1 Module One: The Construction Industry – Practice and Pathways
Module One: The Construction Industry – Practice and Pathways
Module Learning Objectives
- Reflect on your own experiences of project management. (CLO 2)
- Define project management. (CLO 2)
- Identify types of environments for a project. (CLO 2)
- Identify aspects of a successful project. (CLO 2)
- Identify project constraints. (CLO 2)
- Discuss what construction project management is and its importance to the built environment. (CLO 1, 2, 3)
Module Essential Questions
- How do your past experiences in project management shape your understanding of successful project execution? (CLO 2)
- What is your definition of project management, and how does it contribute to the success of various endeavors? (CLO 2)
- How do different project environments influence project management strategies and approaches? (CLO 2)
- What are the key components of a successful project, and how do they contribute to its overall outcome? (CLO 2)
- What constraints do project managers typically encounter, and how do these constraints impact project planning and execution? (CLO 2)
- Why is construction project management crucial in shaping the built environment, and how does it intersect with broader societal needs and aspirations? (CLO 1, 2, 3)
Bridge-In
Lesson 1: Introduction to Project Management
Welcome
Welcome to Introduction to Construction Project Management. This module focuses on the fundamentals of project management, its foundational definition, what constitutes success, and the various constraints and skills that are required to manage projects effectively. But first let us delve into what exactly makes Construction Project Management a subject worth exploring.
Why Should We Talk About It?
From the Great Wall of China to the Burj Khalifa in Dubai, Project Management is an ancient practice integral to the creation of the world’s most famous and enduring structures. The achievements of our industry highlight the lasting impact present in construction project management in both generational knowledge and skill while showcasing innovation.
Definition of Project Management
There are many written definitions of “project”. The Project Management Institute (PMI) defines a project as a temporary endeavor undertaken to create a unique product, service, or result. The temporary nature of a projects indicate a definite beginning and end.
Project management is the art of directing and coordinating human and material resources throughout the life of a project by using modern management techniques to achieve predetermined objectives of scope, time, cost, time, quality, and participation satisfaction. The end is reached when the project’s objectives have been reached or when the project is terminated because its objectives will not or cannot be met or when the need for the project no longer exists.
Project Attributes
Projects have distinctive attributes that distinguish them from ongoing work or business operations. They are temporary and as such are not an everyday business process as they have definitive start and end dates. This characteristic is important as a large part of the project effort is dedicated to ensuring that the project effort is completed at the appointed time. To this end schedules are created showing when tasks should begin and end. Projects can last minutes, hours, days, weeks, months, or even years.
Projects exist to bring about a product or service that haven’t existed before. In this sense the project is unique. Perhaps something has previously been done in a very similar fashion never before has something been done in exactly this way. For example, Ford Motor Company is in the business of designing and assembling cars. Each individual model that Ford designs and produces can be considered a separate product as the models differ from one another in their features and are marketed to people with varying needs. An SUV serves a different purpose and clientele than a luxury car. The design and marketing of these two models are unique projects. The actual assembly of the cars, however, is considered an operation (i.e. a repetitive process that is followed for most makes and models).
In contrast with projects, operations are ongoing and repetitive. They involve work that is continuous without an ending date and with the same processes repeated to produce the same results. The general management of business and industrial corporations assumes a broader outlook with greater continuity of operations. The purpose of operations is to keep the organization functioning while the purpose of a project is to meet its goals and conclude. Therefore, operations are ongoing while projects are unique and temporary. Nevertheless, there are sufficient similarities as well as differences between the two so that modern management techniques developed for general management may be adapted for project management.
A project is completed when its goals and objectives are accomplished. It is these goals that drive the project, and all the planning and implementation efforts undertaken to achieve them. Sometimes projects end when it is determined that the goals and objectives cannot be accomplished or when the product or service of the project is no longer needed and the project is canceled.
The characteristics that distinguish a project from ongoing work are:
- Uniqueness: A project introduces a novel product or service.
- Temporariness: Projects have a specific start and end date.
- Goal Completion: A project ends when its objectives are reached or deemed unachievable.
