic Algorithms technique. The final ob-
jective is to keep refining our schedule, solving its problems, and making it as realistic
as possible so that it can be followed on site. Without this much structured planning
and scheduling, execution may neither proceed on time nor on budget.

7.11 Bibliography
Allam, S.LG. (1998). Multi-project scheduling: a new categorization for heuristic
scheduling rules in construction scheduling problems. Journal Construction 1v1a?u;='-
ment and Economics, E&FN. Spon Ltd., 6(2), pp. 93-115.
Chan, W., Chau, D., and Kannan, G. (1996). Construction resource scheduling \\-i:l-.
genetic algorithms. Journal of Construction Engineering and Management, ASCE, 122 :: :
pp. 125-132.
Davis, E. W., and Patterson, J. H. (1975). A comparison of heuristic and optirnurr. ~-
lutions in resource-constrained project scheduling. Management Science, 21(bi. F~
944-955.
Easa, S. (1989). Resource leveling in construction by optimization. Journal Construc:.:-:
Engineering and Management, ASCE, 115(2), pp. 302-316.
Gavish, 8., and Pirkul, H. (1991). Algorithms for multi-resource generalized assign-
ment problem. Management Science, 37(6), pp. 695-713.
Harris, R. (1978). Resource and Arrow Networking Techniques for Construction. New York:
John Wiley & Sons.
Hegazy, T., and El-Zamzamy, H. (1998). Project management software that meet the
challenge, Construction Engineering Journal, AACE International, 4(5), pp. 25-33.
Moselhi, A., and Lorterapong, P. (1993). Least impact algorithm for resource alloca-
tion. Canadian Journal Civil Engineering., CSCE, 20(2), pp. 180-188.
Shah, K., Farid, F, and Baugh, J. (1993). Optimal resource leveling using integer-Er-
ear programming. Proe. 5th International Conference in Computing in Civil & Build-
ing Engineering, ASCE, 1, pp. 501-508.
Talbot, F and Patterson, J. (Dee. 1979). Optimal methods for scheduling projects ur.-
der resource constrains. Project Management Quarterly, pp. 26-33.
Wiest, D. (1964). "Some properties of schedules for large projects with limited re-
source." Operations Research, 12, pp. 395-416.

7.12 Exercises
1. State briefly what is meant by resource constraints.
2. The program of a small contract is given in the table below. Each activity requires
the continuous use of a mechanical excavator throughout its duration. What will be
the minimum contract duration if no more than two excavators can be made avail-
able for the work and if it is assumed that having started an activity, it must be com-
pleted without a break? Compare manual versus Microsoft Project solutions.
208 I CHAPTER 7

Activity Duration (weeks) Depends upon

A 1
B 2 A
C 2 A
D 3 A
E 4 B
F 5 C
G 4 D
H 1 C,E
I 3 G
J 1 F,H, I

3. Two schedule alternatives have associated resource profiles as shown below.

Which alternative would you choose and why? Also calculate the total uiorker-
weeks needed for both cases.
Profile Profile
9 1 2

4. The data for a small project are as follows:

Resources Requirements
Duration
Activity (days) Men Equip. 1 Equip. 2
A 4 3 o 1
B 6 6 1 o
C 2 4 o 1
D 8 o 1 o
E 4 4 1 o
F 10 o 1 o
G 16 4 o o
H 8 2 o 1
I 6 4 1 o
J 6 5 o 1
K 10 2 o 1

Maximum Resources: Men = 8; Equip.l = 1; and Equip.2 = 1

 a. Do the following manually:
• Use the early-late start rule to schedule the project, respecting resource con-
straints.
• Use the early-late start rule to schedule the project, respecting resource con-
straints and utilizing the following multiskill rule (1R2 = 1R3).
• Show the tables of calculations and draw the resource aggregation charts in
both cases after resource allocation.
b. Do the following using Microsoft Project software:
• Solve the problem using Microsoft Project and show total project duration.
• Attempt to reduce project duration by assigning random priorities to the
tasks.
• Print the resulting schedule and resource profile.
5. The following project is considered for multiresource scheduling.
Resources Required
Activity Duration
i-j Description (Weeks) A B c
1- 2 A 3 4 4 2
1- 3 B 4 3 4 1
1- 5 C 5 1 3 2
2-4 D 2 1 o o
2-6 E 3 2 1 o
3-4 F 4 2 2 1
4-7 G 3 3 1 2
5-6 H 6 4 4 4
5-7 I 4 3 2 1
6-7 J 3 1 4 5

a. Develop a resource schedule using a limit of seven Resource A, seven Resource

B, and six Resource C.
b. Solve the problem using Microsoft Project and show total project duration. At-
tempt to reduce project duration by assigning random priorities to the tasks.
c. If the project deadline duration is 14 weeks, estimate the minimum resource
level required for each resource.
d. Briefly describe the benefits of using the double moments approach in man-
aging the resources of a project.

6. Consider the following project.

Resources

Activity Predecessor Duration Plumbers Labors

A 4 2 3
B 3 1
C 6 1 3
D B 8 3 4
E B 7 1
F C 2 3 5
G AD 9 1 2
H E 5 2 4
I E 4 2
J F, I 4 2 3

a. Eleven plumbers and nine labors are available for the project. Both resources
must work at the same time when assigned to the same activity. Prepare an ac-
tivity schedule that satisfies the resource constraints.
b. Solve the problem using Microsoft Project and show total project duration. At-
tempt to reduce project duration by assigning random priorities to the tasks.
210 CHAPTER 7

7. A network for a small project is shown below with activity duration and required
number of laborers. During the first 10 days of the project, the contractor has a
maximum of four laborers. Afterwards, a subcontractor will be employed to re-
lieve the work force.

A
d=1,
r=3

J
5,3

a. Use the early late-start rule (ELS) to resolve any resource conflicts in the first
10 days and calculate the consequent project extension.
b. Briefly describe a suitable strategy for smoothing the labor resource used, as-
suming the contractor has no resource constraints.
8. A network for a small project is shown below.

@@ Activity (duration, men)

}----'-'---'-~ 5

C(5,8) 1(3,7)

a. Develop a resource schedule using a limit of 20 men.

b. Solve the problem using Microsoft Project and show total project duration. At-
tempt to reduce project duration by assigning random priorities to the tasks.
c. Modify the Sch-Level.xls file to consider the data of this exercise. Use Evolver
to solve the problem and print your Excel model. Draw a modified network
that corresponds to your optimum solution.
9. A network for a small project is shown below.

(duration, men) [ill]

~\ A (7,7)
D 8,6
H (7,5)

;f
E (7,5)
[2lQ] WIQJ ~ 9
8(3,5) ~ 1(4,10

o
C (4,6)\..::../

G(9,4)
~~

.~~
~
c
~
8
K (5,9)

C±TIJ [i]J]

a. Develop a resource schedule using a limit of 15 men/ day.

b. Solve the problem using Microsoft Project and show total project duration. At-
tempt to reduce project duration by assigning random priorities to the tasks.
c. Modify the Sch-Level.xls file to consider the data of this exercise. Use Evolver
to solve the problem and print your Excel model. Draw a modified network
that corresponds to your optimum solution.
 RESOURCE
MANAGEMENT
Part 2-Time-Cost Tradeoff

A fter studying this chapter, you will be able to:

• Understand the basic relationship between project cost and project duration.
• Perform simple time-cost tradeoff (TCT)calculations to crash project duration.
• Model the time-cost tradeoff as an optimization problem.
• Use nontraditional optimization technique for TCT optimization.
• Experiment with an all-in-one spreadsheet model for schedule optimization
under time, cost, and resource constraints.

Need
• Feasibility • Conceptual Design
• Project • Owner Approval
Definition • Soil Reports
• Owner • Preliminary Design
Approvol • Detailed Design
• Quantities O&M :
• Work Documents
• Demolition :
• Select Project
ot End of :
Contract Strategy
• Schedule Updating Service Life: ,
Progress Evaluation ,,
,
• Bidding Strategy & Markup
Estimation
Time, Cost. & Quolity
Control
.,
,,
Commissioning ,
• Cosr. Flow Analysis ,,,
• Submit Bid

8.1 Resource Management Continued

This chapter continues the discussion made in the previous chapter related to proj-
ect resource management and deals with what is referred to as the Time-Cost Tradeoff
(TCT) analysis. TCT analysis is, in fact, an important management tool for overcom-
ing a serious CPM limitation of being unable to confine the schedule to a specified
duration. The objective of the analysis is to reduce the original CPM duration of a

211
212 CHAPTER 8

project to meet a specific deadline, in the least costly manner. In addition to meeting
the deadline, reducing project duration is also desirable to avoid adverse weather
conditions, receive an early-completion bonus, free key resources early, and avoid
liquidated damages. Later in this chapter, also, we will combine all resource man-
agement aspects into an integrated model so that the schedule can be optimized un-
der time, cost, and resource constraints.

8.2 Project Time-Cost Relationship

In general, there is a tradeoff between the time and the direct cost to complete an ac-
tivity: the less expensive the resources, the larger duration they take to complete an
activity. For example, using more productive equipment or hiring more workers may
save time, but the cost could increase. This time-cost relationship for a single activity
is illustrated in Figure 8-1(a), where the activity can be constructed by option A, B, or
C. As shown in the figure, the least-direct cost required for completing an activity is
called normal cost, and the corresponding duration is called the normal duration. The
shortest possible duration required for completing the activity is called the crash du-
ration, and the corresponding cost is called the crash cost. Similar to the example cov-
ered in Chapter 4 (Figure 4-7), each option (A, B, and C) represents a different con-
struction method in which some of the resources are changed (e.g., overtime hours,
faster installed material, multiple shifts, more resources) or a different technology is
used. Ultimately, resource assignment decisions made at the activity level control the
overall duration and cost of a project.
Figure 8-1. Activity
Direct
Time/Direct-Cost
Cost
Relationships (a) Discrete
Direct
Cost (Crash
- - -.. A duration
& cost) -------. Duration

Direct
Cost (c) Curvilinear
____~ • B
(Normal
___; .• _. B duration
: ' & cost)
L- Duration
Duration

Usually, we start the estimating and scheduling processes by assuming the least
costly option for all activities (option C). Because this strategy may lead to a project
duration that is longer than desired, planners can perform the so-called time-cost
tradeoff (TCT) analysis. The analysis involves selecting some of the critical activities
(on the longest path in the network) to shorten their duration even at extra cost (i.e.,
using a more costly construction method). To offset the increase in cost, the noncriti-
cal activities can then be relaxed by selecting less costly methods of construction. With
projects involving a large number of activities with various construction options,
large numbers of combinations can be formed, each resulting in a certain project du-
ration and direct cost. It is possible, therefore, to plot these various scenarios as shown
in Figure 8-2 to try finding the optimum TCT decision for the project. By plotting the
direct cost and indirect cost curves individually, the total-cost curve can be formed by
adding these two components. The minimum total-cost point on this curve thus pres-
ents the set of activities' optimum construction methods associated with optimal bal-
ance of project duration and cost.
Finding optimal TCT decisions is difficult and time-consuming, considering the
number of permutations involved. For example, a project of only 10 activities, each
 RESOURCE MANAGEMENT: PART 2 213

Figure 8-2. Project 2100

Time-Cost
1900 Total cost
Relationship
0
1700
Minimum '"'---~
0
~ total cost
y, 1500
x Optimum
u; 1300 decision
0
0
t3 1100
Q)

.~
0... 900
700

500
90 100 110 120 130 140 150 160 170
Project duration (days)

having three possible construction options, a total of 310 (59,049)combinations can be

formed and the number of combinations increases exponentially with the number of
activities. Evaluating each combination requires recalculating of the schedule using
the CPM and assessing of total project cost. Exhaustive enumeration is, therefore, not
economically feasible even with fast computers. This is, although the TCT analysis is
traditionally performed in isolation from other computations, related to resource al-
location and leveling.

8.3 Existing TCT Techniques

-------
A brief overview of existing techniques for solving the TCT problem, along with their
advantages and drawbacks, is compiled in Figure 8-3. Since the early 19605,heuris-
tic methods and mathematical programming models have been used as two distinct
categories of solutions. In the literature, various models of both categories have been
developed and their performance compared. The main criticisms to mathematical
programming models have been their complex formulations, computational-intensive
nature, applicability to small-size problems, and local minimum solutions. Heuristic
approaches, on the other hand, have been criticized for not being able to guarantee
optimum solutions, despite their easy-to-understand formulation and acceptable so-
lutions for most CPM networks.

Figure 8-3. Existing TECHNIQUES FOR TIME-

rCT Approaches COST TRADE-OFF ANALYSIS

Description: Linear Programming; Integer Optimization search

Simple rules of thumb. Programming; or Dynamic procedures that mimic natural
Programming. evolution and reproduction.

Advantages: - May provide optimal solutions. - Robust search algorithm.

- Easy to understand. - Can use discrete relationship
- Provide good solutions. between time and cost.
- Used for large-size projects. - Applicable to large problems.

Drawbacks: - Difficult to formulate. - Random search is time-

- Lack mathematical rigor. - The gradient-descent consuming.
- Dot not guarantee optimal approach often terminates in - Cannot tell when or if an
solutions. local minimum. optimal solution is Obtained.
- Mostly assume linear, rather - Applies to small problems
than discrete relationship only.
between lime and cost. - Mostly assume linear, rather
Ihan discrete. relationship
between time and cost.
214 I CHAPTER 8

8.4 The Cost-Slope Method

One of the simple heuristic approaches for TCT analysis is known as the cost-slope
approach. The analysis shortens the project duration based on the assumption that all
the activities' direct-cost/ time relationships are linear, as shown in Figure 8-1(b). Ac-
cording to this assumption, the cost slope of an activity is defined as the rate at which
the direct cost increases when its duration is shortened by a unit of time. The detailed
procedure is as follows:
1. Use normal durations and costs for all activities.
2. Calculate the CPM and identify the critical path.
3. Eliminate all noncritical activities.
4. Tabulate normal/ crash durations and costs for all critical activities.
5. Compute and tabulate the cost slope of each critical activity:
Crash Cost - Normal Cost
Cost SIope =
Normal Duration - Crash Duration (8.1)
6. Identify the critical activity with the least-cost slope and possible duration
shortening.
7. Reduce the duration of this activity until its crash duration is reached or un-
til the critical path changes.
8. If the network has more than one critical path, we need to shorten all of
them simultaneously. This can be done by shortening a single activity that
lies on all paths or by shortening one activity from each path. The option to
choose is determined by comparing the cost slope of the single activity ver-
sus the sum of cost slopes for the individual activities on all critical paths.
9. Calculate the direct cost increase caused by activity shortening by multiply-
ing the cost slope by the time units shortened. Add the additional cost to
the total direct cost.
10. If float times are introduced into any activity, relax them to reduce cost.
11. Plot one point (project duration versus total direct cost) on a figure such in
Figure 8-2.
12. Continue from Step 2 until no further shortening is possible to the project.
13. Plot indirect project costs on the same figure. Add the direct cost and indi-
rect cost and plot the total cost curve.
14. Get the optimum TCT strategy as the one with minimum total cost.

8.5 Back to Our Case Study Project

This chapter continues the efforts toward improving the schedule, considering dead-
line duration. Later in this chapter, we will integrate all resource aspects together,
including resource fluctuation, resource limits, and time-cost analysis.

8.5.1 Manual Cost-Slope Method

Let's take our small case study project as an example of cost-slope calculations. In
Chapter 7, we dealt with the situation of given availability limits for the three main
resources used in the case study, L1, E3, and L2. Under these resource limits, the proj-
ect duration was determined to be 40 days. It is possible now to take the case study
one step further and assume a certain deadline. However, even for this simple exam-
ple, the involved calculations can be complicated. Therefore, in this section we will
deal only with TCT analysis separately to demonstrate the basic computations in-
volved. Later, in Section 8.5.4, we will combine both approaches to try meeting a
 RESOURCE MANAGEMENT: PART 2 I 215

- Resources. WBS. 08S. &

Construction Methods
(Chapters 3 & 4)

- Scheduling
(Chapters 5 & 6)

- Resource Constraints
(Chapter 7)

- Time Constraints (Chapter 8)

- Cash-flow Constraints (Chapter 10)

- Actual Progress Data (Chapter 11)

deadline and, at the same time, respect resource availability limits and resource fluc-
tuation needs.
Now, we need to use the cost-slope method to determine the optimum project du-
ration and cost under the following assumptions:

• Resources are not constrained.

• Relationship between time and cost of each activity is linear. The relationship
is defined by two points: the normal point (construction method with longest
duration and cheapest cost) and the crash point (construction method with
shortest duration).
• Activities' data are shown in Table 8-l.
• The daily indirect cost is assumed to be $500, as per our estimate that we dis-
cussed in Chapter 4.

Table 8-1. Case Study Data

Normal Normal Crash Crash

Activity Duration Cost Duration Cost

A 4 2,000 No Crashing
B 6 10,000 3 16,600
C 2 4,000 No Crashing
0 8 18,000 No Crashing
E 4 20,000 No Crashing
F 10 15,000 No Crashing
G 16 12,000 12 12,800
H 8 16,000 4 17,000
I 6 10,000 No Crashing
J 6 10,000 No Crashing
K 10 8,000 9 9,000

Solution
Our solution will follow the cost-slope procedure described earlier. First, we
calculate the cost slope of the various activities, as shown in Table 8-2.
216 I CHAPTER 8

Table 8-2. Cost-slope Calculation

Cost Slope ($/ day) Normal Normal Crash Crash

Activity Equation 8.1 Duration Cost Duration Cost

A 4 2,000 No Crashing
B (16,600-10,000)/(6-3) = 2,200 6 10,000 3 16,600
C 2 4,000 No Crashing
D 8 18,000 No Crashing
E 4 20,000 No Crashing
F 10 15,000 No Crashing
G (12,800-12,000)/(16-12) = 200 16 12,000 12 12,800
H (17,000-16,000)/(8-4) = 250 8 16,000 4 17,000
I 6 10,000 No Crashing
J 6 10,000 No Crosrunq
K (9,000-8,000)/(10-9) = 1,000 10 8,000 9 9,000
Total Cost = 125,000

Afterwards, we perform cycles of modifications to the schedule and cost.

Each cycle provides us with a crashing strategy with certain total cost and
project duration. All these strategies will then be plotted as shown later in
Figure 8-9. Detailed analysis is as follows:

• Cycle 1: Using the initial CPM data (Figure 8-4), we determine:

Total Project Duration = 32 days
Indirect Cost = 32 x 500 = 16,000
Total Direct Cost = 125,000
Total Cost = 125,000 + 16,000 = 141,000

Figure 8-4. Case

Study Network

• Cycle 2: Using the initial CPM data (Figure 8-4), we determine:

Number of Critical Paths = One path of 32 days. Next path is 30 days.

Critical Activities = B-G-K
Activity with Lowest Cost Slope = G (200)
Maximum Shortening Possible = 2 days (smaller of the 4-day allowable
shortening for G; or the 2-day difference
between the critical path and the next
path).
Action = G becomes 14 days.
CPM Recalculation = Figure 8-5
Total Project Duration = 30 days
Indirect Cost = 30 x 500 = 15,000
Total Direct Cost = 125,000 + 2 x 200 = 125,400
Total Cost = 125,400 + 15,000 = 140,400
 RESOURCE MANAGEMENT: PART 2 I 217

Figure 8-5.
G Reduced 2 days.
Project Duration =
30 days.

• Cycle 3: Using the revised CPM data (Figure 8-5), we determine:

Number of Critical Paths = Two paths of 30 days. Next path is 22
days.
Critical Activities = Path 1: B-G-K; and Path 2: B-F-H-I
Activity with Lowest Cost Slope = G on Path 1 and H on Path 2,
simultaneously. (smaller of: the 2,200
slope of B, which lies on both paths; and
the 450 sum of (200 slope of G and 250
slope of H).
Maximum Shortening Possible = 2 days (2-day allowable shortening for G
and H; afterwards, G reaches its 12-day
crash duration. No change in critical
paths is expected.)
Action = G becomes 12 days; H becomes 6 days.
CPM Recalculation = Figure 8-6
Total Project Duration = 28 days
Indirect Cost = 28 X 500 = 14,000
Total Direct Cost = 125,400 + 2 X 450 = 126,300
Total Cost = 126,300 + 14,000 = 140,300

Figure 8-6.
G and H Reduced 2
E(4)
days. Project
Duration = 28 days.
CBI) 1 )--='-+(

• Cycle 4: Using the revised CPM data (Figure 8-6), we determine:

Number of Critical Paths = Two paths of 28 days. Next path is 22
days.
Critical Activities = Path 1: B-G-K; Path 2: B-F-H-I
Activity with Lowest Cost Slope = K on Path 1 and H on Path 2,
simultaneously.
(smaller of the 2,200 slope of B, which
lies on both paths; and the 1,250 sum of
1000 slope of K and 250 slope of H.)
218 I CHAPTER 8

Maximum Shortening Possible = 1 day (I-day allowable shortening for K

and H; afterwards, K reaches its 9-day
crash duration. No change in critical
paths is expected.)
Action = K becomes 9 days; H becomes 5 days.
CPM Recalculation = Figure 8-7
Total Project Duration = 27 days
Indirect Cost = 27 X 500 = 13,500
Total Direct Cost = 126,300 + 1 X 1250 = 127,550
Total Cost = 127,550 + 13,500 = 141,050

Figure 8-7. GEJ

(8)
@@
K and H Reduced 1
A(4) 2 3 E(4)
day. Project
Duration = 27 days. (iliJ ~ @El
B 6
~
4 F 10 0 H(S) .0 1(6)

C(2) G(12)

J(6)

• Cycle 5: Using the revised CPM data (Figure 8-7), we determine:

Number of Critical Paths = Two paths of 27 days. Next path is 22

days.
Critical Activities = Path 1: B-G-K; Path 2: I3-F-H-I
Activity with Lowest Cost Slope = B on both paths. (B is the only activity
that can crash both paths
simultaneously. Slope = 2,200.)
Maximum Shortening Possible = 3 days (All the allowable shortening
time for B. No change in critical paths is
expected.)
Action = B becomes 3 days.
CPM Recalculation = Figure 8-8
Total Project Duration = 24 days
Indirect Cost = 24 X 500 = 12,000
Total Direct Cost = 127,550 +3 X 2,200 = 134,150
Total Cost = 134,150 + 12,000 = 146,150

Figure 8-8. (ill] @8

B Reduced 3 days. (8)
Project Duration = A(4) 2 3 E(4)

24 days. CiliJ @@ @@
B3
~
4 F 10 0 H(S) .0 1(6)

C(2) G(12)

J(6)
 RESOURCE MANAGEMENT: PART 2 219

Figure 8-9. Project 148

rcr Relationship
145
Optimum TCT 0
0
strategy corresponds o.
142
En
to Cycle 3 (G crashed
at 4 days, and H
)(

t? 139
------------~-~~~~------
.. - _ .... - - - - - - - - .. - - - - - .. [. .
0
crashed at 2 days). 0
1

1
The project network is co 136 .-. _.--- --_.. ----. -- ---- 'r'
that of Figure 8-6. ;§ 1

133 . - •.• - • - ..•. - - .. . ....•.. 1..•..... __ . _.

1
128 days
130+---~--~--~--,_--~--._--._--._--_,--~
23 24 25 26 27 28 29 30 31 32 33
I
Project Duration (days)

8.5.2 Cost-Slope Method on Excel

As mentioned earlier, the comprehensive Excel model of the case study is included in
the Case-Study.xls file. Let's now load this file, proceed to the Schedule sheet and
then apply the cost-slope analysis to it, as shown in Figures 8-10 to 8-12. Now, let's
assume that it is desired to shorten the project to meet a 28-day deadline (ignoring re-
source limits and thus setting all the delay column to zeroes).
Values initialized to
zeroes.

Index to Selected
Method (initialized t
1's).

Figure 8-10. The CPM-rCT Model of the Case Studv with Some Activities Having up to Three Construction Methods
220 I CHAPTER 8

As shown in Figure 8-11 in the Schedule sheet, columns Z to AE are used to al-
low user input of three methods of construction for each activity. Column X specifies
the user selection of the method used in the activity (index I, 2, or 3). Accordingly, for-
mulas are included in columns C and 0 to determine the duration and cost of each
activity. As shown here, method 1 (cheapest) has been selected for all activities. Any
change in the method variable of any activity automatically changes the activity du-
ration and cost and accordingly all related CPM calculations. The model as such al-
lows the project manager to examine various scenarios of project execution and their
impact on total cost and time.
One column (W) has also been added with equations to calculate the cost slope of
critical activities (assuming linear relationship between normal and most crashed
strategy). Any change in the method of any activity changes the project duration, cost,
and the CPM critical activities. At the bottom of the CPM analysis section, all the in-
formation related to TCT optimization is included. This part allows user input of
daily penalty, daily incentive, daily indirect cost, and the deadline duration. As
shown in this figure, the project duration of 32 days is four days beyond the 28-day
deadline and the total cost is $141,000. Our task now is to try to meet the deadline in
the Leastcostly manner.
With this TCT modeL, all the ingredients for the analysis become clear and sim-
ple. The objective is to set the values in the Method Variable column so that the proj-
ect duration cell is less than the deadline duration cell, while the total cost cell is
minimized.

Variable (any value >= Automatically set between I

0). to 3.

Figure 8-11. Setup for TeT Analysis

 RESOURCE MA."1AGEMENT: PART 2 I 221

It is possible to apply the TCT analysis by simply changing the Method Variable
of critical activities to select different construction methods with faster duration and
least cost increase. Our guide in this process is the Cost Slope column. Figure 8-11
shows the starting point in the schedule with activity C being the critical activity with
least cost slope. It is possible, therefore, to change the method of construction of C to
3 (faster, but more costly). Accordingly, the schedule improves to become 30 days and
$140,800. The critical activities also change. Following that, we continue looking at the
new critical activities, selecting the one with smallest cost slope, and crashing that ac-
tivity. Accordingly, after C was crashed, activity H was crashed by setting its method
to 3. Accordingly, the duration became 28 days, thus meeting the deadline. The total
cost of the project in this case remained $140,800.
The manual solution obtained on Excel is shown in Figure 8-12. Although the
process is simple, some observations are as follows:
1. The cost-slope approach produces different results when the activity time-
cost relationships are either linear or discrete. The discrete case, however, is
more close to reality.
2. It is difficult to optimize TCT decisions manually. As demonstrated by the
spreadsheet analysis, we could meet the project deadline, however, we do
not know if a better solution exists for the simple project at hand. Also, in
larger projects the manual process can be time consuming.
3. It is possible to try spreadsheet-based optimization tools such as linear pro-
gramming (Solver) and genetic algorithms optimization (Evolver) to opti-
mize TCT decisions. Because Solver will not operate on this type of problem,
the use of CA tools is described in the following subsection.

Activity with TF = 0 and smallest cost

slope is picked first

Figure 8-12. Application of the Cost-slope Method

Meets the deadline with a cost of $140,799

222 I CHAPTER 8

8.5.2.1 Random Improvements Let's now try to improve the schedule using the au-
tomated button on top of the Schedule sheet. Selecting the proper optimization ob-
jective (as shown) and then letting the program introduce random changes in the
methods of construction column, the experiment produced a better solution that
meets the 28-day deadline with a total cost of $140,000.

1 A
1 B
1 C
1 D
1 E
1 F
3 G
2 H
1 I
1 J
1 K

8.5.3 Genetic Algorithms Optimization

The linear relationship assumed in the cost-slope approach is one of its drawbacks. In
addition, it is not guaranteed to determine the global minimum cost for the project.
To illustrate how a more general and practical TCT analysis is formulated, we need to
consider that each activity in a project has a number of discrete methods of construc-
tion (three methods defined in the Schedule sheet).

TCT Objective: With the discrete methods of construction, the

objective of TCT analysis is to search for the optimum set of
activities' methods of construction that minimizes the total
project cost (direct and indirect) while not exceeding the target
completion time. For practicality, the analysis needs to consider
daily liquidated damages for late completion and daily
incentive for early completion.

To optimize TCT decisions, let's now use the Evolver add-in with the objective
function to minimize project cost in cell AC26. Evolver uses the genetic algorithms
(GAs) technique that applies a random search for locating the globally optimal solu-
tion. Before starting Evolver, all activities with only one construction method were
given a fixed index of 1 in column Y and were not used in the optimization. The in-
dices to the remaining activities (B, G, H, and K), which have more than one con-
struction method, was considered as the optimization variables. These variables were
then initialized with integer values of 3 (index to the shortest method of construction),
as shown in Figure 8-13. This can be a most expensive solution but is a good start for
Evolver. Also, all delay values for the activities (colwnn K) are set to zeros.
 RESOURCE MANAGEMENT: PART 2 I 223

Figure 8-13.
Initialization of
Optimization A
Variables B
C
D
E
F
G
from the .H
optimization. I
J
~"""",,,,,,,,,,",,,'K

Figure 8-13 shows a good starting point for Evolver with variables set to 3 (short-
est method of construction). This gives a short project duration (meeting the deadline
constraint), but it is more expensive than desirable. Evolver then can optimize this so-
lution by finding a cheaper one.
Evolver is set up as shown in Figure 8-14. One constraint is needed that limits
project duration to the specified deadline. The Evolver optimization process ran
smoothly and an optimum solution was found (Figure 8-14), which is better than the
manual solution obtained by the cost-slope approach.
It is noted that for this particular example, the cost-slope heuristic approach was
able to obtain a close-to-optimum solution. The good solution of this approach, how-
ever, is in most cases accidental. Remarkably, the CA model is able to provide several
equally good solutions compared to the single solution by the heuristic approach. In

A
B
C
D
E
F
G
H
I
J
K

Figure 8-14. Evolver Optimization Results

(Construction methods that meet the 28-day deadline with minimum cost of $140,000.) This solution is identical to the
one generated by random improvements.
224 I CHAPTER 8

addition, the cost-slope approach becomes obsolete when the TCT analysis is com-
bined with other aspects related to resource allocation and leveling, as discussed later
in this chapter.

8.5.3.1 Comments on the TCT Model Basedon its application on our project, the TCT
model has been demonstrated to have several interesting characteristics, including:
• The model considers discrete time-cost relationships within activities.
• The GA optimization proved to be efficient at finding solutions by searching
only a small fraction of the total search space.
• The model considers project deadline, daily incentive, daily liquidated dam-
ages, and daily indirect cost into its formulation and uses total project cost as
the objective function.
• The model accounts for the formation of multiple critical paths during the
process.

8.5.4 Integration of TCT, Resource Allocation, and Resource Leveling

At this stage, we discussed the problem of meeting a project deadline in isolation from
other aspects related to resource constraints. Let's now use the Excel model to address
all aspects of resource management simultaneously. Later, in Chapter 10, we can also
add aspects related to cash-flow management. Ultimately, we will be able to optimize
the schedule development in consideration of time, cost, and resource constraints so
as to achieve the best economic benefit for a project.
For simplicity, let's assume that the project manager is concerned with one key re-
source, Ll , for which he has a limit of 6 per day, as discussed in Chapter 7, meanwhile
trying to meet the 28-day deadline. The model that incorporates both TCT and re-
source calculations is included in the Schedule sheet of the Case-Study.xls file. In this
sheet, to the right of the data for the methods of construction, columns AK to AN (in
Figure 8-15) show the resource data and their related calculations.
The spreadsheet in Figure 8-15 is set up so that the amount of Ll resource used
by every activity (column AK) is a function of the construction method index (column
X).Also, three rows of calculations are added at the bottom of the bar chart to calcu-
late the daily amount of resources needed for the project. Calculations for resource
moments (discussed in the previous chapter) are also included. All shaded cells in this
model are calculations that you can check how their underlying formulas are written.
This sheet now becomes very flexible. If we change the index to the method of con-
struction used in any activity, the activity duration, cost, and resource amount will
change. Accordingly, project duration and cost will change.
It is possible now to use the model of Figure 8-15 and try to determine the op-
timum combination of construction methods and the proper delay amounts that
minimize total project cost while meeting the deadline and not exceeding the limit
on L1 resource. As such, Figure 8-15 shows the variables in the model as the two
columns K and X (variables in column AF are dealt with in Chapter 10). The initial
values of these columns are shown on the figure, leading to a 24-day project dura-
tion and 9 L1 resources per day. Our objective now is to try meeting the maximum
availability limit of 6 Ll resources per day and the 28-day deadline with least proj-
ect cost.
 RESOURCE MANAGEMENT: PART 2 I 225

Resources of the selected

Vartables initialized method in column X.
to zeroes.

Variables initialized to
shortest methods.

Figure 8-15. Initialization for Combined TCTand Resource Analyses

8.5.5 Solution Approach 1

To solve the problem, we can use the Evolver program and set it up for the combined
TCT and resource optimization, as shown in Figure 8-16. Once the optimization pa-
rameters are specified, optimization can be started. Because the process is essentially
a random process, it might not readily arrive at the optimum solution. In some situa-
tions, a rerun of Evolver may become necessary to avoid a stagnant solution, partic-
ularly if the problem is much larger in size. We can, in this case, start the optimization
giving the variables different initial starting values. After the processing is stopped,
we can manually manipulate the values of the variables to try improving it. For ex-
ample, if we arrive at the solution shown in Figure 8-17, we may check if all the four
days of delay in activity D are absolutely needed. We then set that value to 3 and check
the impact on project cost, duration, and daily resource amount. You will see that it
increased the daily demand of L1 resource to 8 (thus violating its limit of 6 per day).
Therefore, we return the value back to 4. Following this manual check, the solution
shown in Figure 8-17, which meets all constraints at minimum cost, becomes the op-
timum for this case study.
One set of construction methods and a 4-day delay in Activity D meet the 28-
day deadline, do not exceed the 6 L1 resource limit, and are at a minimize cost of
$141,400.
 Objective
Function:
Setup Run Minirnum
Total Cost

- Duration Deadline (Hard)

- Resource limi: (Soil)
- SUIll of delay column minimum (Soil)

The variables have set ranges:

- Delay rs integer (0-5)

- Method or construction is integer (1-3).

Figure 8-16. Evolver Setup for Combined TCTand Resource Allocation

226
 RESOURCE MANAGEMENT: PART 2 I 227

Figure 8-11. Evolver Solution

8.5.6 Solution Approach 2

Instead of setting up Evolver to solve the combined problem, it is possible in some
cases to set Evolver to solve the problem incrementally. In this approach, a smaller
model is set up to solve the resource constraints problem, as explained in Chapter 7
in which only the delay column is the variable. After reaching a solution for this part,
Evolver can be set up again to solve the TCT problem, as explained in this chapter,
with the methods of construction as variables. The benefit of this approach is that the
number of optimization variables at each step is small and the optimization setup is
much easier. This approach, as such, can suit large problems, which may take a long
time for the optimization.
228 I CHAPTER 8

8.5.7 Other Experiments

Without using the Evolver software, we can try to improve the schedule using the
Random Improvement button on top of the Schedule sheet. Selecting the proper op-
timization objective (as shown) and then letting the program introduce random
changes in both the delay column and the methods of construction column. Using one
experiment with 1,000 trials, a good solution was obtained, deadline was met with a
total cost of $141,799, which is very close to the optimum. Still, however, this solution
can be improved if the other experiments are tried.
The results of this example show that the scheduling model and the Evolver pro-
gram are able to optimize the schedule as desired by the user. Also, the random im-
provement procedure also produces good results. The Excel model can still be used
with some variations in the objective functions and constraints. For example, the user
may set the objective function to minimize the fluctuation in the demand profile of a
certain resource and so on. Moment calculations can be used as soft constraints so that
it can be minimized to reduce resource fluctuation (Mx) or resource utilization time
(My),or both. A summary of these experiments is discussed in Chapter 10.

A
B 2
C
D 4
E
F
G :'1
H
I
J
K

8.6 Another Solved Example

Now let's experiment with a little bigger example of a project with 18 activities as
shown in Figure 8-18.
The model of this example is included in a spreadsheet file TCT.xls that comes
with the CD of this book. The file shows, in three separate sheets, the stages in devel-
oping the model: CPM, CPM-BarChart, and the CPM-TCT analysis. To start creating
this model, three spreadsheets of the previous example CPM.xls were duplicated into
an empty spreadsheet. To do that, we click the right mouse button on the spreadsheet
tab and use the option Move or Copy, as shown in Figure 8-19. The new file is then
adjusted for the new case study and renamed TCT.xls. Details of the model are in Fig-
ures 8-20 and 8-21.
Figure 8-18.
Network of Case
Study

18 days 20 days
f'----~ 11
TF=35 TF=35
33 days

Duration
DJr-------------1
TF=64
Critical Path
~ ~
Total Float

Menu appears
when using the
right mouse
button.
(

Three tabs of the

CPM.xls file
selected using the
Ctrl key.

Figure 8-19. Creating a Model for the New Example

Figure 8-20. The

CPM-BarChart
Model of the New
Example
The model shows a
169-day duration for
the project.
Activities' durations
in Column Dare
user-input values
and represent the
normal durations of
activities.

\........~
~
. Shati:]C ~'l.1:;::Ic.I~j.:e;;~ Jrt1'l.1.:t;e~ ~{:::~:;;.iderormui3s
an;) j;~·n:nN;."·H ,~I"<~t ce!i~ .~f£:'J~tl .~1t::':":1~
'c' ~6
Part of
I'~':!l!

71:t :~ito;t
r.:::?'lf."d ~d\lI"
d~Uj ."';:;:r~:geCM >;2:,:is r::::!;y<e:~·d~ta"
hree sheets the Bar
of the New Example Chart

229
230 CHAPTER 8

f'l<ill=
-Sh~d .;ndcvkr ••d c.•.I:t;.;" b'.e·;';'llrdud"fo){rr~;':;.;~
_, ~<j;:~~UJ&l'QI'"'5. \.Jiwe-c~h a:,' !:'fk;p'~1:!
-C~"!: 1"k n:;,rr,,,,j "dur ",
- ~"',6'lr.-ole d~::'I .._~, ~".r.Q.<l ';r lis emeo ' data-
...•..
-'w'..,(~(c.d.;,.:,,·;t>:·"""'ll·.-~'i •... :,:,~..q.·er1:·•••• I::.Ith~Swieoc! ••dlit....ho;]·'
-:,:~,."f:'t'.f1'03;E.t;--:;'lk .•;';~·~.~:.~m 'z<:!.:i
r.=c ._,JI",_-.~-<",·i .., \1' .~.,-.. > l<)b! •• ,r.
- ·';.C~_...•.. Index
-;"':,:.·r":~·~Jn~er·,} 11·.• ulN ""th cr" ..•rt-..-..rat"',j <;O"'l'?$. ::'t3Tt ',,,.,.h.a,bll.:w
,•.,,,j,;,;,:'!;JrJ'''''I'Io",hnd.< to
Selected
':pc,,:";:;' "C,,-: :T5i:M~thDd'

Figure 8-21. The CPM-TCT Model of the New Example

ColUI1UlsZ to AE allow user input of three methods of construction for each activity. Column Y also specifies the user
selection of which of these three methods is used in the project (index 1,2, or 3), As shown here, method 1 (cheapest) has
been selected for all activities, Any change in the selected method of any activity automatically changes the activity
duration and cost and accordingly all related CPM calculations, As shown in Figure 8-21, the project duration of 169
days is 59 days beyond a llD-day deadline, thus a total penalty of $1,180,000 is added to the total cost. Our task now is to
try meeting the deadline in the least costly manner,

8.6.1 Cost-Slope Method

As demonstrated before, we can attempt the TCT analysis manually by simply chang-
ing the Selected Method of critical activities to select different construction methods
with faster duration and least cost increase. Our guide in this process is the Cost Slope
column. Figure 8-21 shows the starting point in the schedule with activity J being the
critical activity with least cost slope. It is possible, therefore, to change the method of
construction of J to 3 (faster, but more costly). Accordingly, the schedule improves to
become 161 days and the critical activities change. Following that, we continue look-
ing at the critical activities, selecting the one with smallest cost slope, and crashing
that activity by setting its method of construction to 3. Accordingly, after J was
crashed, the sequence of crashing was: I, R, A, L, Q, and O. In these steps, the project
duration reduced from 161 days after J was crashed to 151, 142, 132, 124, 114, and 110
days for the subsequent steps, respectively, thus meeting the deadline. The total cost
of the project in this case becomes $216,270. It is noted that further crashing of the
schedule is possible but will result in a higher total cost than obtained by the solution
obtained (Figure 8-22).
 RESOURCE 1viANAGEMENT: PART 2 231

Figure 8-22. Cost-

Slope Solution
Meeting a l lu-dov
Deadline for
$216,270
33 $3.20 33 $4.50 15

20 S3D.()O 20 $45.00 12
30 $10.01) 30 $20.0. 22
N $18.00 2. $40.00 14
I. $:22.00 18 $30.00

I $1).12 2. $0.21 21 $0.22

"
--:r-=11

I
$0.10
$0.32
$0.30
25

33
20
$0.15

$0.32
$0.30
23
33
20
~O.30

$0.45
$0.015
15
is
12
.__ l........ $1.00 30 $1.00 30 $2.00 22
I $1.80 24 tl.80 2. $'.00 14

__
t
.L....$:3.50
$2.20 I.
I.
$2.20
t3.S0
16
I.
53.0t)

$4.50
•
12
I 30 $1.50 28 $3.00 20
3 ):1.80 24 $4.00
11 $2,20 1. $3.00
"

8.6.2 Genetic Algorithms Optimization

Both Solver and Evolver were applied to this example. The Solver screen for this ex-
ample is shown in Figure 8-23. The optimization objective is to minimize the total
project cost (cell AC33). The optimization variables are the values in the Selected
Method column (cells V6 to V23).The optimization constraints were also set to limit
the values of the variables to integers between 1 and 3. Experimenting with Solver,
however, it failed to provide a solution for this problem.
Evolver was also used for this example. Before starting Evolver, the variables (in-
dex of construction methods) were initialized with integer = 3 (shortest methods).
The objective function and variables (adjustable cells) are shown in the Evolver screen
of Figure 8-24. No constraints needed to be specified, rather, an option in Evolver to
enumerate the values in the variables was used. Upon completion of the process that
ran smoothly for a few minutes, an optimum solution was found, achieving a solu-
tion identical to that in Figure 8-22 but using a different set of construction methods.

Figure 8-23. Excel

Solver Failed to
Provide a Solution
232 I CHAPTER 8

Figure 8-24. Evolver Provided Another Solution with Identical Results

8.7 Summary
-- -------------------
In this chapter, a spreadsheet model for time-cost tradeoff analyses was introduced
and a case study project was used to demonstrate its operation. I'or TCT optimization,
the optimization attempts to find the optimum combination of construction methods
for the different activities, considering deadline duration, late completion penalty,
early completion incentive, and daily indirect cost. Based on the obtained results, the
genetic algorithms technique was able to find an optimum solution to the problem.
The model, as such, is preferably applicable at the aggregate, rather than the very de-
tailed, activity level. The genetic algorithms technique also has been shown to hold a
great promise as an optimization search mechanism that does not suffer from the
drawbacks of traditional mathematical programming techniques. The TCT model is
also expanded to include resource allocation and leveling.

8.8 Bibliography
Feng, C, Liu, L., and Bums, S. (1997)_ Using genetic algorithms to solve construction
time-cost trade-off problems. Journal of Computing in Civil Engineering, ASCE, 11(3):
pp. 184-189.
Hegazy, T., and Moselhi, 0_ (1994). Analogy-based solution to markup estimation
problem. Journal of Computing in Civil Engineering, ASCE, 8(1): pp. 72-87.
Karshenas, S., and Haber, D. (1990). Economic optimization of construction project
scheduling. Construction Management and Economics, 8(2): pp. 135-146.
Kelly,J. E. Jr. (1961). Critical path planning and scheduling: mathematical basis. Op-
erations Research, 9(3): pp. 167-179.
 RESOURCE MANAGEMENT: PART 2 I 233

Koumousis, V. K., and Georgiou, P. (1994). Genetic algorithms in discrete optimiza-

tion of steel truss roofs. Journal of Computing in Civil Engineering, ASCE, 8(3): pp.
309-325.
Li, H., and Love, P. (1997). Using improved genetic algorithms to facilitate time-cost
optimization. Journal of Construction Engineering and Management, ASCE, 123(3): pp.
233-237.
Liu, L., Burns, S., and Feng. C. (1995). Construction time-cost trade-off analysis using
LP /IP. Journal of Construction Engineering and Management, ASCE, 121(4): pp. 446-454.
Mitchell, M. (1998). An Introduction to Genetic Algorithms. MIT Press.
Moselhi.O. (1993). Schedule compression using the direct stiffness method. Canadian
Journal of Civil Engineering, 20: pp. 65-72.
Siemens, N. (1971). A simple CPM time-cost trade off algorithm. Management Science,
17(6): pp. B-354-363.

8.9 Exercises
1. Discuss, with the help of a simple diagram, the activity time-cost relationship.
2. If the cost slope of an activity is $100/day; the maximum crashing possible for the
activity is 5 days; and its crash cost is $2,000, what is its normal cost?
3. The following tasks are part of a network and are the only ones available for crash-
ing. Which one would you start with and why?

ES LF Duration Cost/day

A 5 20 10 $4
B 18 32 14 $8
C 15 21 6 $12

4. The following table gives the activities involved in a small contract under both
normal and crash conditions. The indirect cost for this contract is $250/week. The
contract conditions state that the contractor will pay $200/week for delays by his
own fault.

Duration (week) Cost ($)

Activity Predecessors Normal Crash Normal Crash

A 7 3 1400 5400
B 9 5 4500 7500
C A 8 5 2400 3900
D B 14 9 1200 4200
E CD 4 2 800 2300
F B 9 5 2700 5700
G F 7 3 2100 5300
H E. G 12 7 4900 6900

Determine the minimum contract cost for a 32-week project duration.

234 I CHAPTER 8

5. In performing the three aspects of resource management, individually, complete

the following table to describe the characteristics of each technique:

Allocation TCT Leveling

• Resourcesare limited. y N N
• Project can be delayed.
• Activities can be delayed beyond their float,
• Critical activities are affected,
• Moments are calculated,
• Noncritical activities are affected.
• Objective isto reduce project delay.
• Objective isto minimize total project cost
(direct + indirect),
• Objective isto reduce resource fluctuation,
• Activities can split,
• Critical activities can be shortened.

6. The data of a small project is shown below. Assuming a $1,000/ day indirect cost,
determine: (a) the optimum project duration that minimizes total project cost; and
(b) the optimum strategy to meet an IS-day deadline.

~ []]l]
5 H 1241241
A
[QIQ] [2illJ [I@] 9

[IT!]
6 I 11Gr-
Ilf'
0 G
• 7

Normal Normal Crash Crash Cost

Activity Duration Cost Duration Cost Slope!

A 7 15000 7 15000
B 3 6000 3 6000
C 4 8000 3 8500
D 8 16000 8 16000
E 7 15000 7 15000
F 1 2000 1 2000
G 9 18000 7 19000
H 7 15000 7 15000
I 4 8000 4 8000
J 6 12000 4 15000
K 5 10000 4 11000
 RESOURCE MANAGEMENT: PART 2 I 235

7. Cost and schedule data for a small project are given below. Assume an indirect cost
of $200/day. Develop the time-cost curve for the project and determine the mini-
mum contract duration.

Cost ($) Duration (days)

Activity Preceded by Crash Normal Crash Normal

A 3900 3600 6 7
8 A 6500 5500 3 5
C 8 7200 6350 7 9
0 8 4900 4700 18 19
E B 2200 2050 9 10
F C 1700 1200 6 8
G F 7200 7200 5 5
H E 10000 9450 10 11
I 0, G, H 4700 4500 6 7

8. Draw the precedence diagram for the following data:

Duration (days)
Cost Slope
Activity Followed by Normal Minimum $/day

A B, E, F 7 5 200
8 K 9 5 450
C H,D 8 7 400
0 I, N 11 4 100
E G,M 9 6 400
F L 8 7 500
G C 7 5 200
H I,N 6 2 200
I 12 9 200
J E,F 10 8 600
K G 14 10 350
L M 18 16 700
M C 9 8 550
N 12 9 200

It is required to compress the schedule to 65 days. Determine the resulting

increase in the project's direct cost.
236 I CHAPTER 8

9. The duration and direct-cost data for an activity-an-arrow network is given in the
following table. Any duration between the normal duration and the crash duration
is possible for each activity. Indirect costs are equal to 200 cost units + 50 cost units
per day. Draw the CPM network and establish the optimum (least total cost) proj-
ect duration and the corresponding cost.

Normal Crash
Our. Cost Our. Cost
Activity (days) (Units) (days) (Units)

1·2 6 180 3 330

2-3 4 160 2 320
2-6 5 100 5 100
1·3 4 400 4 400
3-6 8 160 3 360
3-5 2 20 1 50
1-4 4 150 4 150
4-5 4 160 3 210
5-6 4 165 2 305
BIDDING STRATEGY AND
MARI<up ESTIMATION

A fter studying this chapter, you will be able to:

• Understand the factors that affect markup decision.

• Utilize the data of past bids to analyze the bidding behavior of key competitors.
• Analyze the probability of winning a bid at a given markup value.
• Estimate an optimum markup value as an allowance for risk and profit.

: • Need
: • Feasibility II
: • Project I
I

: Definition II Prepare Bid Proposal + Baselines

: • Owner
I
• CollecT Data (site, quantities,
: • Preliminary Design specs. resources. tasks, etc)
: Approval : • Detailed Design
• Planning • Start Construction -.
: • Quantities • Time & Cost Estimation • Detailed Planning. : • 0 & M
: • Work Documents Estimating & Resource : • Demolition
• Scheduling
: • Select Project • Resource Management: Management : at End of
: Contract Strategy Adjustments for Resource Con- • SChedule Updating : Service Ufe
I
I straints & Deadline • Progress Evaluation :
I
• Time. Cost. & Quality :
.,
I
I
I Control :
, • Commissioning :
.
,
, .,
,

9.1 Accounting for Project Risks

At this stage in our project, we have calculated the direct and indirect costs, calculated
project duration, resolved resource problems, and adjusted the schedule so that it
meets the deadline. All these aspects establish a good baseline plan in terms of time
and cost for the project. Now, it is time to put the final touches on the bid.

237
238 I CHAPTER 9

If you are much involved in the construction business, you must have experi-
enced how difficult it is to decide on a suitable bidding strategy against the expected
competitors. This bidding strategy is basically a fine-tuning of the bid by accounting
for the level of uncertainty associated with the project and as an allowance for profit.
In general, contractors often have two main methods of assessing and accounting for
project risks: (1) estimating a single percentage mark up to be added to the total cost;
(2) detailed analysis of the risky components in the project, the probability of risk oc-
currence, and the expected damages so as to assign an appropriate contingency al-
lowance for each of these components. The latter analysis, however, is lengthy and
may not suit competitive bids; as such, it is beyond the scope of this book. Specific
techniques that can account for the uncertainty associated with activities' durations
and cost will be sufficiently described in Chapter 12. Our bidding strategy, therefore,
will focus on estimating an optimum markup for a project.
Markup needs to be optimally decided for a project. We need to decide on the
percentage that makes the bid low enough to win and, at the same time, high enough
to make a reasonable profit. Despite the importance of these decisions to a costly com-
mitment, you might have to decide on them while a lot of information is still lacking
and under pressures to speed up the bid preparation. Often, many construction prac-
titioners are left to their own intuition and" gut feeling," with little or no help from
available tools. In this chapter, therefore, we will be introduced to the basics that will
allow us to estimate an optimum markup value for the project. In the next chapter, we
can then deal with project financing so that the bid becomes ready for submission.

9.2 Analyzing the Bidding Behavior of Key Competitors

For a contractor to sustain success in the construction business, he or she has to be the
lowest bidder for a sufficient number of projects while that bid price is not too low, in
order to make a reasonable profit. It is important, therefore, to strike a balance be-
tween profitability and the chances of winning. To enable us to establish a winning
bidding strategy, we need to keep track of our past bids, analyze their information,
and depict any bidding pattern our key competitors use. First, let's see what kind of
information we have:
• Our cost estimate (C = direct cost + indirect cost) for any past bid is known
to us. Because we cannot know the cost estimate of other competitors, let's as-
sume that the cost estimates of all bidders are the same. This assumption is not
true but can be realistic if we assume that all bidders have access to the same
subcontractors and follow standard construction technology.
• The bid prices of competitors in past bids are known to us as a public infor-
mation published by most owners after the bid is let. Government agencies
such as public works (largest owner organizations) make this information
public. Therefore, the relationship between the bid price and the cost estimate
in any bid is as follows:
Bid Price (BJ of competitor i = C * (1 + markup) (9.1)
Thus, BJC = 1 + mark up (9.2)
And, markup = BjC - 1. (9.3)
The B/C ratio in Equations 9.2 and 9.3is a representation of the markup used by com-
petitor i in one bid. For example, in a past bid that we lost, our cost estimate was
$1,000,000.For that project, we submitted a total bid of $1,150,000while our key com-
petitor, Company A, bid $1,100,000.Assuming cost estimate is constant, we used a
markup of 15% (markup = BjC -1) while Company A used a 10% markup. Because
we lost that bid, it is important for us to analyze if the 10%markup used by Company
 BIDDING STRATEGY AND MARKUP ESTIMATION I 239

A is a policy that is repeated in other bids. If this is true, then it is possible in the fu-
ture to beat them by bidding with a markup less than 10%;otherwise we need to an-
alyze how their markup policy changes from one bid to the other.
Let's now expand our analysis of Company A's bidding behavior by retrieving all
our records of past bids in which we competed against them. Let's assume we found
31 past bids and we have all the information regarding our cost estimates and the bid
prices. From that information, we can create a histogram as shown in Figure 9-1(a).
The histogram in Figure 9-1(a) shows the frequency at which Company A bid at dif-
ferent markup levels. From the histogram, we can answer the following questions:
1. If the H/C ratio used by Company A in a past bid was 1.25, it means the com-
pany used a markup of __ % of cost.
Answer: 25% because markup = B/C - 1 = 1.25 - 1 = 0.25 = 25%
2. If we decide to use a 10%markup in a new bid against Company A, how
many times in the past did they underbid us at this level of markup?
Answer: six times. From the histogram, the number of occurrences to the left
of B/C = 1.1 are 3 + 2 + 1 = 6.
3. What are our chances of winning Company A using 25% markup?
Answer: 6/31. From the histogram, the number of occurrences to the right of
B/C = 1.25 are 3 + 2 + 1 = 6. Then the probability = 6 out of the total 31
past bids.

Figure 9-1.
No. of
Analyzing the past bids 7
8idding Behavior of against the
competitor 6 6
Cl Competitor

3 3
2 2

Competitor's bid (B)

1.1 1.2 1.3 1.4 B/C=
Our cost estimate (C)
Competitor bid
below cost 0 10% 20% 30% 40% Markup = BIC -1

(0) Analyzing Past Bidsagainst One Key Competitor

Calculate the mean (m) and standard deviation (s) of B/C ratio of this
competitor: assuming a normal distribution and, repeat the analysis for a
key competitors.

____ BIC

t
Desired markup = m
Then. B/C =(m + 1)

(b) Calculating the Probability of Winning ThisCompetitor Usinga Given Markup Value
240 I CHAPTER 9

4. If we bid right at cost (no profit), then our B/C becomes what?
Answer: 1 because B = C, then B/C = 1.0 and markup = B/C - 1 = O.
5. How many times did Company A bid below cost?
Answer: 1 as read from the left part of the histogram.
6. What is the average rnarkup used by Company A and how much does it
vary?
Answer: We can calculate the •..•..
and er of the B/C ratio from the histogram:
Mean (•..•..
)= 1 X 1.375 + 2 X 1.325 1- 3 X 1.275 + 6 X 1.225 + 7 X 1.175
+6 X 1.125 + 3 X 1.075 -I- 2 X 1.025 + 1 X 0.975 = 1.175

Standard Deviation (er) = Sqrt [(n (IX2 - (IX)2)/n(n - 1)1 '--'0.0931

The •..•..
and er of B/C ratio, therefore, represent the competitor's bchavior and
can be used to evaluate the probability of beating our competitor using any
markup value, as shown in Figure 9-1(b).

9.3 Estimating Optimum Markup

9.3.1 What to Optimize?
In order to optimize our markup decision, we need to define what optimum means by
providing a measure of optimality. Notice that we have two conflicting objectives: to re-
duce markup to improve the probability of winning; and to increase markup to improve
profitability. If you recall what we did in Chapter 8, we were trying to optimize time-
cost trade off (TCT) decisions. We also had two conflicting forces: direct cost and indi-
rect cost. When we crashed the project, direct cost increased while the indirect cost de-
creased. In that case, we used a simple measure of optimality that is a summation of the
two components, which is the total project cost. That measure of optimaJity is accept-
able to use because both components have the same units (cost) and thus can be added
together. Notice here that for TCT decisions, we needed to minimize the measure of op-
timality and determine the decision that brings minimum total cost for the project.
The markup case is apparently different. The probability of winning is unit-less,
whereas profit is in dollars. In this case, it is logical to use multiplication instead of
summation, and thus use what is called the expected profit as a measure of optimality.
The expected profit can be viewed as a fictitious profit value that is weighed by the
chances of attaining that profit. Certainly, in this case, our bidding strategy should fo-
cus on maximizing the expected profit and we can define our optimum markup as the
one that maximizes it, as formulated in Figure 9-2.

(~~~~~)
Figure 9-2. Bidding
Strategy Formulation Expected profit Probability of winning )
of a given markup = x 01/ competitors using the
($) ( specified markup (%)

I
Repeat the
t
Markup (%) x Cost
t
1. Calculate the probability
calculations using of winning individual
various markup competitors. then
values and find
the optimum 2. Combine these
markup as the one probabilities to determine
associated with the probability of winning
maximum all of them simultaneously.
expected profit.
 BIDDING STRATEGY AND MARKUP ESTIMATION I 241

You have kept good records of the bidding behavior of one competitor, Com-
pany A. The mean and standard deviation of the company's B/C ratio are cal-
culated to be 1.1 and 0.1, respectively. Answer the following:

1.1 1.2 B/C

a. What is the probability of winning Company A in a new bid, using a 20%

markup? Your cost estimate for the new project is $1,000,000.
b. What is the expected profit at this markup?
Solution:
a. At 20% markup, B/C = 1 + markup = 1.2
We then use the standardized normal distribution table:
Z = (X - f.L)lu = (1.2 - 1.1)/0.1 = 1.0
and from the table (provides left side area), probability = 0.8413
Then, the probability of beating Company A at 20% markup = shaded
area = 1 - 0.8413 = 0.1587
b. Expected profit Probability of winning X Profit
= Probability of winning X Cost X Markup
= 0.1587 X $1,000,000 X 0.2 = $31,740

9.3.2 Beating All Competitors Simultaneously

Similar to the above example, it is simple to calculate the probability of winning each
competitor separately from all others. To determine our probability of winning them
all, however, is still simple but controversial and many formulations are available
with various assumptions.
Friedman, in 1956, was the first to suggest a model that predicts the probability
of winning a bid knowing the previous performance of other competitors (mean and
standard deviation of B/C distributions). Friedman employed a basic assumption in
his bidding model that different competitors' probability distributions are mutually
independent. Accordingly, he suggested a multiplicative model to combine the prob-
abilities of winning individual competitors, at a given markup, as follows:
a. Probability of winning (n) known competitors is:
P(WinaU)= P(Win1) X P(Win2) X .... X P(Winn) (9.4)

b. Probability of winning (n) unknown competitors is:

P(Winall) = P(WinTypical
Competitort (9.5)
Where, P(Wini) is the probability of winning competitor i. Also, the typical competi-
tor is one who represents the average bidder who is experienced in the type of bid be-
ing analyzed.
The most notable model proposed a decade after Friedman's is that of Gates in
1967.Gates has criticized Friedman's basic assumption of independence and offered
242 I CHAl'TER 9

his own assessment. According to Gates, the probability of winning all competitors at
a given markup is as follows:
a. Probability of winning (11) known competitors is:

1
P(Winall) = ----------------------- (9.6)
[(1 - P(Winl) / P(Win1)] + ... + [(1 - P(Winn)) / P(Winn)) + 1

b. Probability of winning (n) unknown competitors is:

1
P(Winall) =---------------------- (9.7)
n[ (1 - P(WinTypical Competitor) / P(WinTypical Competitor)1 + 1
Friedman's and Gates's models give different results, and debate over the years
has not been able to resolve this conflict. Instead, these models have generated con-
troversy and confusion about their application in the construction industry. A num-
ber of studies concluded that Friedman's model is more correct when the variability
of bids is caused only by markup differences, while Gates's model is more correct
when the variation in bids is caused only by variations in cost estimates. A compre-
hensive study of a contractor's application of both models over a period of several
years showed that Gates's model produces higher markups than that of Friedman's.
In this sense, Friedman's model could represent a pessimistic approach whereas
Gates's represents an optimistic one. Despite their differences, however, over the
study period, both models have led, approximately, to the same total of potential
profits.

9.4 The Optimum-Markup Estimation Process

----- .. ------------- ---
Let's now look at the detailed process for optimum markup estimation and apply it
to an example. The following four steps will be followed:
1. Assume a percentage markup in the range from 1-20%, with 1% increments.
Later we can repeat this process with finer increments to refine the calcula-
tions.
2. At each markup. we calculate the expected profit, as follows:
• Profit = cost X markup (%).
• Probability to win each competitor (from his past history);
• Combined probability P(winall)' using Friedman's or Gates' models; then
• Calculate expected profit = profit X P(winall).
• Tabulate the markup and expected profit values
• Increment markup and repeat the calculations in this step.

3. Plot the tabulated markup versus expected profit values, as shown, where
(X = markup; Y = expected profit).

Optimum
'--- ....L.._M_a_rk_u_p Markup
(%)

4. Choose the optimum rnarkup from the plot.

 BIDDING STRATEGY AND MARKUP ESTIMATION I 243

A contractor wants to determine the optimal bid to submit for a job with es-
timated cost $1,000,000, bidding against three key competitors with the fol-
lowing historical data.
B/C Mean B/C Standard
Competitor No. of Occurrences (J.l) Deviation (0)

A 5 1.081 0.052
B 6 1.032 0.044
C 8 1.067 0.061

Solution
1. Let us assume a range of markups from 1% to 7% with 1% increments.
2. At markup = 1 %, we calculate the following:
a. Probability of beating the first competitor, A:

X = B/C = 1 + mark up = 1 + 0.01 = 1.01

ZA = (X - !LA) I erA = (1.01 - 1.081)/0.052 = -1.365
Then, from the table of standardized normal distribution, the
probability P (WinA) at 1'X) markup '--'1 - F, (1.365)
= 1 - 0.086 = 0.914

b. Probability of beating the second competitor, B:

X = B/C = 1 + markup = 1 + 0.01 = 1.01

ZB = (X - J.L13)/erB = (1.01 - 1.032)/0.044 = -0.500
Then, from the table of standardized normal distribution, the
probability P (Wine) at 1 %, markup = 1 - F; (-0.500)
'-=- 1 - 0.309 = 0.691

c. Probability of beating the third competitor, C:

X = B/C = 1 + markup = 1 + 0.01 = 1.01

Zc = (X - IJ..dlac = (1.01 - 1.067)/0.061 = -0.934
Then, from the table of standardized normal distribution, the

probability P (WinA) at 1% markup = 1 - Fz (-0.934)

= 1 - 0.175 = 0.825
d. Probability of beating A, B, and C, simultaneously and the expected
profit:
Using Friedman's model and 1% markup:
P(Winan)-F = 0.914 X 0.691 X 0.825 = 0.521
EP-F (expected profit) = $1,000,000 X 0.01 X 0.521 = $5,213.3

Using Gates's model and 1% markup:

1
P(WU1all)-G = ------------
[(1- 0.914)/0.014 + (1- 0.691) I
0.691 + (1 - 0.825) I 0.825 + 1]
=0.571
EP-G (expected profit) = $1,000,000 X 0.01 X 0.571 = $5,705.9

e. Incrementing markup and repeating the calculation in a, b, c, and d

above, as tabulated in Table 9-1.
244 I CHAPTER 9

Table 9-1. Markup versusExpected Profit: Friedman and Gates Models

P(winatl)
ZA P(WinA) lB P(WinB) le P(Winc) Friedman

-1.365 0.914 -0.500 0.691 -0.934 0.825 0.521

-1.173 0.880 -0.273 0.607 -0.770 0.779 0.417
-0.981 0.837 -0.045 0.518 -0.607 0.728 0.316
-0.788 0.785 0.182 0.428 -0.443 0.671 0.225
-0.596 0.724 0.409 0.341 -0.279 0.610 0.151
-0.404 0.657 0.636 0.262 -0.115 0.546 0.094
-0.212 0.584 0.864 0.194 0.049 0.480 0.054
3.1 -0.962 0.832 -0.023 0.509 -0.590 0.722 0.306 $9,484.2
3.2 -0.942 0.827 0.000 0.500 -0.574 0.717 0.296
3.3 -0.923 0.822 0.023 0.491 -0.557 0.711 0.287 $9,473.5
4.1 -0.769 0.779 0.205 0.419 -0.426 0.665 0.615 $1:2,917.3
4.2 -0.750 0.773 0.227 0.410 -0.410 0.659 0.308
4.3 -0.731 0.768 0.250 0.401 -0.393 0.653 0.301 $1:2,927.7

Figure 9-3. $15,000.0

Optimum Morkup
Plot 4.2%
$13,000.0 .
from this plot, we can
evaluate our $11,000.0
probability of winning ec,
:t:=

the bid at any markup '0

$9,000.0
.2!
value. o
Gl
Q.
P(Win)
>< $7,000.0
= Expected Profit W

Markup x Cost
$5,000.0

$3.000.0 +----.-----.-----.-----.-----.-----.----~.
o 2 3 4 5 6 7
Markup (%)

Notice that the top part of Table 9-1 shows that the highest expected
profit for Friedman's model occurs around a mark up of 3%, whereas
it is around 4% for Gates model. Therefore, the second and third parts
of Table 9-1 show refined calculations in which the mark up is incre-
mented by small values around the expected optimum. Accordingly,
it is seen from the calculations that optimum markup is as follows:
Using Friedman's model, optimum markup = 3.2%.
Using Gates' model, optimum markup = 4.2%.

3. Plotting the markup versus expected profit relationship and confirming the
optimum markup values, as shown in Figure 9-3:
 BIDDING STRATEGY AND MARKUP ESTIMATION I 245

9.4.1 Important Bidding Relationships

From the previous discussion and the solved example given, let's discuss some of the
observed relationships:
• When the (T of the B/C ratio of a competitor is small, it indicates that this com-
petitor uses a consistent markup policy. It is possible in this case to establish a
markup to win over him or her.
• Friedman's model, in most cases, determines a lower optimum markup than
that of Gates's (as shown in the solved example). In this sense, Gates's model
is more optimistic as it assumes that you can still win the bid at a high markup.
• If you have entered only one bid against a competitor in the past, the (T of his
or her B/C ratio becomes zero and the use of probability tables is not possible.
Therefore, one bid against a competitor is not sufficient to determine your
competitor's bidding behavior. In a new bid against this competitor, therefore,
it is advisable to replace it with a typical one whose behavior is close to the
type of project being analyzed.
• In case of high project risk, the chances of cost and schedule variations are
high, thus their potential impact on project cost is high. In this case, therefore,
it is wise to use higher markup as an allowance for unforeseen conditions. The
use of Gates's model in this case is more advisable than Friedman's model.
• When the level of competition is high (large number of bidders) and the eco-
nomic conditions are not favorable, winning bids becomes difficult and bid-
ders reduce their bids to become more competitive.
• In construction, an average bidder behavior is exhibited as having a bid/ cost
ratio mean of 1.06 and a standard deviation of 0.065. For building construc-
tion, markup may vary from 2 to 10%, whereas for highway and heavy civil
construction, it can reach up to 20%. The average number of competitors bid-
ding for a job is around six. Accordingly, if no information is available
regarding typical competitor behavior, numbers around these values can be
assumed.
• The correlation between markup and number of competitors and between
markup and project size has been studied by many researchers and can be
expressed in the following simple relationship:

~~ = (~~r7 (9.8)

where, NI and N2 are the number of competitors on jobs 1 and 2; Ml and M2

are the markup on jobs 1 and 2, respectively. According to this inverse rela-
tionship, markup is reduced with increase in the level of competition associ-
ated with a larger number of competitors.
• Project size, as indicated by its cost estimate (C), has an important impact on
the markup value, as expressed in the following relationship, which indicates
that the percentage markup is less when project size increases.
M2
W
= (Cl)O.2
Q ~~
The use of this relationship becomes handy so that last-minute adjustments
can be made to the bid at the negotiation table. If, for example, you received
information that the winning bid has the potential for additional work to be
awarded later, you may be willing to reduce your markup so that your bid be-
comes more competitive. In this case, this relationship can give you a rough
figure on the revised markup to use.
• With Friedman's and Gates's models being viewed as pessimistic and opti-
mistic, respectively, a moderate bidding strategy is to consider the average of
their optimum markups,
246 I CHAPTER 9

9.5 Bidding Strategy Program on Excel

As seen in the earlier solved example, optimum markup calculations can be tedious
particularly if a large number of competitors are involved. Let's now try an Excel
sheet, Bidding.xIs, developed to automate the calculations involved. For the purpose
of using this spreadsheet, we will consider the following case study.

The previous records of past bids against four key competitors is in the fol-
lowing table. Using Friedman's and Gates's models, determine the markup
needed to optimize expected profit in bidding against competitors A, B, and
C in a new job with an estimated total cost of $4,000,000.

Bid Price of Competitors ($)

Job Contractor's
No. Cost Estimate ($) A B C

1 1,550,000 1.900,000 1,700,000 1,750,000

2 2,000,000 2,000,000 2,200,000
3 1,300,000 1,500,000 1,400,000 1,650,000
4 1,200,000 1,600,000 1,400,000

Solution:
The solution of this example is provided in the Bidding.xIs spreadsheet. De-
tailed explanation on the use of this sheet as it applies to the example is made
in Figures 9-4 to 9-·6.

Names of Other Competitors Here

(Sheet is Set up for a total of 40)

---_._._-----------------,
Instructions:

Historical h trK~ ye!lOi/~'(Br;; ;::t Pc,w ti,

- Enter th!~ rt2:!,,,0-; of I.j:);..,: :;."f}t"}-!r-~~Ht.)r5
Bids, Each in .. E~·k·;r ::\1,)t bid:; (:d~~t·fin a :Anoh) {!)IN :;inrtF~g l'cc:rn F:ow 7
- ~3<?!8(.t;t1E.~ "E(cLfi;-;g" sr:ed.
One Row (sheet is
set up for 1000 bids) :~~t:'~I~~;;~~~~:,~~:,~~~:~)o;~;:~I:~e~~:~~:~:~t:~ei~:;~'~:I::~ C,:.mbG '".
~.. .._ _ _ . ~. ._._.----...--.J

Figure 9-4. Storing Historical Bids

Figure 9-5. Bidding Sheet with Markup Calculations

Here you enter only the cost estimate and select the competitors (up to 15) from user-friendly cornbo boxes. Accordingly,
optimum markup is calculated automatically (10%,and 11.2% for Friedman and Gates, respectively).

,,("I. j till ::t.i) i.·1'h (({

. :~:frj~~
(i_l~t:)?p: C~f!lp.t'l~i~Qf H.N5 'J'I:l" (;~;::1 ,
i)_S~

~::_(f2'~\~';,:}'AH~.l.~ No: (j';jJS o:tJO t':,~I':i ij'£!

10
1\

11

CAIICaICLJla~~ L..----I='::=---+------'-"':::"::O=-..J....!;;=.:::"'-l...:=~~.·1
are .shown in the ~

Figure 9-6. Detailed Optimum Markup Calculations

247
9.6 Incorporating Qualitative Factors
Probability-based bidding models such as Friedman's and Gates's are useful and pro-
vide a guideline on markup estimation, instead of shooting in the dark. From a prac-
tical point of view, however, the sole use of such probabilistic methods is inadequate.
Probabilistic models do not account for a number of important factors, such as the
keenness of the contractor to win the job, prevailing economic conditions, level of
project complexity, and owner's attitude, that govern the determination of markup in
current practice. The results of various surveys among construction practitioners also
seem to support this argument.
One survey among the top 400 general contractors in the United States have iden-
tified the top-ranked factors that govern the contractors' markup decisions. The 10
top-ranked factors are:
1. Degree of hazard
2. Degree of difficulty
3. Type of job
4. Uncertainty in estimate
5. Historical profit
6. Current work load
7. Risk of investment
8. Rate of return
9. Owner
10. Location
Noted that competition and profitability, which are the only two factors considered
in the formulation of probabilistic models, were not among the top-ranked factors.
Other surveys have identified similar factors but with a different ranking order in
which the contractor's workload and desirability of the job are at the top. Despite the
dependence of Friedman's and Gates's models on quantitative factors only, the argu-
ment of their inapplicability is not true. Their underlying analysis provides a starting
point for markup estimation and their analyses of past bids could disclose the essence
of the factors that are implicit in the markup decided by a contractor.
The subject of incorporating qualitative factors into markup estimation has con-
tributed to the development of nontraditional decision-support systems based on ar-
tificial intelligence. One such system, ProBID, has been included with the CD of this
book for your experimentation. ProBID is a comprehensive system based on the con-
cepts of artificial neural networks, which is capable of learning the ins and outs of
real-life projects to become able to predict the outcomes of new projects. In a sense, it
works as a sort of complex regression model that has good interpolative and extrap-
olative performance. In addition, ProBID organizes the contractor's historical infor-
mation regarding past projects and past bids and analyzes the performance of key
competitors. Therefore, in addition to suggesting a markup value, ProBID intelli-
gently recognizes the risk pattern of your upcoming project and then matches your
project environment with a number of stored cases of successful and unsuccessful
projects. Accordingly, ProBID predicts some indicators of the project's potential suc-
cess or failure. ProBID predictions direct your attention to potential problem areas
that you may consider to adjust your estimate, think of alternative decisions, and take
early countermeasures to help assure a successful hid.
One benefit of ProBID is that it is not a purely theoretical model. Rather, it is de-
veloped based on the experience of a large number of real-life projects that were col-
lected from general contractors in the United States and Canada. Although ProBID
was initially intended for building projects, i.tis designed with a powerful" Adapta-
tion" option that builds on your own past projects' experience and enables you to de-
velop custom predictors that suit your particular work environment, locality, and
types of projects.
 BIDDING STRATEGY AND MARKUP ESTlIvL'\TION 249

To experiment with ProBlD, you need to install it from the CD to your hard disk.
Afterwards, you can activate the PB.bat file to run the program. After the introduc-
tory screens, the main menu appears. Pigures 9-7 to 9-13 show the main features of
ProBlD and its use.

Figure 9-7. ProBID

Main Screen and
Help Topics

You can follow the

help topics to get a
good idea about
ProBID features.

Figure 9-8. Loading

an Example Project
 (0)

(c)
(b)

(d)

Figure 9-9. Data Inputs for a Project

You need to input various factors that describe the project in terms of: a. General information about the job type, owner,
etc. b. [ob uncertainty and complexity levels. c. Market condition. d. Your company's experience and need for the job.

Figure 9-10. ProBID

Predictions

Predictions include:
• (%) Markup.
• Chance to
win/lose.
• ($) left on the
table.
• Change orders
level.
• Claims level.
• Actual duration
(months).
• Actual
profitability.

250
 Figure 9-11. Sensitivity Analysis Option

Sensitivity analysis examines how ProBID predictions may vary with changes in your
assessment of the project factors. The simulation generates a number of scenarios
(simulations) that are minor random variations of the assessment you provided during the
editing of the project data. All simulations are then input to the prediction model you
select, and predictions for all scenarios are produced. As a result, the mean and standard
deviation in all scenarios will be reported as the most likely predictions for the project
outcomes. Refer to the manual for guidelines on the number of simulations to use and how
to interpret the results.

Figure 9-12. Using Friedman's and Gates's Models to Establish a Winning Strategy

251
 (b)

(c)

(d)

Figure 9-13. A Set of Recommendations for the Example Project (a) Summary of all project results;
(b), (c). and (d) Guidelines for fine-tuning the markup and for providing a more attractive bid.
252
 BIDDING STRATEGY AND MARKUP ESTIMATION I 253

9.7 Back to Our Case Study Project

We can easily apply the concepts presented in this chapter to our case study project.
For simplicity we will assume a 5% markup is most suited to the project at hand. In
the next chapter, we will use this percentage in finalizing our bid proposal, consider-
ing the expected project cash flow.

9.8 Summary
Bidding strategy models are, basically, methodologies designed to maximize con-
tractor's expected profit in a competitive environment, where expected profit is, for a
given bid amount, the product of the profit that would be realized from the bid and
the probability of winning the job with that bid. These models enable the contractor
to organize his past experience on bids and use this experience to establish winning
strategies against key competitors. Collectively, all bidding strategy models compro-
mise between a contractor gaining a maximum profit and being the lowest bidder. In
both Friedman's and Gates's models, optimum markup is determined in an iterative
manner, within a practical range of markup. Incremental variations in markup are
plotted against the expected profit and the optimum markup is determined as the
markup corresponding to peak expected profit.
Despite the differences in assumptions and basic formulations between these models,
they generally provide answers to three questions:
1. What is the probability of winning at a desired markup?
2. What is the optimum markup value?
3. What is the probability of winning at optimum markup?
In this chapter, a spreadsheet model, Bidding.xls, is used to automate the calculations
involved in probability-based bidding strategies. A more sophisticated program, Pro-
BID, is also used to consider the qualitative factors that affect markup decisions and
provide guidelines on fine-tuning the markup estimate. After a markup is estimated,
our bid for a project becomes close to being ready for submission. In the next chapter,
we will consider project financing options and the final preparation of a bid proposaL

9.9 Bibliography
Ahmad, 1., and Minkarah, I. (1988, July). "Questionnaire Survey on Bidding in Con-
struction," Journal of Management in Engineering, American Society of Civil Engineers,
Vol. 4, No. 3, pp. 229-243.
Benjamin, N. B. H., and Meador, R. C. (1979, March). "Comparison of Friedman and
Gates Competitive Bidding Models," Journal of the Construction Division, American So-
ciety of Civil Engineers, Vol. 105, No. COl, pp. 25-40.
Friedman, L. (1956). "A Competitive Bidding Strategy," Operations Research, Vol. 4,
pp. 104-112.
Gates, M. (1967, March). "Bidding Strategies and Probabilities," Journal of the Con-
struction Division, American Society of Civil Engineers, Vol. 93, No. COl, pp. 75-107.
Ioannou, P. G. (1988, June). "Bidding Models-Symmetry and State of Information,"
Journal of Construction Engineering and Management, American Society of Civil Engi-
neers, Vol. 114, No. 2, pp. 214-232.
Morin, T. L., and Clough, R. H. (1969, July). "OPBID: Competitive Bidding Strategy
Model," Journal of the Construction Division, American Society of Civil Engineers, Vol.
95, No. COl, pp. 85-106.
254 I CHAPTER 9

Moselhi, 0., and Hegazy, T. (1990,April). "Optimum Markup Estimation: A Compar-

ative Study," Proceeding, 11th International Cost Engineering Congress, 6th AFITEP
Annual Meeting, Paris.
Park, W. R. (1968,June). "Bidders and Job Size Determine Your Optimum Markup,"
Engineering News Record, pp. 122-123.
Runeson, G. (1990, March). "Incorporation of Market Conditions into Tendering
Models," Proceeding, International Symposium on Building Economics and Con-
struction Management, CIB, Sydney; Australia, March, Vol. 6,1990, pp. 393--404.
Sey, Y, and Dikbas, A. (1990, March). A Study on Factors Affecting Tender Price of
11

Contractors," Proceeding, International Symposium on Building Economics and Con-

struction Management, CIB, Sydney, Australia, March, Vol. 6, 1990, pp. 451-464.
Van Der Meulen, G. J. R., and Money, A. H. (1984,June). "The Bidding Game," Jour-
nal of Construction Engineering and Management, American Society of Civil Engineers,
Vol. 110,No. 2, pp. 153-164.

9.10 Exercises
1. The previous record of a contractor's bidding encounters against three competi-
tors is:
Bid Price of Competitors ($ millions)
Job Contractor's Cost
No. Estimate ($ millions) A B C
--------

1 0.85 1.05 1.1 0.95

2 1.6 2.1 1.8 1.6
3 0.7 0.9
4 2.0 2.4 2.2

Using Friedman's and Gates's models, determine the markup needed to optimize ex-
pected profit in the following cases, and comment on the results:
a. Bidding against A, B, and C in a new job with estimated total cost of $10,000.
b. Bidding against A, E, and C in a new job with estimated total cost of $5,000,000.
c. Comment on the impact of project size in (a) and (b) on the estimated optimum
markup.
d. Bidding against six typical competitors with behavior close to that of com-
petitor B.
2. Briefly explain if the following statements are right or wrong and why?

• When the of the B/C ratio of a competitor is small, winning this competitor
(J"

becomes easier to predict.

• Friedman's model uses a pessimistic strategy whereas Gates's model uses an
optimistic strategy.
• In case of high project risk, the use of Gates's model is more appropriate than
Friedman's.
• You should (increase/decrease) your bid markup when you bid against a
larger number of competitors than you initially expected.
• You should (increase/ decrease) your bid markup when high risk is involved.
• Youshould (increase/ decrease) your bid markup when you need the job badly.
3. Your company is very keen on winning a job for which you submitted Cl bid of
$1,100,000.Your cost estimate for the job is about $1,000,000.After the bid opening,
your company, and two others, is selected for final negotiation with the owner. At
 BIDDING STRATEGY AND MARKUP ESTIMATION I 255

that meeting, you were asked if you are willing to reduce your final bid. You were
also told that there is high chance of additional work that will be added, in the or-
der of about 20% of the original volume of work. Based on this information, how
much will you go down in your bid.
4. If a typical competitor has a B/C ratio with I-L = 1.05 and a = 0.09, what is the
mark up associated with a 30% probability of beating four typical competitors?
5. Assume that a typical competitor has a B/C ratio with a = 0.07. Also, assume that
the markups associated with a 23% probability of beating seven typical competi-
tors is 6.5% using Friedmans model. Calculate the average markup used by this
competitor in any bid.
6. Analysis of the bidding behavior of a typical competitor against you, as a contrac-
tor, has revealed that his bid/your cost in ten previous bids take the following his-
togram.

No.of Bids
4

o
1 1.04 1.08 1.12 1.16 1.2 1.24 B/C Ratio

a. Based on that behavior, what is the markup value that this competitor uses on
average? What is the your probability of winning this competitor if you use a
markup of 14%?
b. In a new project with a $1,000,000 estimated cost, what is your optimum
markup strategy against four typical competitors using Friedman's model?
What is the expected profit at optimum markup?
c. Optimum markup generally __ (increases/decreases) with the number of
competitors.
d. Which model (Friedman/Gates) is more sensitive to the number of competi-
tors and why?
7. The previous records of past bids against four key competitors is in the following
table:

Bid Price of Competitors ($)

Job Contractor's
No. Cost Estimate ($) A B C D

1 1,550,000 1,900,000 UOO,OOO U50,000

2 2,000,000 2,000,000 2,200,000
3 1,300,000 1,500,000 1,400,000 1,650,000 1,550,000
4 1,200,000 1,600,000 1,400,000
Maine Experience Hospitals Town Houses Office Buildings Comm. Buildings

Using Friedman and Gates models, determine the markup needed to optimize ex-
pected profit in the following cases using an estimated total cost of $4,000,000:
a. Bidding against A, B, and C in a new job.
b. Bidding against six unknown competitors in an office building project.
c. You are bidding for a project that involves building several townhouses. Com-
panies A, B,and C are also interested in bidding for that job, in addition to two
unknown bidders.
256 I CHAPTER 9

d. How will the optimum markup obtained in case (c), above, change if the un-
known bidders are assumed to have a bidding behavior that is the average of
all companies.
e. Comment on the behavior of contractor D and how you can incorporate it in
your bidding strategy.
8. Using the Excel program Bidding.xls for bidding strategy and the data of the
solved problem in Section 9.5, try to determine the optimum markup using Solver
to maximize the expected profit. Using the formulation on the sheet, set up Solver
for optimizing the markup based on Friedman's and Gates' formulations, inde-
pendently. Compare the results with those of the solved example.
 PROJECT
FINANCING
AND SCHEDULE
INTEGRATION

After studying this chapter, you will be able to:

• Understand the various options of project financing.

• Graphically compare a project's cumulative cost and the owner's payment
scheme. .
• Perform overdraft calculations to determine the interest charges due to financing;
• Finalize a bid proposal in a manner that improves financing.
• Integrate cash flow calculations into an overall sprcadsheet model for schedul-
ing, resource management, and cash flow optimization.
• Experiment with various case studies.

Need
• Feasibility • Conceptual Design
• Project • Owner Approval
Definition Prepare Bid Proposal + Baselines
• Soil Reports • Collect Data (site, quantities,
• Owner • Preliminary Design
Approval specs, resources, tasks, etc)
• Detailed Design • Start Construction
• Planning
• Quantities • Time & Cost Estimation • Detailed Planning, : • O&M :
• Work Documents • SCheduling Estimating & Resource '
• Demolition :
• Select Project Management
• Resource Management: at End of :
Contract Strategy Adjustments for Resource Con- • Schedule Updating Service Life: ,
straints & Deadline • Progress Evaluation ,,
Bidding Strategy & Markup • Time, Cost & Quality ,,
Estimation Control ,,
• Commissioning ,,
,,
,

257
258 CHAPTER 10

10.1 Introduction
In the previous chapters, we learned techniques for scheduling and resource man-
agement so that our bid proposal is realistic and is close to being finalized. In this
chapter, we will be introduced to project financing options and cash-flow calcula-
tions, which are very important, and in many cases are reasons for problems and even
bankruptcies to contractors. The purpose of the analysis is to understand the financ-
ing needs of our project, determine the interest charges associated with our financing
decisions, investigate various financial incentives in our bid that appeal to owners,
and finalize our bid in a manner that improves project financing.

10.2 Project Cash Flow

At the project level, a project's cash flow is basically the difference between the project's
expense and its income (shaded area in Figure 10-1). At the construction company
level, on the other hand, the difference between a company's total expense and its to-
tal income over a period of time is the company's cash flow. Let's now consider the sin-
gle project case.

Figure 10-1. Project

Cash Flow Curves
~
•..en
o
U
Gl
>
:;:::;
C'Cl
:::J
E
:::J
U
Time Period
----~--~--~--~----~--~-
2 3 4 6 7 8

In Figure 10-1, a brief explanation of the terminology and the various elements
included in preparing the contractor's cash flow for a project is as follows:

Time Period: This is the time at which changes in income or expenses occur. Usu-
ally, this period (often monthly or bimonthly) is stipulated in the contract as the
time at which the contractor can submit an invoice of past period's work or re-
ceives an owner payment.
The Expense Profile (Svcurve): The expense profile is a graphical presentation of
the cumulative expenses (direct plus indirect) associated with executing the
works, along the project duration. At each time period, the expenses of all the
work completed till this period are accumulated from the project bar chart. In
most cases, particularly at the planning stage, the contractor's direct and indirect
expenses can be estimated to be equal to the direct and indirect costs estimated for
the activities, as illustrated later by example.
The general "5" shape characteristic of the expense profile is shown in Figure
10-2 and can apply to most construction projects. Early in the project, activities
are mobilizing and the expenditure curve is relatively flat. As many other activi-
ties come on line, the level of expenditure increases and the curve has a steeper
middle section. Toward the end of a project, activities are winding down, finish-
 PROJECT FINANCING AND SCHEDULE INTEGRATION I 259

100··

85
o-g
~~
CIlQ.
.:: E 50 .
"'0
.!!lu
:l.:.::
E~
:l0
U~
15
'--===----;.-----;------+------'-- Time %
o 25 50 75 100

Figure 10-2. General Characteristics of the S-curve

The cost S-curve can be calculated from various points at the end of the time periods. For
each point, the contractor sums the total costs of the planned work during that period and
then draws a cumulative S-curve.

ing tasks take a long time but costs are small, and expenditures flatten again. It is
noted also that when expenses on activities are not the same as their cost estimate,
we can plot two S-curves, one for the expenses and one for the cost.
Retainage (%): This is the amount retained by the owner from every invoice, be-
fore a payment is made to the contractor. The purpose is to ensure that the con-
tractor will continue the work and that no problems will arise after completion.
This retainage amount (0 to 10%) is stipulated in the contract along with the time
at which all the withheld amount will be repaid to the contractor. Owners have
many options of deciding this amount, depending on their incentive policies and
their relationship with the contractor. Examples are:
• A retainage amount of 5% is applied to all invoice payments, up to a max-
imum of $3000. All withheld amounts will be repaid to the contractor: 50%
at substantial completions, and the other 50% three months later.
• A retainage amount of 10% is applied to all payments made before 50% of
the work is completed. All withheld amounts are repaid to the contractor
two months after substantial completion.
The Income Profile: The income profile is the ladder line in Figure 10-1 and rep-
resents the cumulative progress payments to be received by the contractor from
the owner. In most cases, when owners receive an invoice for payment, the con-
tractor receives his or her payment after a certain delay time (for processing and
approvals) of one or more period(s), as stipulated in the contract.
As opposed to the expense S-curve, the contractor's income profile is a fW1C-
tion of the contract price and is calculated as follows:
1. At each time period (i), the contractor sums the contract prices (incor-
porate direct cost, indirect cost, and markup) associated with the work
of this period. This sum is often referred to as the budget value of the
work. This amount is the invoice value to be billed to the owner.
2. The owner's payment is calculated by subtracting the stipulated
retainage from the bill amount, and payment is expected to be made to
the contractor after the delay period is passed.
3. Repeat these calculations for all periods and plot the ladder line.
260 CHAPTER 10

10.3 Project Financing Options

Based on the discussion made on Figure 10-1, we can make several observations
related to project financing, as follows:

• The shaded area in Figure 10-1 represents the difference between the contrac-
tor's expense and income curves, i.e., the amount that needs to be financed
(overdraft amount). The larger the shaded area, the more money 10 be fi-
nanced and the more interest charges are expected to cost the contractor.
• The amount of money to be financed in each month can be shown directly on
the cash flow figure as the vertical difference between expense and income.
For the case shown in Figure 10-1, the largest amount to be financed is the
amount, 0, right before receiving the owner payment in period 5. This value
is sometimes referred to as cash out-of-flow.
• The contractor in the case of Figure 10-1 attained his profit only after the last
owner payment, which included a payback of the retainage withheld during
the previous progress payments.
• To improve project financing, i.e., minimizing the cash out-of-flow, we can get
the expense and income curves closer together to reduce the shaded area. Var-
ious options are available to shift the expense curve to the right and/ or the in-
come curve to the left, as follows:
a. Subcontractors' Credit: Subcontracting parts of the work with delayed
payments to subcontractors reduces the direct expenses per period, thus
shifting the expense curve to the right.
b. Arrangement with Material Suppliers: This, similar to subcontractors'
credit, can shift the expense curve to the right, closer to the income profile.
c. Owner Mobilization Payment: This strategy substantially improves fi-
nancing by asking owners for an advance payment for mobilization pur-
poses. The mobilization payment can then be deducted from one or more
progress payments. This strategy, however, may be used only in projects
that require expensive site preparation, temporary facilities, etc. The effect
of this strategy is shown schematically in Figure 10-3 in which no external
financing is needed. In this case, the contract is fully financed by owner
payments.
d. Front-end Loading (Bid Unbalancing): In this strategy, the contractor in-
flates the bid prices of the items that are early in the schedule and deflates
the bid prices of later items, so that the total bid remains unchanged. As
such, the early invoices will be of higher value, thus attaining a larger in-
come that can facilitate the financing of the remaining stages in the proj-
ect. The effect of bid unbalancing on cash flow curves is shown in Figure
10-4, leading to some improvement as depicted in a lower monthly value
to be financed and less shaded area (less interest charges). To perform bid
unbalancing, contractors distribute the indirect cost plus markup un-
evenly among the contract items. However, because owners can detect
unrealistic bids and can discredit them, contractors need to exercise care
when doing the bid unbalancing. It is possible also to formulate the bid
unbalancing situation as an optimization problem to determine the opti-
mum unit prices that minimize the cash out-of-flow.
Other general guidelines that can be followed during construction to prevent un-
desirable or unexpected changes to project financing are:
e. Accurate request for payments that is thoroughly checked for accurate
progress measurements and free of errors.
f. Proper planning of materials and large equipment delivery.
g. Short-term loan, considering interest charges into account.
 PROJECT FINANCING A D SCHEDULE INTEGRATION I 261

Figure 10-3. Effect

-
Income profile shifted
of Mobilization ~ to the left of expense
III curve (No overdraft)
Payment o
U
Gl
> Exp~nse
:;:: curve
.!2
::J
E
::J
U
MObilization-t
payment Time Period
~~+---~--~--+---+---~--~--4--
8

Figure 10-4. Effect

~
of Bid Unbalancing
•..
III
Expense:
0 S-curve
U
Gl

••.!2>
::J . : : :

E . Modified Income Prbfile

::J
U
'Original Income Profile • Time Period

2 3 4 5 6 7 8

Figure 10-5.
Alternative Payment
Scheme
--•..
~
III
0
U
Gl

••>ca
:;
E
j
o
Time Period
2 3 4 5 6 7 8

In the situation when project financing is not a major concern to the contractor, it
is possible for the contractor to propose an alternative payment scheme that can
be attractive to the owner, thus giving the contractor a competitive advantage. As
shown in Figure 10-5, a two-payment scheme, rather than a period-by-period
payment, is used to suit the budgetary constraints of an owner.

10.4 Calculating the S-curve

The S-curve of cumulative expenses is one of the main elements of cash-flow analy-
sis. In general, however, an S-curve is a cumulative plot of costs or any other data that
we would like to see how it accumulates along the project duration. In the next chap-
ter, for example, we will plot an S-curve for the completion percentage of the project.
That is to say, for example, that by the end of month 2, the project should be 45% com-
plete. We can also plot various S-curves and use them for comparison purposes. For
example, we can plot the S-curve of the planned versus actual percentage complete in
the project. That is to say that by the end of month 2, our actual completion percent-
age is 38%, as opposed to the 45% on the plan. Various S-curves, therefore, can be used
to view the overall picture of the project from different angles.
262 I CHAPTER 10

In terms of cost, we can plot various S-curves to show cumulative values along
project duration. Each S-curve requires two essential types of information: the type of
cost to be accumulated and the type of bar chart schedule. Examples of S-curves and
their requirements are shown in Table 10-I.
Now, with a given type of cost and a given bar chart type, we can calculate the
S-curve of cumulative costs. Consider, for example, an S-curve for the direct costs of
planned work. The Estimated Direct Costs and the Planned Schedule are shown in
Figure 10-6. The estimated direct costs are evenly distributed along the duration of

Table 10-1. Example S-cuNes

S-curve Cost to be Accumulated Bar Chart Type

• Direct Costs of Planned Work • Estimated Direct Costs • Planned Schedule

• Direct Expenses of Completed Work • Actual Direct Expenses • Actual Schedule
• Budget Value of Planned Work • Contract Bid Prices • Planned Schedule
• Budget Value of Completed Work • Contract Bid Prices • Actual Schedule
• Actual Cost of Completed Work • Actual Direct + Indirect Expenses • Actual Schedule

$140,000
Estimated $125,000
Direct ~ $120,000
Expenses Q,)
III
t:
Q,) $100,000
a.
><
W
$80,000
'0
•..
Q,)

cQ,)
$60,000
>
:;::: Direct Costs at
.!!! $40,000 day-a -; $3'i,50(i - - _. - - - - - -- - - - -- - - - - --
:::I
E
:::I $20,000
U

$O~~--r----''----'-----.-----'-----'-----'----~
o 4 8 12 16 20 24 28 32
Time (days)

Figure 10-6. The Project Bar Chart and the S-cuNe of Cumulative Direct Costs
 PROJECT FINANCING AND SCHEDULE INTEGRATION I 263

each activity and shown on the activity bars. The S-curve is then plotted from various
points along the project duration. At any point of day i (e.g., i = day 8), cumulative
costs are calculated by looking at the part of the bar chart to the left of that date and
summing the costs of the activities (j's), as follows:
11

Cumulative Costs = L (Days of activity j at left of time i x Cost/ day of activity

j=l
j) at time (i)
where, (j) is activity number 1, 2, ... , n.
Therefore, at day 8, which is the first time period, the cumulative direct costs =

4 days activity A X $500 / d

+ 6 days activity B X $1,667 / d
+ 2 days activity C X $2,000 / d
+ 4 days activity 0 X $2,250 / d
+ 2 days activity F X $1,500 Id
+ 2 days activity G X $750 / d
+ 6 days activity J X $1,667 / d = $39,500

We then repeat this calculation day by day, bi-daily, weekly, or monthly along the
project duration, depending on the time period of the project. The result is the S-curve
shown in Figure 10--6, with the cumulative costs at various time periods shown on the
figure. Although this calculation is time consuming, it is necessary as the basis for
cash flow analysis. Later, we will discuss how to get the S-curve directly from Mi-
crosoft Project, Prima vera, or Excel.

10.5 Overdraft Calculations and Interest Charges

From the previous discussion on cash flow curves, a summary of the variables that af-
fect project financing and need to be considered in overdraft calculations are:
• The project bar chart, which is developed considering project constraints.
• Activities' direct and indirect costs (function of the construction methods).
• Contractor method of paying his or her expenses (immediate or credit).
• Contractor's markup.
• Method of distributing indirect cost plus markup among activities.
• Retainage amount.
• Retainage payback time.
• Time of payment delay by owner.
• Owner mobilization payment.
• Interest rate on overdraft amount.
Now, let's demonstrate the detailed overdraft calculations considering all the
cash flow variables. We will use our small project that we dealt with in the previous
chapters, and we will consider two different financing scenarios to illustrate the var-
ious options.

10.5.1 Financing Scenario 1

The first scenario deals with the case study that we dealt with in previous chapters,
but assuming we have no resource problems or deadline constraints.
264 I CHAPTER 10

• The 32-day network of the case study is shown in Figure 10-7.

• All activities use their cheapest method of construction (index 1), and the
direct costs of activities are shown in Figure 10-7.
• Indirect cost is $500 per day (total of $16,000).
• Contractor's optimum markup is 5%.
• To determine bid prices, indirect costs are distributed in a balanced way
among activities.
• Contractor will pay his expenses immediately, thus expenses equal costs.
• Time period = 8 days.
• Retainage amount is 10%.
• All withheld retainage money will be paid back with the last payment.
• Owner's payment delay of any invoice is one period. For example, the first
invoice will be submitted at the end of the first period and payment (invoice
minus retainage) will occur at the end of the second period.
• No mobilization payment is given to contractor.
• The interest rate applied to any overdraft money is 1% per period.

Solution
Calculations of overdraft amounts and interest charges incorporate five main
steps, as follows:
Step 1: Project Network and Bar Chart
The network of the planned schedule is shown in Figure 10-7. Estimated direct costs
are also shown in the same figure. The bar chart of the work plan is shown in Figure
10-6.
Step 2: Assessment of Costs, Expenses, and Bid Prices
Based on the assumptions used in this scenario, all costs of activities become imme-
diate expenses to the contractor. The budget value or bid price of activities, on the
other hand, is basically a summation of cost and markup. The distinction between the
three items of costs, expenses, and bid prices is important. The calculations of costs
(direct plus indirect) and bid prices (budget values) are shown in Table 10-2. Ex-
penses, on the other hand, is the portion of the costs (0 to 100%) incurred at a given
time. In this example, expenses equal costs.

Direct
Activity Duration Cost

A 4 $2.000
B 6 $10,000
C 2 $4.000
D 8 $18,OO()
E 4 $20,000
F 10 $15,000
G 16 $12,000
H 8 $16,000
I 6 $10,000
J 6 $10,000
K 10 $8,000
Total Direct Cost $125,0()0
----
Figure 10-7. Network and Activity Data of Scenario 1

J
 PROJECT FINANCING AND SCHEDULE INTEGRATION I 265

Table 10-2. Cost and Budget Calculations

Direct Indirect Cost Total Markup Bid Price

Activity Duration Cost (Balanced Bid) Cost (5%) (Budget Value)

A 4 $2.000 = 16.000' (2000/125.000) = $256 $2.256 $113 $2.369

B 6 $10.000 = 16.000' (10000/125.000) == $1.280 $11.280 $564 $11.844
C 2 $4,000 = 16,000 * (4000/125,000) = $512 $4,512 $226 $4,738
D 8 $18,000 = 16,000' (18000/125,000) = $2.304 $20,304 $1.015 $21.319
E 4 $20,000 = 16.000' (20000/125.000) = $2.560 $22,560 $1.128 $23,688
F 10 $15,000 ~ 16,000 * (15000/125,000) = $1.920 $16,920 $846 $ 17.766
G 16 $12,000 = 16.000 * (120001125,000) ~ $1.536 $13.536 $677 $14.213
H 8 $16.000 = 16.000 * (16000/125.000) = $2,048 $18.048 $902 $18.950
I 6 $10,000 =-c 16,000 * (10000/125,000) = $1.280 $11.280 $564 $11.844
J 6 $10.000 = 16,000 * (10000/125,000) = $1.280 $11.280 $564 $11.844
K 10 $8,000 = 16,000 * (8000/125,000) = $1,024 $9,024 $451 $9.475

Total Direct Cost = $125,000 Total Cost = $141,000 Total Bid = $148,050

Step 3: Cash Flow Calculations

Cash flow calculations are compiled in a table format (Table 10-3). In this table, five
periods (each is eight days) are used along the project duration, including an extra pe-
riod after project completion. We then perform the calculations, starting from row 1
in a systematic fashion. The table is basically divided into three sections: (1) the top
section for S-curve computations of cumulative expenses; (2) the middle section cal-
culating the owner cumulative payments; and (3) the bottom section for overdraft cal-
culations and interest charges.
The calculations involved in the first two sections in Table 10-3 (cumulative ex-
penses and cumulative owner payments) are straightforward. The direct cost values
in row 1 are obtained from the calculations of S-curve for direct costs, as discussed in
Section 10.4. Then, in row la, costs become immediate expenses to the contractor. Af-
terwards, we add indirect expenses and then accumulate the total expenses, thus
forming an S-curve for total expenses.
The second part of the table deals with owner payments, and the essential part of
this calculation is row 5 in which the budget value of the work is calculated. For that
part, S-curve calculations were performed using the bar chart of the plan and the bid
prices (budget values) in column 7 of Table 10-2. We then subtract retainage amounts
and shift the payment by the amount of owner delay (one period). Notice that at the
end of the last time period (period 5), two payments are planned to be received from
the owner; $17,482 for the work done in period 4; and $14,805 as a payback of all re-
tention withheld by owner. Here, the last period requires extra care for its calculations.
The calculations in the third section of Table 10--3 (overdraft) can be tricky. The
simplest way to understand it is as a bank account. We start the project with a balance
of zero and proceed to withdraw funds to cover the expenses needed for the work of
the first period (-$43,500). By the end of the first period, the bank adds its interest
charges and sends you the statement of -$43,935 as total overdraft balance. We then
keep withdrawing money to cover the expenses during the second period ($51,000),
and as such we accumulate an overdraft of -$94,935 = -($43,935 + $51,000). Interest
charges are then added to increase the overdraft to -$95,884 and the second bank
statement is sent to you. Right after sending the statement, a deposit of $42,106 owner
payment is made, however, this will only appear in next month's statement. Notice
here that owner payments are right aligned in Table 10-3 to remind you that the de-
N
QI
Table 10-3. Cosh Flow Calculations for Scenario 1
QI I
Time Period

1st 2nd 3rd 4th (Last) 5th (End) I 5th

(1) Direct Costs I $39,500 $47,000 $22,100 $16.400 $0 I Retainage

Payback
(10) Direct Expenses = (1) $39,500 $47,000 $22,100 $16.400 $0
I + + + +
(2) Indirect Expenses ($500/d) $4,000 $4,000 $4,000 $4,000

(3) Total Expenses = (10) + (2) I $43,500 $51,000 $26,100 $20.400

(5) Budget Value of Work $46,784 $55,667 $26,175 $19.424 $0

(6) Retainage (5) x 10% $4,678 $5,567 $2,618 $1,942 =0 Sum of (6)
$14,805
(7) Amount Payable = (5) - (6)
$42'106~0~~~
(8) Payment Received = (7) $42,106 $50,100 $23,558 $17,482

(10)** Overdraft Balance at End I - $43,500' - $94,935 - $79,879** - $50,977 - $27,930

of Period before Interest
+ + + + + - $28,209
(11) Interest on Overdraft + $17.482
Balance = (10) x 1% - $435 - $949 - $799 - $510 - $279 + $14,805

• A negative sign represents an overcrati whereas a positive sign represents a positive balance,

•• Overdraft balance at eno of period con be calculated in two ways:

= Total overdraft balarce (row 12) at previous period - Expensesthis period (row 3) + Owner payment (row 8) made at previous period, e.q.. at end of period 3 =
(-$95,884) - (26,100) f ($42,106) = -$79,879; or
= Cumulative expenses (row 4) to this period + Sum of interest paid until previous period (row 11) + Cumulative payments rece.ved (row 9) until the previous pe-
riod = (-$120,600) -'- (-$435 - $949) + $42,106 = -$79,879
 PROJECT fINANCING AND SCHEDULE INTEGRl\TION I 267

Figure 10-8. Cash $148,050

$150,000 - ,-$141;GGG-
Flow Plot of
Scenario 1

$100,000 --

$50,000
rn Net P~ofit
~
'0 , Period
c

($28,~09)
(550,000) --------~---

\$51,~87)
Overdraft
(Net C~sh Flow)
($100,000) --------($95,Ef84) ----- _1 ---'- ---- ---

posit will show in next statement. The calculation is also logical from the bank's point
of view because an end-of-period payment will not relieve you from interest on the
current period. Continuing our progress on the project, we withdraw additional
-$26,100 to spend on progress in the third period. At the end of the period, the over-
draft is calculated as shown at the bottom of Table 10-3, then interest is added to cal-
culate a total overdraft of -$80,678. The process then continues until the end of period
5, which is one period after the completion of the project. Immediately afterwards, all
amounts withheld are repaid back and final adjustments are made in the last column
of the table.

Step 4: Plotting the Overdraft Profile

The calculations in Table 10-3 are used to plot the cash flow plot as shown in Figure
10-8. The "Overdraft Profile" shows all the overdraft transactions and the financing
amount needed each period. The values below the horizontal axis represent financ-
ing amounts that include interest charges whereas the values above the axis represent
a positive balance (profit).
Step 5: Interpreting the Results
Various interesting observations can be made on the overdraft calculations and the as-
sociated tables and figures, as follows:
• The sum of interest charges is determined from row (11) in Table 10-3 as $435
+ $949 + $799 + $510 + $279 = $2,972, representing the cost to the contractor
due to project financing. Failing to add these costs to the indirect cost reduces
the contractor's net profit;
• The area in Figure 10-8 enclosed between the expense S-cUl'Veand the owner
payment profile is the area of financing. It is possible, therefore, to roughly es-
timate the interest charges directly from the graph. Notice that the area of one
grid unit in the figure is ($50,000 X 1 period). Therefore, if we add the number
of grid units that make the enclosed area, it is approximately 5 units and as
such the interest charges are as follows:
5 units X ($50,000 X 1 period) X 0.01 interest per period = $2,500
which is an underestimation of the actual interest charges since the effect of
compounding is not considered.
268 CHAPTER 10

• As given in the problem statement, the project's total direct plus indirect costs
are $141,000. With markup being 5%, a profit of $7,050 is expected. If we sub-
tract the interest charges, the net profit becomes $4,078, as shown in the last
overdraft balance (row 12) of Table 10--3.
• The amount required to be financed (cash needed) for this project is shown in
row 12 of Table 10-3 and the overdraft curve of Figure 10-8. For this project,
therefore, the maximum finance amount is $95,884 and is needed in the sec-
ond period. This information is important to be communicated to the financ-
ing institution.
• Multiproject financing is performed by adding the monthly overdraft
amounts from several projects and presenting a combined overdraft diagram
to the financing institution.

10.5.2 Financing Scenario 2

Let's now look at another scenario of project financing to investigate the effect of some
of the financing options discussed in Section 10.3. We will use the same case study
project again but with different assumptions. In this scenario, we will take the result
of applying resource analysis and time-cost tradeoff analysis performed in Chapters
7 and 8. These analyses were necessary to meet a 28-day deadline and to limit the
amount of L1 resource needed for the project to 6. The schedule that resulted from the
analysis was shown in Figure 8-17.

• Project network and activity data are shown in Figure 10-9. Project was
crashed four days by selecting appropriate methods of construction for the ac-
tivities, as discussed in Chapter 8. Also, a delay of four days was applied to
activity 0 to account for L1 resource limit of six per day.
• Indirect cost is $14,000 ($500 per day).
• Contractor's optimum markup is 50/".
• Bid is unbalanced as shown in Figure 10-9. The indirect costs of early activities
are increased by a positive adjustment while indirect costs of later activities
are decreased by a negative adjustment. Total bid, however, does not change.
• 50% of the contractor's expenses in any period are credit by suppliers, which
will be paid in the following period.
• Time period = 8 days.
• Retainage amount is 10%.
• All withheld retainage money will be paid back with last payment.
• Owner's payment delay of any invoice is one period.
• A 20% mobilization payment is given to the contractor at the beginning of the
project and will be deducted from the first two payments.
• The interest rate applied to any overdraft money is 1% per period.

Solution
Step 1: Project Network and Bar Chart
Project network is shown U1 Figure 10-9. Notice the two critical paths in the network:
Path B-G-K and Path B-F-H-I. Project duration is 28 days. The bar chart is also shown
in Figure 10-10.

Step 2: Assessment of Costs, Expenses, and Bid Prices

Similar to the previous scenario, activities' direct costs, indirect costs, mark up, and
bid prices are calculated as shown in Table 10--4.
Figure 10-9.
Network and
Activity Data of
Scenario 2

A 4 $2,000 $256 1.27 $398 $2,398

C 2 $4,000 $512 2.54 $795 $4,795

D 4 8 $18,000 $2,304 -1.43 $1.778 $19,778
E 4 $20,000 $2,560 -1.59 $1.976 $21.976
F 10 $15,000 $1,920 0.96 $1.783 $16,783

H 8 $16,000 $2,048 0 $1.758 $17.758

I 6 $10,000 $1,280 -2.23 $787 $10.787
J 6 $10,000 $1.280 -2.23 $787 $10,787
K 10 $8,000 $1.024 -1.34 $691 $8,691

Total = $127,400 $14,000 $141,400

• Total indirect = balanced indirect + adjustment (%) x $14,000

Note: Shaded activities are crashed to reduce project duration.

4 days .::<),C{})i"iJ" 0 sdays

10"')'. '15.::mw
14 f.i~ys S12,(GJ.i.¥J .

Figure 10-10. Bar Chart of Scenario 2 with Direct Costs

269
270 I CHAPTER 10

Table 10-4. Cost and Budget Calculations

Direct Indirect Cost Total Markup Bid Prh:e

Activity Duration Cost (unbalanced bid) Cost (5"10) (budget value)
A 4 $2,000 $398 $2,398 $120 $2,518
B 4 $12,000 $1,707 $13,707 $685 $14,392
C 2 $4,000 $795 $4,795 $240 $5,034
D 8 $18,000 $1,778 $19,778 $989 $20,767
E 4 $20,000 $1,976 $21,976 $1,099 $23,07'5
F 10 $15,000 $1,783 $16,783 $839 $17,623
G 14 $12,400 $1,541 $13,941 $697 $14,638
H 8 $16,000 $1,758 $17,758 $888 $18,646
I 6 $10,000 $787 $10,787 $539 $11,326
J 6 $10,000 $787 $10,787 $539 $11,326
K 10 $8,000 $691 $8,691 $435 $9,126

Total Direct Cost = $127,400 Total Cost = $141,400 Total Bid = $148,470

Step 3: Cash Flow Calculations

Similar to Scenario 1, cash flow calculations are summarized in Table 10-5.
Compiling this table becomes simple given, that the values in rows 1and 5 are com-
puted from the bar chart. Row 1 is the calculation of the direct costs in every period, fol-
lowing S-curve calculations based on the bar chart and direct costs of Figure 10-10. Be-
cause direct expenses in this scenario are less than direct costs, due to suppliers' credit,
we can accordingly calculate the direct expenses in each period. A£terwards, we add the
indirect expenses in row 2 to determine the cumulative expenses in row 4.
To calculate the owner's payments, we need to consider the budget value of the
work planned to be performed in each period. This can be calculated also from the
planned bar chart in Figure 10-10 but considering the budget values of activities
shown in the last column of Table 10-4. Overdraft calculations, on the other hand, are
identical to those performed for Scenario 1.
Step 4: Plotting the Overdraft Profile
The calculations in Table 10-5 are used to plot the cash flow plot as shown. The "Over-
draft Profile" shows all the overdraft transactions and the financing amount needed
each period. The values below the horizontal axis represent financing amounts that
include interest charges whereas the values above the axis represent a positive bal-
ance (profit).
Step 5: Interpreting the Results
The calculations in Table 10-5 and Figure 10-11 show a much-improved cash flow as
a result of project crashing, mobilization payment, bid unbalancing, and suppliers'
credit. Accordingly, the results of the second financing scenario are as follows:
• The sum of interest charges is $1,656, which is much less than the $2,9'72of the
first financing scenario.
• In addition to a lower bid and a shorter duration, the net profit is $5,414, which
is higher than the $4,078 of the first scenario.
• To the contractor's benefit, the amount required to be financed for this proj-
ect, has reduced substantially to a maximum of $57,949 and is required later
in the project (period 3), as opposed to the $95,884 needed in period 2 in the
first scenario.
 Table 10-5. Cash Flow Calculations for Scenario 2
i
Time Period

ls1 2nd 4th (Last) 5th (End) 5th

3rd
I Retainage
(1) Direct Expenses I $37,543 $38,086 $41,905 $9,867 $0 I Payback

(la) Direct Expense Considering

Supplier's Credit I $18,771
+
$37,814
+
$39,995
+
$25,886
+
$4,933
+
(2) Indirect Expenses ($500/d) $4,000 $4,000 $4,000 ~ so
(3) Total Expenses = (1a) + (2) I $22,771 $41,814 $43,995 $27,886 $4,993

(5) Budget Value of Work $44,501 $44,366 $48,401 $11,201 $0

(6) Retainage (5) x 10% $4,450 $4,437 ~ iL.l2Q

(7) Amount Payable = (5) - (6) $40,051 $39,930 $43,561 $10,081 $0 = Sum of (6)

(8) Payment Received 29,694 ~~~~$10,081 $14,847

(Mobil.) Half mobil. Half mobil.
deducted deducted

(10) Overdraft Balance at End I - $6,923 - $34,892 - $54,032 - $57,375 - $19,321

of Period, before Interest
+ - + - $19,514
(11) Interest on Overdraft + $10,081
Balance = (10) x 1% I so - $349 - $540 - $574 - $193 + $14,847

l;J
'I
~
272 I CHAPTER 10

$148,470
$150,000 - ~ - - - - - - - - - - - - - - - -:- - - - - - .. - - - - - - - - -$13€i;467 - - - - - - - --
, ,
,
$123,542
$100,000 --_ .... __.. _- - .•... _-_ .. __ .. _ ~ _ _ _ _ _ _ _ J

$79,981

_ • • _ L _
$50,000 ,

,
Period:
--------~----------~j----
$O~-~--------~~--------T-

($1~,514)

($50,000) - - -. - _ _. - - - ,- - - - - - --

_______
,
.J
,
1 .'

($100,000)

Figure 10-11. Cash Flow Plot of Scenario 2

10.6 Using Microsoft Project

In Microsoft Project alone, there is no direct way to perform overdraft analysis.
However, it is possible to use the cash flow reports of the software as a basis for the
analysis. For example, with some manipulation, we can use the software to deter-
mine the values of direct costs per period that we use in row 1 of our analysis table
and also the budget values of the work per period that we use in row 5 of the analy-
sis. Using these values, the rest of the table can be calculated easily on a spreadsheet
program like Excel. The use of Microsoft Project is demonstrated in the Figures
10-12 to 10-15.
We first load the CPM-ChlO.mpp file of our case study project into Microsoft
Project. Once loaded, we adjust the durations of tasks Band G as per the second
scenario. Also, we specify the four days of leveling delay for activity D. This brings
to us a 28-day duration and a schedule that does not require more than 6 Ll re-
sources. Afterwards, we activate the Cost Table from the View-Tab le-Cost menu
option.
In Figure 10-B, the Cost Table is shown and we can manually enter the Budget
value of each activity from the data in Table 10-4 to the Fixed Cost column. Auto-
matically, the Total Cost column is adjusted. Now, we need to save the schedule as our
baseline by selecting Tools-Tracking-Save Baseline menu options. We are now ready
to view Cash Flow reports associated with the saved baseline.
From the View-Reports menu option we can access various reports. We need to
select the Costs reports, and then the Cash Flow option. We can adjust the way the re-
port looks like by selecting the Edit button.
In Figure 10-15,we can set the time period for which the cash flow data is to be
viewed (shown here as three days). Accordingly, a detailed report is presented with
the cost per period calculated in the bottom row. This data can readily be used and
plotted cumulatively as the S-curve of budget values for the project.
 2 :3~'~
g ~~y~

4 osys

C eC::ly::,
H C f:t:qs.
0 j~!':s: o 9:t;3'tS
& o ;;,t~3N5
;{ 10 D !3ri~fJS

Figure 10-12. Loading Project File of Scenario 2

F~r..I:i;'J:(~ t~,j ,:;t,7:. OC::I

F!I)r:!:~!.! sS.L~J.iJ:
Prcratcti :~I,7E7.OOI'
. $P .n}~Ll1
;.!'.G~g.JC·
~18.G46.(l(
F>i~.r~~~:i
Prorete.i
$11,nn.m .
F'ur",.·, :d,075.00
$14.03B.OO!
f!I,;!;!jia!: $1B.046.00:·
1,+ I: t:::::::::t:;~~=j~Jiiil.
illxo.Dc ~",.:"r:;
.
$11,326.00 .

······'~~i,~~~t
. F';"(;r:~!j{~ ill.J2fi I)J
{:'~i::J;;i~rl'~·~1.!~)?;.m...~.. '

Figure 10-13. Input of Tasks' Cost Data

273
Figure 10-14. Viewing Cash Flow Reports

10 13 16 19 22 25 28 Total

A $1.888.50 $529.50 $0.00 $0.00 $000 so.oo $0.00 SO.OO $0.00 $000 S2.518.00
B $10.794.00 $3.598.00 $0.00 SO.OO $0.00 $0.00 $0.00 $0.00 $000 $0.00 s 14.391.00
C $5,034.00 SODa $0.00 $0.00 $0.00 $0.00 $0.00 SO.OO SO.OO $0.00 S5,034.00
D SO.OO $0.00 $2,595.88 $7.787.83 $7.787.83 $2,595.88 $0.00 $0.00 $0.00 $000 S20.767.02
E $0.00 $0.00 $0.00 SO.OO $0.00 SI1.537.50 SII,537.50 $0.00 so.oo SO.OO ~;23.075.oo
F $0.00 S3,524.80 S5,288.90 $5,288.90 S3.5248O $0.00 SO.OO $0.00 $0.00 SOOO ~;17,623.00
G $0.00 $2,09114 S3,138.71 S3,138.71 $3,138.71 $3,138.71 $0.00 $0.00 $0.00 $0.00 ~;14,637.98
H $0.00 $0.00 $0.00 $0.00 $2,330.75 $5,992.25 $5,992.25 52,33075 $0.00 $0.00 s 18,848.00
1 So.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 S3,775.23 S5,883.00 s 1.88787 ~;11.328.00
$1.887.67 $5,663.00 S3,77533 $0.00 $0.00 SO.OO SO.OO SO.OO SO.OO so.oo ~;11,326.00
K $0.00 $0.00 $0.00 $0.00 SO.OO SOOO $2.737.80 $2.737.80 $2,737.80 S91280 $9.128.00

Total SI9,804.17 515,50824 S14,794.82 $18,211.24 $16,779.89 S24,282.34 S21,267.55 S8,84388 $8,40080 S2.8OO27 $148.471.00

Figure 10-15. Viewing Cash Flow Reports

274
 PROJECT FI)\,'ANCI)\,'G AND SCHEDULE INTEGRATION 275

10.7 Using Primavera P3

Similar to Microsoft Project, there is no direct way to perform overdraft analysis on
Prima vera P3. However, we can manipulate the software to determine the cumulative
costs, which can then be transferred to Excel or other software to perform overdraft
calculations. To use the P3 program, we follow the steps in Figures 10-16 to 10-20.

Figure 10-16. Input

of Project Data

First we input the

activity names,
durations, and
relationships. The
durations correspond
to the project crashing
decisions. We then
specify a delay of four
days to the start of
activity D. From the
activity details
window, we select the
Constr tab to specify
the delay as a start
constraint. Once done,
we schedule the
project using the
Schedule button.

Figure 10-17.
Specifying a Cost
Code

Before entering costs

for the activities, we
need to add a
Resource Code called
Cash. We access that
screen from the Data-
Resources menu
option.
Figure 10-18. Entering Activities' Budgeted Costs

We now can start entering the budgeted cost for the activities. First the cost form is activated by a right click on any of
the activities and selecting the Activity Detail-Cost option. Now we select the activities one by one, add the Cash
resource and assign a value for its budgeted cost (from last column in Table 10--4). Once done, we need to reschedule the
project again using the Schedule toolbar button.

Figure 10-19. Preparing for Cash Flow Reports

From the Tools menu, we can access the many graphical reports on resources and costs. Let's add a new report and
specify its options as shown.
 PROJECT FINANCING AND SCHEDULE INTEGRATION 277

Figure 10-20. Cash

160

.>
Flow Graph

After selecting the EARLY

140

report options, the

report shows the S- 120

/
curve of budgeted
costs as shown here.
100

80

60

/
40

20

o
.:
AUG
1
AUG
s
AUG
5
AUG
7
AUG
9
AUG
11
AUG
13
AUG
15
AUG
17
AUG
19
AUG
21
AUG
23
AUG
25
AUG
27
AUG
29
AUG
31
SEP
2
SEP
4
SEP
6
SEP
8

10.8 Back to Our Case Study Project

We now come to the last step of planning. We will try to optimize our schedule con-
sidering all project constraints related to time, cost, and resources together. Accord-
ingly, we will have our bid proposal ready for submission.
Now that we have discussed the various financing options and the overdraft cal-
culations, let's incorporate that into our spreadsheet model so that we can experiment
with all the scheduling options in a transparent way. Let's now load the spreadsheet
model of our case study project (the Case-Study.xls file). This file works as a template
that we can use for other projects. The Schedule sheet is fairly simple and versatile. In
the next few figures, let's see how the large Schedule sheet can be used.

- Resources, WBS, OBS, &

Construction Methods
(Chapters 3 & 4)

- Scheduling
(Chapters 5 & 6)

- Resource Constraints
(Chapter 7)

- Time Constraints (Chapter 8)

- Cash Flow Constraints (Chapter 10) Excel Model

- Actual Progress Data (Chapter 11) (Chapter 10)
278 I CHAPTER 10

Some of the characteristics of the Schedule Sheet in Figure 10-21 are:

• The figure shows the solution of the second financing scenario of this chapter.
Using the top two buttons, the Schedule sheet was automatically set up with
the activities' data linked by formulas to the Estimate sheet, including three
methods of construction and amounts of three key resources.
• The Schedule sheet is set up to allow you to distribute the total indirect cost
among the various activities.
• Column AC, Balanced Indirect Cost, has formulas to automatically distribute
the total indirect costs proportional to the activities' direct costs.
• Column AF is a user input of any adjustment (% of total indirect cost) positive
or negative to cause bid unbalancing. Accordingly, the total indirect costs of
the tasks are calculated by formulas in column AI and the total budget values
(direct + indirect + markup) are calculated in column AJ.
• Cash flow calculations are set up underneath the bar chart of the project. For-
mulas are included to calculate the daily expenses and all other details of the
cumulative expenses (S-curve), owner payments, and overdraft amounts at
each time period, based on user inputs of the cash flow variable.
• Cash flow curves are plotted automatically, based on the values input by the
user.
• The Estimate sheet has formulas to transfer the scheduled start times of the ac-
tivities to the estimate and as such, season-based productivity factors are ap-
plied to activities' durations and costs (Figure 10-22).
• Any changes to the methods of construction, activity delays, adjustment
amounts, financing options, resource data, project deadline, or any activity
data, will automatically reflect on the total project duration and cost. As such,
you can easily experiment with any combination of variables and examine the
result. We can also use Evolver to try minimizing total project cost under con-
straints.

10.8.1 Cash Flow Optimization

With our Case-Study.xls file being so flexible, we can attempt to do one more refine-
ment to the schedule in an attempt to optimize financing cost or the overdraft
amount. Here, we will assume that other optimization experiments have taken place
and accordingly the activities' delay values and methods of construction are set to
meet the project deadline and resource limits. We then need not tamper with these
values. Instead we will try the following:

• Objective is to minimize overdraft money (finance money, cell AC33).

• Variables are the activities' adjustment values (column AF), which lead to an
increase or a decrease in the unit cost of the activities.
• The concept is to assign high positive adjustment percentages to the activities
that are early in the schedule and high negative percentage to the ones that are
late in the schedule. As such, total bid is not changed but our invoices to the
owner are higher early in the project to facilitate financing.
• We need to be careful with this bid unbalancing process so that our unit prices
are still within the practical range acceptable to owners. Therefore, a con-
straint on the maximum adjustment percentage can be assigned.
• Total of the adjustment values have to add up to zero.
For demonstration purposes, let's now apply this optimization experiment on
our case study, as shown in Figures 10-23 to 10-25.
 Delays used for
Methods of
resource allocation
construction
and leveling
used for
Time-Cost
Trade-Off
analysis
Adjustments used
for bid un balancing

: : ;
.......... -~... . : ~... Daily d:rect expens~'~"~"
$5:500Tss:5iiO~$5:i6?
: Direct Expense I Period :
.......-:::9(~~~1::~:~p' .:
;y:~~:PP.ii~~~::~~~~tiL~~~ii!: ':::::::::'';'::: .
-'---
r .... ·V~i.m ...,... .. ; Da"yl.~.~;'.~."E.'f".'"'~)... ~500 $500 ..$.500 .

~~~.?~.~
..
..; !.. . j- . ;..!r!Qj~~!.~~~n~~.!.p.~.~!?9
..;
'l::"':'::---~:~'~...
..~ __
~~·§Ufal~1f:~~<~~~~~~+;·¥":yqJ
-;$~;'~ti.'{_;::ssJ6'Q1..r·$ii'53ii
. "i
.....1.._
.i...Cash .,·F1.oW· ..l..
;qt~~!::h!Mir~~].!:}!-!~.9~u.~~y..l..~~~.?~ ~.?,.~~:1.
.
.Ql~~\t.r~.i:~:!:~~:~~,::~.~e::~j'..
"CaiqutatiQns' . :~.:.::::: ..:::;:::.
~~.-.- - - ~
~~
.
::u:nd"erneattt::: :
. Ca~h~f-'~w ]he.::bat::c.f:iai:t..'········· ·.·.·.·.·.7.·....•••..•••••.•.....•. - !,:....................•.',; .
9m!~<;If~~?I.l~~!P.!'!~.~.i.
·.-_;
.••••.

___
C_lJrV~$__.
..···~·O!~m~E.~,.~U(').<
.
. .. ;.. . ~\6~;F~;ji~i~~:~f~'Jyr:·~C:r.200Yi¥
:~2if~~:i~:~9ff~·t"2tr~~'
.. , ; ~ 9:\1(.v~;ili.~i('r;;;~.;.!:,'iv.t.~;l.\.i ··· t • •••• • •• •• •• t •• • •
··.:daSh~F.iOwi. .. i.. .- ~~.~.:kfFr~:.I;t~2n~DE:
! ·..···..···..l.. _·.·.·.·.·.·.·.·.·f:t~iftN!ii~~;~£r~~:Jl~·~~:?:Q~~t .
..! ! ! .
:p,arafflelets!: -
Time (dayS)

Costs '''~.,. Owner Payments

.. j ... •••• ~ •.•••••••••. 1'"

...... :.. ..i..

SclWdute

Figure 10-21. Overall Schedule Sheet for Financing Scenario 2

279
 -
I t,H> 'I
M1?

Q' ~tlum2 Q2 N •••hodJ

.;0(1)0

.~OOon MrO HClCi)

.scoe
1~((I.UO

5000[
!Y'J,H. 50.00
N'\d:> tOO Md 10 HO t·id.·
1.~O ~i<j 1"3 I.CO Md ••

)I'd IS I:CO
ytlle I.C.O
W.<l.11 I.CO MdlS

Figure 10-22. Link from the Schedule Sheet Back to the Estimate Sheet

Variables

} ... "</it'cr~
I

Objective Function
Figure 10-23. Preparation for Cash Flow Optimization

Notice here that in our manual bid unbalancing that we discussed earlier, the resulting maximum overdraft amount is
$57,444.

280
 PROJECT FINANCING AND SCHEDULE INTEGRATION 281

Figure 10-24.
Solver Screen with
Optimization Setup

Constraints are:
Adjustment
percentages are
limited to within
::'::5%;and total of all
adjustments = zero.

Figure 10-25. Cash Flow Optimization Result

Solver found an optimum solution with maximum overdraft amount of $55,487.This experiment shows that
Solver can work easily for this problem. For consistency with the manual solution, however, in our case study
we will adopt the schedule in Figure 10-23.

10.8.2 Using the Excel Template on Other Projects

The Case-Study.xls file works as a generalized model for resource data storage, esti-
mating, scheduling, cash flow analysis, bidding, and project control. All elements of
the schedule are variables that you can change, and its immediate effect on total proj-
ect duration and cost is instantly shown. This sheet, as such, becomes a generalized
model on which you can experiment with project cost optimization, under any set of
constraints and variables. Later, in Chapter 11, we will continue using the template
for progress evaluation and control during construction.
282 I CHAPTER 10

To use the file for a new project, we need to do the following:

• Use the File-Save As menu option of Excel to create a copy of the Case-
Study.xls file to be used in the new project.
• Use the Reset button on the Schedule sheet to remove the data from the Sched-
ule sheet.
• Follow the steps we used in creating our case study, starting from Chapter 3.
• First, the project team should finanlize their initial planning effort, as dis-
cussed in Chapters 3 and 4: project Work Breakdown Structure, three possible
methods of construction for each activity, resource requirements for each
method of construction, and the logical relationships between activities.
• Before we add project information to the template, you may add resource cat-
egories in the appropriate sheets (labor, material, etc) related to the project at
hand. One essential step to keep in mind here is that activities are defined with
methods of construction that need to be defined in the Methods sheet.
• We then proceed to the Estimate sheet, and we may overwrite existing data or
remove some of the old rows that do not relate to the current project. Keep at
least one row so that you can copy it and paste it to new rows with all formu-
las copied automatically.
• In the Estimate sheet, use one row to enter each project activity. For each ac-
tivity, we specify the WBS information and we define the codes of three pos-
sible methods of constructing the activity (if these methods do not exist yet in
the Methods sheet, you need to go back and add them. Make it a habit to use
method 1 as the cheapest and method 3 as the most expensive. You may use a
simple strategy to generate your three methods of construction: method 1
with normal working conditions, method 2 with overtime hours, and method
3 using a hired subcontractor. On top of the Estimate sheet, remember to de-
fine the codes for three of our key resources. Once done, we need to export
their data to Microsoft Project using the Send Data to MS Project to Specify
Relationships button on the Estimate sheet so that we easily define the logi-
cal relationships;
• In Microsoft Project, we can add the activities' logical relationships in a sim-
ple and user-friendly manner. We can then utilize the software's resource-
leveling features so that we determine an initial solution before we export it
back to the Schedule sheet of the Excel template.
• We then move to the Schedule sheet and use the first two buttons to set up the
sheet. You will find all instructions written on the sheet for your quick refer-
ence. We use Button 1 to set up the schedule sheet according to the data in the
Estimate sheet. After that, we use Button 2 to load the logical relationships
from the Microsoft Project file. Afterwards, we can specify the deadline, indi-
rect cost, and cash flow variables. During the sheet setup process, links are es-
tablished from the Schedule sheet back to the Estimate sheet so that costs are
modified depending on the time of year the activity is scheduled.
• Remember to estimate the project indirect cost using the Indirect.xIs file and
also to estimate the markup value to use in the project using the Bidding.xIs
file. These values are used as important parameters in schedule refinement.
• Once done, the model becomes ready for optimization. Similar to our discus-
sion in this chapter and previous ones, the total cost becomes your objective
function to minimize. Using a Genetic Optimization tool, you can specify the
constraints and proceed with the optimization. A summary of the optimiza-
tion experiments that you can conduct is given in the next section.
• Once a satisfactory project schedule is determined, you can proceed to the Re-
ports sheet, refresh the pivot table data from the Pivot-Table toolbar and au-
tomatically a bid proposal form becomes ready for submission.
• If you successfully win the project, you can use the Progress sheet to enter ac-
tual performance data and then monitor the project progress during con-
 PROJECT FINANCING AND SCHEDULE INTEGRATION I 283

struction (discussed in Chapter 11).Accordingly, cost control curves will ad-

just automatically.
• At any time, you may send the plan (and optionally actual progress data) to
Microsoft Project (using Button 3) to utilize its powerful graphics and other
project control features.
• It is noted that if you introduce changes to the number of activities in the proj-
ect (has to be done in the Estimate sheet), you need to reset the schedule sheet
using the fourth button. This will remove all data from the Schedule and
Progress sheets, then you can repeat the process to adjust the template ac-
cording to the new activities in the project.

10.8.3. Summary of Schedule Optimization Experiments

Table 10-6. Summary of Optimization Experiments

If You Want to: Optimization Setup

Resolve resource Objective function: minimize project duration

constraints
Variables: values in the "delay" column

Initial variable values: delay values imported from Microsoft Project

Constraints: delay range (e.g" integers 0-5);

daily resources <= maximum available (hard)
sum of delays = minimum (soft).

Resolve resource Objective function: minimize project duration

constraints, reduce daily
fluctuation, and release Variables: values in the "delay" column
some resources early
Initial variable values: delay values imported from Microsoft Project

Constraints: delay range (e.q. integers 0-5);

daily resources ™ = maximum available (hard);
sum of delays = minimum (soft);
(optional) moment Mx = minimum (soft);
(optional) moment My = minimum (soft),

Meet deadline duration Objective function: minimize total project cost

Variables: the "Method Variable" column

Initial variable values: index to the shortest construction method

Constraints: variables range (integers 1-3);

project duration < = deadline (hard),

Resolve resource Objective function: minimize total project cost

constraints and meet
deadline duration Variables: "Delay" and "Method Variable" columns

Initial variable values: zero delays and shortest methods

Constraints: delay range (e,g" integers 0-5);

Method variables (integers 1-3);
Project duration < = deadline (hard);
daily resources <= maximum available (soft);
sum of delays = minimum (soft),
284 I CHAPTER 10

Table 10-6. Summary of Optimization Experiments (continued)

If You Want to: Optimization Setup

Resolve resource Objective function: minimize total project cost

constraints, meet deadline
duration, reduce daily Variables: "Delay" and "Method Variable" columns
fluctuation, and release Initial variable values: zero delays and shortest methods
some resources early
Constraints: delay range (e.g., integers 0-5);
method variables (integers 1-3);
project duration <= deadline (hard);
daily resources < = maximum available (soft);
sum of delays = minimum (soft);
(optional) moment M, = minimum (soft);
(optional) moment My = minimum (soft).

Optimize cash flow Objective function: minimize overdraft money (usually applied after
one of the top experiments)
Variables: activities' adjustment column AF;

Initial variable values: zeroes

Constraints: adjustment range (integers -5 to +5);

sum of the adjustment values = 0 (hard).

Optimize all aspects Objective function: minimize total project cost

together: resources.
deadline, and cash flow Variables: "Delay" column. "Method Variable" column,
and activities' adjustment column AF
Initial variable values: zero delays, shortest methods, & zero adjustment

Constraints: delay range (e.g .. integers 0-5);

method variables (integers 1-3);
adjustment range (integers -5 to +5);
project duration < = deadline (hard);
daily resources < = maximum available (soft);
sum of delays = minimum (soft);
(optional) moment M, = minimum (soft);
(optional) moment My = minimum (soft);
sum of the adjustment values = 0 (hard).

10.8.4 Finalizing Our Bid Proposal

Now, after we completed all planning and estimating steps and refined the schedule
to account for resource constraints, deadline, and cash flow requirements, we can use
the Reports sheet to show various important reports (Figure 10-26). The figure shows
the three automated reports available. One important step is that we need to refresh
the data in each report by selecting each report and selecting the Refresh button on
the Pivot Table toolbar. The three reports are as follows:
a. A pivot table report of the bid proposal associated with the finalized plan. The
report (Figure 10-26) shows the unit prices associated with the work items in
the project, to be submitted to the owner.
 PROJECT FINANCING AND SCHEDULE INTEGRATION 285

Useful Pivot Table reports.

{c} Methods of CQO$t~uction Report.

rim(~,.,••..:.:::::::
...
::..:..:::::.:. It

Figure 10-26 Automated Project Reports

b. A pivot table that summarizes the costs associated with the work break-
down structure items and the organization breakdown structure items of
the project. In Figure 10-26, for example, the report shows the total budget
of the Civil-Superstructure work supervised by Hosam as $22,656. Using
this report, you can select the WBS and OBS levels you would like to have a
report on.
c. A pivot table report on the time-cost relationships among the three methods
of construction for any activity that you select in the report.

10.9 Summary
The flow of money from the owner to the contractor is in the form of progress pay-
ments. Estimates of work completed are made by the contractors periodically (usu-
ally monthly), and are verified by the owner's representative. Depending on the type
of contract (e.g., lump sum, unit price, ctc.), these estimates are based on evaluations
of the percentage of total contract completion or actual field measurements of quan-
tities placed. Owners usually retain 10% of all validated progress payment claims
submitted by contractors. The accumulated retainage payments are usually paid to
the contractor with the last payment.
Various options are available to the contractor to improve project financing, in-
cluding: 1) realistic bid unbalancing; 2) subcontracting; and 3) owner mobilization
payment. With project financing being costly to contractors, a scheduling model on
Excel has been developed to allow us to optimize the schedule considering all our
project management needs.
286 I CHAPTER 10

10.10 Bibliography
Eldosouky, A. 1., Elsaid, M., and Torna, H. M. (1997, July). Proposed model for pre-
diction of contract cash flow, Alexandria Engineering Journal 36, No. 4, July
pp. C353-C364.
Halpin. D., and Woodhead, R (1998). Construction Management, 2nd ed. New York:
John Wiley & Sons.
KaKa, A., and Price, A. (1991). Net Cashflow Models: Are They Reliable? Construction
Management and Economics, Vol. 9, E. & F.N. Spon Ltd., UK.
Navon, R (1996). Company-Level Cash-Flow Management, Journal of Construction
Engineering and Management 122, No. 1, ASCE, pp. 22-29.
Padman, K, Smith-Daniels., D.E., and Smith-Daniels, V.L. (1997). Heuristic Scheduling
of Resource-Constrained Projects with Cash Flows, Naval Research Logistics, 44,. No. 4,
New York: John Wiley & Sons, pp. 365-381.
Singh, 5., and Lokanathan, G. (1992). Computer-Based Cash-Flow Model, Transac-
tions of the American Association of Cost Engineers, Proceedings of the 36th Annual
Transactions of the American Association of Cost Engineers, 2, AACE, pp. R.5.1-R5.1
Stark, R, and Mayer, R. (1983). Quantitative Construction Management. New York: John
Wiley & Sons.

10.11 Exercises
1. The following table shows a contractor's project budget and profit for a new con-
tract:

Month Number 1 2 3 4 5 6 7 8 9 10

Value of work each

month ex $1000) 2 3 4 8 9 9 8 5 4 2
% Profit charged 6 6 6 6 6 6 6 10 10 10

Measurements are made monthly with payment delay of one month and 10%
retention. Half the retention is paid on completion and the other half is released six
months after completion. Draw the cumulative income and expense curves and de-
termine the monthly net cash flow. Interest rate is 1% per period.
2. The data of a small project are as follows. The indirect cost for this contract is
$250/week. Determine the schedule timing of the activities so that the weekly
cost of the contract will not exceed $750/week.

Activity Predecessors Duration (week) Cost ($)

A 7 1400
B 9 4500
C A 8 2400
D B 12 1200
E C,D 4 800
F B 9 2700
G F 7 2100
H E,G 7 4900
 PROJECT FINANCING AND SCHEDULE INTEGRATION I 287

3. The table below lists the cumulative monthly expenses incurred by a contractor
and the corresponding monthly payments received from the owner of a project.
Calculate the cost to the contractor of providing the working capital necessary to
finance the project if interest rate is 10%. If the owner makes his payments one
month later than anticipated in the table, by what percentage will the financial
charge increase?
End of Month Cumulative Expense ($ x 1000) CumUlative Income ($ x 1000)
o 0 o
1 12 o
2 20 o
3 54 o
4 90 14
5 130 40
6 180 100
7 220 130
8 240 190
9 260 210
10 290 300
11 290 320
12 290 340

4. Briefly discuss the factors that minimize the contractor's negative cash flow re-
quired to execute a construction contract.
5. The activities involved in the construction of a small building are given below.
The price of the work contained in each activity is listed in the table. The con-
tractor undertaking this project would like you to prepare graphs of cumulative
expense and income to date against time for activities starting as early as possi-
ble. The markup is 10%of tender value and retention is 5%.Measurement is made
monthly with a payment delay of one month. The retention is paid at the end of
the contract. To simplify the calculations you may assume that all costs must be
paid by the end of the month in which they are incurred. What is the maximum
amount of cash the contractor needs to execute this contract and when does he re~
quire this amount?
No. Activity Duration (months) Predecessors Overlap Value ($)

10 Excavation 2 9,000
20 Concrete bases 3 10 12,000
30 Erect frames 1.5 20 18,000
40 Concrete floor slab 1 20 15,000
50 Fixcladding 1.5 30 6,000
60 Install plant 1 40,50 20,000

6. A simplified project is shown in the following figure. The direct costs associated
with the individual activities are shown above the bars. It is assumed that project
indirect cost will amount to $5,000 monthly. The contractor included a profit
mark-up of $10,000to his bid so that the total bid price was $210,000.The owner
retains 10%of all validated progress payments until one half of the contract value
(i.e., $105,000).The progress payments will be billed at the end of the month and
the owner will transfer the billed amount minus any retains to the contractor's ac-
count 30 days later. Determine the expenses and income profile of this project.
288 CHAPTER 10

Activity
A

c
o Time

7. A contractor's expected monthly cost (direct plus indirect) is shown in the fol-
lowing table. Find the highest amount of cash he or she needs and the month in
which this amount is required. Contract conditions are as follows:
• The contractor adds a markup of 8% to the total cost before submitting an in-
voice.
• Owner retention is 10%of the requested amount.
• Average delay between a request for payment and making the payment is one
month.
• A mobilization payment (20%of total contract value) is paid to the contractor
and will be deducted from the first two owner payments (50% each).
• Bank interest rate is 14%per annum.

End of Month 0 2 3 4 5 6 7 8 9 10

Direct Cost 2400 2400 3400 5400 5400 7400 5400 3400 1400
Indirect Cost 600 600 600 600 600 600 600 600 600

8. Answer question 7 under the following changes in contract conditions:

• Half of the monthly direct costs shown in the table are credit given by suppli-
ers who agreed to get their money one month after credit is made.
• There is no mobilization payment.
 CONSTRUCTION
PROGRESS CONTROL

After studying this chapter, you will be able to:

• Understand the basics of project control and how to bring success to con-
struction.
• Learn the site measurements needed to evaluate actual construction
progress.
• Compare actual versus planned progress of work using the Earned Value tech-
nique.
• Determine schedule updating needs and the impact of changes.
• Forecast the actual cost at project completion based on the actual progress of
work.
• Experiment with various software tools for project control.
• Understand the basis of the critical chain concept for project control.

Need
• Feasibility • Conceptual Design
• Project • Owner Approval
Definition Prepare Bid Proposal + Baselines
• Soil Reports • Collect Data (site. quantities.
• Owner • Preliminary Design
Approval specs. resources. tasks. etc)
• Detailed Design • Planning • Start Construction
• Quantities • Time & Cost Estimation Detailed Planning. • O&M :
• Work Documents • Scheduling Estimating & Resource • Demolition :
• Select Project • Resource Management: Management
at End of
Contract Strategy Adjustments for Resource Con- SeNice Life
straints & Deadline
Bidding Strategy & Markup
Estimation
• Cash Flow Analysis
• Submit Bid

289
290 I CHAPTER 11

11.1 Preparing for the Big Challenge: Construction

ill the previous chapters, you have learned various techniques for scheduling and re-

source management so that your bid proposal is both competitive and realistic. In this
chapter, we will assume the role of the contractor who won the job and is in the
process of bringing the plan into action during construction. Before we embark on ac-
tual construction, however, let's look at the global picture and formulate reasonable
expectations of the construction environment so that we can be more prepared to deal
with its challenges.

11.1.1 Problems during Construction

Anyone who is involved in the construction business will be able to recognize vari-
ous common factors in almost all projects:
• Construction is a dusty, dirty, and multifaceted operation. Material is deliv-
ered daily at the same time that tens to hundreds of workers must come to-
gether to complete their assignments. As construction proceeds, the site be-
comes congested.
• Despite the fact that the estimate and plans were made with a large factor of
safety in each and every task, many activities consume more than their esti-
mated time and cost. This is because trades tend to delay their start to the last
minute, thus wasting float time (referred to as student syndrome).
• Even if one crew or trade works in a more productive way and finishes its
work early, the following trades are not obliged to start earlier than initially
planned. Thus, earlier work is not reflected on the project. Rather, the more
productive crew may be penalized by cutting its estimates on new projects or
even getting it dowsized.
• During construction, frequent changes are introduced to the scope of work,
thus causing a lot of work disruption and cost overrun.
• In the midst of the work, some trades proceed slower than desired whereas
others proceed faster than desired, and in both cases, delays occur.
• Dealing with suppliers and subcontractors also may not be easy.
11.1.2 Objectives of Project Control
During construction, our objective is to make sure that we execute the project as
smoothly as possible so that the planned level of profit can be attained. This means
we need to:
• Accurately follow the project plan.
• Update the project plan based on new circumstances.
• Monitor actual site execution and keep track of resources.
• Provide detailed progress reports, comparing actual versus planned progress.
• At any stage during construction, forecast the cost at completion.
• Take corrective actions at any stage to bring time and cost closer to the plan.
We can divide these responsibilities into four main aspects, as shown in Figure
11-1. Each of these is dealt with in a separate subsection.

Figure 11-1.
Elements of Project
Control
 CONSTRUCTION PROGRESS CONTROL I 291

11.2 Measuring Work Progress

During the course of construction, the individuals executing it must periodically re-
port the progress on each activity. Because the nature of each activity varies, no sin-
gle reporting method is suitable and several methods of measuring progress are re-
quired. The convenient measure of the work progress of each activity is in terms of
the percentage of work done each day or within a given period, referred to as its per-
cent complete.

11.2.1 Calculating Activities' Percent Complete

The most common six methods for calculating the activities' percent complete based
on actual progress on site are presented as follows:
1. Units Completed: Applies to activities that involve repeated production of
easily measured units of work (e.g., pile driving).
% Complete = Units Completed / Total Units

2. Incremental Milestone: Applies to activities that include sub tasks that must
be handled in sequence. Each milestone is assigned a certain percentage as a
rule of credit.
For example, Installation of Major Equipment:
Receive & Inspect 15%
Setting Complete 35%
Alignment Complete 50%
Internals Installed 75%
Testing Complete 90%
Accepted by Owner 100%

3. StartJFinish: Applies to activities that lack readily definable intermediate

milestones or those for which the effort/time is difficult to estimate (e.g.,
planning activities). A percent complete is arbitrarily assigned to the start of
a task, and 100%is recorded when the task is finished. The start and finish
percentages are assigned depending on the duration and value of the activ-
ity, as shown here.

Duration

Value

4. Supervisor Opinion: Applies to minor activities and requires the subjective

judgment of supervisors. Examples are dewatering, temporary construction,
and landscaping.
5. Cost Ratio: Applies to activities that are budgeted based on a bulk allocation
of dollars and involve a long time or are continuous during the life of a proj-
ect (e.g., project management, quality assurance, and project controls).
% Complete = Actual Cost (or hrs) of Work to Date
Forecast at Completion
292 I CHAPTER 11

6. Weighed or Equivalent Units: Applies to activities that are composed of

two or more overlapping subtasks, each with a different unit of work meas-
urement. In essence, all the elements are converted into an equivalent
amount of a unified measurement unit. In the following example, a struc-
tural steel with a total weight of 520 tons is used as an example. All sub-
tasks are converted into their equivalent steel tons as a unified meaE·ure-
ment unit.

Example: Structural Steel Erection

Weight (1) Total Quantity Eamed

cost/total Subtask Unit Quantity (2) to Date (3) Tonls(4)

0.02 Run Found, Bolts Each 200 200 10.4

0,02 Shim % 100 100 10.4
0.05 Shakeout % 100 100 :26
0.06 Columns Each 84 74 27.5
0.11 Beams Each 859 45 3
010 Cross Braces Each 837 0 0
0,20 Girts & Sag Rods Each 38 0 0
0.09 Plumb & Align % 100 5 2,3
0,30 Connections Each 2977 74 3.9
005 Punch List % 100 0 0

Total Steel Tons = 520 83.5

Earned Tons to Date (4) Quantity to Date (3)

X Weight (1) X Total Steel Tons
. Total Quantity (2)
c... 74/84 X 0.06 X 520 = 27.5Tons; and
O/'. Complete = ~ Earned Tons
Total Steel Tons
= 83.5/520 = 16.1%

11.2.2 Calculating the Project's Percent Complete

It is possible to measure the work progress done on a daily basis within each activity
based on daily site reports. For the purpose of reporting to management and for sub-
mitting invoices to owners, progress is calculated at prespecified intervals (e.g.,
monthly). The end-of-period report can be easily obtained by accumulating the total
percent complete in each activity for all work performed within the period.
Based on the activities' percentage complete, we can calculate the overall project
percent complete, the budget value of the work done, and other information related
to progress payments. The relationship between the individual activities' percent
complete and the overall project percent complete can be illustrated in the following
example.

The planned versus actual bar charts of a completed project are shown in Fig-
ure 11-2. Each week, the planned amount of work is prorated according to
the activity duration. The actual progress, however, is shown as percent com-
plete done within each period (week) on the actual bar chart.
 CONSTRUCTION PROGRESS CONTROL I 293

Figure 11-2.
Planned versus
Actual Bar Charts
.4••lfllif.t'.'I,'I1••
A $30,000
lOo/~
,
•• a_.~ii
_I1tli_1"".ill~~
,"'·'-'"·1.""'::····
40o/~
'"" ....
,
p'....'
40%:
I
10%
,
B $20,000 ! cl
70% 30%

c $10,000
40% 60%:

D $40,000 ;'''''T::7T''''''t~'~''CF']
40~/o 60%:
Total $100,000 2 3 4 5 Week No.

~iC:J '" Planned SU4! •• = Actual

a. Calculate the planned versus actual percent complete at the end of each
week and draw the budget S-curves of planned versus actual progress.
b. Compare the actual versus planned progress of the project by end of week 4.
c. Calculate the Earned Value (i.e., the budgeted cost of the actual work) in
the second period.
Solution
a. To calculate the percent complete, we proceed as follows:
• We deal with planned separately from actual progress.
• The planned percent complete at the end of each week is prorated with ac-
tivity duration.
• If you add the weekly percent completes of each activity in Figure 11-2,
they add up to 100%. These percentages then are written cumulatively, as
shown in Table 11-1.
• We calculate the weight of each activity as the activity's total budget in pro-
portion to the total project budget.
• Now, we calculate the project percent complete at the end of each week
(planned separately from actual), using the numbers in Table 11-1, as fol-
lows:

Project percent complete at any date

= 2:" Cumulative
i~l
percent complete to date; x Weight;

Where, i = activity number 1,2, ... n.

For example, Actual project percent complete at end of week 2 = 0.50 X 0.3
(A) + 0.70 X 0.2 (B) + 0 X 0.1 (C) + 0 x 0.4 (D) = 0.29 = 29%
Following that, the project percent complete in all weeks is calculated as
shown in Table 11-2.

• Interpretation:
Notice that the project proceeded in week 1 slower than
planned but managed to get closer to planned in the following periods.
• Now, we can plot the S-curves (Figure 11-3) based on the data in Table 11-2.
b. By the end of week 4, planned progress (project percent complete) is 77.5%
as compared to the actual percent complete of 76%.
c. The actual work done in the second period, as shown in Figure 11-2, is 40%
of activity A and 70% of activity B. With (n) activities in the project,
294 I CHAPTER 11

Table 11-1. Cumulative Percent Complete in the Individual Activities

Cumulative Percent Complete at End of Week No.

Task Budget Weight 2 3 4 5

Plan 0.333 0.666 1.0 1.0 1.0

A $30,000 30%*
0.5
Actual 0.1 0.9 1.0 1.0

Plan 0.25 0.75 1.0 1.0 1.0

B $20,000 20% 0.7 1.0
Actual 1.0 1.0
----
1.0
Plan 0.25 0.75
C $10,000 10% 1.0
Actual 0.4 1.0

Plan 0.5 1.0

D $40,000 40%
Actual 0.4 1.0

* Activity weight = Activity cost / Total project cost

Table 11-2. Project Percent Complete

Project Percent Complete at End of Week No.

1 2 3 4 5

Plan 0.15 0.35 0.525 0.775 1.0

Project Percent Complete: 0.29 0.76
Actual 003 0.51 1.0

Figure 11-3. 100% 120.000

Planned versus
Actual Progress 100,000
80%

Q) 80,000
+"
Q)
60% - ~
Ci m
E 60,000 Cl
0 '0
o 40% ::J
~ III
0 40,000

20% . ~- - - . ,-"- -- 20,000

"
0% +---~~~~-----+------4-------~-----+
0
2 3 4 5 Week No.

-- Plan - --<>- - Actual

In General, Earned Value = Actual Percent Complete X Budget.

Thus, at the project level with n activities:
Earned Value = Budget of Actual Work

= f Actual Percent Complete;

i=l
x Budget;

Now, Earned Value at end of period 2 = 0.4 X $30,000 + 0.7 x $20,000

= $26,000
Another way to calculate this budget value is from the cumulative project
progress in Table 11-2 and Figure 11-3, as follows:
Earned Value in period 2 only = (0.29 - 0.03) X $100,000 = $26,000
 CONSTRUCTlON PROGRESS CONTROL I 295

11.3 Cost and Schedule Control

The concepts discussed thus far provide a system for determining the percent com-
plete of a single activity or a project as a whole. The next challenge is to analyze the
results and to determine how well things are proceeding according to plan through a
control system. Along the project, various reports should be prepared to determine
those activities where expenses are excessive or delays are bound to occur. The objec-
tives of a control system are:
1. To draw immediate attention to any activity that is proving to be uneco-
nomic to the contractor, in order that corrective action can be taken to keep
cost within acceptable bounds;
2, To analyze the construction progress in every period and determine how
well things are proceeding according to the plan; and
3. To develop actual production rates of labor and equipment and actual per-
centages of material wastage to feedback estimating of future works.
The various techniques used for cost and schedule control are described in the fol-
lowing subsections. .

11.3.1 S-Curve Method

In this method, we use the same calculations presented in Section 11.2.2 for compar-
ing the actual versus the planned S-curves. However, the planned S-curve can be plot-
ted as an envelope bounded by the early-start S-curve and the late-start S-curve, as
shown in Figure 11-4. The shape and the width of the project's time-cost envelope will
depend upon the relative amount of float each activity in the network has. Basically,
a wide envelope indicates more flexibility than a narrow envelope.
Notice in Figure 11-4 that we compare actual expenditures to the planned costs
(direct + indirect), not the budget. Also, it is possible draw an S-curve that is average
of the early-start and the late-start S-curves and then use these curves for decision
making. For example, if at any reporting period, the actual cost point is above the av-
erage S-curve, then we can assume that we have additional project expenses. One of
the drawbacks of this method, however, is that it does not tell us if these extra ex-
penses are caused by a fast execution of more work items than planned or simply be-
cause of higher unit rates paid to execute less work than planned. Therefore, while we
can tell that the project exhibits a cost overrun, we have no indication on the amount
of work for which these expenses were incurred.

Figul'e 11-4. Project Direct + indirect

Time-Cost Envelope costs 100%

Time
296 I CHAPTER 11

11.3.2 Double S-Curve Method

To circumvent the drawback in the S-curve approach, a double S-curve approach can
be used. In this approach, we plot actual versus planned costs (left-side y-axis) on the
same plot with actual versus planned hours needed for the execution of the project
(right-side y-axis). as shown in Figure 11-5.
In this case, we can not only view the cost progress but also the work hours (in-
dicating the amount of work done). While the double S-curve approach is useful, par-
ticularly for projects in which a detailed estimate of the planned work hours is avail-
able (e.g., schedule of rates contracts), reading the progress from this plot can be
misleading and requires extra care. For example, at time" ow" in Figure 11-5, it is
possible to read the project as follows:
• The project exhibits a cost overrun equal to the distance between points "E"
and "e."
• The project exhibits a slow work progress (schedule delay) indicated by the
distance between points A and a.
Based on these progress evaluations, it is possible to conclude that the amount of
cost overrun and the delay are not excessive and can be recovered in the remaining
time till completion. However, this is a misleading picture of project performance and
the reason is as follows:
• Point A shows the level of work done till time "Now";
• Using a horizontal line, point B shows the time at which the current level of
work was supposed to be completed;
• Using a vertical line from point 8, point C is the level of planned cost that cor-
respond to the amount of work done;
• Using a horizontal line from point C, point 0 is the planned cost for the work
done at time "Now"; and
• Recalculating the cost overrun of the project based on the amount of work
done at time "Now" (the distance between points "E" and "0"), which is
much larger than the cost overrun assumed earlier.
From that, we conclude that the two above techniques have their drawbacks and
a more rigorous approach is still needed. This is discussed in the next subsection.

Figure 11-5. 100%

Double S-Curve Plot .' E
Cost Actual •...····
(Direc + Indirect)

o!

.. .'
'
........

.................................

Now
 CONSTRUCTION PROGRESS CONTROL I 297

11.3.3 The Earned Value Technique

The Earned Value technique lends itself very well to the analysis of the cost and
schedule performance in a project. It involves a combination of three measures that
are needed for the analysis (Figure 11-6). The Earned Value system defines these
terms as follows:

• Budgeted Cost of Work Scheduled (BCWS): measures What is Planned in terms of

budget cost of the work that should take place (i.e., according to the baseline
schedule of the work). Along the project, we can plot the BCWS S-curve by ac-
cumulating the budget cost on the schedule that shows the planned percent
complete (similar to the example in section 11.3.2).
• Budgeted Cost of Work Performed (BCWP) - Earned Value: measures What is Done
in terms of the budget cost of work that has actually been accomplished to
date. We also plot the BCWP S-curve point by point after each reporting pe-
riod. Here, we accumulate the budget cost on the schedule that shows the ac-
tual percent complete;
• Actual Cost of Work Performed (ACWP): measures What is Paid in terms of the ac-
tual cost of work that has actually been accomplished to date. We also plot the
ACWP S-curve point by point after each reporting period. Here, we accumulate
the actual expenditures on the schedule that shows the actual percent complete.

The significance of these three indicators is that they directly indicate the sched-
ule and cost performances of the project at its different reporting period. This is illus-
trated as shown in Figure 11-7.
Now, applying the SPI and CPI performance indicators to the project illustrated
in Figure 11-6, we can see that the project at time "Now" exhibits a schedule delay
and a cost overrun. In our project control system, these provide warning signs and
mandate corrective actions. In the next reporting period, new values for the BCWP
and ACVVP S-curves will be plotted and then used to calculate new SPI and CPI val-
ues to see if improvements are achieved in the project performance.
To facilitate the follow-up on project performance from one reporting period to
the other, it is possible to draw a plot of the CPI versus SPI as shown in Figure 11-8.
The figure connects the performance points in all periods, starting from the start of
the project.

Figure 11-6.
Earned Value $
Measures

Cost
Variance
."S~h~d~I~!'"
Variance
.......... , , .

Time
Time
BCWP (EV) Variance. ,Now
298 I CHAPTER II

Figure 11-7.
The ratio of BCWP/BCWS is an
Relationship indicator of the Schedule
Schedule Performance
between Earned
Index (SPI) = performance since the cost
Value Measures basis is the same. SPI > 1.0
indicates schedule advantage.

The ratio of BCWP/ACWP is an

Cost Performance Index indicator of the Cost
performance since the schedule
(CPI) = is the same. CPI > 1.0 indicates
cost saving.

Figure 11-8. Project SPI

Performance
1.5
Indices
1.4
Schedule Advantage Schedule Advantage
Cost Overrun Cost Saving
1.3

1.2

1.1

0.5 0.6 0.7 1.1 1.2 1.3 1.4 1.5 CPI

0.9

0.8
Schedule Delay Schedule Delay
Cost Overrun 0.7 Cost Saving

0.6

0.5

In addition to the SPI and the CPI, other performance indicators are:
• Schedule Variance (SV): difference between the actual cost (ACWP) and the
Earned Value or the budget cost (BCWP).
SV = BCWP - BCWS; SV > 0 indicates Schedule Advantage
• Cost Variance (CV): difference between the actual cost (ACWP) and the Earned
Value or the budget cost (BCWP).
CV = BCWP - ACWP; CV > 0 indicates Cost Saving

11.4 Forecasting
Along with progress measurement and performance evaluation, an important aspect
of project control is to forecast the project completion cost at different stages of exe-
cution. One of the simple approaches for forecasting the Estimate at Completion
(EAC) is by adjusting the Scheduled Budget (BCWS)according to the difference be-
tween the actual cost (ACWP) and budget cost (BCWP), as follows:
Estimate at completion (EAC)
= BCWS at completion + (ACWP - BCWP) at present
 Cor STRUCTION PROGRESS CO~TR.oL I 299

Graphically, the estimate for the actual costs from the present time till project
completion is plotted parallel to the BCWS curve but shifted according to the differ-
ence between actual and budgeted costs of the works completed at present, as shown
in Figure 11-9. It is noted that the end point represents the estimate at completion
EAC costs. This EAC keeps changing as we update the progress from one reporting
period to the other. The EAC value also can be adjusted further by adding possible
additional costs such as:
• Outstanding commitments including changes issued.
• Known changes that are not yet issued.
• Allowance for unidentified changes.
• Claims received or anticipated and not yet settled.

Figure 11-9.
Estimate at
Completion (EAC)
,,
,
,,- -.
EAC
Cost.
Variance:
,,
on Earned Value $ At Present:
Curves
Estimated '
Costs,
,,,
,
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1
1
,I

Cost
Variance
At Present

Time

.Now

11.5 Schedule Updating

At any stage during construction, our plan becomes the baseline against which we
compare actual progress. However, because changes during construction are immi-
nent, soon the plan becomes unrealistic and needs to be updated to reflect the new cir-
cumstances. It is advisable to frequently update the plan at reasonable intervals.
When we update the plan (for the following reasons), we will have a new baseline
against which we compare actual progress.
Reasons for schedule updating:
• Changes in actual activity durations and network logic.
• Procurement delays.
• Sudden changes regarding the availability of craftsmen.
• Accidents.
• Strikes.
• Changes in owner requirements or in design.
300 CHAPTER 11

Frequency of Schedule Updating:

Depending on Network Shape
I

Linear networks (high percent Fan-shaped networks (smail

of all activities are critical) percent of all activities are critical)

Use fixed updating intervals Decreasing updating intervals

(monthly or shorter) (large interval at beginning,
decreases towards end)

Schedule updating procedure:

• All completed activities become fixed in the revised plan.
• A new estimate of the amount of work remaining to be done should be made
for each activity at the time of updating.
• The probable output of various resources should be assessed to revise the du-
rations of future and proceeding activities.
• If the job is behind schedule, future activities may be crashed or new methods
of construction introduced. Other remedial courses may include the redistri-
bution of resources.
• Network analysis should be performed with an attempt to reschedule the
work to obtain the cheapest overall solution to project constraints.

11.5.1 Evaluation of Work Changes and Delays

Work changes mean changes in the volume and duration of work to be performed
from that envisaged at the start of the contract. Variation in the form of addition re-
sults in more or less cost and time to execute the changed item. On the other hand,
work omissions mean less cost but not necessarily less time and may result in wast-
ing resources. If the quantity of work in a critical activity is increased by x%, for ex-
ample, then the duration of the activity will be extended by x%. The direct cost of the
activity should be increased by the same ratio whereas the indirect cost of the contract
might be increased for the extended period.

11.5.1.1Types of Delays Delays can be divided into the following categories:

Compensable delays: A delay is compensable to the contractor when it is
caused by the owner (0 delay). Examples include:
• Late possession of site;
• Faulty design;
• Incomplete drawings and specification;
• Changes in scope;
• Suspension of work;
• Differing site conditions;
• Late delivery of owner-supplied materials; and
• Owner failure to disclose information vital to the contractor.
 CONSTRUCTION PROGRESS CONTROL I 301

The conditions of contract should allow the contractor to be entitled to a time ex-
tension and to monetary recompense for extra costs associated with these delays.

Nonexcusable delays: In this category, the contractor caused the delay (c delay).
The contractor is entitled neither to time extensions nor to monetary recompense
from the owner. He may pay liquidated damages according to the contract.

Excusable delays: These are occurrences over which neither the owner nor the
contractor have any control (n delay). Examples include:
• Unforeseen future events (e.g., strikes);
• Impracticable work which the contractor can only do at excessive cost; and
• Events in that the contractor is blameless, such as material shortage beyond
what was expected at the time of bidding.
The contractor should declare the excusable delays and can be entitled to a time
extension.
Concurrent delays: Concurrent delays are two or more delays that occur at the
same time and can be classified as follows:
1. Owner 0 delays and contractor c delays are concurrent;
2. Owner 0 delays, contractor c delays, and excusable n delays are con-
current;
3. Excusable n delays and contractor c delays are concurrent; and
4. Excusable n delays and owner 0 delays are concurrent.
When owner 0 delays and contractor c delays are concurrent (case 1), the con-
tractor is allowed a time extension, with each party suffering its own losses (i.e., liq-
uidated damages/compensation). The terms of the contract should declare the
method of evaluation of such claims. On the other hand, when excusable delays are
involved concurrently with other delays (cases 2, 3, and 4), the contractor is entitled
to time extension if the delays are on the critical path. This protects him from any re-
sulting liquidated damages.

11.5.1.2Analysis of the As-Built Schedule The as-planned schedule of a contract is

its initial schedule. The as-built schedule will show the time status of the contract and
the causes of all the time changes that happen. For comparison purposes and to facil-
itate the analysis of delays, both schedules are drawn as time-scaled diagrams.
The as-built schedule provides a compete record of the work as built. It shows all
delays encountered and the actual starting and finishing dates of every activity. When
compared with the initial schedule, it gives the date for the evaluation of each time
delay encountered during construction. This schedule becomes the basis for analysis
of the effect of different types of delays on the contractor's progress.

Step1: Identifying Primary Paths

If the as-built schedule contains more than one equally delayed critical path, each of
them will be examined in turn to determine its net duration, which is the actual du-
ration of this path under no changes or delays. This is:
Net Path Duration = Total path duration - all delay times lying on the path
Having examined all critical paths, we can determine the primary critical path(s)
as those with the longest net duration. The project could not have been completed in
less time than this, even if the delays had not occurred.
302 I CHAPTER 11

Step 2: Analysis of Primary Pathts)

If the as-built schedule contains one primary critical path, then the overall effects of
all changes on the contract will be the difference between the path's actual duration
and its net duration. The responsibility of each party for the delayed completion is
then determined by the amount of delay days this party caused to the primary path.
Liquidated damages, time extension amount, and compensation to the contractor are
then determined.
If the schedule contains more than one primary critical path with the same net du-
ration, then it may have concurrent delays. In this situation, analysis of the time-
scaled as-built schedule is carried out as follows:
a. The number of days in which owner 0 delays and contractor c delays are
concurrent on the different primary paths are determined.
b. The number of days of concurrent delays involving excusable n delays are
determined.
c. Excluding the delays in 1 and 2 above, the number of days a contractor
should be assessed for liquidated damages is the smallest number of days of
c delays on all primary critical paths.
d. Excluding the delays in 1 and 2 above, the number of days a contractor
should be reimbursed for additional overhead expense plus a time extension
is the smallest number of days of owner 0 delays on all primary critical
paths.
e. The number of days of excusable delays is the difference between the total
delay duration and the summation of all the above four delays. These are
part of the time extension given to the contractor.

Consider the contract given in the Table 11-3. The delay report given in Table
11-4 was recorded for this contract. Determine how each party is responsible
for the contract delayed completion.
Solutiun
The as-planned and as-built schedules are drawn below.
Step 1: Identifying Primary Paths
The two critical paths are B-E-H-Jand A-C-F-I. Each of them has a net duration = 41
- 18 = 23 days, thus both are considered primary paths.
Step 2: Two Primary Paths
The total delay of 18 days can then be divided as follows:
a. Concurrent c and 0 delays = 3 days (days No. 13,14, and 16)
b. Concurrent with excusable = 2 days (days No. 7 and 33)
c. Nonconcurrent inexcusable c delays = 1 day
(Smallest of day 3 on Path B-E-H-Jand days 2, 3, 12,35, 36, and 39 on Path
ACFI)
d. Nonconcurrent compensable 0 delays = 2 days
(Smallest of days 4 and 15 on Path B-E-H-Jand days 15, 24, 25, 32, and 40
on Path ACFI)
e. Nonconcurrent excusable = 18 - (3 + 2 + 1 + 2) = 10 days
Accordingly, the contractor should be given a time extension of 17 days (a +
b + d + e). He will pay liquidated damages for 4 days (a + c) and will be re-
imbursed for overheads of 5 days (a + d).
 CONSTRUCTION PROGRESS CONTROL 303

As-planned schedule
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Table 11-3. Data of a Small Example

Activity Predecessor Duration (days)

A 7
B 5
C A 7
D B 9
E B 6
F C 4
G D 3
H E 9
I F 5
J H 3
304 I CHAPTER 11

Table 11-4. Recorded Delays for tile Example

Delay No. Category Activity Affected Effective Dates Delay Time

1 Neither A 1
2 Contractor A 2-3 r)
L.

3 Contractor A 7 1
4 Contractor B 3 1
5 Owner B 4 1
6 Neither B 5-7 3
7 Contractor C 12-14 3
8 Owner C 15-16 r)
L.

9 Owner E 13-15 ~\
10 Contractor E 16
11 Neither E 19-23 El
12 Owner F 24-25 r)
L.

13 Owner G 22
14 Contractor G 23
15 Neither H 30
16 Owner H 33
17 Owner I 32
18 Neither I 33-34 2
19 Contractor I 35-36 2
20 Contractor I 39 1
21 Owner I 40 1
22 Neither J 37-38 2

11.6 Back to Our Case Study Project

Having won the bid for this project, we need to monitor project progress so that we
can bring the project to a successful completion and secure our desired profitability
level of the project.
In our project control, we will consider our finalized plan as our baseline for com-
paring actual performance. The finalized plan is the one we established in Chapter 10
(Figure 11-10 and Table 11-5).
 CONSTRUCT10N PROGRESS CONTROL I 305

Figure 11-10. 28-

Day Baseline Plan

Table 11-5. Cost and Budget Data

Direct Indirect Cost Total Markup Bid Price

Activity Duration Cost (unbalanced bid) Cost (5%) (budget value)

A 4 $2,000 $398 $2,398 $120 $2,518

B 4 $12,000 $1,707 $13,707 $685 $14,392
C 2 $4,000 $795 $4,795 $240 $5,034
D 8 $18,000 $1,778 $19,778 $989 $20,767
E 4 $20,000 $1,976 $21,976 $1,099 $23,075
F 10 $15,000 $1,783 $16,783 $839 $17,623
G 14 $12,400 $1,541 $13,941 $697 $14,638
H 8 $16,000 $1,758 $17,758 $888 $18,646
I 6 $10,000 $787 $10,787 $539 $11,326
J 6 $10,000 $787 $10,787 $539 $11,326
K 10 $8,000 $691 $8,691 $435 $9,126
Total Direct Cost = $127,400 Total Cost == $141,400 Total Bid == $148,470

11.6.1 U sing the Excel System

With our plan finalized and construction started, we can use the Progress sheet of the
Excel system to apply project control. The steps followed are shown in Figures 11-11
to 11-14.
As shown in these figures, changes to the actual performance in the Progress
sheet or to the baseline plan in the Schedule sheet updates our progress charts auto-
matically and allows us to monitor performance at all stages of construction.
 User input of start and User inputs of actual
finis~yment report. costs and daily accomplishments.

Automated Progress
payment report.

:~

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Figure 11-11. Step 1: Input of Actual Progress Dato Into the Progress Sheet

Construction reached day 6 and the progress made in each activity and actual costs are shown here. Between days 1 and
6, the project is 17.7%complete as opposed to the planned 23.6%.

306
Figure 11-12.
S-Curve Control S-Curve

Now we can look at $160.000

the automated sheets
!
for project control. $140,000 --or -_.. ·..---------·----·-w~~~::~~~--~~~~..:.<::
,ff"

Shown here is the S- I

curve envelope of $120,000 ....
1
early and late costs, as I
well as actual $100,000 -------r--- I
-- -- _ .. -- -- --. --- ----- - -~ ~~;;.::-:;;~
progress until day 6 r - ,--,~;r; U,ef,-4YO-:

and the estimate at u. $80,000 . __._._L __

... ~ . ...
~.. --,>.:~t..:;;.':(l~-

I 'XBt.'cl;:'t :{,' C :.rr: ,-et"...'!l

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!- r..- !-

that costs are the

S60.000 '1'"
direct plus indirect,
not the budget values.
$40,000

$20,000

$0
0 10 20 30 40 50
Duration [days]

Figure 11-13.
Earned -Value Earned-Value Curves
Control
$160,000.0 -----------------
Now, we look at the I
~I---·---h-_-_-hh------~!::1':~;a-,:~~~~j,;.!. •.-l1s-~:.~~-~
automated Earned- $140,000.0 _u

Value curves. I ~~.

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I
_______~. . __ --BC'WS.[arly
$100,000.0
I -"·"""---BCWP
(Earned- Value)
"1 --ACWP
...,. $80.000.0 - --- ---: -- --- -- ..-, I ....
--- ----- --- -- --- --- ----- --- -- --- --- --- -- _ 0- Forecast to Completion"
I ;/" - - 'Progress Di'lfe"
;;
$60,000.0 -------1'·· ··j(,.r----------------------------------------------------
, 'J
~ l'
$40,000.0 ---.---'1---.---------------------------.-
-------------.----------
"

$20,000.0 --- "J~-- ----------------------------------------- -------..-.. ----

~ I
$0.0
0 10 20 30 40 50
Duration (days)

307
308 CHAPTER 11

Figure 11-14.
Progress Indices Project Progress Indices
Tlus uuaner. SPI
Automated chart for .• ·•..00
r;(i-'i';b;i: ;'.~h·';tl:l.i~:?
monitoring the daily {'c-:::l :;o;'t~H:.m

schedule performance
index (SPI) versus the
daily cost
performance index
··uo
(CPI). Shown here is a
schedule delay but ·120
also cost savings. The
CPI
trend also shows that
schedule delay is 0.00 0.20 0.40 O.GO 0.80 1. r.. If 0 UO 1.60 1.80 2.00

decreasing. ~.8B ~.\ .... /

'<;"
.•.. " ·0,40 "''',''. ----_.-.----

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11.6.2 Using Microsoft Project

In addition to the project control charts in the Excel system, it is possible to export the
project data to Microsoft Project software to use its project control options. To do that,
we follow the steps in Figures 11-15 to 11-19.

Figure 11-15.
Exporting
Project Data to Combil1edHesource Allocation &. Leveling. Time-Cost Trade",
Microsoft c",My

Project MS Project File: Dvcuments\Dook\Mate:rial\C

PM.7.mpp

In the Schedule
sheet, we use the
Export button to
send the data of
the finalized
plan, and
optionally
performance
data, to Microsoft
Project.

Saves the plan as a Exports activities,

baseline and exports relationships, and
actual data: percent resources to Microsoft
complete, actual duration, Project without actual
and actual cost. performance.
 ~,/22 5f."6 :~,<!d;'t'~"'->

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) .-,~~;;;:;,:;~>
G '$:'j,1'lS,ES L' f2;

Figure 11-16. Gantt Chart of Exported Project

Shown here is the project generated when No is selected in Figure 11-15. The table shown here to the left of the Ganrt
chart view is the Entry table. In this option, actual performance data is not exported to Microsoft Project.

Tracking Table
-----------------~------------------

t:V1f:. !O)"):, ~ 1Y1fi;[ ~~a'~:;' '12,000.00

5lLS fJli). ~oo-% {li.el)fJ ssooo.oc

Sf;:)· ('1-'" ',,-~j'li; l.€dU,,~: $1,000.00 38.4 hrs

HA· H.4 vI<. (;'d~~:~~ .; o-:t'Jt saeo unrs

F !'-I~ :-J;;. (f~ 3:jf.$) Q?'t~l

:,·t~\ o"':{, $0.00 Ohts

J% '}D1U U rtrs

l-L4· G>~ $11.00 ChrSj

f~.t.. ~. 0 simem 1 9:Lhrs ~

1-'(t., 0%': $0.00 Onrs

Figure 11-17. Gantt Chart of Exported Project

Shown here is the project generated when Yes is selected in Figure 11-15. In this option, actual performance data is
exported to Microsoft Project. The plan in the Schedule sheet of Excel is saved as the baseline plan. The table shown here
is the Tracking table whereas the veiw to the right is the Tracking Cantt view. Shown in this view is the current schedule
(30 days) versus the baseline schedule (28 days). The reason for the current schedule being extended to 30 days is that
actual performance, which had some delays, becomes a fixed part of the schedule. The question now is how to
reoptimize the schedule to bring it within the deadline.

309
 t:O_O) ~517.34 £2,000.00 $2,517.30:;

$1 Cl,392.02 $(lOO ~lhrJ ~\4,J~2:~1: SI2,O;)UOO ~·.4.192.02

$5,033.95 i.5,03:H6 :iJOO '$0.00 $5,033.S6 116,00(; 00 $5,033.96

10.00· 'J4 ,I 53.4'3 $0.00 'S4,153.41. $4JS3.43 '17,61:':_54 J20.7E6.93

It I;;; SODA so 00 !O.CYJ $000 $23,07460 523.014 &1

S3,5~·.j4~ $0.00 $00:.- ($3:524.45) $000 $,17,622:53 $17,522_53 so Oil

$2,0'31.19 "'.00 so 00 ($2,C91.19) $000 $14,637.67 $14,637,6;: $0.00

snoo W.OD so 00· sooo SO.DO '516,64616 $18,646.16 W.OD

;':j";;:'.;
)0.00 10.00 )0.00 'WJ)). $ll00 $11,32625 $'1,32625 SO.QO

S1,~~..u es 'S-Zi6 54 $O(J) :1:' _:~}4'-Hj'·· 122654 112,099 rs 1>~',3:;E ·is $nJ48

10.00 m.DO $000 to.oo sooo $9,t25.68 $9,1::::5.613 $0.0) 0%

Figure 11-18. Viewing the Earned Value Table

Activating the Earned Value table shows the data as per the status date selected from the Project-Project Information
menu option.

'P;51i.J4 :1517.34) on,OOO.OO $000

Prcreted 1112,000.00 $14,39202 ($2.392.02) $12,000.00 $000

Prcrsted $0.000.00 $5,03396 $966.04 $6,000.00 KOO

h('A~';if 51 ~ .61354 $20.16693 (SJ,153 3~) $1,00000 l16.613 54

F:·~~fl3j $13,074.60 t23,074 eo fO.OO $1100 $23.074 eo

FroJtlled $17,622.53 3:17.62253 rooo SO.OO S17.62~ 53

croretet $11l,63757 ;14,63767 1iO,Cl:)· W.OO 3:14,63767

Prcreted $-;8.646,16 $18,646.16 lO.OO "'.00 'J10,&Ui.16

Prcretec $11,326.25 $11.326~5 ~O.OD 00.00 1H ,326 2$

Prorated :512,000.73 $11,:)"26.25 17!3,4t; 11.OQO,!)O $11,09S.7j

Proreted $9,12:.,68 $9,~2~66 $0.00 so no 19,1 J.~.: 00

Methpd 1

Figure 11-19. Other Project Control Views

Let's now activate the Cost table and the Gantt view. Shown here are the actual performance bars within the activity
bars. Also, the Cost table shows a comparison of actual costs and baseline costs. All the data here are consistent with the
calculations in the Excel system.

310
 CONSTRUCTION PROGRESS CONTROL I 311

11.7 Critical Chain Project Management: A New Concept

Traditional project management concepts have been around since the 1950s, yet it is
common that projects experience time and cost overruns. Critical Path-based project
management was introduced as a cure for these problems with a goal of delivering
projects within the original cost and time estimates. Today, Critical Path project man-
agement is a significant industry.
In 1997,Dr. Eliyahu Goldratt introduced a new approach for project management
with the publication of his best-selling business novel, Critical Chain. The new concept
is widely known as the Critical Chain Project Management (CCPM) concept. CCPM
is beneficial and improves our understanding of the needs for successful manage-
ment of projects. Let's have a look at the details.
11.7.1 Problems Addressed by the Critical Chain Concept
• Estimating with Excessive Safety: At the estimating stage, if a five-day task
is sufficient, all estimators tend to add a hidden safety (contingency) into their
estimates to account for any uncertainties. Although using a safety factor in a
task estimate is not wrong, we need to understand the implications of this
safety factor during actual performance.
• Student Syndrome: Given that the tasks have hidden safety, let's take a look
at what happens when the task is actually performed. Similar to when stu-
dents are given an assignment and, regardless of the length of time available,
they tend to start only at the last minute. Therefore, the large safety gives a
false feeling of security and leads to late starts, which consume the float and
if any unexpected problems are encountered (often in construction), the task
ends up with overruns;
• Parkinson's Law: Work expands to fit the allotted time. If a task is estimated to
take 10 days, it usually does not take less. This adjustment of effort to fill the al-
lotted time can come in a number of ways. People will simply adjust the level of
effort to keep busy for the entire task schedule. Traditional project environments
stress not being late, but they do not promote being early. This environment en-
courages hidden safety, the student syndrome, and Parkinson's Law effects.
• Multitasking Problems: Most of us work in a multiproject environment. We
all have experiences of having to stop working on one task so that progress
can be accomplished on another task in another project. Often, we wonder if
all this jumping around makes sense because it comes with the penalties of re-
duced focus and loss of efficiency. The reason for this multitasking environ-
ment is that resources tend to migrate between projects in response to the lat-
est, loudest customer demand in an attempt to keep as many customers
satisfied as possible. This focus on showing progress on as many active proj-
ects as possible is the major cause of multitasking.
Let's consider the bad effects of multitasking in a simple multiproject example, as
shown in Figure 11-20 on a case when four projects, A, B, C, and 0 each of which is
estimated to take four weeks to complete.
• No Reward for Early Finishes: Our project management methods, includ-
ing rewards and punishments, rarely reward early finishes. In fact, they often
punish early finishes. If you finish a task earlier than planned, you might be
accused of sandbagging your estimates instead of being rewarded for com-
pleting ahead of schedule. If you finish early and announce your results, you
then encounter the next problem. The task that depends upon your comple-
tion might not be able to start early because the required resources are off do-
ing something else. Remember that the project schedule gave a clear start date
for the following task and the resources were allocated elsewhere based upon
this schedule.
312 I CHAPTER 11

• When you integrate student syndrome, Parkinson's Law with the likelihood
of no early finishes, you lose the effects of early finishes and only propagate
late finishes in the schedule. In other words, the best you can do is to finish on
time, not earlier.

Figure 11-20. Bad

Effects of
Multitasking
lUll BlIi!!1I l"BI iIIlil!f}.

!lili I1i1i!iD IBl ~

••
...........
I1fiIIilI liB i'iii'l\

~ [Prclect B \

~ ;PrOJfct C
.j....-.-----.- '1
I

11.7.2 The Critical Chain Method

Toaddress the problems in Section 11.7.1,the Critical Chain adopts the following steps:
1. Scheduling backwards to reduce unnecessary dependencies: During the
planning stage, you develop a plan backwards in time from a target end date
for your project. One of the benefits of working backwards is that you are
less likely to create unnecessary task dependencies. Additionally, because
you start with the objectives and work back, you are also less likely to add
tasks that do not add value to the objectives. This backward thinking ap-
proach, however, can be difficult and if you find it difficult to think this way,
and many people do, do not do it.
2. Task estimating with safety put aside: To be effective, Critical Chain task
estimating requires a change in individual and organizational behavior. You
want to remove the hidden safety in the task durations. Now, because this
safety is hidden, you have to establish an organizational culture that removes
the fear of exposing this safety and putting it aside. We are pooling this re-
moved safety as a project resource as opposed to a hidden task-level re-
source. When you remove the safety from a task, the goal is to get a task esti-
mate that has a 50% chance of being met. When it is difficult to think in terms
of probability, you should ask the team to provide estimates that are associ-
ated with three positive assumptions: (1) all the material and information
needed for the task are on hand; (2) we are able to focus on the task without
any interruptions; and (3) there will not be any surprises that cause addi-
tional work. If you use these assumptions, you will be off to a good start in
deriving a 50% probability estimate. To compensate for the reduced safety,
later we will insert buffers at key points in the project plan that will act as
shock absorbers to protect the project end date against task duration in-
creases.
3. Scheduling as late as possible: In traditional Critical Path scheduling, your
tasks are scheduled as soon as possible (ASAP) from the project start date. In
Critical Chain planning, your tasks are scheduled as-late-as-possible (ALAP),
based upon the target end date. This approach places the work as close as
possible to the end of your schedule. One of the main benefits of this work
delay is that you are not incurring costs earlier than necessary. One draw-
 CONSTRUCTION PROGRESS CONTROL I 313

back of scheduling all work as late as possible is that all tasks become critical.
An increase in duration of any task will push out the project end date by the
increased amount. To circumvent that, in a later stage, we will insert buffers
at key points in the project plan.
4. Resolving resource conflicts: Using backward resource leveling, resource
conflicts are resolved. Traditional resource leveling techniques are applica-
ble here.
5. Identifying the Critical Chain: The Critical Chain is the longest chain of
tasks that consider both task dependencies and resource dependencies. This
is different from the definition of the Critical Path, which is based upon task
dependencies only. Critical Chain recognizes that a delay in resource avail-
ability can delay a schedule just as a delay in dependent tasks.
6. Inserting buffer zones: We have effectively removed the safety from our
tasks based upon our estimating technique. Now we are going to form a pool
of this safety and place it in shock-absorber buffers at key points in our proj-
ect. When inserting buffers, we need to determine the size of the buffer. The
two types of buffers (Figure 11-21) are:
The Project Buffer is placed at the end of the project after the last Critical
Chain task to protect the target end date against overruns in Critical Chain
tasks. For our example, we will size this project buffer at 50% of the length of
the Critical Chain. This buffer can be applied as an additional activity at the
end of the project.
The Feeding Buffer, on the other hand, is needed at the intersection be-
tween noncritical chains and the Critical Chain. This protects the Critical
Chain against overruns on these feeding chains. In Figure 11-21, for example,
activity B is a noncritical chain task that feeds into the Critical Chain activity
4. The size of the feeding buffer is 50% of the length of the feeding chain. To
apply these buffers, we add an additional activity in front of each task that is
a noncritical chain but has a Critical Chain successor.
7. Relay race approach: The relay race approach means that you must get
your team to de-emphasize the task scheduled start and finish dates and con-
centrate, instead, on triggering their preparation and start on the preceding
task's progress. In this manner, we capitalize on the early finishes of the pre-
ceding tasks. Importantly, once a task is started, the resources work as fast as
possible towards completion without clocking themselves to the scheduled
finish date. Using this relay race approach, when one task is getting close to
completion, you must have the next task's resource on the track and ready to
go as soon as possible after the preceding task completes. For subcontractors
and suppliers, we need to establish a communication mechanism and incen-
tive programs to frequently keep them informed of the status of their prede-
cessor trades and the proper time they should start on site.
8. Buffer management: As in traditional project management, you update
your schedule on a periodic basis by entering the completed duration on
your tasks and updating the remaining duration with an estimate of the
work needed to finish the task. In the Critical Chain concept, you do not
worry when a particular task overruns its estimate. Instead, the concept sim-
ply watches the effect of many tasks on your buffers.

Figure 11-21. Noncritical Chain

Buffers

Critical Chain
314 I CHAPTER 11

Buffer management is the key to tracking project performance in Criti-

cal Chain project management, rather than applying project control tech-
niques such as variance analysis and Earned Value. The Critical Chain con-
cept watches the buffers and acts depending upon how much of the buffer
is penetrated by task schedule changes. It treats the buffer as if it were di-
vided into three equally sized regions. The first third is the green zone, the
second third is the yellow zone, and the final third is the red zone. If the pene-
tration is in the green zone, no action is required. If the penetration enters
the yellow zone, then you should assess the problem and think about possi-
ble courses of action. if the penetration enters the red zone, then you should
act. Your action plans should involve ways to finish uncompleted tasks in
the chain earlier or ways to accelerate future work in the chain to bring the
buffer penetration back out of the red zone.
9. Resource allocation decisions: When faced with a resource conflict dur-
ing the project, Critical Chain allocates the resource to the task with the goal
of minimizing buffer penetration. This approach tries to optimize the use of
resources towards the true highest priority goal: finishing the project early.
10. Staggered multiprojects to prevent multitasking: In the Critical Chain
concept, you introduce new projects into your multiproject mix at a point
that avoids conflict with key resources (called drum resources). This stag-
gering of projects based upon key resource constraints is known as project
synchronization. A capacity buffer is also inserted between the last use of
the drum resource in the predecessor project and the first use of the drum
resource in the successor project. This gap acts as a protection against delay
due to the limited availability of the drum resource.

11.7.3 The Best of CPM and CCPM

Since its introduction, the Critical Chain Project Management (CCPM) concept has
generated a lot of excitement about its use. Many papers have either extolled the ben-
efits of the Critical Chain approach or advised restraint in adopting this theory. The
various aspects of the CCPM approach have been met with varying degrees of ac-
ceptability. Some of the criticisms include:
• The assumption of dedicated resources to the tasks is not true in the real world.
• Multitasking, which is considered a problem in CCPM, can be viewed as a de-
sirable management strategy for efficient use of resources, particularly with
current trends of downsizing.
• The 50%estimates are too short and do not consider that resources have to de-
velop a learning curve.
• Defining the Critical Chain and points at which feeding buffers should be
placed is an excessive additional effort.
• Project buffer is advisable to use but feeding buffers reduce the total and free
floats from noncritical tasks, thus giving a wrong indication of the impact of
delays.
• Staggering multiprojects can lead to unnecessary delays.
• The dependence on buffer management and discarding the Earned Value con-
cept leaves the CCPM without strong financial management.
Despite these criticisms, no doubt the CCPM concept is of great benefit to project
managers and many successful implementations of the approach have been reported
by various organizations. Perhaps the two most beneficial features of the CCPM are
the change in the estimating culture and the use of project buffers, which can be used
within existing project management techniques, and even on the Excel system dis-
 CONSTRUCTION PROGRESS CONTROL I 315

cussed in this textbook. Other aspects need to be reflected upon by project managers
to examine their suitability to the environment of the project and the organization.
11.7.3.1Critical Chain Software Commercial software systems that use the Critical
Chain concept are now available. Two of the most well-known systems are Project
Scheduler 8 (PS8) by Scitor corporation, which is full-fledged project management
software, and ProChain add-in software for Microsoft Project (ProChain Solutions
Inc.). Both software systems allow users to apply the CCPM concept with ease.

11.8 Golden Rules for Successful Construction

For the purpose of this text, the discussion on the Critical Chain and the EamedValue
concept, in addition to the following golden rules, provide us with the ingredients for
successful project completion:
1. Site organization: properly placing temporary facilities, access routes, and
work areas improves the circulation on site and prevents accidents.
2. Advance planning: planning does not end with the start of construction, it
is a continuous task that helps you make proper decisions along the con-
struction. Schedule updating and recording daily progress has to be the duty
of dedicated staff for this task.
3. Timely payments: accurate measurements of progress and on-time prepa-
ration of invoices prevents owner payment delays.
4. Managing change orders: try to settle all change orders as they come up.
Changes are like virtual pits for attracting surplus costs and schedule delays.
5. Tracking trades' gaps: good aggressive project managers ensure that sub-
contractors all push the trades ahead of them while being pushed from those
following. This keeps up the pace. When there are gaps between the trades,
problems arise. Establish a system to monitor the gaps between the trades.
Capitalize on the time saving by one trade and give incentive to its followers
to start early. Establish a system for negotiation and communication with
suppliers and subcontractors.
6. Effective communication: keep all parties involved and informed of the
progress and its requirements. Establish regular communication meetings
and fully document all communication.
7. Reducing work interruption: do not keep your resources moving and
working partially on various projects at the same time. Multitasking can be
disruptive to the crew's production, thus causing delays and extra cost.
B. Documentation: establish a mechanism for permanent documentation of
all aspects related to the project: photos, camcorders, time-lapse cameras, in-
terim plans (network and bar chart), communications, minutes of meetings,
progress reports, daily site reports, delivery slips, time sheets, site-utilized
bar charts, site visits, and change orders. These can be useful in case of
claims and disputes.

11.9 Summary
In this chapter, we dealt with the basics of project control and how to successfully com-
plete the construction stage of the project. We learned the various techniques of evalu-
ating the project progress and to evaluate its cost and time performance. We compared
actual versus planned progress of work using the Earned Value technique, discussed
schedule updating needs, estimated the cost at completion based on the actual
progress of work, and we experimented with various software tools for project control.
316 I CHAPTER 11

11.10 Bibliography
Cass, D. (1991). Earned Value Graphics-New, Exciting, Innovative, 1991 AACE
Transactions, AACE, pp. L.4.1-L.4.6.
Fish, J. (1991). Control in Design/Build, Cost Engineering, Vol. 33, No. 10. AACE,
pp. 7-10.
Goldratt, E. (1997). Critical Chain. Great Barrington, MA: The North River Press.
Kim, J. (1990). An Object Oriented Database for Project Control, Transactions of the
AFITEP 6th Annual Meeting, Paris.
Levine, H. (October 1999). "Shared Contingency: Exploring the Critical Chain" PM
Network, PM!.
Martin, B. (1992). Aspects of Cost Control, Cost Engineering, Vol. 34, No. 6. AACE,
pp. 19-23.
Rayburn, L. (1989). Productivity Database and Job Cost Control Using Microcomput-
ers, Journal of Construction Engineering and Management, ASCE, Vol. 115, No. 4, ASCE,
pp. 585-{)01.
Rizzo. T. (December 1999). "Operational Measurements for Product Development Or-
ganizations-Part 2" PM Network, PM!. Vol. 13, No. 12, pp. 31-35.
Sanvido, v., and Paulson, B. (1992). Site-Level Construction Information System, Jour-
nal of Construction Engineering and Management, ASCE, Vol. 118, No. 4, ASCE,
pp. 701-715.
Wilkens,1'. (July 2000). "Critical Path, or Chain, or Both?" PM Network, PMI. Vol. 14,
No. 4, pp. 68-74.

11.11 Exercises
1. Draw the contract time-cost envelope. Discuss the relationship between the enve-
lope and the actual cost-to-date curve.
2. The data of a small project are as follows. The indirect cost for this contract is
$250/week and liquidated damages are $200/day.
Duration
Activity Predecessors (weeks)

A 7
B 9
C A 8
D B 12
E C,D 4
F B 9
G F 7
H E, G 7

Activities Effective Delalf

No. Delay by Affected Dates (week no.)

1 Owner A 2-5
2 Contractor C 14-16
3 Owner C 21-23
4 Owner D 15-18
5 Contractor E 27-28
6 Neither F 18-19
7 Neither G 26-27
8 Owner G 28-29
 CONSTRUCTION PROGRESS CONTROL I 317

Given the delay report for this contract as shown, determine how each party is re-
sponsible for the contract delayed completion.
3. a. How can the engineer evaluate a claim where compensable and none xcusable
delays overlap on the contract primary Critical Paths?
b. Consider the following small contract and the recorded work changes and de-
lays. Draw the as-built schedule and determine how each party is responsible
for the contract delayed completion.
Duration
Activity Predecessor (days)

A 8
B A 12
C 5
D C 10
E 7
F C, E 15
G B, D 8
H F 2

No. Delay by Reason Effective Dates Affected Activity

1 Contractor Equipment not on site 1-2 E

2 Owner Redesign work in activity D 6-12 D
3 Owner Design change (20% extra work) F
4 Contractor Late supply of materials 9-13 B
5 Owner Late supply of drawings 10-12 F
6 Owner Late inspection 25 B
7 Contractor Equipment breakdown 25-26 F

4. The data for a small project is tabulated below.

Activity Duration (days) Depends upon

A 3
B 6 A
C 8 A
D 10 A
E 5 B, C
F 7 E
G 12 D, E
H 17 E
X 9 y, Z
Y 3 H,D
Z 4 F, G

a. Construct a precedence network for this project and compute start and finish
dates, total float, and free float for each activity. Also, indicate the Critical Path.
b. On day 12, the field scheduler gives you the following information and asks
you to update the network and provide an accurate precedence diagram
showing the updated schedule. The new diagram is to show start and finish
dates and total float of each activity. Indicate the Critical Path, or paths.
Information from field scheduler:
1. The project has been underway for 12 working days.
2. Some concrete forms broke during one pour, and activity B was delayed in
completion by two days.
318 CHAPTER 11

3. Activity 0 is now in progress but five days were lost waiting fOTbetter
weather.
4. Activity A was completed on schedule.
5. Activity C was completed one day early.
6. The precast concrete supplier has been delayed; he can have the concrete on
the job so that activity Y can begin on the morning of day 36.
In addition to the items provided by the field scheduler, your own office
personnel have brought the following to your attention:
1. Activity H will not require 17 days, but seven days; the scheduling engineer
discovered a IO-day error in the computations.
2. Activity Z, originally planned to last four days, is projected to take an ad-
ditional two days because of a decrease in the labor force.
3. An error in log-in in the precedence diagram was discovered by the field en-
gineer. He pointed out that activity Z must precede activity F instead of fol-
lowing it. Activity Z is still dependent on activity G and activity F is still de-
pendent on activity E. All other activity dependencies remain as planned.
5. a. A cost control report of a certain contract gives the following figures as per-
centages of the total budgeted cost:
BCWP- 25% BCWS- 47% ACWP - 72%
Calculate the cost and schedule variances and comment on the status of the
contract.
b. The application of a certain cost control system to a certain contract shows a
that the use of materials exhibits an adverse variance (i.e., material wastage).
Give three suggestions to the site manager in order to improve the situation.
6. A bar chart showing the Plan versus the anticipated Actual progress of a small proj-
ect is shown below:
a. Plot the BeWS (S-curve).
b. On the same chart, draw the ACWP curve until current date (end of day 14).
c. Calculate the EV until the current time and plot it on the same chart.
d. Calculate the CPI and SPI values at the end of days 7 and 14. Plot these points
and comment on the project progress.
e. What is your projection of the actual total project cost?
f. What is the anticipated actual cost of activity H?

I I I I I Time (Days)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
ask :ost IS'
A I Plan: 15 000 ~~"'¥iN; ...
:~~~}R.f..7.qi<:W~".&~ .:::.~
. ....
Actual: 14000

~:"":""::~;tj;®t~~r%~±::J""Wi+!-+-+--l--l---1I-r-r-+-+-+-+-+-+-+--+--+--1--+--+---+
-1-_c=--+=:~cccat:c-;a_l;
Actual; 8 000

o Plan; 16000
Actual: 9000
~
Plan; 15000
Actuat: 10000 I •••.

F Plan: 6000
Actual: 9000

Plan; 18000
Actual; 16000
I
Plan: 15000
Actual;

Current date I I I I I
 CONSTRUCTION PROGRESS CONTROL I 319

7. Replace the question marks by the appropriate answers:

s BCWS

---1'-------1-- Cost overrun

Time
T-now

s BCWS

ACWP ?
?
BCWP

Time
T-now

BCWP

ACWP

T-now

8. The table gives the activities involved in the first phase of the construction of an
earth dam. The duration, predecessors, and budget costs of the activities are also
listed. The project has a physical constraint: the river must be diverted (activity H)
in January 2002 (time of low flow).
a. Choose a suitable date (week no. and month no.) for the start of the project, ne-
glecting holidays.
b. Assume that the project starts on the date chosen in (a) above but the contrac-
tor encounters unexpected ground conditions during construction. This in-
creases the duration required to drive the diversion tunnel (activities B and D)
by 25%. How can the contractor deal with this situation to achieve minimum
increase in contract cost?
320 I CHAPTER 11

c. Assuming that the budget of each activity is uniformly distributed over its du-
ration, dra w the contract time-cost envelope (early-start versus late-start), con-
sidering a four-week basis. Given that the actual cumulative cost at end of
week 4 is $33,600 and at the cnd of week 8 is $85,000, draw the cost-to-date
curve and comment on the progress of the project.

Duration Budg.~tCost
Activity (Weeks) Predecessors ($)
-------
A. Establishsite 6 50AOO
B. Drive diversion tunnel east 12 A 84,420
C. Concrete diversion tunnel east 14 B 44,520
D, Drive diversion tunnel west 6 A 20,940
E, Concrete diversion tunnel west 8 D 25A40
F. Excavate forebay 3 A 15,000
G, Concrete forebay 6 F 12,000
H, Divert river 0 C,E,G I]
 SPECIAL TOPICS

A fter studying this chapter, you will be able to:

• Understand the effect of uncertainty on projects through the parade game.

• Use the PERT technique to consider the uncertainty in activity duration.
• Be familiar with the emerging concept of Enterprise-Wide Project Management.
• Be familiar with various technological trends including the Internet and its use
in project management.

12.1 Effect of Uncertainty: A Classroom Game

To enhance our intuitive understanding of the impact of variability (e.g., uncertainty
in duration estimates) on the outcome of a project, let's tryout an experiment that can
be carried out in a classroom setting with student participation. In this experiment,
we will simulate a parade of trades in a building construction that form a single-line
production system. Examples of building parades are (Tommelein et al., 1999):
• Structural Parade: e.g., erecting structural steel (steel erectors); placing and se-
curing decking as well as welding shear studs (decking contractor); and plac-
ing rebar (rebar contractor); then pouring and finishing concrete (concrete
contractor).
• Overhead Work Parade: e.g., installing an HVAC system (mechanical con-
tractor); sprinkler system (fire protection contractor), emergency lighting
(electrical contractor), and pipe (plumbing contractor).
A parade is considered as a production system. The subcontractors in a building
parade can have daily variability in their production, representing the reliability in
their production. This variability may jeopardize the succeeding trades' ability to
perform because the output of one trade is prerequisite to the work done by the suc-
cessor trades. Therefore, to enable the whole parade to expedite job completion and

321
322 I CHAJ'TER 12

minimize waste, it is essential that work be released reliably between trades. The pa-
rade game illustrates the impact variability has on the production rates of trades that
succeed one another.
Our game is a simplified version of the one presented in Tommelein et al. (1999).
Each row of students represents a parade, with each student being one trade in the
parade. Depending on the number of students in the class, we can have rows of equal
sizes, e.g., five students each (Figure 12-1). Each parade is the same as the other and
each trade. on average, produces the same production as the other (e.g., 4 units per
day). The main difference is in the production variability, as follows:
Given four parades available (i.e., total of 20 students in the class), then:

• Each of the five trades in parade 1 produces exactly 4 units per day.
• Each of the five trades in parade 2 produces either 3 or 5 units per day.
• Each of the five trades in parade 3 produces either 2 or 6 units per day.
• Each of the five trades in parade 4 produces either 1 or 7 units per day.

As such, parade 1 has high production reliability whereas parade 4 has the high-
est variability in their production. Before playing the game, the materials we need to
prepare are as follows:

• Dice: Each student will get one die that corresponds to the amount of pro-
duction of its parade. All parade 1 trades, for example, will get dice with num-
ber 4 on all its six faces. Parade 2 trades will get dice with number 3 written
on three faces and number 5 on the other three (called 3-5 dice), and so on. For
that purpose blank dice are available commercially and also a 2-by-2 piece of
lumber can be cut to make the dice.
• Production Units: Each parade will start with say 75, 100, or 150 (depending
on the number of students) Popsicle sticks or cards that represent the units
that have to be processed by each parade. As shown in Figure 12-1, all these
units are put on one side before the game starts.
• Production Plot: Each parade will get an overhead transparent sheet with an
empty grid so that the cumulative daily production can be plotted (Figure
12-2). This sheet is given to the last trade in each parade so that he or she can
plot the amount of production made by his or her parade.
• Colored Pens: Along with the transparency sheet, each parade gets a trans-
parency pen with a different calor. Later at the end of the game, all trans-
parency sheets can be put on top of each other on an overhead projector as to
clearly show the results to the students.

Figure 12-1. Setup End of Parade 2

for the Parade (plot of production)
Game
 SPEClAL TOPICS 323

Figure 12-2. Blank 2 100

Plot Sheet 'c 90 I:::;:; 11 '.;.:
,.,'

80 ,"'-
....
~ ;-~..:. ;-~..:.:.

o~ ·~·I
60
!-:.. ;-!-

...~...
H':';'
:,:

50
:., ~.;. ;.;. ;.,

40

30

20

.~... ~
.;..;. ~-:- -

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
Day No.

12.1 The Game

The essence of the game is that each member of the parade waits until his predeces-
sor trade provides him with enough units of work on which he can progress, With
high variability in trades' production, the amount one predecessor trade produces
may be insufficient for the succeeding trade, thus causing delay in production. The
parade game is played as follows:
• Students are arranged in their seats (in our case four rows of five students).
• The students of each parade get a die each, corresponding with their assumed
variability. For example, each of the five students in parade 1 get one die with
the number 4 on all faces, and so on.
• 100 Popsicle sticks are given to the first student of each parade (left most).
• One plot sheet and a colored pen are given to the last student (right most) of
each parade.
• One additional student (or the instructor) acts as a day counter and loudly an-
nounces the counter number followed by a pause to allow the parades to fin-
ish their daily work.
• Day 1 in the project is announced and cycles of production start as follows:
• Each student looks at his right side to see the amount of units (Popsicle
sticks) available to him at the start of the day, call that U. On day 1, only the
first trade has 100 available units.
• Each student tosses his or her die and the uses the number as the produc-
tion amount to be made by his trade on that day, call that P;
• If a student (trade) finds enough units to work upon, i.e., U > = P, then he or
she moves a number of units P from his or her right pile and places it to his or
her left side (becomes ready in the following day for his successor trade). Par-
tial daily production is not allowed (i.e., if U < P,no production is made).
• Each time the end trade moves units to the end of the production line, he
or she plots that amount cumulatively on the transparency sheet.
• If all parades move the 100 units to the end of the production line, the process
stops, otherwise a day is incremented and the intermediate steps above are
applied.
• At the end of the game, all transparency sheets are superimposed on an over-
head projector and shown to the students. The expected result of the experi-
ments is that project duration gets longer with increased production variabil-
ity. Figure 12-3, for example, shows the results of an experiment in which 75
units took 18 cycles of a 4 dice (a die which has a 4 on all six faces) and 32 cy-
cles of a 1-7 die (a die which has a 1 on 3 faces and a 7 on the other three faces).
This demonstrates the effect of uncertainty on project duration.
324 I CHAPTER 12

Figure 12-3.
Sample Result of the
Parade Game 70

60 "4" Dice t::

"35" Dice;
50 "1-7" Dice i-
::

-----' ,,',

30 ....

20

10 ":/ .._C_ •• :••

o /; ..
o 5 10 15 20 25 30 35 40
Cycle No.

12.2 The PERT Approach for Project Risk Assessment

With uncertainty being demonstrated to have an effect on the project, let's introduce
one of the well-known techniques for quantifying the impact of such uncertainty. The
program evaluation and review technique (PERT) was developed by the late 1950s. The
objective was to evaluate the risk in meeting the time goals of the execution of proj-
ects whose activities had some uncertainty in their duration estimates.
To represent the uncertainty in duration estimates, the PERT technique recog-
nizes the probabilistic, rather than deterministic, nature of the operations involved in
high-risk activities. Accordingly, the PERTtechnique incorporates three durations for
each activity into its methodology. The three duration estimates are:
Optimistic duration (a): estimated time (comparatively short) of executing
the activity under very favorable working conditions. The probability of at-
taining this duration is about 0.01.
Pessimistic duration (b): estimated time (comparatively long) of executing
the activity under very unfavorable working conditions. The probability of
attaining this duration is also about O.Ol.
Most likely duration (m): estimated time of executing the activity that is
closest to the actual duration. This estimates lies in between the above two
extremes.
These three estimates, rather than only one, express the time to accomplish an ac-
tivity in terms of likelihood rather than for certain. Likelihood in turn can be ex-
pressed in terms of statistical probability and distribution curves representing the fre-
quency of occurrence of various durations if the activity were to be performed a large
number of times.
In PERT,the given estimates of times and the likelihood of occurrence are repre-
sented by a beta curve, as shown in Figure 12--4. However, with the three estimates of
time for each activity, we cannot perform traditional CPM analysis to determine proj-
ect duration. Therefore, we need to get a single weighted average duration for each
activity. The formula for the expected duration, called expected elapsed time, (te) is as
follows:
t, = (a +4m + b) / 6
 SPECIAL TOPICS I 325

Figure 12-4. Beta m

Distribution of
~ Beta Distribution Curve
Activity Duration

~---- ...•.Activity
a t' b Duration
e

The t, value is a sort of an average with more weight given to the most likely time.
As shown in Figure 12-4, the te point divides the area under the beta curve into two
equal parts, meaning, the activity has a 50-50 chance of being accomplished earlier or
later than te' Also, to represent the variability and level of uncertainty in the activity
duration, the activity variance is calculated as follows:
at/ = [(b - a) / 6f
In effect, the variance at/ is larger when optimistic and pessimistic estimates are
far apart, representing high uncertainty in the activity duration estimate.

12.2.1 Step-by-Step Analysis

Now that we have one duration estimate value (te) calculated for each activity, let's
discuss the probabiiistic scheduling process using the PERT technique. Using an ac-
tivity on arrow (AOA) representation of a project network, the process is as follows:
Step 1: Individual Activity Durations
a = optimistic duration (1 in 100 chance) = minimum duration
In = most frequent duration (most likely)
b = pessimistic duration (1 in 100 chance) = maximum duration
te = activity expected duration = (a + 4 m + b)/6
at/ = activity duration variance = [(b - a)/6]2

Step 2: CPM Calculations

Using the activities' te durations, CPM calculations are performed following the for-
ward and backward passes to determine the project duration (TE). Activity floats and
also calculated and critical activities are identified.
Step 3: Distribution of Project Duration
Because the probability is 0.5 that each activity will finish at its te durations, there is a
probability of 0.5 for the entire project being finished at time T E' However, the ex-
pected project duration does not follow a beta curve as did the activities comprising
the project. Assuming that the project is executed a large number of times, the result-
ing population of project durations may be assumed normally distributed.
TI1enormal distribution of project duration is defined by its mean (J.L) and stan-
dard deviation (a) values, determined as follows:
J.LTE = TE = ~ te of critical activities

!TT
E
= y'~arc of critical activities

Step 4: Analysis of Project Completion Probabilities

Using the project normal distribution, it is possible now to find the probability values
associated with specific project duration. By scaling the project distribution to the
standard normal distribution, we can obtain probabilities from standard probability
tables and make conclusions, as follows:
326 I CHAPTER 12

Z = Desired Completion Date - f.LT

E
<TT
E

= 0.5 reasonable
Using Z and ----Get
Standard Probability bili ~ 0.5 not necessarily good
Tables Pro b a iuty
< 0.5 no good

Let's consider a simple example of a project network similar to the one we use
for our case study but with three possible durations as shown in Figure 12-5.
Calculate the probability of the project being completed in 30 days of less.

Figure 12-5.
Network of a Small f2\
V D
2,8,10 '~ E
Example
1,4,6

/----;~-+-( f---::::-:-:;F~f5"l
7,10,12 \:V
H
7,8.10 .~
0f---::--:::1--::--'
3,6,9
0
G K
12,1 . 0
{-;'\,7 J 6,10,14
~~-=--_.\
5,6.8
8

Solution:
Given:
Step 1: Activity Durations

Activity a m b

A 3 4 5
B 2 6 9
C 1 2 4
0 2 8 10
E 1 4 6
F 7 10 12
G 12 16 20
H 7 8 10
I 3 6 9
J 5 6 8
K 6 10 14

Step 2: CPM
Critical path is B-G-K.
Step 3: Project Duration Distribution
f.LT E = TE = ~ te of critical activities = 5.83 + 16.0 + 10 = 31.83 days

aTE = v'~<Tr, = \11.36 + 1.78 + 1.78 = 2.217 days

 SPECIAL TOPICS I 327

Step 4: Analysis of Project Completion Probability

Using the project normal distribution, it is possible now to find the probability of fin-
ishing the project in 30 days or less.
Normal Distribution

IlTE = 31.83

0T
E
= 2.217

30
7
31.83

Probability (Project duration <= 30 days): Z = 30 - 31.83 = - 0.8268

2.217
From standard probability tables: Probability « = 30 days) = 0.204 or 20.4%

12.2.2 Criticisms to PERT Technique

The PERT approach has been used for risk analysis in R&D projects. Many re-
searchers, however, have reported several comments on its applicability, including:
• Requires three estimated durations for each activity, which requires time-
consuming analysis of past projects.
• Assumes continuous probability distribution for activity durations. In various
domains, including construction, only discrete durations are available.
• The assumption of the suitability of beta distributions for activity durations is
debatable.
• It focuses on a single Critical Path and ignores close-to-critical paths.
• It assumes independent activity durations, whereas in practice, activity dura-
tions are correlated with one another.
• It ignores the risk that occurs at path convergence points, therefore, according
to some, is suitable only for one-path schedules.

12.3 Monte Carlo Simulation for Project Risk Assessment

Monte Carlo simulation was introduced in an effort to overcome the limitations of
PERT.The method basically uses randomly generated numbers to determine possible
activity durations. The technique essentially generates various scenarios associated
328 I CHAPTER 12

with the project, each involving a random set of durations for the project activities.
Each of these scenarios is then used to produce a CPM-type deterministic schedule. At
the end, we can analyze the results of all these scenarios to understand the resulting
range of variability in project duration.
To generate the random project scenarios, the Monte Carlo simulation technique
requires information about the duration of activities and their distributions, includ-
ing discrete values. It is apparent that this technique requires numerous calculations.
The number of activity duration sets may vary from 40 to 1000. The outcome of the
technique is basically an estimate of expected time and variance of project completion
time. Accordingly, the probability of meeting a particular completion date is deter-
mined and also the probability that a particular activity could become critical.

12.3.1 Step-by-Step Analysis

The following is a five-step procedure for performing Monte Carlo Simulation:
1. Determine the duration distribution of each activity. It is possible to use dis-
crete values or to use the simplified assumption of a triangular distribution
(Figure 12-6).

Figure 12-6. m
Distribution of Discrete Distribution
Activity Duration for Triangular Distribution
Monte Carlo
Simulation

Activity a b Activity
Duration Duration

2. Generate one project scenario by randomly generating one possible duration

for each activity in the project (based on its distribution). Perform CPM cal-
culations for this scenario and determine the project duration.
3. Repeat step 2 for the number of desired sirnulations (scenarios) and then tab-
ulate the results.
4. Project Duration Distribution: Calculate the mean (f1.) and standard deviation
(a) values for the resulting project durations.
5. Using the (f1.) and (a) values, determine the probability of the project being
completed on or before any given date similar to step 4 in PERT analysis.

Let's consider again the project network of Figure 12-5, which defines the un-
certainty in terms of three estimated activity durations for each activity. Let's
follow the five steps of Monte Carlo simulation for the example and then
compare the results with the PERT analysis made earlier.
1. To enable a comparison with PERT analysis, let's consider the three estimates
as discrete values for each activity.
2. Let's now generate 500 random scenarios of the project. We then calculate the
CPM duration of each.
3. When can tabulate the results as shown in the example of Table 12-1.
4. Project Duration Distribution: We now calculate the mean (J..L) and standard
deviation (a) of the 500 CPM durations at the bottom of Table 12-1. The re-
sults are as follows:
Mean (I-L) = 35 days; and Standard Deviation (a) = 7.45 days.
 SPECIAL TOPICS I 329

Table 12-1. Partial Monte Carlo Simulation Results

Scenario Scenario Scenario

Activity 1 2 500

A 3 4 5
B 2 9 2
C 1 2 8
D 8 8 1
E 4 12 7
F 10 16 12
G 16 7 12
H 8 10 9
I 9 8 6
J 8 5 8
K 14 10 6 ~

CPM
Duration 32 43 29

It is interesting to note that these values are larger than those estimated us- t',
ing PERT. These results point out to some of the frequently cited limitations
of PERT, which result in underestimating the project duration.
5. Using the (u.) and (er) values, we determine the probability of the project be-
ing completed in 30 days or less, as follows:

Probability (Project duration <= 30 days): Z = 30 - 35 = -0.671 ~

7.45
From standard probability tables: Probability « = 30 days) = 0.251 or 25.1 %

12.4 Advanced Tools, Techniques, and Applications

In this section, some of the emerging new techniques, tools, and technologies are
touched upon. Although the description here is brief, each of these topics, or other
new ones, can be explored by the students in the form of a group course project. The
project can be a search and summarization exercise and can end with student pre-
sentations. When the various groups present their work to the whole class, they bring
additional up-to-date content and their combined knowledge complements the theo-
retical and quantitative aspects presented in this textbook

12.4.1 Enterprise Project Management: A New Wave

With the turn of the millennium, many software vendors have put into the market
project management software that is claimed to be usable by all parts of the "Enter-
prise." It ties scheduling, resource allocation, document management, timekeeping,
financing, procurement, and reporting together into one integrated system. In the
larger business community, such systems have been referred to as "ERP" or Enter-
prise Resource Planning systems. An Enterprise Resource Planning system is a pack-
aged business software system that enables a company to manage the efficient and ef-
fective use of its resources (materials, plant, and equipment, etc). ERP systems have
been used by large manufacturing, production, and larger corporations, and they cost
330 CHAPTER 12

millions of dollars in planning, customization, and training of users. The objectives of

using such systems are to:

• Automate and integrate the majority of an organization's business processes.

• Share common data and practices across the entire enterprise.
• Produce and access information in a real-time environment.
• Tie all departments of a corporation together and facilitate the transfer of bus i-
ness information.
• Increase productivity, achieve a higher level of competitiveness, and ulti-
mately attain larger market shares and profit margins.

With the increase in the number of corporations Llsing ERP software, organiza-
tions are facing many challenges during the implementation, particularly with the
large cultural changes required from users. In fact, the use of these systems is going
through the second wave, which follows the "Go Live" step in their implementing. In
this second wave, the focus is on addressing whether the promised benefits are at-
tainable, the systems' impact on users' ability to adapt, and how to optimize the ben-
efits gained from using such systems.
In a recent consulting report published by Deloitte Consulting
(http://www.dc.com). various worldwide ERP implementations were at alyzed
through a survey among 230 respondents in 85 global companies. The report, "ERP's
Second Wave: Maximizing the Value of Enterprise Applications and Processes", in-
cluded a survey that was conducted between the summer of 1998 and spring of 1999.
The ERP systems surveyed are SAp, Oracle, Baan, and PeopleSoft. Some of the findings
in the report are shown in Figure 12-7. According to this report, full benefits of ERP
implementation can be achieved through the following practices:
1. Focus on capabilities and benefits, not just going live.
2. Implementation does not end by go-live. ERP requires planning and pro-
gram management practices throughout the program life cycle.
3. Companies should anticipate a temporary dip in performance after going
live but substantial improvements will soon follow.
4. Achieve balanced people, process, and technology changes across all area.
5. Extend the ERP capabilities even further. Web-based ERP is an expected
area.
6. Teach the organization to use new capabilities.
7. Build and leverage process expertise.
8. Promote post-implementation commonalties.
9. Assign clear ownership of benefits.
10. Define metrics and manage to them.

12.4.2 Simulation
Computer simulation is a powerful tool for accurate modeling of real-world con-
struction systems to support planning, scheduling, and resource management. Since
the introduction of the CYCLONE system for construction (discrete-event) simulation
by Halpin in 1973, research in this domain has been growing increasingly. Over the
years, several systems have been developed with various capabilities. Such tools are
beneficial in modeling any cyclic process, such as the erection of steel elements in the
various floors of a high-rise building, or earth-moving operations in which trucks are
loaded with material, sent to dump area, and returned in a queue for another load-
ing. These processes can have a lot of variability in the timing of each step, probabil-
ity of process breakdowns, and various possible resource combinations.
With traditional simulation tools, the process of developing a simulation model
requires the user to be familiar with specific terminology and the modeling schemat-
ics of particular software, in addition to the ability to write proprietary computer
 SPECIAL TOPICS 331

Respondent Profile by Role Industry Representation

Aerospace and Defense 3% ----:;

User 29% Energy 4%

Aulomotive 9%
Implementer 39%
Consumer Business 18%

Executive 32% Process 39%

High-Tech 27%

Anticipated vs. Actual Benefits

Inventory Reduction

Personnel Reduction

Effective Cash
Management
Revenue/Profit
Enhancement

IT Cost Reduction

Productivity Improvement

Procurement
Cost Reduction
Order ManagemenV
Cycle Time Improvement

Maintenance Reduction

Faster Financial Close Cycle

TransportationJLogistics
Cost Reduction
Improved Supplier
Management

Improved On-Time Delivery

•• Anti ipated
Improved Sales &
N:m
Operations Planning

o 10 20 30
r40
Actu I

50 60
% of Respondents with Measurable Results
Note: Based on multiple answers per respondent

Figure 12-7. Analysis of ERPImplementations

code. This may not be suitable for many construction practitioners who are not fa-
miliar with the operational details needed for accurate simulation. Several re-
searchers have, therefore, employed different ways to simplify the modeling process
and to make it more attractive to practitioners. These include efforts to introduce sim-
ulation techniques imported from other domains such as Petri Nets, which were in-
troduced by Wakefield and Sears in 1997.Still, however, Petri Nets still needs famil-
iarity with new terminology.
One of the simple simulation tools available commercially that is remarkably
easy to use is the Scitor Process software. It allows the user to draw a flowchart of any
process, assign resources to the process steps, run the simulation, and then obtain var-
ious reports on productive times, idle times, and the production quantity produced
at the various process steps. An example of a simple concrete placing operation is
shown in Figure 12-8.
332 I CHAPTER 12

Figure 12-8. Model Crane & Bucket return after

ofa Simple placing 1 CuYd
Concrete-Placing Reposition new truck
Operation (after loading 8 CuYds)

3 4
Load & Hoist Place & Vibrate
r--~1--:C:-u-:-:Y-:-d
~-< (AND-IF) >----1-=C-uY-d---< (AND-IF)

'-- C.=cr-=-ew'-'--'-'moves
to next
column after placing 2 CuYds

Using any simulation tool brings substantial benefits. This includes proper esti-
mation of production rates, analysis of the impact of various resource combinations
on production, analysis of the impact of uncertainty on production, and analysis of
various reengineering decisions.

12.4.3 Artificial Intelligence Techniques

Artificial Intelligence (AI) is the area of computer science focusing on creating ma-
chines that can engage on behaviors that humans consider intelligent. The ability to
create intelligent machines has intrigued humans since ancient times, and today with
the advent of the computer and 50 years of research into AI programming techniques,
the dream of smart machines is becoming a reality. Researchers are creating systems
that can mimic human intelligence and preserve human experience.
In construction engineering and management, experience is crucial for decision
making and problem solving. Thus, computer technologies that are capable of stor-
ing and re-using human experience are essential for developing practical decision
support systems. The aspiration to work more productively and cope with increasing
challenges has motivated many researchers in the academic arena to develop nontra-
ditional problem-solving tools based on artificial intelligence. Examples of these tools
are knowledge-based expert systems (KBES), artificial neural networks (ANNs),
fuzzy logic systems, and genetic algorithms (GAs). A brief introduction to these tools
and their application areas is as follows:
12.4.3.1Knowledge-Based Expert Systems (KBES) The primary goal of expert sys-
tems research is to store and preserve the knowledge of expert practitioners and make
it available to decision makers at the time of need. When enough knowledge about
specific subjects is acquired and stored in a computer, the Expert system mimics the
human ability to make logical deductions based on this knowledge to come up with
proper answers to problems.
KBEScan assist supervisors and managers with situation assessment and long-
range planning in many domains including business, science, engineering, and the
military. Today's expert systems clients can choose from dozens of commercial soft-
ware packages with easy-to-use interfaces. With many construction problems being
solved based on experience and judgment, KBEScan be applied to various areas in-
cluding diagnostic problems such as determining the proper rehabilitation for
cracked buildings, selection of proper foundation type for a large project, and deci-
sions related to proper use of resources.
The key advantages of KBESis their method of representing and storing infor-
mation and the manner in which they search through the knowledge to come up with
solutions to problems. The knowledge storage and representation is mainly made in
the form of IF-THEN rules that can be collected from various experts and stored sep-
arately from any processing mechanism. Let's, for example, represent some of the
rules used to define the area of the batch plant needed on a construction site, as shown
 SPECIAL TOPICS 333

Figure 12-9. Su~oal5 Sub!\l0al4 Subgoal3 Su~oal2 Sub!\loall Goal

Knowledge
Search
Representation and ~
IF IF direction
the Backward
contractor owns batch plant is more
Chaining Process or can rent or economical than
bUI' batch plant ready mix concrete
= true = true

IF IF IF
required batch plant batch plant
concrete available = feasible =
production:="\ true true
user input area of
batch
AND
6 plant=
3 batch plant
* 300
possible =
300
true
400
400
AND 500 m2
AND
concrete
production enough site
x 1.5 > 25= space = true
true AND
batch plant
5 capacity = 30
45
THE ~---------------------------- 60
AND 80
concrete 120
production x 1.5 =
25-30
30-45
45-60
60-80
80-120 • Rule number

in Figure 12-9. This decision depends upon several factors including the quantity of
concrete, site space, availability of cheaper alternatives, and potential reuse of the
plant. This knowledge takes a hierarchical form suitable for rule-based representa-
tion. Also, the separation of the knowledge base from the processing mechanism sun-
plifies the updating of the knowledge base.
During a consultation, a solution or conclusion to a problem is driven through an
inference engine, which is a mechanism for searching the knowledge base for a solu-
tion. There are two common types of search: forward chaining and backward chain-
ing. The forward chaining starts from the IF part and uses the available symptoms to
activate one of the THEN parts that determine the conclusion or solution. The back-
ward chaining. on the other hand, starts from the goal and searches the THEN part of
the knowledge base. The mechanism works backward to determine its subgoals. Con-
sider the chain of knowledge in Figure 12-9, for example, the goal to be determined
(right side) is the area of the batch plant. Before a final conclusion is made, the sub-
goals have to be determined first. The process moves backward to evaluate the sub-
goals and their sub-subgoals following the knowledge chain. Following this process,
the rules (numbered 1 to 6) are activated sequentially, and accordingly the area batch
plant is determined. Because of its mechanism, one of the good features of a KBESis
its ability to logically explain the conclusion reached by the system.
12.4.3.2 Artificial Neural Networks (ANNs) Many of the systems that engineers
deal with exhibit dynamic, multivariate, and complex behaviors (e.g., wave forces,
weather conditions, earthquake strengths, and material mechanics). Dealing with
such systems has been a difficult task, and traditional tools, or even expert systems,
have not been able to accurately predict and model the behavior of such systems as
basis for design and analysis. Therefore, among the artificial intelligence tools, ANNs
have been used for the modeling of such complex systems. Through their learn-by-
example process, a neural network is able to automatically associate the causes with
their related outcomes, without logical inferencing or explanation. After being
334 I CHAPTER 12

trained, an ANN is able to quickly predict the outcomes of a completely new situa-
tion. As such, ANNs behave similar to the development of the human gut feeling,
which is based on years of experience and the ability to recognize patterns even with
little information. Some examples are the ability to recognize hand-written characters
and to recognize the age of people from passport-size pictures. In these examples,
human intelligence cannot be explained easily in the form of IF-THEN rules.
Neural networks have been suggested as most suitable for modeling problems in-
volving judgment and analogy with previous situations, where a structured problem-
solving mechanism is lacking. Basically, ANNs are computer programs simulating
the biological structure of the human brain and its ability to learn from previous ex-
periences and generate estimates for new situations. A typical ANN consists of a
group of processing elements organized into a sequence of layers usually with full
connections between successive layers through connection weights. Figure 12-10
shows the elements of a simple three-layer ANN, widely known as feed-forward
backpropagation.
The input nodes accept the data that is presented to the network (representing
model parameters) whereas the output nodes produce the outputs (representing the
decisions associated with the parameters). The hidden nodes internally represent the
relationships in the data and their number is usually determined in a trial-and-error
manner. Each processing element in the ANN performs a simple sum product of its
inputs by the corresponding weight value. Using some historical cases of known in-
puts and outputs, an ANN can be trained to produce correct outputs when presented
only with the inputs. The training process, in fact, is a process of determining the op-
timum values for the ANN weights that produce the desired outputs. The calcula-
tions involved in ANN processing are discussed in a large number of references.
In recent years, the backpropagation type of ANN has been successfully used by
many researchers to develop estimating models in construction. Examples of these
models include estimating the cost of change orders, trenching productivity, and the
structural behavior of concrete slabs.
12.4.3.3Fuzzy Logic As many of the linguistic terms used by humans involve a de-
gree of fuzziness and relative significance, it is desirable to address the impact of such
fuzziness on the solutions made by experts for complex problems. To support the de-
cisions under such fuzzy situations, the fuzzy logic technique of artificial intelligence
is beneficial.

Figure 12-10.
Elements of a Three-
INPUT HIDDEN OUTPUT
Layer Neural BUFFER LAYER LAYER
Network
1
1

p
 SPECIAL TOPICS I 335

Figure 12-11. Degree of

Representing Membership Fuzzy Variable: Competition
"Competition" as a Values: Low, Medium, or High
Fuzzy Variable
Low Medium High
1.0

No. of
Competitors
04---~--------~~--------~----------~----~
o 2 5 8 12

In fuzzy logic, each individual value for a given variable is not represented by "-
single number, rather, by a "Membership function" to represent the fuzziness in-
volved. Looking at Figure 12-11, for example, when a contractor in a new bid con-
siders that the level of competition to be "Medium," this means that the number c:
competitors can be between a range of 2 to 8 competitors. Using these membershic
functions, the technique applies rigorous mathematical formulation to determine "-
crisp value of the outcome or solution to a given problem.
No doubt that each of the artificial intelligence techniques presented here has its
potential applications in construction engineering and management applications. Ex-
amples of application area being carried out by researchers and practitioners are
quality control, claims analysis, cost estimation, resources optimization, productivirv
assessment, diagnosis of problems, efficient material handling, risk assessment, ar..:i
cause-effect analysis, among many others.

12.4.4 The Internet

The Internet has been regarded by many people as a revolution in communicatior.
and information technologies that is soon to change the manner in which evervdav
business is being conducted. Although the construction industry has been slow tc
adapt to almost all new technologies, the low cost and the many benefits of the Inter-
net will prove to be very attractive to construction practitioners in formulating corn-
petitive business strategies. Contractors can use the Internet to coordinate among :e-
mote experts, advertise services cheaply to a broad base of customers, obtain
information about out-of-town jobs, procure for cheaper materials and equip men:
and find out who in the world has a solution to an urgent problem. Ultimately this
means lower bids to submit, more jobs, global sophisticated appearance, and higher
profits. With the industry's tighter project budgets and time constraints, informatior.
about new cheap materials, equipment, or techniques can mean higher job efficiencv
and productivity. The Internet, thus, becomes a key to reducing overhead cost and 0t-
erating an efficient construction business.
Currently, and growing almost exponentially, thousands of commercial comFa-
nies have connected to the Internet to offer online services to almost all countries in
the world and almost 20 million computers. This is in addition to an increasing num-
ber of government agencies providing useful business information concerning trade.
costs, and statistics. Some departments and cities have also taken the lead in adver-
tising their online request for bidders, thus starting a change in the manner jobs car.
be obtained. It is expected that many processes will soon be redefined to make use 0:'
the wide reach and low cost of online communications, particularly with improved
Internet security and confidentiality.
336 I CHAPTER 12

Physically, the Internet is a vast network connecting smaller networks of com-

puters in many countries around the world, running on different platforms (e.g.,
workstations, microcomputers, mainframes) and using different operating systems
(UNIX, Windows, Macintosh, DOS). To enable these computers to communicate, the
Internet uses a Transmission Control Protocol/Internet Protocol (TCP/IP) to break
the source information into packets and reassemble them at destination, bypassing
operating system and platform barriers.
Access to the Internet is open for commercial users and individuals as it is for
government, educational, and research organizations. The Internet is free, however
for a fee, users can connect to a local service provider and save on their connection
telephone bills. Among the Internet services, the World Wide Web (WWW) is the most
interesting because of its multimedia nature and its user-friendly interface to the
other Internet services.
As a general trend, the Internet will facilitate the replacement of current costly
paper-based procedures with less-costly electronic means. Ultimately, with the intro-
duction of new solutions to the Internet's security and confidentiality issues, the In-
ternet can offer to a construction office a lot more than the telephone and the facsim-
ile technologies are doing today.
The examples of Web-enabled devices and software applications are plenty. From
cellular phones that can browse the World Wide Web to applications that can com-
pletely run from the remote server by the Web browser. Almost all the new versions
of project management software such as Microsoft Project and Primavera have Web
features. Other specialized software that provide Web-based project management
services have also become available. Examples include BidCorn, Framework, and
Meridian. A listing of these software systems is provided in the appendix. With the
new handheld gadgets and Web-enabled software, site-to-head-office communica-
tion is much facilitated so that reports are transmitted online and expert solutions are
provided immediately to site professionals.

12.4.5 Advanced Applications

Based on the issues described in this chapter, among others, a wide spectrum of new
and innovative technology and applications are being introduced by companies and re-
search institutions. Although some of these applications are still under development,
new improvements are being made daily and the near future will see a lot of these ap-
plications being mainstream. Some of the important technologies/applications include:
• Improving design productivity with the Internet.
• Virtual project extranets.
• Using 3D and video in design.
• Construction planning and management using 3D CAD models.
• e-Cornmerce and facilities management.
• Web-based GIS.
• Web-based design collaborative.
• Project-specific websites: Integrating the job site and the design office.
• Estimating and bidding on the Internet.
• Mobile and job site systems.
• Video conferencing.
• GIS/IT integration.
• Asset tracking.
• Mobile architecture: The impact of palm and wireless connectivity.
• Building the e-commerce infrastructure.
• Using your extranet to disseminate best practices.
• Surveying software.
• The paperless job site.
• Wireless construction management applications.
 SPECIAl. TOPICS I 337

12.5 Summary
In this chapter, various special topics are presented. First, the techniques that deal
with uncertainty in activity duration are discussed. Advanced tools and techniques
are then introduced. The Internet is also presented as a fast growing approach for get-
ting all business partners to collaborate for the purpose of reducing project cost. Var-
ious Web resources are included in Appendix A

12.6 Bibliography
Ayre, R & Willmott, D. (1995). "The Internet Means Business," PC Magazine, 14(9), pp.
195-203.
Eager, B. (1994). "The Information Superhighway Illustrated," (Que Corporation).
Goldsborough, R (1994). "Straight Talk About The Information Superhighway." Que Cor-
poration.
Gonzalez-Quevedo, A A, AbouRizk, S. M., Isley, D. T., and Halpin, D. W. (1993).
"Comparison of Two Simulation Methodologies in Construction." Journal Construc-
tion Engineering and Management, ASCE, 119(3), pp. 573-589.
Hecht, A (Dec. 1998). "A Web-Based Project Management Framework," PM Net-
work, PM!.
Huang, R, Grigoriadis, A M., and Halpin, D. W. (1994). "Simulation of Cable-stayed
bridges using DISCO." Proc., Winter Simulation Conj., Inst. of Electr. and Electronic En-
grs., Piscataway, NI, pp. 1130-1136.
Hulett, D. (Feb. 2000). "Project Schedule Risk Analysis: Monte Carlo Simulation or
PERT?" PM Network, PMI. Vol. 14, No. 2, pp. 43-47.
Ioannou, P. G. (1989). UM-CYCLONE User's Guide. Dept. of Civ, Engrg. Univ. of Michi-
gan, Ann Arbor, MI.
Schhuyler, J. (lan. 2000). "Exploiting the Best of Critical Chain and Monte Carlo Sim-
ulation," PM Network, PMI. Vol. 14, No. I, pp. 56-60.
Scitor Process V 3 (1999). Sunnyvale, CA: Scitor Corporation.
Tommelein, L, Riley, D., and Howell, G., (1999). "Parade Game: Impact of Work Flow
Variability on Trade Performance," Journal of Construction Engineering and Manage-
ment, ASCE, Vo!. 125, No. 5, pp. 304-310.
Wakefield, R. K, and Sears, G. A (1997). "Petri nets for simulating and modeling of
construction systems." Journal Construction Engineering and Management, ASCI,
123(2), pp. 105-112.

12.7 Exercises
1. Conduct a Web search for information related to any of the topics described in this
textbook. Report on the top interesting sites found.
2. Based on a Web search of various project management software, compare the ca-
pabilities of at least three Web-based software systems for integrated project man-
agement.
3. Student group projects: each group of two to four students uses one of the tools de-
scribed under section 12.4, search the literature on state-of-the-art development
and apply the technique to one case study purposes (can be obtained from the lit-
erature) for demonstration. Each group makes a 10-minute presentation of their
findings.
 WEB RESOURCES

The various websites provided in this section are by no means exhaustive. Everyday
new web sites become available and new information is put on the Web. The follow-
ing web sites serve as examples. Readers are encouraged to conduct a Web search us-
ing their desired keywords to obtain links to updated information.

Some Websites Related to Chapter 2: Project Acquisition

Website Site Description
www.constructionplace.com or Various construction information, services, and
www.constructionplace.com/glossary.htmlglossary of terms
~---------------------------------------
http://www.foulgerpratt.com/whycm.htm Discussion on the benefits of project management
www.pubs.asce.org/contract.htmISample contract forms
------------------- ------------------------
www.constructton-orn.corn or www.constructton- Construction project participants, project manager
pm,com/handbook,html#anchor31554
www.dforeman.com Foreman construction management, marginal subs
www.brtable.org/document.cfm/l41 The business roundtable, contractual relations
CICE Reports - "A-7 Contractual Arrangements"
www.new-technologies.org Emerging construction technologies
Emerging trends-construction teChnology
www,brtable.org or The business roundtable, emerging trends-
www.brtcble.oro/tssue.cfrn/: international projects-"Guide for Global Project
Delivery" 04/23/99
www.reqis-uso.corn or Regis Communications, emerging trends-
www.regis-usa.com/psws.htm project-specific websites; Web-based project
into. systems
www.usprojects.corn or ConstructLink, emerging trends-project-specific
www.usprojects.com/customer / cnsprod / websites; Web-based project into. systems
html/main.cfm
www.brtable.org or www.brtable.org/issue.cfm/l The business roundtable, emerging trends-quality
assurance ClCE Reports- "Modern Management
Systems"
www.brtoble.orq or www.brtable.org/issue.cfm/l The business roundtable, emerging trends-quality
assurance CICE Reports- "Improving Construction
Safety Performance"

339
340 I APPENDIx A

Some Websites Related to Chapter 2: Project Acquisition (continued)

Website Site Description
www.brtable.org or www.brtable.org/issue.cfm/l The businessroundtable. project delivery method
publications - "The BusinessStake in Effective ProjecT
Systems"09/16/99
http://138.25.138.94/signposts/articles/Generic/ Signpoststo Asia & the Pacific Project delivery
Development /364.html method Build-Operate-Transfer (BOT)
www.fta.dot.gov/library/planning/prob/execsum.html Federal TransitAdministration. project delivery
method. turnkey
www.dforeman.com/ Foreman construction management. project deliv-
ery method design/build
www.dig.bris.ac.uk/teaching/o_a_hf/pscales/pscales Universityof Bristol,project organizational structure.
.htm techniques that may be used in the management 0"
large projects
www.dforeman.com/ Foreman construction management. types of con-
tracts. contract baseline
www.dforeman.com/ Foreman construction management. types of con-
tracts. contract-subcontract
http://www.aiaonline.com The American Institute of Architects, Q&A discussion
and case study projects
www.construction-on-line.co.uk Information on various construction projects such as
drawings. models. on line pictures and site-related
data.
www.copywriter.com/ab/constr.html Connections to builders. contractors. construction
managers. trade workers. architects. designers. eng-
neers and vendors.
--------------------------------------------------------,-----
http://cic.vtt.fi/links/constrit.html Network of construction ITcenters
www.nationalcontractors.com/ Information on contractors nationally and interna-
tionally
www.4specs.com/ Directory of specified construction products dividec
by the CIC
www.nwbuildnet.com/nwbn/specifications.html Building and construction specifications resource
page
www.aecinfo.com The e-market place for the global building industry
www.ncsbcs.org Construction industry codes
www.nrc.ca Canadian national research council. research in
construction

Some Websites Related to Chapter 2: Data Management Tools

Website Site Description
www.pcshowandtell.com or PC show and tell. video/audio demonstrations of
www.pcshowandtell.com/shows. asp?product= Excel functions
Excel_97
www.microsoft.com Microsoft Excel and Microsoft Project
www.primavera.com Primavera. SureTrack,and Primavera P3 systems
www.wardsystems.com/genehunt.htm GeneHunter software
www.palisade.com/html/triaLversions.html Evolver software-down load evaluation version
 WEB RESOURCES I 341

Some Websites Related to Chapters 3 and 5: Planning and Scheduling

Website Site Description
www.byte.com/art/9702/sec15/art3.htm BYTE,(Article) adding more PERTcharting to Mi-
crosoft Project
www.people.virginia.edu/-av9y/ITC-PM-web/PM- Project planning processes
planning-doc-july 12.htm
http://tiger.coe.missouri.edu/-perfsppt/Dbell University of Missouri, Columbia PERT /GANTT and
/index.html Critical Path review of Microsoft Project for Windows
www.byte.com/art/9504/sec12/art9.htm BYTE,PERT/GANTTand Critical Path (article) compar-
ing project management tools for Windows
www.scis.nova.edu/ or Nova Southeastern University, PERT /GANTT and
www.scis.nova.edu/-mcte/MCTE661/pert.html Critical Path descriptions of PERTcharts, Gantt
charts, and WBS
www.w3c2.com.au/steve/sd201/pert.htm Optimum ISSolutions, PERT
/GANTT and Critical Path
example of PERTand Gantt charts
www.cs.cmu.edu/-SW_Managemnt/html/ Carnegie Mellon, PERT /GANTT and Critical Path,
mod_2/mod_2_ 4.html making and using activity networks by Dr. James E.
Tomayko
www.uwf.edu/coehelp/studentaccounts/ University of West Florida, PERT/GANTT and Critical
rnew /perthome. html?ti2Xdw=www.uwf.edu/ Path program evaluation and review technique
-coehelp/studentaccounts/rnew /perthome .html
www.goalqpc.com/ Goal/QPC, PERT/GANTT and Critical Path, the seven
www.goalqpc.com/RESEARCH/7mp.html management and planning tools
www.dig.bris.ac.uk/ www.dig.bris.ac.uk/teaching University of Bristol, PERT
/GANTT and Critical Path, an
/0_ a_hf /pscales/pscales.htm overview ot techniques that may be used in the
management of large engineering projects
www.dforeman.com/ Foreman construction management planning re-
construction

Some Websites Related to Chapter 4: Cost Estimation

Website Site Description
www.rsmeans.com/ R.S.Means is North America's leading provider of
construction cost data
www.mailbase.ac .uk/llsts/ construction-process Discussion on construction processes
www.dcd.com/dcd.html Design and cost magazine for engineers and con-
tractors.
www.doc.gov Bureau of Economic Analysis. Information on eco-
nomic growth, inflation, regional development etc.
-----------------
www.CSlnet.org Construction specifications institute-MasterFormat
http://tacoma.wpi.edu/firsto/ /mainform l.htm Detailed MasterFormat
www.rsmeans.com/means/demo/g2.html G2 Estimator; An estimating software
www.build.com/ Building improvement network; Directory for
building/home improvement products and into
www.icoste.org The International Cost Engineering Council
http://www.copywriter.com/constr.htm Connections to contractors, construction managers,
trade workers. architects, designers, and vendors
342 I APPENDIX A

Some Websites Related to Chapter 4: Cost Estimation (continued)

Website Site Description
www.to.orq/r-estimos/oest-est.htrnl Best estimator software
www.dcd.com/d4cost.html Design 4/cost. A square-foot cost-estimating soft-
ware
www.umoncton.ca/cie/ Computers & ind. engineering. Int. journal for cost
studies
www.aecinfo.com AEC Info Center, useful prices for orchltects/
constructors.

Some Websites Related to Chapter 6: Line of Balance

Website Site Description
http://www.dcmc.hq.dla.mil/ dcmc _0/ oct eornvolu/ Origin of the line of balance in manufacturing
help/lob.htm
http://www.rdg.ac.uk/-kcshuwil/cme/edit161.htm A study of controlling the activity interval time in LOB
scheduling
http://www .umsl.edu/ -jmartini/pomnotesl Design of repetitive processes
owebprocessdesign. htm
--------------------------

Some Websites Related to Chapter 7: Resource Allocation and Leveling

Website Site Description
http://www.bham.ac.uk/planning/ The University of Birmingham, The Planning & Re-
source Allocation Section
http://officeupdate.microsoft.com/ Articles/projht5.htm Microsoft Project 98, using views to highlight the im-
pacts of resource leveling
http://www.cisti.mc.ca/cisti/journals/cjce/199-028.html A fuzzy optimal model for construction resource
leveling scheduling
http:// aug3. augsburg. edu/depts/infotech/ Resource leveling
project98/Features/Resource _Leveling .htm
http://www.dcmc.hq.dla.mil/dcmc PERTand resource leveling
_%c/earnvalu/help/pert.htm
http://138.92.9.17/mtm630/resource_allocation.htm Resource allocation
http://officeupdate.microsoft .com/ article list/ Microsoft Project 98 article lists
Projectarticles.htm

Some Websites Related to Chapter 8: YCY Analysis

Website Site Description
http://www.engr.uiuc.edu/Publications/ Operations research, construction, time-cost,
engineering_research/1996/gen 1/gen 1-11.html tradeoff optimization
http://www .engr. uiuc. edu/Publications/ Construction, time-cost, tradeoff, optimization
summary99/pg000136.htm
 WEB RESOURCES I 343

Some Websites Related to Chapter 11: Project Control

Website Site Description
www.prochain.com/faq.asp ProChain Solutions, Inc-Innovations In Project
Scheduling & Management
www.nnh.com/ev/pert2.html NNH Enterprises,Earned Value Papers PERT/GANTI
and Critical Path
Web sitesof projects:
www.bigdig.com/index.htm Central Artery Project. Boston MA
www.wpl.edu/e-solozor/mqp Brookfield Engineering Project. Middleborough MA
www.wpi.edur -solozor/holden Bullard Street School Project, Holden MA
www.anticruelty.org/thumbnaiLgallery.htm Construction thumbnail gallery for projects
www.nnh.com/ev/papers.html NNH Enterprises-Papers on various constructio man-
agement issues:Earned Value, WBS,LOB

Some Websites Related to Chapter 12: Risk Analysis

Website Site Description
http://gunsmoke.ecn,purdue,edu/CE597N/ 1997F/ Purdue University,PERTtutorial on simulation of PERT
students/muhamad,abduh.l/projectl networks

Some Websites Related to: General Project Management

Website Site Description
www.pmi.org Project Management Institute
www.svnoose.net/e-lodov Project Management Forum
www.bdcmag.com/ Building Design & Construction Magazine
www.4pm.com Project Manager's Palette
www.asterisk.co.uk/project/Pmgen.html PM Cafe
www.pmforum.org/vendors/vendors.htm Project management forum
www.pmboulevard.com Project management boulevard
www.sn.no/ipma International Project Management Association
www.eevl.ac.ul Edinburgh Engineering virtual library
www.aiaonline.com The American Institute of Architects. Q&A discussion
and case study projects
344 I APPENDIX A

Some Websites Related to: Web-Based Project Management

Website Site Description
www.handilinks.com/index.php3/computers/ Linksto many project management software
software/project_management
www.pmboulevard.com Internet portal for complete project management
services with monthly subscription
www.constructionweblinks.com More than 2,000 indexed online resources for the
construction industry
www.web4engineers.com Example projects
www.microframe.com MicroFrame software
www.Bluelineonline.com Blueline On line Web-based project management
services
-------------------------------------
www.bidcom.com Web-based project management services
www.planview.com PlanView enterprise-wide project management
www.emergingsolutions.com Web-based project management
www.grantlun.com Web-based project management
http://www .meridian- GraphicVUE project management system
marketing.coml ACCENTInis_3.html
www.Bbid.thebluebook.com The Blue Book's Online Bid Management System
------
www.cincom.com/acquire Acquire System: Bid Management Services On line
www.contractorsesource.com Contractors E Source: Online system for acquiring
subcontractors' quotes
www.e-builder.net E-Builder: Internet-based project-specific sites for
communication
www.account4.com Web-based project control software
www.amsrealtime.com AMS Realtime: Enterprise Project Management
www.webestimating.com Web-based estimating system
www.callingwatson.com Business-to-business servtce on environmental health
and safety
www.mps-inc.com Prolog website by Meridian Project Systems
 NEW CASE STUDY

The case study is to construct the infrastructure (water, sewer, and electricity facili-
ties) for a new, small four-acre residential area. The objective is to conduct a cost esti-
mate and a detailed schedule, select proper methods of construction, prepare a real-
istic bid, study the impact of seasonal productivity factors on project time and cost,
and demonstrate the project control features.

Brainstorming
The project management team identified the main activities of the project, the super-
visory personnel, and the logical relationships between activities as follows:

Activity Type of Activity

No. Work Description Predecessors Supervisor
1 Clear site ST Ahmed
2 Survey & layout 1 Ahmed
3 Rough grade 2 Ahmed
4
...• Excavate for sewer 24 AIi
s
5 (3 Excavate elec. manholes 3 Ali
6 Drill well 24 Ali
7 Water tank foundations 24 Hussen
8 Tank fabrication & erection 7 Hussen
9 Install manholes 5 Fawzy
10 Install electric duct 9 Fawzy
11
...• Erect overhead poles 3 Fawzy
<C
12 0 Overhead poles wiring 11 Sid
ii
t-
13 0 Duct wiring work 14, la, 15 Sid
14
...•
IU
IU Transformer erection 9 Ziad
15 Bus bar erection 9 liad
16 Electric safety inspection 12,13 Ziad

(continued)

345
346 I APPENDIx B

Activity Type of Activity

No. Work Description Predecessors Supenisor
17 Connect piping 18,20 Essom
18 ...• Tank piping and valves 8 Essam
~
19 0 Install well pump 6 Essom
20 Z Underground water piping 19 Essom
~
l:
21 0 Install sewer and backfill 4 Esscm
III

22 ::E Sewer inspection, test 21 Arm

23 Sanitary inspection, test 17 Arm
24 Milestone 3

Planning:
Planning consists of:
• Construction of the Activity on Node (AON) and Activity on Arrow (AOA) dia-
grams.
• Defining the Work Breakdown Structure (WBS)and Organization Breakdown
Structure (08S) data.
In order to construct the AON and AOA diagrams, we need to calculate the ac-
tivities' sequence steps from their dependency relationships. Notice that Start (ST)
and Finish (FN) activities have been added (as discussed in Chapter 3).

Activity Dependency Table and Sequence Step Calculation

Activity Activity Immediately Preceding Sequence
No. Description Activities (IPAs) Step (SS)
ST SS(S1)= 1
1 Clear site ST SS(l) = 2
2 Survey & layout 1 SS(2) = 3
3 Rough grade 2 SS(3) = 4
4 Excavate for sewer 24 SS(4) = 6
5 Excavate elec. manholes 3 SS(5) = 5
6 Drill well 24 SS(6)= 6
7 Water tank foundations 24 SS(7)= 6
8 Tank fabrication & erection 7 SS(8)= 7
9 Install manholes 5 SS(9) = 6
10 Install electric duct 9 SS(10) = 7
11 Erect overhead poles 3 SS(ll) = 5
12 Overhead poles wiring 11 SS(12)= 6
13 Duct wiring work 14,10,15 SS(13)= 8
14 Transformer erection 9 SS(14)= 7
15 Bus bar erection 9 SS(l5) = 7
16 Electric safety inspection 12,13 SS(16) = 9
17 Connect piping 18,20 SS(17) = 9
 NEW CASE STUDY I 347

Activity Dependency Table and Sequence Step Calculation (continued)

Activity Activity Immediately Preceding Sequence
No. Description Activities(IPAs) Step (SS)
18 Tankpiping and valves 8 SS(18)= 8
19 Install well pump 6 SS(19)= 7
20 Underground water piping 19 SS(20)= 8
21 Install sewer and backfill 4 SS(21)= 7
22 Sewer inspection. test 21 SS(22)= 8
23 Sanitary inspection, test 17 SS(23)= 10
24 Milestone 3 SS(24)= 5
FN 16.22.23 SS(FN) = 11

Sequence Step: \y W W ~
I
I
I
I
I
I ,,
I

I
I
I
I ,,
I
,,
I I

AON Network of the Case Study

AOA Network of the Case Study

348 APPENDIX B

Work Breakdown Structure (WBS)and Organization Breakdown Structure (OBS) data:

- ----- .---------- -- --- - -- --- -- - - --- -- - - ----- - - - - -- - -- - --- L.:..:~L-'-=-.J

I WBS Chart Key I AAC

BAC
Clearing
Surveying
AEE
BEE
Electrical manholes
Electrical ducts
AIM Connect piping
BIM Tank piping and valves
A Site preparation G Transformer and bus bar eree. CAC Grading CEE Over head poles CIM Install well pump
B Excavation H Electric safety inspection ABC Excavation lor sewer AFE Over head poles wiring work DIM Under ground water piping
C Concreting I Sanitary water BBC Excavation tor etec. manhole BFE Duct wiring work & cable pull AJM Install sewer and back fill
D Steel work J Sewer water CBC Dnllwell AGE Transformer erection
E Electrical installations K Sewer inspection ACC water tank foundations BGE Bus bar erection
F Wiring work l Sanitary inspection ADC Tank tabrication & erection

Resources Data
Let's now use our spreadsheet program and input the resource data that are needed
for our project. We can start with a copy of the previous case study file but we change
the data to our new case study file. Remember to use the Reset button in the Sched-
ule sheet to remove the schedule data.
 .. .....Ciar~sI1~IL3ucket,.38
:CiamsheH)l'Jeket. 76
Con.;ret~~Ca~~,3.8
.....
.Du!.er~1.5ltKW

Lobar and Equipment sheets

Crews sheet

349
 1\.1·163-205-04oon5'3" Circuit breakers o5MV,A, and lJUSbar
j~'i:t't:M'157 ,s10-3411 Sewer Pipe, isutatiun, fittings 83.00 In
Z;ia;~M157 -610-3472 [Ieetlleal duct 10 CJO In
1Fi2l Mi57 -610-3473 Electrical manlloples 800.00 Ea
~Tg;!M157 -610-3474 electrical wires 12.00 m
;;;~ Mi57 -610-3475 Electrical poles 220.00 Ea
~1'!;;:jM157 -610-3476 transformer U.5Ivl\/A 20,000.00 Ea
;U~;i M157 -61 0-3477VVater pipe, isolaticn, fittings 47.00 In
...........
Mi57 -61 0-3478 Valves 95.00 Ea
M157 -610-3480 pumps 380.00 Ea
M033-126~350 Concrete material 375.00 rn:3
M160-230-3250 Electric ·#ire~ (4 cm2) 22.00 m

Materials sheet

Subcontractors
'E~C{:trtc-al tmi:}f:::nHHaetnrs
sheet Cl:'::clrit:til 'tJ;j'ct nastrons
fi::r.j;11~r.·j p:,:J" SUflP~iR.·~;~-;I:ll:)1:
f-l(H.trical transformer and bus fitting ~; 3, ~<O(I.O
·Pt.h.~-:;wtrinu S"2.~
:C;j,;:"{'winng .$it1,~
51·6 . :,'n,)fnoles installation t.?£:OO.:j
S30·00 'G"l:",o Electrical,
S:JH·Ol "n"~',.~~oo mj>1.pc,,'

·Mechanlcal
.............. subcontractors
-.
-ccnoect water "'PO:::'S }·..~.92:J
'';:sll:liJ1y W:.ft:~r ~m:':I;IJ~;f~:~dol ,S85 (; I'll

.:ii:tor
;s~\'«t:!!v/~19r~~!;{);:;c;mf . S:t ~6.t) re:

··'Ol'·''''!'' :,'Ior>; st:fKGn~r.iSc·;or

Jij·~o
·excavation subcontractor
excavation suncnnuactor (or rnannote ,
'., ' ",.
n2.0
~:.:r'o}!.rfwo!->: ';lj:-f(!:~I;~-i':'1i)j ~,,,~:'£i:o
JJra.~ln9work cuuconnactor $7'50 i)
. dull well $1 ,0CO U
driilwell 0) 'iLi~ri{i-'

;6'rtarlClsafety
: EI:.=:clr[a)1 SafetY inspection .. $5500 eo
2' Scv..-,.;:; ;}"fetv inspection $.1)5°:9 ..
26.03: SanilarY Safety tnsoecuon ' $850.0
526-04 rJ.j;e~tQn~. $0.0 ea

Steelwork
·lank f(lf.lric~t:nn
.1~~llk~a~Hir:,~!:{F)
"--veilpUfrp e:
iithn;s
'~'~e!i'
~;..:r(:'~<f!rij;;~}~(;!

350
 =~~a-0401 ~:;~;;!:::~:~'
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r..SI-Oll··' 01l··04::UX:i,;,',.J<"·'lr.t.i.~ ••.l'l !:;; .••-><1~1r,Z<
CSI·· ~1'i1" j !O .. m."t{)5.c:),<Y,~ :.:.-g<~,~.:~;~
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(::SJ-02:'-11jO-i~i4 {'·;.';!1.4,.,,'1n~,<o;lil-:-nl::J .
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C$··151-..7.8 : ~'::-f".",~~yS¥~'<:J,r:;;:.s:-c;!I:r.
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C5~:-~.~~~~~_(1:'~:1:~.:j;~~_~~~~:~~:::;:;~;'~~~'~:"i'
~-.Jgr~~i~~:~~:~:v~~:;,~,;i;;!

Methods sheet

351
352 APPENDIX B

The Estimate
In the Estimate sheet, we define the project activities and their data related to:
• The work breakdown structure (WBS)of the case study.
• The organization breakdown structure (OBS).
• The contract items and quantity of work associated with each activity.
• Up to three methods for constructing each activity.
• Specifying the three most critical resources and their daily limits.
After entering the data, automatic calculations are made for the cost, duration,
and resource amounts for each activity, as a function of its selected method of con-
struction (column 0). Total cost and duration for each activity according to the se-
lected method of construction shown in columns Rand AH, respectively.
Indirect cost is considered as a fixed amount of $5001 day in this case study.

The Estimate Sheet:

Note that initially, colurrm 0 shows that method 1 (cheapest) is used in all activities.
Also, observe the key resources and their limit specified on the top of the sheet.

'1i:.t~$. ::::i~;d ~~I~ r"r.-p ,,:'..~y.._~ng Phmed SL.fVe;.) and 400

, 00
j,-. ~.•

a<.:f~$ :ivlI .;:I~9'.::-~-;:~~.e:-;.h9 Ah"",d grJd,og

mJ ~':!'il! E ".c~\'C;;;<:.r:t ,.:cr ....•
:JJOn .<\Ii excevenon f 2300.00 exceveeo«! 2800n!1 t:n.:-;,,<ation f
t2B(U ni1 ;"::',,;i! All E''i~~'1afion, 12800 EXCoEl· •.. atlon, 128;)) 2.~:>1'..'atlxl,.

:000 Lew;,', Ali Drill ~\€II 1000 [.11Iwell 11) 1(!,:JD

l?lf m3 C·"II (;Cl:",;:;t~,t,l',::;l:;;;;~?;.-

:.&'lk I Hu!:s.;n C(\l"'~ret~rOI 15.00 Concrete fer I::<~J
1% V:l~ :..;'111 ~·;l.~~l
~::\·d.~cl'i> f$brH Hue.st'n lankf.±:i::': J 00 t·~nk f4:Jri(;< J 0(1

::.GO l.I:,,1 Ekc.lroc.:i ~1~1t;i':.i :s=EI,;~:.l";r..~

n Fewzy rnenhotes u LOO manhok;s;( 2:00 manholes I,
2~O.l~9 1.Y-'Il.1 :I:Ek::'~fic~
El~:dr,~:;j, ~!,!,)J~("'; C F:~·wzy O\...ct work fi 240.00 Ot.,.{CI work h 240.00 wclwork fi
14 (f ~'~I fJ~lf:';~ f.t.;'~·l::.;.j.::.i'\:;IO' .•~ h~o:t,;; F",·oy Pdes erecu 24.00
400.00 en ••t Electr.cci ~;l;(if"g vsor Dve, bead ~-1d cees ~·nru~ 400.00 ;:>.~~~
\'tl~r~ 10000 p.£Ile;;wirinc
3-~~1.-(;1) uno' €:.1>::·~lr:;~:l;\'Jhln.~ vlOrOucl wir:o;. ;;.id In~\all win!), 320.00 'r.~~t.:!lnwIno> 32000 Int=:,lI wlon\

<,it w-ut fl5'.<;,[f·r;,!l.: T rt:t"'l.~hr~' T(,~~dt:'rm' 2iad Inelali ;~~l':~ I (10

'h unit fJ:::o:t{:C6J Tt,~¥d::::fr:'l Suo: b·~ en 2iad In:;:(c{ ::\iC.<.: ! tJO rnstell crcu 1.00
:.G'D j~V'I'1 EJ'.>"If:C_~i E!~~·::xic",;;td') If:~":~CIJ ~j(i,d EI;:"lIl':~"':; ! 00
.1,,(0). l;r';: .:,,~,~r~~~.~1
~i'!~~:"!,.•. Ct~:-~Cl::~
~·j1i f~.. :%'·; ;':'X".~~<t">::»e. J;:Oti core.e-» w.~; :.:.)(1 ~:~~~0~t.~.•.;::t

~(m ;.,~:..~m ~k,,:r:i::.f~(;b:t

i'&'~~Y Tent PIPW! E::...•~y, ."...;f':'~cono€. ~O.OO
We

roe W"""'i.l \·ktl-Ni:.-;:\ Zaf'::;.:ry 'He im;tel1 w:-i! i::.o:.;"-S'::T. r;!'!t~'idl 1000 Fithr~.F';'.'~I 'OlD
4)::=(j) ;:" ;:vt~,:J~.Y"~C.~15'Y;ii'$:·:"·~,,~ :.;;:;d~: g::":l, vs sem weter prpe r 4C1JOO \o'ldt~ f.~~'!-:
I ~(:(:(~; ';'~-;{<?';f><;:~1

m ivlechar~';;di eeaes \'.'d::t :n:;I.!li (-!;',~ E~:;:~ Sewe- pipe 61000 Se'!i-:>I ~..-ip';> 01000 S~v:,cr pipe

lOO !.iU"':'. :-,ltch&-i:.:-!:! ~~rewer ;r··i~(tlOn Amr Sewer :3'!~;1 1 0('

J IX 1~,.zY, ;o.,bCr:6f:.r;d ~::''f:jkry<"f;;~'clion Am Se-nrtt1Y .:S.~ 100
et) !~U';l ~/b:l';Z"~~;d
::j>..tc":~n,:.': -::\jrrm~.'3 Amr dl.J{nm~J I 00

WBS-OBS
 NEW CASE STUDY 353

Scheduling
After completing the Estimate sheet, we send data to Microsoft Project using the but-
ton on the Estimate sheet. In Microsoft Project, we add activity relationship (you can
use the Predecessors column). Once done, the project duration is shown to be 35 days
and the bar chart and PERT (network) diagrams of Microsoft Project are as follows:

.
Excavate for Install sewer Sewer
~----
sewer and back fill inspection, test
PROJECT
=
4 I 10 days 22 I 5 days
DURATION
35 DAYS
Jul17 I Jul26 Jul27 I Jul31 ~~g-1--1--
:~:~---
I
~.---

i
Water tank Tank Tank piping and
foundations fabrications & valves

7 I 2 days 8 I 10 days 19 I 2 days

Jul17 I Jul18 Jul19 I Jul28 Aug2 I Aug3

~
Clear Site Survey & Layout Rough grade Milestone Drill well Install weH Under ground Connect piping Sanitary
pump water piping inspection, test
1 I 4 days 2 I 2 days 3 I 1 day 25 I 0 days 6 I 10 days 20 \ 10 days 21 I 5 days 18 I 2 days 24 I 1 day
Jull0 I Jul13 Jul14 I Jul15 Jul16 I Jul16 Jul16 I Jul 16 Jul17 I Jut 26 Jul27 I Aug 5 1 Aug 10 I Aug 14 Aug 151 Aug 16 Aug 171 Aug 17

\\ Excavate
Manholes
5
Jul17
I
I
elee.

2 days
Jul18
Install
manholes
9
Jul 19
I
I
2 days
Jul20
Install
duel
10
Jul21

Transformer
erection

14
Jul 21
electric

I
I

I
I
6 days
Jul26

1 day
Jul 21
Duct wiring
work

13
Aug4
I
I
6 day
Aug9

Bus bar
erection
15 I 1 day
Jul27 I Jul27

Erect over head Over head Electric safety

poles poles wiring inspection

11 I 3 days 12 I 5 days 16 I 1 day

Jul17 I Jul19 Jul28 I Aug 1 Augl01 Augl0
354 I APPENDIX B

Dealing with Resource Limits in Microsoft Project

We assume the following resource limits: L102=3; L51=2; and L132=1
Viewing Overallocated Resources
With the resource limits specified in the Resource sheet, the view in the Resource
graph of the overallocation appears in a different color. The following are the resource
histograms for the three key resources (project duration is 35 days):

I
I

., I-

! ~

':u;:·
.;

,
-;

,
f..:. •.•.. i-
•.~,-"'::-(.: .. :. 1:

Resource Leveling
In order to allocate the overallocated resources in Microsoft Project we can use the Re-
source Leveling option from the Tools menu, as follows:
 NEW CASE STUDY 355

1. Using resource leveling with the Level Only Within Available Slack option
selected. This, however, did not relieve the overallocated resources.
2. Using resource leveling with the Level Only Within Available Slack option
not selected. Using the Standard leveling method, project duration extended
to 39 days (bar chart shown in the following figure). Notice the leveling de-
lay values.

f.:{.,-.s:;~"F"·)I::,·
S tafunrd leveling
cxccvete tor sewer
Excevete eec r.~e.<; Project Duration = 39
Ollllvt'&'
....................... days
Y'i«lf';( fllo'l'~ 100..r •. "llt~.,."X'<

hs1a11rnenbcics
~s1a11e\ectrlc duct
F.~e:<:tfYoil!\!" Mer.! ",O:1!5

<J•.•..•
~ ~o:.<&:if:.cieJ. "'~
Wet ''''~OJ":jJ",,'~k
1~'~nsiOtm;;"e;~!;tIon
Bus "0«0'erection
Bectrlc t;8fety 1r's,;Pt':.1l~I'
cif-meet pipr:,;J

U~der ~o.:.;ld weter PiP~"

h!:lNi sew-et and bacL::,~ !)~;;La

Sewer oseectcn, test r.ece

.r.~t~,." i<lS~"'Cbon. test :: -c::dll

M.lestone 0 ece

3. Repeating step 2 with various trials in which we change the activity priority
in Microsoft Project. The following table summarizes the priorities and the
total project duration. According to these experiments, the Microsoft Project
file of the last experiment was saved.
356 APPENDIx B

Resource Leveling with Random Priorities

No Activity Priorities Priorities Prioritic~s
1 Clear site Medium Medium Medium
2 Survey & layout Medium Medium Medium
3 Rough grade Medium Medium Medium
4 Excavate for sewer Medium Lowest Lowest
5 Excavate elec. manholes Medium Medium Medium
6 Drillwell Medium Medium Medium
7 Water tank foundations Medium Medium Medium
8 Tank fabrication & erection Medium Medium Medium
9 Install manholes Medium Medium Medium
10 Install electric duct Medium Lowest Lowest
11 Erect over head poles Medium Medium Medium
12 Over head poles wiring Medium Medium Medium
13 Duct wiring work Medium Medium Medium
14 Transformer erection Medium Medium Medium
15 Busbar erection Medium Medium Medium
16 Electric safety inspection Medium Medium Medium
17 Connect piping Medium Highest Highest
18 Tank piping and valves Medium Medium Medium
19 Install well pump Medium Medium Medium
20 Under ground water piping Medium Medium Medium
21 Install sewer and back fill Medium Medium Lowest
22 Sewer inspection, test Medium Medium Medium
23 Sanitary inspection, test Medium Medium Medium
24 Milestone Medium Medium Medium
Project Duration 39 38 37

21$';'& M"-<j:,.;If, ')o::dS','S

, ',W{ h~,Kh;fn :j~'~';;I(:

L'J-''''>;t';;t :; <;'-'J;\.,.~~

2d:j',';; ~,kj:!Af ':i,:::,-k1F;

IJ~:.tl.ZT' ~: ~::111'fS;

2du';::: Y,,'?ci,~m 'j-td&,,:::

M:e:i'u,; :j ej:'l:;;~

~l:?:::km :~hi~I<;

Lowest 6 ecevs
Medium 0 erevs
';'d!::'r:~ J\oIEdjum 2 ecevs 11

6 day:; Medium J ecevs 14,10,15

trenstormer erection 1 r;?-'i Medium Q Bd8"e: 9

Bus uar erector. 1 c..$.'{ M",ci;um o ad~y:::

Bectnc setetv msoecico 1 0..<'( Medium o edeve 12,13

2::lfjy,:< i-'i<,y~-;;t :::d;1:'i~< 8)(:

hf:~ 2J')'t'.:' Mt',L:~i', OcJ2:"r,;

~;,$l$j '9~<e~ ~'::.V':P ;[)jS','S Ne-j:<.4r:

i.;f}~tlr:;n.iu~\"I·U.,,"1 p~f:£ '" ~1(!(~< MW.NM 19

in5.taU se-ver ere beer IHI SJI}'{'!; l ,~1~'i:;;

'f.,';'<:<(';'- ~'-',""r",;-":,~',n ,,":;..~ \ r;~'>, Necaum o ecevs 21

screorv lnspcc1rn, test 1 ,~<,y Medium n eoevs 17
M!:esl:CIr'Ie I)CUlyS Mecllum n coova

Bestsolution of Microsoft project with project duration = 37 days. Leveling option is Priority-Standard.
 NEW CASE STUDY I 357

Importing Project Data to the Schedule Sheet

Step 1.
Select the Schedule sheet.
Step 2.
Click on the Set Up From Estimate button.
Step 3.
Click on the Import MS Project Data button.

Overall Project Optimization Using Excel

We will use the Excel template and the Evolver Genetic Algorithm optimization soft-
ware to conduct various experiments that attempt to optimize the project under var-
ious objectives and constraints.
• Experiment No. 1 Use Evolver to meet 32-day deadline.
• Experiment No. 2 Use Evolver to meet resource limits.
• Experiment No. 3 Use Evolver to meet 32-day deadline and resource limits.
• Experiment No. 4 Use Evolver to optirnize all: meet 32-day deadline, meet
resource limits, and minimize resource moments.
• Experiment No. 5 Repeat experiment 4 using the random improvements.
• Experiment No. 6 Use Solver to optimize bid unbalancing.
The six experiments are explained in the following figures:
358 I ApPENDIX B

Experiment No. 1: Meet a 32- Day Deadline Duration

Minimize: Total cost
Change: Index to construction methods
Constraints:
• Duration = < deadline duration
• Construction methods are integers.
Notes:
• Initial values for the variables (methods) are set as the shortest one (method 3).
Evolver then minimizes total cost.
• This experiment executed under unlimited resources. Delay values are set to zeroes.
Results:
Project duration = 31.8 days.
Minimum cost = $259,136

"\
~.

</;~bjective
function
 NEW CASE STUDY I 359

Experiment No. 2: Meet Resource Limits ofLl02=3; LSl=2; and

L132=1
Minimize: Project duration
Change: Delay values in the delay column
Constraints:
• Resources = < available limits
• Delays are integer values.
Notes:
• Initial delay values are the best ones obtained from Microsoft Project with proj-
ect duration = 37 days.
• This experiment executed under no deadline limit. Construction methods are all
set to 1 (cheapest)
Results: Delay values remained the same and project duration = 37 days.
360 I ApPENDIX B

Experiment No. 3: Meet 32-Day Deadline; and Meet Resource

Limits of: LI02 = 4; L51 = 2; and L132 = 1
Minimize: Total cost

Change: Delay values in the delay column and methods of construction

Constraints:
• Duration -" < deadline duration
• Construction methods are integers.
• Resources = < available limits
• Delays are integer values.
Notes:
• Initial delay values are the best ones obtained from Microsoft Project with proj-
ect duration = 37 days. Then, we specify the method with minimum time
(method 3) for all activities.

Results:
Project duration = 30.7 days.
Minimum cost = $266,801
Resources meet available limits.
 NEW CASE STUDY I 361

Experiment No. 4: Meet 32- Day Deadline; Meet Resource Limits

and Level Resource Profiles
Minimize: total cost
Change: Delay values in the delay column and methods of construction
Constraints:
• Duration = < deadline duration
• Construction methods are integers.
• Resources = < available limits
• Delays are integer values.
• Sum of all moments <= 2100
Notes:
• Initial delay and methods values are those obtained from experiment 3.
Results:
Project duration = 31.4 days.
Minimum cost = $266,260
Resources meet available limits.
362 I ApPENDlX B

C:::?Ved J
Total Moment
2046.0

Experiment No. 5: Repeat Experiment 4 Using Random

Improvements
Without using the Evolver software, we can now try to improve the whole schedule
(i.e., repeating experiment 4) using the Random Improvement button on top of the
Schedule sheet. Select the proper optimization objective (as shown below) and then
let the program introduce random changes in both the delay column and the meth-
ods of construction column. Using one experiment with 100 trials, a good solution
was obtained, as shown below.

Total Mommi
1016.5

The result of applying random improvements to the variables, as shown here, du-
ration is within deadline, resources are within limits, but cost is little high.
 NEW CASE STUDY 363

Experiment No. 6: Use Solver to Optimize Bid Un balancing

Now, let's try to optimize our bid proposal by improving the project cash flow
through a bid unbalancing process, as follows:
Objective Function: Minimize the overdraft money (finance money, cell AG46).
Variables: Activities' adjustment column "AF", which leads to an increase or a de-
crease in the unit cost of the activities.
Initial Situation: Delays and construction methods are those of experiment 4. Ad-
justment values (variables) are zeroes.
Constraints:
• Variables are integers (- 5 to 5) i.e., limit of :±: 5%;
• Sum of the adjustment values = 0, i.e., total bid unchanged;
• Column" A]" Total Budget> = 0, i.e., no negative budgets;
• Cell" AJ22" > = 250, i.e., example on how to fix the budget of one activity.
Note: Activity 24 is a milestone with no duration and no cost. Therefore, it is not part
of the optimization,
Activity Budget. Divided by the quantity
Optimized Schedule determines the optimum unit prices.

:::::r::':' :"'/zZE:: :"'.::::::'"

$1000')00 • ~----- -- --:-----
, .. '~I;;";;~~,,,,
A_AA.

SHOC/)C - - - - - - - - - - - - - - - - - - - - --- - - - --

.n.,:.~· .
____ A. ..•..•.•.•. _

ash flow diagram automatically

changes if you change any of the cash
flow parameters.
364 APPENDIX B

Bid Proposal Report

Once optimization is complete, a bid proposal for our case study becomes automati-
cally ready in the Reports sheet. The report shows the unit prices associated with the
work items in the project, to be submitted to the OWner.

t:::'..~. Re •• " For "" P,., osn '

liiiiii')11 if :ihibliH : Utlit?Oq~( Total

1:ili;: .CO Clear Site 16900.00 m2 058 $9,736
}4i2oo Survey & Layout 4.00 acres 819.59 $3,278
15-13.00 Rough grade 1.00 acres 1744.20 $1,744
~,E;;j4.DO Excavate for sewer 2800.00 rn3 4.90 $13,711
... 5.00 Excavate elec. Manholes 128.00 m317.91 $2,292
5.00 Drill well 1000 Lsum 1309.69 $'13,097
7.00 VI/ater tank foundations 15.00 m3 602.42 $9,036
.00 Tank fabrication& erection 1.00 unit 21688.17 $21.688
.00 Install manholes 2.00 unit 2214.22 $4,428
10.00 Install electric duct 240.00 unit 28.57 $5,855
1100 Erect over head poles 24.00 unit 549.80 $13,195
12.00 Over head poles wirinq 400.00 unit 46.94 $18,774
13.00 Duct winnq work 320.00 unit 41.74 $13,357
14.00 Transformer erection 1.DO unit 17024.35 $17,024
15.00 Bus bar erection 1.D0 unit 925.44 $925
16.00 Electric safety inspection 1.00 Lsum 246.70 $247
17.DO Connect oipinq 12.00 unit 305.69 $3,668
.18.00 Tank ominu and valves 40.00 Lsum '164.09 $6,563
!;f1A 19.00 Install well pump 3.00 unit 7089.36 $21 ,268
20.00 Under qround water pipinq 400.00 m 72.65 $29,058
21.00 Install sewer and back fill 610.00 rn 112.61 $68,695
22.00 Sewer inspection, lest 1.00 l.sum 710.44 $710
;8;;;112300 sanitarv inspection, test 1.00 l.surn 219.52 $220
2400 Milestone 1.00 Lsurn 000 $0
Grand Total $279,573

Effect of Productivity Factors on Project Time and Cost

Now, let's investigate the effect of using realistic productivity factors in the various
methods of construction on total project time and cost. To add these seasonal pro-
ductivity factors, let's modify the right part of the Methods sheet. We will use the
three seasonal factors as follows:
Winter = 0.7
Fall = 0.9
Spring = 1.0
 NEW CASE STUDY 365

Once the seasonal productivity factors are entered in one row and then copied to
all methods, automatically all calculations are changed and the Schedule sheet reflects
the modified cost, duration, and resources of all activities and for the whole project.
Now, let's investigate one interesting feature, let's assume different project start times
(in the Schedule sheet) and monitor project time, cost, and resources, as follows:

.:j'f

$;)50,000 - - - • - • - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

..
'tt:
g
u saoc.occ
$~~O.O(X).

~ ,150.000
:;
~ $1(/6.000

:;SO.OOJO

rune {days)

Project Start: March (Winter)

;350.000 - - - - - - - - - - - -- - - - - - - - - - - - - - - - - --

------- ----.- .. --.. --- .. -.. ----/~~~~~~!.C~.

e ~2S0,OOO

11
Q

~
U

,
$c20G,OOO

~ )lS{\,()OCo

~
•.•
U
510C.ooo

$SO.COO

".j.-=---------~-~~--
o as

Project Start: July (Spring)

SJSO.OOO ':' - - - - - - - - '. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - _.

scoo.ooo

e.. S~O,QOO

C
:.J $~(JJ.()OO

,
e
'.g SlS0,0OO

~
a $100.000

"'.':::~:-.::.:'.~'-~-'-.--- ..

as .s
Time (tl~)

Project Start: Oct. (Fall)

366 I ApPENDlX 13

The results are summarized in the following table:

No Productivity Factors Seasonal Productivity Factors

Winter = Spring = Fall = 1.0 Winter = 0.7; Spring = 1.0; Fall = 0.9
Project Start Any March Spring October
Month (Winter) (July) (Fall)
Project Duration 31.4 44.8 days 31.L1days 36.9 days
Total Budget $279,573 $351,991 $279,573 $309,392
Resource Limit Respected Exceeded Respected Exceeded

From this table, we can see the following points:

• Productivity factors have a significant impact on project duration, cost, and re-
source use.
• The Excel template is a simple tool to address the impact of local weather condi-
tions on project time and cost so that proper bid proposals can be made.
• With all productivity factors set as LOs, this is an assumption that all conditions
are favourable, which might not be true. This is also means that the time of year
in which the project is constructed has no effect on productivity.
• With seasonal productivity factors specified, the project becomes sensitive to the
time of year in which construction is to be carried out. As seen in the table, win-
ter resulted in much longer duration and substantial cost increase (25%). This
means that a large cost overrun can result if improper bid is submitted.
• Using seasonal productivity factors can be used to investigate the impact of de-
laying some tasks to a different time of the year on project duration and cost.
• Using the Excel template, it is possible to redo the optimization experiments to
select the proper methods of construction, delay values, and cost adjustment
amount that minimize project cost and bring resources within their limits.

Progress Control
Assuming that a bid proposal was submitted for $279,573 and 31.4 days, let's use the
control feature of the Excel system to track the project progress during the first 12 days
of construction. The actual progress made in those days is entered in the white cells
of the following figure, which refer to the actual cost and the percent complete on the
actual bar chart. Accordingly, three progress curves become automatically available,
as shown in the following figures.
 Actual
Progress Data
IOX
SOY.

-------
20x I 20X
~'=- 15r. _15>:; 10:< ' .. _~:"'H __ In-A _

!~~-- ~
'OX 4ft'/-

39x 30x ,,07.

257- 25Y. 25" :t§x

Automated Progress
payment report Total:;';
l.~"t, Ret3;nage (10%): cc!)..;- ===-j
Le ss 1 i2 of mcbilizetion P5yrnerd?

Ne1 Payable: ~··:tl:f\hl:~;~;F

Actual progressdata and automated progresspayment report

367
s- Curve Control S-Curve

$350,000

$300,000

$250,000
- - - Costs-Average
- ....•- Forcast to Completion
$200,000 -- -- - -- - Progress Date

<fl

$150,000

$100,000

$50,000

$0 ~,
0 10 20 30 40 50
Duration (days)

Earned Value Earned Value Curves

Control $350,000.00 - - - - - - - - - -. - - - - ..- - - - - - - - - - - - - - - - - - - - - - - - -

$300,000.00 ------------ . - - - - - - - - - --

I
1
$250,000.00 --------f-
I ~- BCWP (Earned -Value)
I ~-ACWP
$200,00000 --f- - - - - - - - - - - -- - Forecast to Completion"
<fl
I
.- - "Progress Date"
I
$150,000.00 --I
1
1
$100,000.00

$50,000.00

$O~----.-~---.-----.------,-----,
o 10 20 30 40 50
Duration (days)

Progress Indices Project Progress Indices

This quarter: SPI This quarter"

Schedule Advantage Schedule Advantage

Cost Overrun Cost Saving

CPI

0.00 0.20 OAO 0.60 1.20 1.40 1.60 1.80 2.00

- - - - - - 8,28
This quarter This quarter
- - - - - - - 8m
Schedule Delay -Schedule Delay -
Cost Overrun Cost Saving

368
 EXERCISE PROJECTS

The following project cases are some exercises that can be solved either individually
or by a group of students. In each project, students will have hands-on experience in
developing an integrated framework for the planning, estimating, scheduling, re-
source management, cash flow optimization, and project control. Some of the re-
source data related to the exercises are induded on the CD of this book as Excel files
Projectl.xls, Projectll.xls, and Projectlll.xls for the three exercises, respectively.

Project 1
In this project, a two-level residential house is to be constructed. The following infor-
mation is available for the project:
a. The house plan is as follows:

+ . 4=5~ft~ +

Bedroom
Laundry Storage
Kitchen Dining

Bathroom

+::
o
l()

Bedroom
Bedroom
Living

Basement Main Floor

b. All civil work is supervised by Ahmed, electrical work, supervised by Majed

and mechanical work, supervised by Samir.

369
370 I ApPL "DIX C

c. The project consists of 35 activities as follows, with a detailed description below:

Tentative
Item Description Predecessors Quantitv Unit
1 Layout
2 Excavate Foundation & Utility Trenches 1
3 Forms, Footing 2
4 Reinforcing, Light, Footing 3
5 Placing Concrete, Direct Chute 4
6 Removal of Forms, Footing 5
7 Forms, Walls 6
8 Reinforcing, Light, Walls 7
9 Placing Concrete, Walls 8
10 Removal of Form, Walls 9
11 Insulation and Waterproofing of Foundation & Walls 6,10
12 Back Fill 11
13 Placing Concrete, Floor 12
14 Wood Columns 100 mm x 150mm 13
15 Stud Walls & Wooden 14
16 Floor Joists & Cross Bridges 15
17 Roof Trusses& Sheathing 14
18 Subfloor 19-mm Thick 16
19 Ductwork 17
20 Exterior Walls Insulation 15,19
21 Electrical System 18
22 HVAC 20,21
23 Install Plywood Underlay 18
24 Install Stairs 14
25 Plumbing Fixtures 23
26 Window Installation 16
27 Install Tiles & Ceramic 23,24
28 Install Receptacles & Switches 21
29 Doors Installation 26,27
30 Drywall Installation 15
31 Cabinets & Counters 29
32 Exterior Brickwork 20,28
33 Wall Painting 30,31
34 Landscaping 32,33
35 Final Inspection and Handing Over 25,34
 EXERCISE PROJECTS I 371

1. Layout: The excavation perimeter is to be located for foundations, strip

footings, sewage pipe trenches, and drainage well point for the suction
pump and weeping tile.
2. Excavate Foundation & Utility Trenches: Includes the removal of the exca-
vated soil.
3. Forms, Footing: The foundations are to be located on the site with the exact
dimensions.
4. Reinforcing, Light, Footing: Steel reinforcement to be laid inside the footing
forms considering the proper concrete cover.
5. Placing Concrete, Direct Chute: After checking the soundness of the con-
crete forms, concrete to be poured inside the forms with suitable vibration.
6. Removal of Forms, Footing: twenty-four hours after the concrete has been
poured and cured, the forms can be removed.
7. Forms. Walls: Forms for the 200-mm thick concrete walls are to be erected.
8. Reinforcing, Light, Walls: Steel reinforcement to be laid inside the wall
forms considering the proper concrete cover.
9. Placing Concrete, Walls: After checking the soundness of the wall forms,
concrete to be poured inside the forms with suitable vibration.
10. Removal of Form, Walls: twenty-four hours after the concrete has been
poured and cured, the forms can be removed.
11. Insulation and Waterproofing of Foundation & Walls: After curing, the wa-
ter / damp proofing can be applied, the material to be used is bituminous
base material (EXPSIV). Fiberglass can then be used as an insulation mate-
rial for the walls.
12. Back Fill: After the weeping tile is laid around the foundations covered with
pea gravel and concrete curing is completed, backfill can take place with the
specified amount of compaction (normally 95%) using a dozer with vibra-
tory roller.
13. Placing Concrete, Floor: With special protection for all drainage pipes and
columns/walls and the soil compacted properly, the concrete floor takes place.
14. Wood Columns 100 mm X 150 mm: These columns are to support the
beams for the main floor and the roofing frames. These columns are to be
supported on the footings and the surrounded walls. Steel columns may
also be used.
15. Stud Walls & Wooden: These studs work as a support for the drywall from
both sides. The studs are supported by the floor beams. The studs also de-
termine the door and window locations.
16. Floor Joists & Cross Bridges: The distances between beams are to be divided
by the joists to fit the plywood dimensions. These joists need cross bridges
to support them against lateral forces in the transverse direction.
17. Roof Trusses & Sheathing: The top covering system to the second floor is to
be supported on columns at the two sides of the building. TIle sheathing
consists of plywood covered by waterproofing material.
18. Subfloor 19-mm Thick: This is to be laid on the floor joists to support the
following flooring items.
19. Ductwork: Install the duct for heating and air-conditioning all around the
two levels of the house.
20. Exterior Walls Insulation: All the walls around the building through the two
levels have to be insulated.
21. Electrical System: This activity progresses along the construction of other ac-
tivities, where the main electric circuit breaker is installed while the base-
ment construction is being done, then the internal (walls, floors) wiring is in-
stalled during the construction of these items. After completing the
installation of the drywalls, the on! off switches and their covering is to be
installed.
372 I ApPENDIX C

22. HVAC: This activity also progresses along the construction of other activi-
ties because it is extended through the two levels of the house. InstaLling the
needed ducts and vents for the HVAC system has to be completed before
the interior drywalls have been installed.
23. Install Plywood Underlay: This activity is a predecessor to all the finishing
activities.
24. Install Stairs.
25. Plumbing Fixtures: This activity also progresses along the construction of
other activities because it serves the two levels of the house. The main dis-
charge for the sewage system is always found at the basement floor. The
plumbing pipes and water supply pipes/ connections have to be installed
before the installation of the drywalls.
26. Window Installation: Before the exterior or interior walls are finished, this
activity has to take place.
27. Install Tiles & Ceramic: This activity applies to the washrooms and the
kitchen and takes place after the installation of the subfloor.
28. Install Receptacles & Switches: This is the finishing stage of the electrical ac-
tivity.
29. Doors Installation: The wall studs determine the location of the doom,
which are installed in two stages: first is installing the door frames during
the wall-studs installation, and the second is to install the doors after finish-
ing the drywalls.
30. Drywall Installation: This activity comes after the installation of the wood
studs and the door/window frames. The supervisor should make sure that
all necessary services installed inside the walls are already completed and
working efficiently, such as: duct work, water supply, sewage discharge
pipes, electrical wires, HVAC ducts.
31. Cabinets & Counters: This is one of the finishing activities.
32. Exterior Brickwork: To be finished before landscaping.
33. Wall Painting: This activity takes place after most of the finishing activities
and it consists of a primer and two coatings.
34. Landscaping: There are different choices for this activity, such as: concrete,
asphalt, and grass, depending on the architectural design.
35. Final Inspection and Handing Over: This is the final and crucial activity be-
fore the house is ready for use.
d. The developer has a system for keeping track of his lab or, equipment, ma-
terial, and subcontractor resource. The following resources are available to
him with the hourly rates specified:
 p~;~tii'!l
Shf.:'et_M€tal_ 4f;f!"en;1(e
?tll.:d_~,~::;:';z!_
wur;,ef
St::::~mrttJ£I' ;:;3 S,_ tnQ!l1_·v':tr'·)~Qr $94
St::G~t!ctter..!-pp~c~~tite ~'!'j_.Cr-?:n?_>~ !r;,t $54:.
!~l~...,
U::{J;r ~.,.h~n!lJ,4:::;:tjnE_ ;""/ $61
.[qulp .•. ::,\,,?' _ :"I!)rt PO'w€r.,tljC:: $3.8 Labor,
P,rh:~~
..,t~"1,!~:
8n~ i<_L:.iY~:".~"!~Pt:~
Sanr:iJ:.lastJ?f_-lc:.:e:,sctiC-$ $1.3 Equipment
6_rr>!,:.'t(0_ton
rM)(~~:m_~R(.,l)~:rA
(;;:iq)!:'!f!ter
S'i;~~e:6~:lt~F«:::ed~TG'h'e£i and Crews
G.2>:-penk<_P0rt:,'T:;JH
.c:.:.;pe::t'5r _h:'lp6: t'(/(i E,:";(:;':i\:::itcr, ;.1 t.i!1Y~

Cf.;ril:l:t.f'in!~!"lef
.c?;i=;_.::;CP~lt)'
E;:?'{.mClBr:
EqBtp.~tJ::e"
"["quip:_')o::( _C_!';~I~':;
CRA~
}:JI;jlp ...D~ef )4B:i.i~_\~ff!
CRIHO~
·in·~tf:.Jr(le.r{ •••Msn . CR6·iOG 'r':rt:~;:.f~S.·!OG
CRE·10L :::'(f»:('R~.lIY
l3;:';-0rer CRf:H2A (rt~w(.r.:2.. 12.~,
i..J<tJ1f:"{
J*r'~RIl'l7 (;rt<'.:' Ch'f,:· 37
;IP;:CRC-Ql :,)'$,;"W i)~ .>~'
1tY.CRC-02 '::If."w:,::'R':"·:}2
il:r cRc.{)G .;:,re» CF~>jE
GPf;';:: C~C,·~O E150
'l@CRJl-lll
16?CRO~7
i?Xi\:RD-oo::,tW CI~C·G"
)kt? CRF~'" . :.>.,j·t~
.. (;~~. ~02. ,
:··.·.::-.t.,.··~.·.··~ ..·.:.:.·.:
.;<>' ~;.:-h-.,.;-
••• ':';2-~ "
ru'""'1.,I "'" r;[f!~i::R;: .[<~j.,. I
:~~WCRF-03 .. C'lS~~;C~F~03 cDO , LCG
,<]5;':CRJ-lJ2 Crf.-~iC{';:,~·C;? : 00 (A~.$~.f .GC

Il~~
~ 00 I i<:
'00 l ec :
, eu , icc
, QO
·f~l}cRQ~20
':~e~:lcpi-Gt
Et.kRZ..:t2
:~~~:N-CRZ~~
;1~~1<
CRZ-04
:;j~CflZ-<l5
'ji;j :csz-os
hi: =CRI'{)7
~~~~:;CR2·7iJ
}.j~'JtR.i.77
;,ji}'CRZ-71l .. .;

Fi1a! Inspection ami hanting OVEr

91~::;;
~.0:::~CA1·U
Imen,.- ceors & names l;';}
.I'11nillHs.antl~al1\e!...
'K~tfler:·:~~~~t~
&. aC~~!)f:~
.-.-.-
...~t(,:·.~~:~~f~;:l·.~d·~q~~~{~~~· ,,((b
$.~~!!,~·,j~~~iii~~~;§?·~~.~~~·~·;2·:i!!·~~?:p':~~:',_,
.. -151l-<l010 27,.CO !ra

;:'1,1 :\~ f:~<if!~,:~~I.~:'?'~.0:,t;f,B_~~:p! ·170-1000 .1. ::l' rf'

M£{lri!~i~JJ
1roriiS :)Mro1 ~'1'S2~:Z~ tp(":-r::'. ~5 50 fO:)

PILflibing ·fu<uJre'&!';llrooml 'in :wm2~101..o800 r~75,OO ton

:a1'rA033-12il~360 81.00 m3
FOnTl footlngs
;,~ii/~~.90S-0400 If:n ::.p~~n
~31'~1:~ 1i :;0 ill~
.Reinforcing light walls
:Fi-1c:==8Ccm.f~\f ..~]I?b 0i ~3jl_~
····E~~~~··\.v?:~~F;r,~r~p~~
(,~-~0~'J9>
mia]~1t07'i--9Z2~1'100
:r%4Jt.ID7Z~11s.(.r~o ;'4
8tir(u
i~im:).l.i{/a:::f:(,. :-:~mMt;:h'J~,11
n
"I
'2;!!}
I1r)
m2
..-.~ilr:;l:'tr'~k"~uik"'" . .ti=~PM.D7;!.1 JS..o140 Ffb~rgt;1~~",1"3ftt(,h:e(i, ISG!nmti":;<:t.:} ~ r~12 ~9t m-.2
:~::;t~m~w)7~-1
t2..o960 F!t:~:·'JIa'..:j."J3ft t-at:~,j. 2G;Jmf:I.~n,(.t-.:.o.? !'~2.'. 6.91) re''';:
Of)'walllnslalatlon
't(l!!~o!!)r
~f-
:?~
~rtlr;:1'4001.150.01 :"'!C:.:~::t:;~-.a:;~Jjj ti.63 Ill::

\J$;;~MOO'l .rsc.oz I» l"f:({: Inj,;~~~:'lI~.I;tr:,::tir.~2:;it-(1 6fW Ill:

...r~t~:!
~~'R~.~o.n
..~n~~!,~ " e~ r~:~m~h-A:OO:}.1Q2.:,)QOO T>1<:"3.:::;{;';:..';!;:1.31.1~<·':::I)E\.:.if tlmt(;rm. irllll ~C"t 2~ 00 m::
a~~r,f~X~~i;"lr
.~~e~~·~l ~ . eG .. ~::l&JM064.306.0400 (-'.~;~~~~d\i<;.i·:·n~;;r;f'ti OGOOO !1t;'h!
·fc:rr;"":'iS'!.s €~
1-4:X1~~lm92.60B,O·i5f) [}f't';i.:~~;':JfPS:;(!l; :',~~Ied Dj' SCfE<~',;Bd tu st;.lf., 6~ m'
R';:~I>}r(:[lg jg/l! fOOtJng <,<
',:g;M099,2:24'()S4Qhn 2 cats. sm.),;,:r rr,iSh, ,(,>;e, (; 75 m5
~?{'::Q(.::I:c:~waltspu~p._.
Fict:f9 C-:nrete, FIoCX"
to!.:
:-'~
g4;~::;(\11061 ~118'-O';ZO- 'i"tfe:-;;-=-J()k~r::;',~
1 O(Jff1rrt ~ 50r~m 3@08 rr-3
!~~~·;t}t
..-WG1.16')"(}2()O F-l·~··,,'::J~J ~9 !"r.1 tt::CI· £.,55 m2
Re1ig~?:l,~~r~w.aI!,s e~ t\1t<} r'l1042~1S4.oaoo E:<.1t:-fWf!Jr-,d': t,ion( 26 QG m2
ru!r:F!r9 ,t:~;~i!~.~,
.(>J;~st:!~(;!?) ~<iti:i l'>J100i'~114·2720 ;:,wu
1':;3£-::< 5fr250 ;r;~! :t!8 00 m.2
~4.T:; MOO1·110-3500 Et.:dt-Up ~;,/c~)dt;,?~rn ffyn 850 OD mJ
1'3 'M167-125·1100CcDr"o· "H' c,cdiNr",;') :.? ,JOC O~; FIl
>29 :iM157..o1 . 0itr':'{';,r'9 ~;!':il;(f;:; ~\~;t.l$i·:~u~r:)j '2,-:-GO ee (.,

t~;r1_ ~M'157 400·1020 ChKt ~<;~(~.~lC~·.SS·~:::0,)1' 14 !i) Eo

Materials and :jii~~~~:~~~~

~~~~,;,~tc:~~~:;e;c~;~':~rl~~:,"'n
w.nc.:
21 :;Q
?99·1)~
Ea
f.~

Subcontractors fft£tEtlti.U]*~~4(1ii::~.{tM;~~;:~:~~,:#i;:¥~~~'D;;i'i~~~~!-~tJ.

373
374 ApPENDIX C

e. The developer also keeps track of various methods to perform the activities:

Code Description Units Crew Sub RegPr/d MatQ/d Material Hrs/d

CSI-022·208·2043 Backflil from existing stockpile. no campaction m3 CRB·l0L 650.00 The doily 8.00
CSI-O13-306-11 00 Building layout. 2. person crew day CRA·06 1.00 material 8.00
CSI-064-76 Cabinets & counters Isum S77.02 1.00 quantity 8.00
CSf.15J.12So1100 Cemral air conditioning Eo CRQ·Q5 1.20 needed for M157·125·1100 8.00
CSI·157·125-1103 Central alf canditioning(2) Eo CRQ·05 1.20 each M157-125-1100 12.00
CSI·157·125-1101 Central 01(ccndltioning( 1) Ea S51.32 1.00 method is 8.00
CSI.092~1I-0350 Or;wall insrallation m2 CRZ·76 89.65 always M092.6080150 800
CS1-092~1I-0353 Orywall insrollation(l) m2 CRZ-76 89.65 equal 10 M092.6D8.01.'iO 1200
CSt.092~1I-0351 Drywall insra:lation(2) m2 S51.20 89.65 the amaunl 8.00
CSI·157-48G-l020 Duct work access door Ea CRZ·27 11.00 ofaaily MI57-480-1D2D 8.00
CSH63-24s-D150 Electric system Ea CRZ·26 1.00 production M163·24Er0150 800
CSI.(J22·2311-0201 Excovcftorx l). bcckhoe = 57 m3/hr m3 S51.01 500.00 01 the crew 800
CSI.(J22·2311-0202 Excavation(2). bockhoe = 57 m3/hr m3 CRB·12A 459.00 used. 12.00
CS1-022-2311-0200 Excavation. bcckhae -. 57 m3/hr m3 CRB·12A 459.00 800
CSI-042-184.(J800 Exterior brick work m2 CRO·08 19.97 In the 1v1042·184·0800 8.00
CSI-042-184.(J801 Exterior bnck work(l) m2 CRO·08 19.97 Methods
CSI-042-184.(J801 Exterior bnck work(?) rr.2 S51.18 19.97 slleet of 8.00
CS~072·116-0041 l.xterior walls fiberglass insulation m2 S51.09 92.90 Ihe Excel 8.00
CSI-072·116-0042 [xterior walls fiberglass msulotioru l) m2 CIIZ·02 9?90 svstem, M072-116·0040 12.00
CSI·17()'31 rina; inspection ond handing over Ea S31-D1 200 column 0

CSI-061-114-2720 Floor joists 50 x 250 rnm m3 CRZ·02 3.52 calculates

CS1-03J.1511-0010 Fo·ms. tooting CRC·01 34.&1 the lotol
CS1-031·1511-0012 Forms. footing(l) m2 CRC·Ol 34.&1 production.
CSI.(J31·158.(JOll Forms. footing(2) rn2 S57.09 34.84 You may
CSI-031·182·2oo0 Forms, walls m2 CRC·02 34.37 use on M031 182-2000 8.00
CSI-03J.182-2002 Forms, \Volls(1) rn2 S57.19 34.3/ <'!qLJotion 8.00
CSI-031·182-2001 Forms. wolls(2) m2 CRC-02 34.3/ in this M031·1822ClJO 12.00
CSI.(J93-1 02·3000 Install ceramic tiles (both room) rn2 CRO·07 17.00 column. M093.102.3CllO 8.00
CSI.(J61·1611-0205 In"a'l plywood underlay m2 CRF·02A 161.00 therefore. M061.160.D:2 8.00
CS1-061-1611-0207 Install plywood underlay(l) m2 CRF·02A 161.00 to refer to M061.160.0:2 12.00
CSI-061·1611-0206 Install piywood underlay(2) m2 S51.24 161.00 column D. 8.00
CSI-064-306-0400 lnstoll pref. stoirs sections flight CRZ·76 3.00 M064.306.041JO 8.00
CSI·168-17()'3250 Install receptacles & switches Eo CRZ-26 1000 MI68·17D--3250 8.00
CSI· 168-17G-323 Install receptacles & swilches(l) Eo CRZ·26 10.00 MI68-17D--3250 12.00
CSI·168-17()'324 Insloll receptacles & switches(2) Eo S5403 1000
Insulation of foundation & we lis

lnt. doors frames installation

Landscaping

Piocing concrete. footings·direcl chute. pumped

PlaCing concrete. slob on grade

Placing concrete. slob on grade

Piocing concrete. slob on grade(l)

Placing concrete. slob on grade(2)

Placing concrete. walls. pumped

Plocinq concrete. walls. pumped(l)

Placing concrete. walls. pumped(2)

Plumbing fixtures (washroom)

Plumbing fixtures (woshroom)(I)

Plumbing fixtures (wQshroom)(2)

 EXERCISE PROJECTS 375

Code Description Units Crew 5ub RegPr/d MatQ/d Material Hrs/d

CSI-032·107-(1500 Reinforcing, light, footing ton CRZ-&1 0,12 M032-1 07 -0500 8,00

CS1-032·107-'1501 Reinforcing, light, footing(l) ton CRZ-&1 0,12 M032-1 07-0500 12,00

CSI-032·107-(1502 Reinforcing, light, footlng(2) ton S51.44 0,12 8.00

CS1-032·107-'1703 Reinforcing, light, wa!!s ton CRZ-04 0.12 M032-1 07-0500 8,00

CS1-032·107-'1703 Reinforcing, light, walls(l) ton CRZ-04 0.12 M032-107-0500 12.00

CSI-002·1 07 -'1708 Reinforcing, light, walls(2) ton 551,03 0.12 8,00

CSI-031·158-0010(b) Removal of form, fOOling m2 CRL-02 200,00 8,00

CSI-031-182·2000(b) Removal of form. walls m2 CRL-02 200.00 8.00

CSI-'l31-182·2001 (b) Removal 01 torrn, \VolIs(l) m2 CRL-02 200.00 12.00

CSI-031-182·2002(b) Removal 01 form, 1'10115(2) m2 551.55 200.00 12.00

CSHI61-1 10-3500 Stud walls lower level m3 CRF-02 1.65 M06I- 110-3500 8.00

CSI-061·164-0200 Subfloor 19-mm Ihick m2 CRF-02 116.00 M06I-I64-0200 8,00

CSI-099.224.0840 Wall calor m2 CRU8 74,32 M099,224,0840 8.00

CSI.Q99.224.0841 Wall color(l) m2 CRU8 74.32 M099,224.0840 12,00

CSI.Q99.224.0841 Wall cOlor(2) m2 S51.22 74.32 8,00

C51-08$-76 Window frame lnst. l.sum S76,03 1.00 B,OO

CS1-061·118-'l420 Wood columns loomm x i 50mm m3 CRF-02 1.30 M06I-118-0420 s.oo

CSI-061-908-'I401 Wooden roof trusses, 13m to IBm span m2 CRF-03 279.00 M061-908-0400 12.00

Project Requirements:
1. Contact your local contractors/ subcontractors/ suppliers/ developers and
discuss the hourly rates of resources, crew formations, construction methods,
and seasonal productivity factors. Make any necessary adjustments to avail-
able data. Also, discuss the project, modify the activities and the logic, and
estimate quantity of work associated with each activity. Make reasonable as-
sumptions of any missing data.
2. Proceed to the Excel system and enter the project data. Perform the following:
a. Determine the project duration when all activities are at their cheapest op-
tion. Choose the three key resources (e.g., Ll02) and determine the maxi-
mum need of each.
b. Optimize the bid proposal when project duration is limited to 80% of the
duration in part a, key resources are 90% of the amount used in part a,
cash flow needs to be minimized, no subcontractor credit is given, no mo-
bilization payment is given by the owner, indirect cost is $300 per day, liq-
uidated damages are $500 per day, markup is 10%, invoices are submitted
to owner every week, and seasonal productivity factors are used.
c. What is the impact of weekly, biweekly, and monthly invoices on project
cost?
d. Discuss the results with the same people who helped you with project
data and report your findings.
e. Use the schedule in part a and use the BALprogram to schedule the work
of constructing 10 houses. Project deadline is three times the duration in
part a. Report your findings.
376 ApPENDIX C

Project 2
This is a highway bridge construction project. The structure to be erected is a 60-foot-
long single-spanned highway bridge. It is designed as a composite steel-concrete
deck-girder type. The following figures show the profile and the cross section of the
bridge.

Expansion Fixed
bearing 60'·0· c.c. bearings bearing

, ,
,,
... .•.
...
.•.
.•. "
- -' - -
~
.•.
AM
no. 1 ( " ,
.•.
.•. , ,,
/
;~Ab"t 110.2
, .•. ,-
,,
,, ---"
....

, ,
.•. ,-
~,
-, - ]
1,
-;
I, , I
--- --
;-

I, 'I "" // I1
"
"
" I, "" "
/,
I' "
I,
"
I,
11
"" Present~ 1/
1/ I [
r r
"
."" ,
28 . 12 x 54 steel H" piles,
I. I. " ,I
ground surface
each 40 ft. long

Guardrail

_l

The two abutment walls are made of reinforced concrete; each includes a breast
wall and two wing walls. Each abutment wall sits on a concrete footing that is sup-
ported by 28, 40-foot-long H-shaped steel piles. The deck slab is lO-inch-thick rein-
forced concrete pavement supported by four W 36 X 150 steel girders. A steel
guardrail is installed along each side of the bridge. All exposed concrete surfaces are
to be given a rubbed finish, and specific surfaces are to be painted.
The entire construction project is broken down into 32 activities under three
work-breakdown levels, as illustrated in the following figure, which also shows the
personnel involved in the supervision of the project activities. John, Paul, and Steve
supervise all site-work activities. Sam, Kile, Uma, and Zen supervise all processes re-
lated to abutments and footings. Niles and Jerry supervise the construction of the
deck and the installation of the girders. Finally, Cramer and Eil supervise the finish-
ing. The figure also shows the network of activity relationships in the project.
 Description HIGHWAY BRIDGE
1 Move in
2 Prefabricate abutmentlorms
3 Excavate abutment # t
4 Mobilize pile-driving rig
5 Drive piles, abutment #1 Site Work Structural Finishing
6 Excavate abutment #2 29
7 Forms & rebar, footing #1 30 (Cramer)
8 Drive piles, abutment #2
Prep, excavation

I7\ 7\ i\
9 Pour footing #1 31 (El)
1 3 32 I
10 Demobilize pile-driving rig
11 Strip footing #1 2 6
12 Forms & rebar, abutment #1 4 (Paul)
13 Forms & rebar, footing #2 10
14 Pour abutment #2 (John)
15 Pour footing #2 Abutment Fooling Abutment Footing Deck Girder
16 Strip & cure, abutment #1 5 7 8 13 26 25
17 Strip looting #2 12 9 18 15 27 (Jerry)
18 Forms & rebar, abutment #2 14 11 19 17 28
19 Pour abutment #2 16 (Kile) 22 (Zen) (Nile)
20 Rub concrete, abutment #1
20 23
21 Backfill abutment # 1
(Sam) (Uma)
22 Strip & cure, abutment #2
23 Rub concrete, abutment #2
24 BaCkfil1 abutment #2
25 Set girders
26 Deck forms & rebar
27 Pour & cure deCk slab
28 Strip deck
29 Guardrails
30 Paint
31 Saw joints
32 Cleanup

377
378 APPENDIX C

The tentative quantity of work associated with the project activities is as follows:

No. Description Quantity Unit

1 Move in 1 Lump Sum
2 Prefabricate abutment forms 1810 Sq. Ft.
3 Excavate abutment #1 1100 Cu. Yard
4 Mobilize pile-driving rig 1 Lump Sum
5 Drive piles, abutment # 1 1120 Ft.
6 Excavate abutment #2 700 Cu. Yard
7 Forms & rebar, footing #1 360 Sq. Ft.
8 Drive piles, abutment #2 1120 Ft.
9 Pour footing #1 60 Cu. Yard
10 Demobilize pile-driving rig 1 Lump Sum
11 Strip feoting #1 360 Sq. Ft.
12 Forms & rebar, abutment #1 1810 Sq. Ft.
13 Forms & rebar, footing #2 360 Sq. Ft.
14 Pour abutment # 1 140 Cu. Yard
15 Pour footing #2 60 Cu. Yard
16 Strip & cure, abutment #1 1910 Sq. Ft.
17 Strip footing #2 360 Sq. Ft.
18 Forms & rebor abutment #2 1810 Sq. Ft.
19 Pour abutment #2 140 Cu. Yard
20 Rub concrete, abutment # 1 980 Sq. Ft.
21 Backfill abutment # 1 170 Cu. Yard
22 Strip & cure, abutment #2 1910 Sq. Ft.
23 Rub concrete, abutment #2 980 Sq. Ft.
24 Bockfill abutment #2 170 Cu. Yard
25 Set girders 6870 Lb.
26 Deck forms & rebar 1800 Sq. Ft.
27 Pour & cure deck slab 180 Sq. Ft.
28 Strip deck 1800 Sq. Ft.
29 Guardrails 120 Ft.
30 Paint 1 Lump Sum
31 Saw joints 60 Ft.
32 Cleanup 1 Lump Sum

The resources available to the general contractor are as follows:

~~'U'~2~d~f~";~~~~:~::~~I::~-::I~~~!J~~::3;-'
~.:::-:"!r ~;;:i~:=::; £::.,@. :~9::~:~;--~;
~:;.tR~~Wfff·)!:ni2_.a:f.~_~;~~~~--·;,~~!.~4Q··
;:'.:·;·~;:'·: - e·:
~::.±.-:;.-;...[l:- c-;. ~~~:~.~~~. ~~;:~ .:~~~l
$:~6.0
Tl;;~f:rvl' d<.~i.:O::-i opv: aeor :;;;"~' d6-.hu Backfill equipment $9.8
£:<.' ~""~·m:>r::. Lab-or er-
.p,.<tc.:'·.~i.U,
Guardrail,
:4'.'·...re-r
lu b or cr
~::; ;~i':~~ ~~::~:~~::
$1 1. 5 . F":S FIar bed truck
$108.0
S".'''.;)
$j.5.0
Crane Operator
; ~~:; ~}I=.6 50 ton crane + 25 ton crane $18"1.5
Mov~ ill, iab cc'er
Clean up, lab orer
$1 J :5 6(1 E7 .Pile harnmer & cfrn compressor S~i8.0

Flat bed ts-uclc drtver $13.8 16J1E8 Rebar (place) equipment $"'0.0
$11 6 ··,"-f7-h£9 Vibrators & bucket $110.0

m~~J;:! ~:'~~;E~~:::~c~~~~pm~\
.Plie dn.Vl.~" la?or~r
:Pi·.edrive~an $150.0
F .or-rri, Lab orerv Carpenter $3.0
?- t':l:-
...a-. t·:lz<r.~h~"':J!'~I' $11.0
$11 5
MaS<"'IJ $145
lt~b. !d:.;:,~·::::
{' s i 1.5
Sa"" Iab or er s i i 5
Gu-der
Pamrer
plaCing. leb or er $:1 5
$100
Equipment
F orrn, L aborec/ Ccrp encer $115 Labor
Crews

1.00 E6

:;CO El

, CO F$

Materials

Ml Guanlrails (includin;; anchor bolts) $3,848.0 L. sum

M2 Mobilization! Dcmobilzation $100.0 L. sum
l\U Pile driving $30.500.(\ L sum
Mol Forms & Rebar (ton of steel}, footing $4.500.0 T. 5ur.n
1\.15 Snip f<>oting $110.0 L. surf"
Mo Pour footing $6,230.0 L $.tun
]\;D Fabricate Abutment form $1.700.0 L. sum
)),[8 Pour/Cure Deck $3.40().0 L. swn
1\1.9 Strip/Cure Abutment $&OiU:J L sum
1\11U hmns &: Rcb31', abutment $4,600.0 L ~urn
1\oIll POUf Abutment $7,255.0 L. Stun
l\H2 Rub Abutment $JIKO L. nlln
MU Sll~p, Deck $] ..314.0 L. SU:Ul
1\-114 Forms & Rebar, deck $4,800.0 L. sum

Subcontractors

Rt;nt~)f"ing.'lcd(rehan), snpply& i",(ai!

Guardrails, supply & install L.Sum
Excavation abutment #1 L.Sum
Excavation abutment #2 L.Sum
Drive piles, abutment #1 L.Sum
Drive piles, abutment #2 $42,000.0 L.3um
Pour footing #1 $8,000.0 LSum
Pour footing #2 $8,000.0 LSnm
Backfill abutment #1 $1,500.0 L.SUIYl
Backfill abutment #2 $1.500.0 LSU.ffl
Set girders lJ'1,500.i.l L.Sum
Cleanup $6,00D.O L.SIJfIl

379
380 APPENDIX C

Tentative Construction Methods

Code Description Units Crew Sub RegPr/d MotG/d Material Hrs/d
01-01-1 Move in Lump Sum CR-04 0.33 8.00
06--01-1 Pretabricate abutment terms Sq. Ft. CR-ll 603.33 0.33 M7 8.00
02-01-1 Excavate abutment # I (I) Cu. Yard CR-OI 366.67 8.00
02-01-2 Excavate abutment # I (2) Cu. Yard CR-OI 366.67 12.00
02-01-3 Excavate abutment # I (3) Lump Sum 54 0.50 B.OO
01-02-1 Mobilize pile-driving rig Lump Sum CR-06 0.50 0.50 M2 8.00
02-02-1 Drive piles. abutment #1 (I) Ft. CR-O? 373.33 0.33 M3 8.00
02-02-2 Drive piles. abutment #1 (2) Ft. CR-07 373.33 0.50 M3 12.00

02-02-3 Drive piles. abutment # I (3) Lump sum S6 0.50 8.00

02-03-1 Excavate abutment #2 (I) Cu. Yard CR-Ol 350.00 8.00
02-03-2 Excavate abutment #2 (2) Cu. Yard CR-OI 350.00 12.00
02-03-3 Excavate abutment #2 (3) Lump Sum 55 0.33 8.00
03-01-1 Forms & rebor. footing # 1 Sq. Ft. CR-D8 180.00 0.50 M4 8.00
02-04-1 Drive piles. abutment #2 (1) Ft. CR-07 373.33 0.33 M3 8.00
02-04-2 Drive piles. abutment #2 (2) Ft. CR-07 373.33 0.50 M3 12.00
02-04-3 Drive piles. abutment #2 (3) Lump Sum S7 0.33 8.00
03-02-1 Pour tooting # I (I) Cu. Yard CR-lO 60.00 1.00 M6 8.00
03-02-2 Pour tooting # I (2) Cu. Yard Cll-IO 60.00 2.00 M6 12.00

03-02-3 Pour footing # I (3) Lump Sum S8 1.00 8.00

01-03-1 Demobilize pite-driving rig Lump Sum ClH)!> 1.00 1.00 M2 8.00
0303-1 Strip footing # 1 Sq. Ft. Cr,-09 360.00 1.00 MS 8.00
03-04-1 Forms & reber. abutment #I Sq. Ft. cr,-14 452.50 0.25 MlO 8.00
03-05·1 Forms & rebar. footing #2 Sq. Ft CR-08 180.00 0.50 M4 8.00
03-06-1 Pour obutrncnt #1 (1) cu Yard eR 15 70.00 0.50 Mll 8.00
03-06-2 Pour abutment #1 (2) Cu. Yard CR-IS 70.00 0.75 Mlt 12.00
03-07-1 Pour footing #2 (1) Cu. Yard el'-IO 60.00 1.00 M6 8.00
0307-2 Pour footing #2 (2) Cu. Yard CR-IO 60.00 2.00 M6 12.00
03-07-3 Pour footing #2 (3) Cu, Yard S9 1.00 8.00
03-08-1 Strip & cure. abutment #1 Sq. Ft. CR-I3 636.67 0.33 M9 8.00
03-09-1 Strip footing #2 Sq. Ft. ClHJ9 360.00 1.00 MS 8.00
03-10-1 Forms & rebar. abutment #2 Sq. Ft. CR-14 452.50 0.25 MlO 8.00
03-11-1 Pour abutment #2 (1) Cu. Yard CR-15 70.00 0.50 MIl 8.00
03-11-2 Pour abutment #2 (2) Cu. Yard CR-IS 70.00 0.75 MII 1200
03-12-1 Rub concrete. abutment # I Cl) Sq. Ft. eR-16 326.67 033 MI2 8.00
03-12-2 Rub concrete. abutment #1 (2) Sq. Ft. CR-16 326.67 0.50 M12 12.00
02-05-1 BoCkfill abutment #1 (I) Cu. Yard CR-02 5667 800
02-;)5-2 Backfill abutment #I (2) Cu. Yard CR-02 56.67 12.00
02-05-3 Back!11Iabutment # I (3) Lump Sum SIO 0.33 8.00
03-13-1 Strip & cure. abutment #2 Sq. Ft. CR-13 636.67 0.33 M9 8.00
03-14-1 Rub concrete. abutment #2 (I) Sq. Ft. CR-16 326.67 0.33 MI2 8.00
03-14-2 Rub concrete. abutment #2 (2) Sq. Ft. CR-16 326.67 0.40 MI2 12.00
02-06-1 Backfill abutment #2 (I) Cu. Yord CR-02 56.67 8.00
02-06-2 Backfill abutment #2 (2) Cu. Yard CR-02 56.67 12.00
02-063 Backfill abutment #2 (3) Lump Sum Sl1 033 8.00
OS-DI-l Set girders (1) Lb. CR-20 2748.00 0.40 MI5 8.00
05-01-2 Set girders (2) Lb. CR-20 2748.00 0.50 MI5 12.00
05-01-3 Set girders (3) Lump Sum SI2 0.40 8.00
03-15-1 Deck forms & rebar Sq. Ft. eR-18 450.00 0.25 M14 8.00

03-1&1 Pour & cure deck slob Sq. Ft. CR-12 60.00 0.33 M8 8.00
03-17-1 Strip deck Sq. Ft. CR-17 600.00 0.33 MI3 8.00
09-01-1 Guardrails (I) Ft. CR-03 40.00 0.33 MI 8.00
 EXERCISE PROJECTS 381

Tentative Construction Methods (continued)

Code Description Units Crew Sub RegPr/d MatQ/d Material Hrs/d

09-Dl-2 Guardrails (2) Ft. CR-D3 40.00 0.40 MI 12.00

09-01-3 Guardrails (3) Lump Sum $3 0.20 8.00

09-02-1 Paint (I) Sq. Ft. CR-21 700.00 0.25 MI6 8.00
09-D2-2 Paint (2) Sq. Ft. CR-21 700.00 0.25 MI6 12.00
09-D2-3 Paint (3) Lump Sum SI 0.20 8.00
09-03·1 Saw Joints (I) Ft. CR-19 60.00 8.00
09-03-2 Saw joints (2) Ft. CII-19 60.00 12.00

01-04·1 Cleanup (1) Lump Sum CR-05 0.33 800

01-04-2 Cleanup (2) Lump Sum CR-D5 033 12.00
DI-D4-3 Cleanup (3) Lump Sum SI3 0.33 8.00

Project Requirements
Follow requirement 1 under project 1 then conduct a cost estimate and a detailed
schedule, select proper methods of construction, prepare optimum bid, and study the
impact of seasonal productivity factors on project time and cost. Consider that the
contractor has maximum resource limits of four of L12; one of E3, two of L6, and a
maximum credit limit is $75,000. A project duration of 45 days is desirable. Discuss
your findings.

Project 3
The following garage has been designed with reinforced concrete footings, concrete
slab on grade, concrete block bearing walls, offices/lavatories, mezzanine over the of-
fices, bar joists and steel deck, T&G roof, skylights, H.M. doors and frames, and over-
head doors.

100'- 0"

I'I' 12'- O·

'I 12" CMU -INSULATED

~SKYLlGHTS
r" - I ,- 1 '--1
I I I I I I
I I I I IL __ I
L_ ~ L_~

~t=I~- STEEL STAIRS

o 0 0 0 o
o o~ 0 0 o
OFFICE ~ DRAINS AND VENTS
r-' -1 r'-l r-' -1
I I I I I I
\j I
L __ I I I
OFFICE
~-~ L __

PLAN
_ .._.- .. C?l = =

[l
H. M. DOOR AND FRAME
I'\~-

~ 10' - 0" X 10' - 0" OVH'D DOOR (TYP.)

n
C12X2. 07 FRAM E (TYP.)

ELEVATION
Resources Data

Labor Sheet

Dozer .:56~<W
L,;~i/IJn.:_'';'.{e!dlng_I""!:lech
F.E: ,,,),).Ja(J~rT.M _,1 .,9,,1rn,3
f't~a)l.:.n1_r ruck3rn ..
Gas_Engrn_ Vibrator
GAs_ WeldlllQ_Macnlne
c~pe"...
. equip. __
Grol.lllno_l:-:qu1fl
0qi,Jip _~~~~;F!7r
~.•U;Y:~ .
LQuip CIPf":(, _.t.:1.},1iHm ~~~(I.Ex(,~·~<:~t0~
->:,;;j7

("cr€:rr,~r. Power _toOl

10-_~'_!(l-,(t~r·'(._.M.;l:f)
Tafldern __Roller,4 .5._me~re_.ton
,Labor_Fareman Truck_Craln~ 73
Application Eqptlpneumatlc

Crews Sheet
E:~ "~:' ; GO (;'<X:',
> ·h"n
E24!:! I 00
L78
, uo
>
no

CHC·f,H
~. .
L
.i:t.:~
~.,,, ~oc
\

3 :]{J
l.72
u;
L10.L
> t~O
1 00
1 00
f.':f:tI).OB I oo
, 1 00
cn.O.i)";
, i.o.;::0 I OC' 1.00
CHl:.O ..•.
csu- U"~1 :C(.F •••.
,< ~:~>-:.!i,~.:, ,
, DG
r::;[~4.
t:. :1::,4 ,
> ::iD
;j:::
, iJG
1 00
1 ou
cru:·uJ ";:r."yr ~::nf:":::' 1"':'::4 ~:y.' 1 00
r.'~.(.;. f.\1b' C r •.,-.,., .-:-::~(;. 0 Il~ '~1';: :) i..."ll) =-1'':>:-; .,GO
(li:1

'. ~ ~."$"I > -(I:C: LlO? 1 m

C,R.q.U~3~( n::·w ~-~~("·.u:'::n :...1':".0(., ..:t ..x; W<1 ~.(:O ~;~~ I QO f:::~~9 r.uo
\ IJ1.J· 1 ~}-a 1 {~(J
CHO.{J1
cno.o4
,Cp;." .• CF':O·01
c rv,,,' ;::.I,!'>·O~\
:' ..1:':::Z I ~"r:l L13S
·~.l~e l.f.t'::':L132 , .UfJ ~::--"'d: 1 (30 Ll:::·t; 1.~O
(.:HO.n()o .C":.:w c:r~()·clf;(~ i..H~) :: O~·; 1.171 4 00 L"":32 2D(; L228 2.00
CI~'),/. I.....•.•• 1 ·:ID 1 00 1 ~}::i > "J
r:n/.·~~6 I.!'"":t

CH.?" tri ;. '".'Hi' 1.24

LHL·ll I 'i'lf
Cf.y .:ro i ~:<)i~~:t

Materials Sheet
;J3ner aoarn and Fire t\J3lm ccnctro- PanelJC:
3reak Glass Statmn
oetector 17000 eacn
Emerqenrv lighting 100 -)(1 eacn
rve NClfrn Horn ~(; 5:3 eacn
. i= ncrescent FDa.ures 46_uu eacn
;lui;el 8U1le~ 190 eacn
Mt6:2-110--l)650 ·SYr1tChbO){ 211 each
M162.::J2U-o:zOO _o_('_O _Rero:o.p~f.!~$
~"''''\H:hP:"S '1 l~ .~~~':
~~-1-62..o10.2,OO \/Jait Plates 1.7J eacn
M. Jgs~ 130..0200 :.Igmmg FI:-:tur es(Swltcnes/SWltctl box/oulI·ere-,}f: 28600 eacn
Ml).:)4-1~G-o!)zt> Erect Prestressed staos 49.50 rn"2
M-i}$2-o'S6--40ZO -i M Doors 63800 each
M:0>52·110-C4M> Open Web Joist 970 OD tOI1

M03Z-1C7~~ Reinforcing Ftg. 575.00 ton

M082-Qe4-2010 -t M Frames 570.00 eacn
-104-2100 Metal Deck iD_OD m"2

Subcontractors
5:27..():3 ,~.Jo:;r.:;l!-I:eatlng(f?C0r r.t::1:~:j'":9 tJrl:Bl(;:.}:; PI $8.000.0 LSUM
SZ9..tr.;! ·.;ni1mT.~~Jr:NP·plr:;J5 ~1.:8q0. r"
529-00
si!i:04
528_ t··,. $.\8] (.I t'~
5;)0-04 [pi}: 1 m
sao-ce S;?P-f, n
930-00 .f,7.S1?/3 . .0
9.51.03 anc (;orr.p<":Ict;·,r; ',I'~',U'''·'':J''jc." $ ~t:-.H J
551.04 Masonry Bearrng Waits 1?~ + 8" BlOCks ;f.9(; r;
951.05 Floor Concrete Slao/S,ccl Trowel Flnls~ $'2(i.o
551.06 ~xc Ftgs & ununes 3 $~c u
~1.07 r
s-orm Ilr:1tI"gs 3 ?;~~:l:;i.
S5:J:OZ ;:;:~J;5;.~!I.~:in=;n J.'I:.'l_f Fi~_~~~-f~~~~.ril
.~5-.<.·-~::'U. :r.tu·,
S!S4.04 ~1P.~l:;r:ji5e 'll2lterp~:'uorlng(;-;'~r;eGrd"J= $:;~6
576.04 ,-'r"dne,:Il] (.1(J0(5 $~:O~o·
579.01 Patntmq $~ 0 m"2

382
 EXERCISE PROJECTS 383

Three resources are considered critical for the accomplishment of the project, namely,
two electricians (L51), four carpenters (L24), and two power tools (E510).

Methods of Construction
Code Description Units Crew Sub RegPr/d McrlQ/d Material Hrs/d

CS~2·232·11 00 Block partitions 4" m;qf2 CRD-08 40.88 32.52 M042-232-1100 8.00

CSH113-30t>-1100 Building layout. 2 person crew day CRA-06 1.00 8.00

CSt-021·104-0010 Clear and grubbing ha CRB-O? 0.40 0.40 8.00

CSI-034-136-0020 Erect prestressed slabs m:qf2 CRCll 418.00 45.92 8.00

CSI-055-1 04-0800 Erect steel slair riser CRE-04 35.00 14.00 MOS5-10408oo 8.00

CSI-022·250-2035 Exc. figs & utilities (I) m:qf3 CllB-12F 68.81 8.00

CSI-022·250-2035 bc. ftgs & utilities (2) m:qf3 551.06 150.00 8.00

CSI-031·158-0050 Form footings (I) m:qf2 CRC-02 17.65 17.34 M031-158-0050 8.00

CSI-031-158-00SO Form footings (2) m;qf2 CRC-02 17.65 26.01 M031- 158-0050 16.00

CSI-031·158-0050 Form tootings (3) m:qf2 551.07 60.00 52.02 M031- 158-0050 8.00

CS~2·320-0250 Foundation block m;qf2 CRD-08 39.95 34.77 M042-320-0250 8.00

CS~2·320-0250 Foundcition block (2) m;qf2 CRD-08 39.95 70.00 M042-320-0250 16.00

CSI-042·310-03OO Masonry bearing walls 12" + 8" blOCK(I) m:qf2 CRD-09 30.66 30.29 M042-3 I 0-0200 8.00

CSI-042-310-03OO Masonry bearing walls 12" + 8" block (2) m;qf2 CRD-09 30.66 42.40 M042-310-0200 12.00

CSI-042·310-0300 Masonry bearing walls 12" + 8" block (3) m:qf2 551.04 65.00 60.58 M042-31O-0200 8.00

CSI-08U04-1000 Overhead doors each CRZ-76 2.00 1.80 8.00

CSI-083-604-1 000 Overhead doors (2) each CRZ-76 2.00 2.25 12.00

CSI-083-604-1000 Overhead doors (3) each 576.04 4.00 3.00 8.00

CSJ-099..204-1OOO Painting m;qf2 CRZ-78 60.39 59.61 M099-204-1000 8.00

CSI-099-204-1000 Painting (2) m:qf2 CRZ-78 60.39 82.54 M099-204-IOOO 12.00

CSI-099-204-1000 Painting (3) m:qf2 579.01 120.00 119.22 M099-204-1000 8_00

CSI-072·109-0700 Perimeter insulation. 50 mm m:qf2 CRZ-02 344.00 60_42 M072-109-0700 8.00

CSI-033-454-0250 Floor concrete s'ob/steel Irowel finish m:qf3 CRC-14E 55l.OS 52.45 35.19 M033- 130-4650 8.00

CSI·l01-602·3000 Toilet partilion each CRZ-76 7.00 1.00 MlOl-602-3000 8.00

CSI-OI6-052-0400 Woven wire pcrtition each CRZ-76 23.00 10.00 MOI6-052-0400 8.00

01 Deliver reinforcing bars LSUM 0.30 0.30 M032- 107-0500 8.00

02 Deliver H.M. frames LSUM 7.00 7.00 M082-054-2010 8.00

03 Deliver H.M. door LSUM 7.00 7.00 M082-066-4020 8.00

04 Deliver open web joists LSUM 625 6.25 M052-110-0440 8.00

05 Deliver metal deck LSUM 371.60 371.60 MOS3-104-21oo 8.00

06 Deliver orestresseo concrete slobs LSUM 45.92 45.92 M034-136-0020 8.00

Al Clean up ana punch list day CRfl60 1.00 8.00

CSI-02~5D-0550 Underground pipiC1Qs(1) m CRQ-04 18.00 12.19 M026-850-0550 8.00

CSI-02t>-85D-05SO Underground pipings (2) m CRQ-QIl 18.00 25.50 M026-850-0550 12_00

CSI-02~5D-0550 Underground pipings (3) m 529-02 40.00 36.58 M026-850-0550 8.00

CSI-022·262.()600 Bockfill and compcction (I) 22.00 19.13 M022-?62-0600 8.00

12.00

8.00
384 APPENDIX C

Methods of Construction (continued)

Code Description Units Crew Sub RegPrtd MalQ/d Material Hrs/d

CS~S2-110-0440 Open web joist + metal [oist (I) ton CRE-07a 5.00 3.37 8.00

CSI.(JS2-110-0440 Open web Joist ~ metal ioist (2) ton CRE-07a 5.00 5.05 12.00

CS~52-11 0-0440 Open web joist + metal joist (3) ton S29-04 10.00 10.10 12.00

CSI.(J33-13G-39SO Place concrete/reinforcing ftg.(I) m;qf3 CRC-14C 20.00 16_07 M033- I 30-3950 8.00

CS~33-130-39SO Place concrete/relnforcmq ftg. (2) m;qf3 CRC-14C 20.00 16.07 M033-130-3950 16.00

CSI.(J72-203-0100 Roofing insulation/skylight/gravel stop/built-up root (1) m;qf2 CRG-Olb 102.00 93.00 M072-203-0l 00 B.oo
CS~72-203-0100 Roofin;:; insJlation/skylight/gravel stop/built-up roof (2) m;qf2 CRG-Olb 102.00 124.00 M072-203-0 I00 12.00

CS~72-203-01 00 Roofing Insulalion/skylignt/gravel stop/built-up roof (3) m;qf2 S53.02 200.00 186.00 MO72-203-0 100 8.00

CSI-153-105-3320 Toilet fixtures(2VJater caoler/2Iav./l ur./2WCil hotWH.) (I) each CRQ-Ol 0.60 0.50 Ml53- 105-3320 8.00

CSI-153-105-3320 Toilet fixtures(2V1ater cooler/2Iav./1 ur./2WCIl hotWH.) (2) each CRQ-Ol 0.60 0.67 MI53-105-3320 12.00

CSI-153-105-3320 Toilet (,xtures(2V1ater cooler /2Iav./ 1ur./2WCIl hotWH.) (3) each S29-05 2.00 2.00 M 153-105-3320 8.00

CSI-155-63D-426O Roof heating(roof heating/gas pipe/duct work/pipe) (1) each 1.00 1.00 M 155-630-4260 8.00

CSI-1S5-63D-426O Rocf heating(root healing/gas pipe/duct work/pipe) (2) each 1.00 1.33 M 155-6.104260 12.00

CSI-155-63D-426O Root healing(roof heating/gas pipe/duct work/pipe) (3) each S27-03 2.00 2.00 M 155-630-4260 8.00

CSI-082.Q66.4020 Roughing/finishing carpentry(H.M. doors. closets) (I) each CRF-02 5.00 3.50 M082-066-4020 8.00

CSI.(J82-066-4020 Roughing/finishing carpentry(H.M. doors. closets) (2) each CRr-a? 5.00 7.00 12.00

CS~96-601-7aoo r<esllientvinyl floOflng and baseboards m;qf2 CRZ-77 26.00 25 OB 8.00

-----------------------------------
CSI-166-205-0S00 .Alum. conduit/eiecr.copper wire condull (1) m CRZ-26 21.70 20.77 8.00

CSI-16G-205-0SOO Alum. conduil/eiect.copper wire conduil (2) m CRZ-26 21.70 30.47 M 160-205-0500 12.00
------------------------------------------------
CSI-166-205-0S00 Alum. canduit/elect.copper wire conduit (3) rn S30-04 42.00 42.00 M 160·205-0500 8.00

CSI-163-245-2100 Ponel beard and fire alarm control panel/circuit breaker (1) each 0.09 0.08 MI63-245-2100 8.00

CSI-163-245-2100 Panel board and fire alarm control panel/Circuit breaker (2) each 0.09 0.13 MI63·245-2100 12.00

CSI-163-245-2100 Par.el beard and frrs alarm control oonel/circurt breaker (3) each $30-06 0.72 0.20 MI63-245-2100 8.00

CSI-168-12G-3000 Detedor each CRZ-26 2.30 1.00 M 168-120-3000 8.00

CSI-I66-11 0-0300 Emergency lighting each CRZ-26 4.00 3.00 M 166-110-0300 8.00

CSI-160-110-0300 Emergency lighting (2) each CRZ-26 4.00 6.00 M 166-110-0300 16.00

CS1-168-12G-S800 Fire alarm horn each CRZ-26 6.70 1.00 M 168-120-5800 8.00

CSI-166-130-0200 Fluorescent fixtures each CRZ-26 5.70 5.63 M 166-130-0200 8.00

C51-166-130-02oo Fluorescent fixlures (2) each CRZ-26 5.70 7.50 M 166-130-0200 12.00

CSI-I66-13G-02oo Fluorescent nxtures (3) each $30-05 10.00 11.25 M 166-130-0200 12.00

CSI-162-110-01S0 Outlet boxes (2) each CRZ-26 20.00 22.50 MI62-110-015O 12.00

CSI-162·11G-0650 Switch box each CRZ-26 27.00 12.00 M 162-110-0650 8.00

CSI-162-320-0200 Swilches and receptacles each CRZ-26 40.00 12.00 M 162-320-0200 8.00

CSI-162-31G-2600 'Nail plates each CRZ-26 80.00 12.00 MI62-31O-2600 8.00

CSI-168-12G-7000 Break glass station each CRZ-26 8.00 1.00 M 168-120-7000 8.00

CSI-166-130-0200 Lighting fixtures (1) each CRZ-26 2.16 2.14 M 166-130-0200

CSI-166-130-02oo lighting fixtures (2) each CRZ-26 2.16 3.00 M 166-130-0200

CSI-166-130-0200 lighting fixtures (3) each $30-05 4.00 M 166-130-0200

 EXERCISE PROJECTS I 385

Project Requirements
1. Contact your local contractors/ subcontractors/ suppliers/ developers and
discuss the hourly rates of resources, crew formations, construction methods,
and seasonal productivity factors. Make any necessary adjustments to avail-
able data. Also, discuss the project, define the activities and the logic, and es-
timate quantity of work associated with each activity. Make reasonable as-
sumptions of any missing data.
2. Proceed to the Excel system and enter the project data. Perform the following:
a. Determine the project duration when all activities are at their cheapest op-
tion. Choose the three key resources and determine the maximum need of
each.
b. Optimize the bid proposal when project duration is limited to 80% of the
duration in (a), key resources are 90% of the amount used in (a), cash flow
needs to be minimized, no subcontractor credit is given, no mobilization
payment is given by the owner, indirect cost is $300 per day, liquidated
damages are $500 per day, markup is 10%, invoices are submitted to
owner every week, and seasonal productivity factors are used.
c. What is the impact of weekly, biweekly, and monthly invoices on project
cost?
d. Discuss the results with the same people who helped you with project
data and report your findings.
PROBABILITY TABLE FOR
STANDARD NORMAL
DISTRIBUTION

Note: If a normal variable X is not "standard," its val-

ues must be "standardized":
Z = (X-f.L}/o-

Z
Z 0 1 2 3 4 5 6 7 8 9

-3.0 0.00135 0.00131 0.00126 0.00122 0.00118 0.00114 0.00111 0.00107 0.00104 0.00100
-2.9 0.00187 0.00181 0.00175 0.00169 0.00164 0.00159 0.00154 0.00149 0.00144 0.00139
-2.8 0.00256 0.00248 0.00240 0.00233 0.00226 0.00219 0.00212 0.00205 0.00199 0.00193
-2.7 0.00347 0.00336 0.00326 0.00317 0.00307 0.00298 0.00289 0.00280 0.00272 0.00264
-2.6 0.00466 0.00453 0.00440 0.00427 0.00415 0.00402 0.00391 0.00379 0.00368 0.00357
-2.5 0.00621 0.00604 0.00587 0.00570 0.00554 0.00539 0.00523 0.00508 0.00494 0.00480
-2.4 0.00820 0.00798 0.00776 0.00755 0.00734 0.00714 0.00695 0.00676 0.00657 0.00639
-2.3 0.Dl072 0.01044 0.OlD17 0.00990 0.00964 0.00939 0.00914 0.00889 0.00866 0.00842
-2.2 0.01390 0.01355 0.01321 0.01287 0.01255 0.01222 0.01191 0.01160 0.Dl130 0.01101
-2.1 0.01786 0.01743 001700 0.01659 0.01618 0.Dl578 0.01539 0.01500 0.01463 0.01426
-2.0 0.02275 0.02222 0.02169 0.02118 0.02068 0.02018 0.01970 0.01923 0.01876 0.01831
-1.9 0.02872 0.02807 0.02743 0.02680 0.02619 0.02559 0.02500 0.02442 0.02385 0.02330
-1.8 0.03593 0.03515 0.03438 0.03362 0.03288 0.03216 0.03144 0.03074 0.03005 0.02938
-1.7 0.04457 0.04363 0.04272 0.04182 0.04093 0.04006 0.03920 0.03836 0.03754 0.03673
-1.6 0.05480 0.05370 0.05262 0.05155 0.05050 0.04947 0.04846 0.04746 0.04648 0.04551
-1.5 0.06681 0.06552 0.06426 0.06301 0.06178 0.06057 0.05938 0.05821 0.05705 0.05592
-1.4 0.08076 0.07927 0.07780 0.07636 0.07493 0.07353 0.07215 0.07078 0.06944 0.06811
-1.3 0.09680 0.09510 0.09342 0.09176 0.09012 0.08851 0.08692 0.08534 0.08379 0.08226
-1.2 0.11507 0.11314 0.11123 0.10935 0.10749 0.10565 0.10383 0.10204 0.10027 0.09853
-1.1 0.13567 0.13350 0.13136 0.12924 0.12714 0.12507 0.12302 0.12100 0.11900 0.11702

(continued)
387
 z 0 1 2 3 4 5 6 7 8 9

-1.0 0.15866 0.15625 0.15386 0.15151 0.14917 0.14686 0.14457 0.14231 0.14007 0.13786
-0.9 0.18406 0.18141 0.17879 0.17619 0.17361 0.17106 0.16853 0.16602 0.16354 0.16109
-0.8 0.21186 0.20897 0.20611 0.20327 0.20045 0.19766 0.19489 0.19215 0.18943 0.18673
-0.7 0.24196 0.23885 0.23576 0.23270 0.22965 0.22663 0.22363 0.22065 0.21770 0.21476
-0.6 0.27425 0.27093 0.26763 0.26435 0.26109 0.25785 0.25463 0.25143 0.24825 0.24510
-0.5 0.30854 0.30503 0.30153 0.29806 0.29460 0.29116 0.28774 0.28434 0.28096 0.27760
-0.4 0.34458 0.34090 0.33724 0.33360 0.32997 0.32636 0.32276 0.31918 0.31561 0.31207
-0.3 0.38209 0.37828 0.37448 0.37070 0.36693 0.36317 0.35942 0.35569 0.35197 0.34827
-0.2 0.42074 0.41683 0.41294 0.40905 0.40517 0.40129 0.39743 0.39358 0.38974 0.38591
-0.1 0.46017 0.45620 0.45224 0.44828 0.44433 0.44038 0.43644 0.43251 0.42858 0.42465
-0 0.50000 0.49601 0.49202 0.48803 0.48405 0.48006 0.47608 0.47210 0.46812 0.46414
0 0.50000 0.50399 0.50798 0.51197 0.51595 0.51994 0.52392 0.52790 0.53188 0.53586
0.1 0.53983 0.54380 0.54776 0.55172 0.55567 0.55962 0.56356 0.56749 0.57142 0.57535
0.2 0.57926 0.58317 0.58706 0.59095 0.59483 0.59871 0.60257 0.60642 0.61026 0.61409
0.3 0.61791 0.62172 0.62552 0.62930 0.63307 0.63683 0.64058 0.64431 0.64803 0.65173
0.4 0.65542 0.65910 0.66276 0.66640 0.67003 0.67364 0.67724 0.68082 0.68439 0.68793
0.5 0.69146 0.69497 0.69847 0.70194 0.70540 0.70884 0.71226 0.71566 0.71904 0.72240
0.6 0.72575 0.72907 0.73237 0.73565 0.73891 0.74215 0.74537 0.74857 0.75175 0.75490
0.7 0.75804 0.76115 0.76424 0.76730 0.77035 0.77337 0.77637 0.77935 0.78230 0.78524
0.8 0.78814 0.79103 0.79389 0.79673 0.79955 0.80234 0.80511 0.80785 0.81057 0.81327
0.9 0.81594 0.81859 0.82121 0.82381 0.82639 0.82894 0.83147 0.83398 0.83646 0.83891
1.0 0.84134 0.84375 0.84614 0.84849 0.85083 0.85314 0.85543 0.85769 0.85993 0.86214
1.1 0.86433 0.86650 0.86864 0.87076 0.87286 0.87493 0.87698 0.87900 0.88100 0.88298
1.2 0.88493 0.88686 0.88877 0.89065 0.89251 0.89435 0.89617 0.89796 0.89973 0.90147
1.3 0.90320 0.90490 0.90658 0.90824 0.90988 0.91149 0.91308 0.91466 0.91621 0.91774
1.4 0.91924 0.92073 0.92220 0.92364 0.92507 0.92647 0.92785 0.92922 0.93056 0.93189
1.5 0.93319 0.93448 0.93574 0.93699 0.93822 0.93943 0.94062 0.94179 0.94295 0.94408
1.6 0.94520 0.94630 0.94738 0.94845 0.94950 0.95053 0.95154 0.95254 0.95352 0.95449
1.7 0.95543 0.95637 0.95728 0.95818 0.95907 0.95994 0.96080 0.96164 0.96246 0.96327
1.8 0.96407 0.96485 0.96562 0.96638 0.96712 0.96784 0.96856 0.96926 0.96995 0.97062
1.9 0.97128 0.97193 0.97257 0.97320 0.97381 0.97441 0.97500 0.97558 0.97615 0.97670
2.0 0.97725 0.97778 0.97831 0.97882 0.97932 0.97982 0.98030 0.98077 0.98124 0.98169
2.1 0.98214 0.98257 0.98300 0.98341 0.98382 0.98422 0.98461 0.98500 0.98537 0.98574
2.2 0.98610 0.98645 0.98679 0.98713 0.98745 0.98778 0.98809 0.98840 0.98870 0.98899
2.3 0.98928 0.98956 0.98983 0.99010 0.99036 0.99061 0.99086 0.99111 0.99134 0.99158
2.4 0.99180 0.99202 0.99224 0.99245 0.99266 0.99286 0.99305 0.99324 0.99343 0.99361
2.5 0.99379 0.99396 0.99413 0.99430 0.99446 0.99461 0.99477 0.99492 0.99506 0.99520
2.6 0.99534 0.99547 0.99560 0.99573 0.99585 0.99598 0.99609 0.99621 0.99632 0.99643
2.7 0.99653 0.99664 0.99674 0.99683 0.99693 0.99702 0.99711 0.99720 0.99728 0.99736
2.8 0.99744 0.99752 0.99760 0.99767 0.99774 0.99781 0.99788 0.99795 0.99801 0.99807
2.9 0.99813 0.99819 0.99825 0.99831 0.99836 0.99841 0.99846 0.99851 0.99856 0.99861
3.0 0.99865 0.99869 0.99874 0.99878 0.99882 0.99886 0.99889 0.99893 0.99896 0.99900

388
 DETAILED
MASTERFORMAT LIST

00001 Project Title Page 02400 Tunneling, Boring, and Jacking

00005 Certifications Page 02450 Foundation and Load-Bearing Elements
00007 Seals Page 02500 Utility Services
00010 Table of Contents 02600 Drainage and Containment
00015 Ustof Drawings 02700 Bases, Ballasts, Pavements, and Appurtenances
00020 Ust of Schedules 02800 Site Improvements and Amenities
02900 Planting
Bidding Requirements
02950 Site Restoration and Rehabilitation
00100 Bid SOlicitation
00200 Instructions to Bidders Division 3-Concrete
00300 Information Available to Bidders 03050 Basic Concrete Materials and Methods
00400 Bid Forms and Supplements 03100 Concrete Forms and Accessories
00490 Bidding Addenda 03200 Concrete Reinforcement
03300 Cast-in-Place Concrete
Contracting Requirements
03400 Precast Concrete
00500 Agreement 03500 Cementitious Decks and Underlayment
00600 Bonds and Certificates 03600 Grouts
00700 General Conditions 03700 Mass Concrete
00800 Supplementary Conditions 03900 Concrete Restoration and Cleaning
00900 Modifications
Division 4-Masonry
Division l-General Requirements
04050 Basic Masonry Materials and Methods
01100 Summary 04200 Masonry Units
01200 Price and Payment Procedures 04400 Stone
01300 Administrative Requirements 04500 Refractories
01400 Quality Requirements 04600 Corrosion-Resistant Masonry
01500 Temporary Facilities and Controls 04700 Simulated Masonry
01600 Product Requirements 04800 Masonry Assemblies
01700 Execution Requirements 04900 Masonry Restoration and Cleaning
01800 Facility Operation
01900 Facility Decommissionlng Division 5-Metals
05050 Basic Metal Materials and Methods
Division 2-Sife Construction
05100 Structural Metal Framing
02050 Basic Site Materials and Methods 05200 Metal Joists
02100 Site Remedlatlon 05300 Metal Deck
02200 Site Preparation 05400 COld-Formed Metal Framing
02300 Earthwork 05500 Metal Fabrications

389
390 ApPENDIX E

05600 Hydraulic Fabrications 10450 Pedestrian Control Devices

05650 Railroad Track and Accessories ]0500 Lockers
05700 Ornamental Metal 10520 Fire Protection Specialties
05800 Expansion Control 10530 Protective Covers
05900 Metal Restoration and Cleaning 10550 Postal Specialties
10600 Partitions
Division 6-Wood and Plastics
10670 Storage Shelving
06050 Basic Wood and Plastic Materials and Methods 10700 Exterior Protection
06100 Rough Carpentry 10750 Telephone Specialties
06200 FinishCarpentry 10800 Toilet Bath, and Laundry Accessories
06400 Architectural Woodwork ]0880 Scales
06500 Structural Plastics 10900 Wardrobe and Closet Specialties
06600 Plastic Fabrications
06900 Wood and Plastic Restoration and Cleaning Division ll-Equipment
11010 Maintenance Equipment
Division 7- Thermal and Moisture Protection
11020 Security and Vault Equipment
07050 Basic Thermal and Moisture Protection Materials 11030 Teller and Service Equipment
and Methods 11040 Ecclesiastical Equipment
07100 Dampproofing and Waterproofing 11050 Library Equipment
07200 Thermal Protection 11060 Theater and Stage Equipment
07300 Shingles, Roof Tiles, and Roof Coverings 11070 Instrumental Equipment
07400 Roofing and Siding Panels 11080 Registration Equipment
07500 Membrane Roofing 11090 Checkroom Equipment
07600 Flashing and Sheet Metal 11100 Mercantile Equipment
07700 Root Specialties and Accessories 11110 Commercial Laundry and Dry Cleaning
07800 Fire and Smoke Protection Equipment
07900 Joint Sealers 11120 Vending Equipment
11130 Audio-Visual Equipment
Division 8-Doors and Windows
11140 Vehicle Service Equipment
08050 Basic Door and Window Materials and Methods 11150 Parking Control Equipment
08100 Metal Doors and Frames
11160 Loading Dock Equipment
08200 Wood and Plastic Doors
11170 Solid Waste Handling Equipment
08300 Specialty Doors
11190 Detention Equipment
08400 Entrances and Storefronts
11200 Water Supply and Treatment Equipment
08500 Windows
11280 Hydraulic Gates and Valves
08600 Skylights
11300 Fluid Waste Treatment and Disposal Equipment
08700 Hardware
11400 Food Service Equipment
08800 Glazing
11450 Residential Equipment
08900 Glazed Curtain Wall
11460 Unit Kitchens
Division 9-finishes 11470 Darkroom Equipment
09050 Basic FinishMaterials and Methods 11480 Athletic, Recreational, and Therapeutic
09100 Metal Support Assemblies Equipment
09200 Plaster and Gypsum Board 11500 Industrial and Process Equipment
Tile 11600 Laboratory Equipment
09300
Terrazzo 11650 Planetarium Equipment
09400
09500 Ceilings 11660 Observatory Equipment
09600 Flooring 11680 Office Equipment
09700 Wall Finishes 11700 Medical Equipment
11780 Mortuary Equipment
09800 Acoustical Treatment
11850 Navigation Equipment
09900 Paints and Coatings
11870 Agricultural Equipment
Division 10-Specialties 11900 Exhibit Equipment
10100 Visual Display Boards
Division 12-furnishings
]0150 Compartments and Cubicles
12050 Fabrics
10200 Louvers and Vents
12100 Art
10240 Grilles and Screens
12300 Manufactured Casework
]0250 Service Walls
12400 Furnishings and Accessories
]0260 Wall and Corner Guards
12500 Furniture
10270 Access Flooring
12600 Multiple Seating
10290 Pest Control
12700 Systems Furniture
10300 Fireplaces and Stoves
12800 Interior Plants and Planters
10340 Manufactured Exterior Specialties
12900 Furnishings Repair and Restoration
10350 Flagpoles
10400 Identification Devices
 DETAILED MASTElU'ORMAT LIST 391

Division 13-Speclal Construction Division 14-Conveylng Systems

13010 Air-Supported Structures 14100 Dumbwaiters
13020 Building Modules 14200 Elevators
13030 Special Purpose Rooms 14300 Escalators and Moving Walks
13080 Sound, Vibration, and Seismic Control 14400 Lifts
13090 Radiation Protection 14500 Material Handling
13100 lightning Protection 14600 Hoists and Cranes
13110 Cathodic Protection 14700 Turntables
13120 Pre-Engineered Structures 14800 Scaffolding
13150 Swimming Pools 14900 Transportation
13160 Aquariums
13165 Aquatic Park Facilities Division 15-Mechanical
13170 Tubs and Pools 15050 Basic Mechanical Materials and Methods
13175 Ice Rinks 15100 Building Services Piping
13185 Kennels and Animal Shelters 15200 Process Piping
13190 Site-Constructed Incinerators 15300 Fire Protection Piping
13200 Storage Tanks 15400 Plumbing Fixtures and Equipment
13220 Filter Underdrains and Media 15500 Heat-Generation Equipment
13230 Digester Covers and Appurtenances 15600 Refrigeration Equipment
13240 Oxygenation Systems 15700 Heating, Ventilating, and Air-Conditioning
13260 Sludge Conditioning Systems Equipment
13280 Hazardous Material Remediation 15800 Air Distribution
13400 Measurement and Control Instrumentation 15900 HVAC Instrumentation and Controls
13500 Recording Instrumentation 15950 Testing, Adjusting, and Balancing
13550 Transportation Control Instrumentation
Division 16-Electrical
13600 Solar and Wind Energy Equipment
13700 Security Access and Surveillance
16050 Basic Electrical Materials and Methods
13800 Building Automation and Control 16100 Wiring Methods
13850 Detection and Alarm
16200 Electrical Power
13900 Fire Suppression 16300 Transmission and Distribution
16400 Low-Voltage Distribution
16500 Lighting
16700 Communications
16800 Sound and Video
Index

A AON method. See Activity on node Balance bidding, 102

(AON) method Bar charts, 123
AACE. See American Association of
Appendix A, Web Resources, 339-344 BCWP. See Budgeted cost of work
Cost Engineers
Appendix B, New Case Study, 345- performed
Activities' percent complete, 291-294
368 BCWS. See Budgeted cost of work
Activity on arrow (AOA) method,
Appendix C, Exercise Projects, 369- scheduled
72-74, 117-118
386 Bechtel, Step hen, 3
Activity on node (AON) method, 74-
Appendix D, Probability Table for Berger, Horst, 3
77
Standard Normal Beta curve, 324, 325
Actual cost of work performed
Distribution, 387-388 Biased priorities in resource
(ACWP),297-299
Appendix E, Detailed MasterFormat allocation, 185-189
ACWP. See Actual cost of work
List, 389-392 Bid bond, 22
performed
Architect/ engineer (A/E) firms, 6, Bid price, 91
Administration practices, 17-23
19 Bid proposal finalization, 102-103
contract documents, 22
Architects, 6 BidCom software, 336
contractual relationships, 17
Artificial intelligence techniques, Bidding contracts, 15-16
key players, 18-22
332-335 Bidding strategy and markup
architect/ engineer (A/E) firms,
artificial neural networks (ANNs), estimation, 237-256
19
333-334 accounting for project risks, 237-
contractor, 20-21
fuzzy logic, 334-335 238
project manager, 18-19
knowledge-based expert systems analyzing bidding of competitors,
resident engineer, 19-20
(KBES), 332-333 238-240
organization structure, 23, 24
Artificial neural networks (ANNs), bidding relationships, 245
Advance planning, 315
333-334 case study project, 253
Advanced tools and applications,
As-built and as-planned schedules, estimating optimum rnarkup, 240-
329-336
301-304 245
Agent contractual relationships, 17,
As-late-as-possible (ALAP), 312-313 on Excel, 246-247
18
As-soon-as-possible (ASAP), 312 Friedman model, 241-242, 244, 248,
ALAP. See As-late-as-possible
ASAP. See As-soon-as-possible 251
American Association of Cost
Assemblies Costs (Means), 89 Gates model, 241-242, 244, 245,
Engineers (AACE), 90
248,251
Announcement in competitive B Pro BID, 248-252
bidding process, 21
Baan, 330 qualitative factors, 248-252
ANNs. See Artificial neural networks
Backward pass, 118,121 Blodgett, Omer, 3
AOA method. See Activity on arrow
BAL program, 156-162 Bonds, 22
(AOA) method

393
394 INDEX

BOT approach. See Build-operate- Construction, 289-320 professional construction

transfer (BOT) approach case study project, 304-310 management approach
Brainstorming, 64 with Excel system, 305-308 (PCM),13
Budgeted cost of work performed with Microsoft Project software, traditional approach, 11-12
(BCWP),297-299 305,308-310 turnkey approach, 12
Budgeted cost of work scheduled cost and schedule control, 295-298 design/ construction interaction,
(BCWS),297-299 double S-curve method, 296 14
Buffer management, 313-314 Earned Value technique, objectives, 10-11
Buffer zones, 314 297-298 cost, 10
Build-operate-transfer (BOT) S-curve method, 295 performance, 10
approach, 13 critical chain project management secondary, 10-11
Building Construction Cost Book (CCPM),311-315 time, 10
(Means), 97, 98 benefits and criticisms, 314 Contractor, 20-22
Buildings, 2-3, 4 method of, 312-314 Contracts, 15-17
problems addressed by, 311-312 competitive bidding contracts,
software for, 315 15-16,21
c forecasting, 298-299 negotiated cost-plus contracts, 15,
Carrier, Willis, 3 golden rules for, 315 16-17
Case study project measuring work progress, risks in various contracts, 17
bidding strategy and mark up 291-294 Cost components in time and cost
estimation, 253 calculating activities' percent estimation, 90-92
construction, 304-310 complete, 291-292 Cost in contract strategy, 10
critical-path analysis for network calculating the project's percent Cost data, 97-99
scheduling, 134-140 complete, 292-294 Cost overruns, 4, 291
financing and schedule objectives of project control, 290 Cost performance index (CPI),
integration, 277-285 problems during, 290 297-298
linear and repetitive projects, schedule updating, 299-304 Cost and schedule control, 295-298
151-162 as-built and as-planned Cost variance, 299
manual heuristic solution in schedules, 301-304 Cost-plus contracts, 15, 16-17
resource allocation, 171-177 evaluation of work changes and Cost-slope method, 214, 219-220,
new case study in appendix B, delays, 300-304 228-229
345-370 procedure for, 300 CPI. See Cost performance index
planning and network diagrams, reasons for, 299 CPM. See Critical-path method
79-82 Construction estimating, 88-90 Crew synchronization, 146-147
planning and time & cost Construction industry Critical activities identification,
estimation, 103-110 history, 1-4 121
resource management, 202-206 poor performance in, 4-5 Critical Chain (Goldratt), 311
time-cost trade off (TCT), trends in, 23, 25 Critical chain project management
214-231 Construction management (CM) (CCPM), 305, 311-314
Cash-flow, 258-259, 278 contracts, 18 Critical-path analysis for network
CCPM. See Critical chain project Construction managers, 6 scheduling, 115-142
management Construction projects advanced topics, 140
Cellular phones, 336 definition, 1 case study project, 134-140
Change orders, 315 life-cycle stages of, 8-9, 25 criticisms to network techniques,
Checklists, 68 participants in, 5-7 126-127
Clients in construction projects,S types of, 7-8 manually solved examples,
Communication, 315 Construction Specifications Institute 124-126
Compensable delays, 300 (CSI),67 Microsoft Project software,
Competitive bidding contracts, 15-16 Construction stage in construction 127-132,140
Competitors' bidding, 238-240 projects, 8, 9 network scheduling, 116-124
Computers, 335-336 Contract documents, 22-23 critical-path method (CPM),
Concept stage in construction Contract period, 22 117-120
projects, 8 Contract strategy, 9-23 precedence diagram method
Concrete contractor, 321 constraints, 10-11 (PDM),I21-122
Concurrent delays, 199 delivery methods, 11-13 schedule presentation (bar or
Conflicts among parties, 4 build-operate-transfer (BOT) Gantt charts), 122-123
Congestion at work site, 290 approach, 13 P3 software, 133-134
Constraints in contract strategy, 11 design-build approach, 12 scheduling objectives, 116
 INDEX 395

Critical-path method (CPM), Estimating function in planning, 63 income profile, 259

117-122,314 Evaluation and selection in Microsoft Project software,
Critical-path method/line-of-balance competitive bidding process, 272-274
(CPM-LOB), 143, 146-150 21 overdraft calculations and interest
CS!. See Construction Specifications Evolver software, 51-52, 201-202 charges, 263-272
Institute Excel, 30-52, 281-283 Primavera P3, 275-277
CYCLONE, 330 bidding strategy and markup retainage, 259
estimation, 246-247 S-curve, 258-259, 261-263
D construction, 305-308 time period, 258
Data lists, 31, 32 for cost estimation, 103 Fire protection contractor, 321
Davenport, Alan, 3 cost slope method, 219-221, Fixed fee cost plus contracts, 16
Deadlines, 148 228-229 Fixed fee plus profit sharing cost
Decking contractor, 321 data forms, 36-37 plus contracts, 16
Default relationship, 78 filtering lists, 33-36 Fixed percentage cost plus contracts,
Delays, 300-301 optimization tools, 48-52 16
Delivery methods in contract Evolver software, 51, 52, 201 Float calculations, 119-120, 121
strategy, 11-13 genetic algorithms (GAs), 50-52 Float time, 291
Design construction management goal-seek, 48 Fluor, John, 3
(CM) contracts, 18 mathematicaloptimizations, Forecasting in construction, 298-299
Design professionals, 6 49-50 Foreman, 21-22
Design stage of construction reporting features: pivot tables, Forward pass, 117-118, 120-121
projects, 8, 9 42-47 . Four M's (Manpower, Materials,
Design-build approach, 12 resource management, 199-202 Machinery, and Money), 5
Design/ construction interaction, retrieving list information, 37-42 Framework software, 336
14 lookup functions, 39-42 Friedman model, 241-242, 244, 248,
Detailed estimating, 92-103 INDEX function, 41-42 251
Direct costs, 91, 93-97 LOOKUP function, 40-41 Function organization, 24
Documentation, 315 MATCH function, 40 Fuzzy logic, 334-335
Double moments, 169-170 OFFSET function, 42
Double S-curve method, 296 VLOOKUP function, 39-40 G
Downsizing projects, 291 statistical list functions, 38-39 Gantt charts, 123
Dummy activities, 67, 74 sorting lists, 31-32 Gates model, 241-242, 244, 248, 251
Dunn, John, 3 spreadsheet-based system for time GeneHunter software, 51
Duration estimates, 324 & cost estimation, 104-110 General contractor approach,
Duration-driven scheduling, 144 template for indirect cost 11,18
estimation, 100 General contractors, 7
E Excessive safety, 311 Genetic algorithms, 50-52, 206
EAC See Estimate at completion Excusable delays, 301 Genetic algorithms optimization,
Earliest late-start (ELS), 171 Exercise Projects, Appendix C, 369- 222-224,231-232
Early finishes, 311 386 Golden rules for construction, 315
Earned Value technique, 297-298 Expense profile. See S-curve Goldratt, Eliyahy, Critical Chain,
Eiffel, Gustave, 3 311
Electrical contractor, 321 F Green zones, 313-314
ELS, See Earliest late-start Factories, 2 Guaranteed maximum price (GMP)
Engineering News Record (ENR), 2-4 Fast-track design/ construction cost plus contracts, 17
innovations, 3-4 interaction, 14
landmark projects, 2-3 Feeding buffer, 313 H
people, 3 Finalizing a bid proposal, 102-103 Hammock activities, 67
Engineering-construction firms, 6 Financing and schedule integration, Heavy and highway construction, 8
Engineers in construction projects, 6 257-288 Highways, 2
Enterprise Resource Planning (ERP) case study project, 277-285 HVAC system, 321
systems, 329-330,331 cash-flow optimization, 278
ERP systems, See Enterprise Excel template, 281-283 I
Resource Planning (ERP) summary of schedule Immediately preceding activities
systems optimization experiments, (IPAs),70
Estimate at completion (EAC), 298- 283-284 Incentives, 22
299 cash flow, 258-259 Income profile, 259
Estimate sheet, 108-109 financing options, 260-262 Indirect costs, 99-102
396 INDEX

Information management tools. See Marine construction, 8 OBS. See Organization breakdown
Excel; Microsoft Project Markup,91-92,102 structure
software; Prima vera P3 Markup estimation. See Bidding Office manager, 22
software strategy and markup Oglesby, Clarkson, 3
Infrastructure, 2 estimation Operation & maintenance (0 & M)
Internet, 335-336 MasterFormat list, 67, 90, 389-391 stage of construction projects,
see also World Wide Web Matrix organization, 24 8,9
IPAs. See Immediately preceding Means, R.5. Optimistic duration, 324
activities Assemblies Costs, 89 Oracle, 330
Building Construction Cost Book, 97, Organization breakdown structure
J 98 (OBS),66
Journal publications, 25 Square Foot Costs, 89 Organization structure, 23, 24
Measuring work progress in Overdraft calculations and interest
K construction, 291-294 charges, 263-272
Kahn, Albert, 3 Mechanical contractor, 321 Overhead costs, 99-101
KBES. See Knowledge-based expert Meridian software, 336 Overhead work parade, 321
systems Method of moments, 167-168 Owner construction management
Kiewit, Peter, 3 Microsoft Project software, 53-57, 308 (CM) contracts, 18
Knowledge-based expert systems BAL program, 156-162 Owner direct force approach, 11, 18
(KBES),332-333 construction, 305, 308-310 Owner I design construction
critical-path analysis for network management (CM) contracts,
L scheduling, 127-132, 141 18
Labor procurement, 69 financing and schedule Owners in construction projects, 5
Landmark projects of the twentieth integration, 272-274
century, 2-3 resource management, 177-181,
p
Large-size monuments of 185 1'3 software. See Prima vera P3
civilization, 2-3 Web features, 336 software
Least total-float (LTF), 171, 184 Military construction, 8 Palisade Corporation, 52
Life-cycle stages of construction Monte Carlo simulation for project Parade game, 321-324
projects, 8-9, 25 risk assessment, 327-329 Parametric estimating method, 89,90
Line-of-balance (LOB), 143-146 Most likely duration, 324 Parkinson's Law, 311
Linear and repetitive projects, Multi-skill resource allocation Participants in construction projects,
143-164 algorithm (MURSA), 195-198 5-7
BAL program, 156-162 Multi-skilled resources, 190-198 PCM approach. See Professional
case study project, 151-162 Multitasking problems, 311, 312, 314 construction management
critical-path method/line-of- MURSA See Multi-skill resource approach
balance (CPM-LOB), 143, allocation algorithm PDM. See Precedence diagram
146-150 method
definition, 144 N PeopleSoft, 330
line-of-balance (LOB), 143, 144-146 Negotiated cost-plus contracts, 16-17 Performance bond, 22
resource-balanced scheduling, Network diagrams. See Planning: Performance in contract strategy, 10
146 network diagrams Personal computers, 30
resource-driven and duration- Network scheduling, 116-124 PERT approach for project risk
driven scheduling, 144 see also Critical-path analysis for assessment, 324-327
Liquidated damages, 22 network scheduling criticisms of, 327
LOB. See Line-of-balance New case study in Appendix B, duration estimates, 324
LTP. See Least total-float 345-368 step-by-step analysis, 325-327
Lump sum contracts, 15 Non-agent contractual relationships, Pessimistic duration, 324
17 Petri Nets, 331
M Non-buildings construction, 8 Peurifoy, Robert, 3
Maintenance period, 22 Non-excusable delays, 301 Phased design I construction
Management decision activities, 67 Nonresidential building interaction, 14
Management functions in life-cycle construction, 8 Planning: network diagrams,
stages of construction 63-86
projects, 8-9, 26 o case study project, 78-82
Management. See Scientific project Objectives in contract strategy, definition, 64, 65
management 10-11 estimating function, 64
Manual cost slope method, 214-219 Objectives of project control in importance of, 65
Manufacturing industry, 4 construction, 290 step 1) project breakdown, 66-69
 INDEX 397

step 2) relationships among Project managers, 7, 18-19 Risks in project, 237

activities, 69-71 Project organization, 24 see also Monte Carlo simulation for
step 3) network diagrams, Project Scheduler 8 (PS8), 315 project risk assessment; PERT
73-77 Project's percent complete, approach for project risk
activity on arrow (AOA) 293-295 assessment
method, 73-74 Public projects, 5
activity on node (AON) method, Published cost data, 97-99 S
75-77 Pyramids of Giza, 2 S-curve, 258-259, 261-263, 296
Planning: time & cost estimation, Safety, 311
87-114 Q SAP, 330
case study project, 103-110 Quality control representative, 22 Schedule control, 295-299
construction estimating, 88-90 Quantity surveyors, 21 Schedule optimization experiments,
cost components, 90-92 283-284
detailed estimating, 92-103 R Schedule performance index (SPI),
software for, 103 Rates schedule, 16 297-298
spreadsheet-based system, Rebar contractor, 321 Schedule presentation (bar or Gantt
104-110 Red zones, 314 charts),123
Plumbing contractor, 321 Redundant relationships, 70-71 Schedule of rates, 16
Poor performance in the Relay race approach, 313 Schedule updating, 299-304
construction industry, 4-5 Repetitive projects. See Linear and Schedule variance, 298
Precedence diagram method of repetitive projects Scheduling. See Critical-path
network drawing, 73-77, Reports sheet, 109-110 analysis for network
121-123 Resident engineer, 19-20 scheduling; Linear and
Preparation and submission in Residential building construction, 7 repetitive projects
competitive bidding process, Resource allocation, 170-177, 184- Scientific project management,
21 198,314 4-5
Primary paths, 302 integration with TCT and resource Scitor corporation, 315
Primavera P3 software, 57, 58 leveling. 224-225 Scitor Process software, 331-332
critical-path analysis for network Resource leveling, 167-170 Separate design/ construction
scheduling, 133-134 integration with TCT and resource interaction, 14
financing and schedule allocation, 224-225 Sequence steps, 76
integration, 275-277 Resource management, 165-210 Simulation, 330-332
resource management, 181-184 advanced strategies, 206 Site engineer, 21
Web features, 336 case study project, 202-206 Site organization, 315
Prime contractors firms, 6 Excel,199-202 Site superintendent, 20
Private projects, 5 improving resource allocation, Sliding fee cost plus contracts,
Probability Table for Standard 184-198 16, 17
Normal Distribution, biased priorities, 185-189 Software
Appendix D, 387-388 multi-skilled resources, 189-198 for planning in time & cost
Pro BID, 248-252 Microsoft Project, 177-181, 186 estimation, 103
ProChain Solutions Inc., 314 Primavera P3, 181-184 ProChain Solutions Inc., 315
Procurement activities, 67, 69 scheduling with limited resources Project Scheduler 8 (PS8), 315
Production activities, 67 (resource alloca tion), 170-177 see also Excel; Microsoft Project
Professional construction smoothing resource profiles software; Prima vera P3
management approach (resource leveling), 167-170 software
(PCM),13 manual heuristic solution: Specialty contractors, 7
Profit, 91 method of moments, 168 SPI. See Schedule performance
Program evaluation and review modified heuristics: double index
technique. See PERT moments, 169-170 Spreadsheet-based system for time &
approach for project risk see also Time-cost trade off cost estimation, 104-110
assessment Resource needs, 148-150 Spreadsheets, 30
Project breakdown in planning, Resource-balanced scheduling, Square Foot Costs (Means), 90
66-69 146 Standard Normal Distribution
Project buffer, 313 Resource-driven and duration- Probability Table, Appendix
Project control objectives, 291 driven scheduling, 144 D,387-388
Project engineers, 7 Retainage, 259 Steel erectors, 321
Project management software. See Retention amount, 22 Structural parade, 321
Microsoft Project software; Richardson, Henry, 3 Student syndrome, 311
Prima vera P3 software Risk contingency, 92 Subcontractors, 7
398 INDEX

T cost-slope method, 214 Unit price contracts, 15-16

TCP lIP. See Transmission Control techniques for, 214 Utilities, 2
Protocol/Internet Protocol time-cost relationship, 211-213
see also Resource management v
TCT. See Time-cost trade off (TCT)
Teicholz, Paul, 3 Timely payments, 315 Valid claims, 22
Terzaghi, Karl, 3 Total Quality Managcment (TQM), 5,
Time in contract strategy, 10 26 w
Time extensions, 4 TQM. See Time, Quality, Money; Ward Systems Group, Inc., 52
Time period in financing and Total Quality Management WBS. See Work breakdown structure
schedule integration, 258 Trade unions, 195 Web Resources, 25, 339-344
Time, Quality, Money (TQM), 5, 26 Trades' gaps, 315 Work breakdown structure (WBS),
Time-cost trade off (TCT), 211-236 Traditional approach, 11-12 66-70,90,91
case study project, 214-232 Transmission Control Work changes and delays, 300-304
Excel cost slope method, 219- Protocol/Internet Protocol Work disruptions, 290
221,228-229 (TCP lIP), 336 Work interruptions, 315
genetic algorithms optimization, Turnkey approach, 12 World Wide Web, 336
222-224,231-232 Twentieth century landmark see also Internet
integration of TCT, resource projects, 2-3
y
allocation, and resource
leveling, 224-225
u Yellow zones, 314
manual cost slope method, Unbalanced bidding, 102
214-219 Uncertainty effect game, 321-324