Project Characteristics
When considering whether or not you have a project on your hands, there are some things to keep in mind. First, is it a project or an ongoing operation? Second, if it is a project, who are the stakeholders? And third, what characteristics distinguish this endeavor as a project?
Projects have several characteristics:
- Projects are unique.
- Projects are temporary in nature and have a definite beginning and ending date.
- Projects are completed when the project goals are achieved or it’s determined the project is no longer viable.
What Does Success Look Like?
A successful project is one that is delivered on time, within budget and meets or exceeds the promised scope. Customer satisfaction is the ultimate measure of success, indicating that the project has met all its anticipated goals and requirements.
A successful project is one that meets or exceeds the expectations of the stakeholders.
Consider the following scenario:
The vice president (VP) of marketing approaches you with an idea. She wants to install tv screens around the various floors of the office space to keep the employees informed of internal news for the company. It will post all sorts of news from the company intranet in a more convenient way for the employees. She believes this will increase employee morale and keep them more informed about how the company is doing on their CSR report. She tells you that senior management has already approved the project, and she’ll dedicate as many resources to this as she can. She wants 10 new tvs installed in high-traffic areas by the end of the year. Finally, she has assigned you to head up this project.
Your first question should be, “Is it a project?” This may seem elementary, but confusing projects with ongoing operations happens often. Projects are temporary in nature, have definite start and end dates, result in the creation of a unique product or service, and are completed when their goals and objectives have been met and signed off by the stakeholders.
Using these criteria, let’s examine the assignment from the VP of marketing to determine if it is a project:
- Is it unique? – Yes, because the TVs don’t yet exist in the space. This is a new way of informing the company’s employees about internal news and stories.
- Does the product have a limited timeframe? – Yes, the start date of this project is today, and the end date is the end of next year. It is a temporary endeavor.
- Is there a way to determine when the project is completed? – Yes, the screens will be installed and the information will be broadcast from them. Once all the screens are installed and operating, the project will come to a close.
- Is there a way to determine stakeholder satisfaction? – Yes, the expectations of the stakeholders will be documented in the form of requirements during the planning processes. These requirements will be compared to the finished product to determine if it meets the expectations of the stakeholders.
If the answer is yes to all these questions, then we have a project!
Project Constraints
Projects are shaped by constraints that define their scope and impact their execution. These include:
- Cost: The budget allocated for the project.
- Scope: The goals and work involved in delivering the project’s outcomes.
- Quality: The standards and criteria for the project’s products.
- Risk: Potential external events that could negatively impact the project.
- Resources: People, equipment, facilities, and funding required for the project.
- Time: The duration allocated to complete the project.
Understanding and managing these constraints are crucial for the success of any project.
Delving deeper, project management in construction encompasses a set of objectives which may be accomplished by implementing a series of operations subject to resource constraints. There are potential conflicts between the stated objectives with regard to scope, cost, time and quality, and the constraints imposed on human material and financial resources. These conflicts should be resolved at the onset of a project by making the necessary trade offs or creating new alternatives. Consequently, the functions of project management for construction generally include the following:
- Specification of project objectives and plans including delineation of scope, budgeting, scheduling, setting performance requirements, and selecting project participants.
- Maximization of efficient resource utilization through procurement of labor, materials and equipment according to the prescribed schedule and plan.
- Implementation of various operations through proper coordination and control of planning, design, estimating, contracting and construction in the entire process.
- Development of effective communications and mechanisms for resolving conflicts among the various participants.
Knowledge and Skills for Success
A core skill set for everyone within the industry is the ability to manage projects, whether you work in project development, architectural design, engineering design, construction or facilities management.
Projects are not unique to construction. For example, some other industries are also very project-focused, e.g., aircraft, computer software, shipbuilding, etc. The Project Management Body of Knowledge (PMBOK) guide has been developed by the Project Management Institute (PMI) and provides a foundational framework for managing projects. It outlines knowledge areas integral to project management:
- Project integration management to ensure that the various project elements are effectively coordinated.
- Project scope management to ensure that all the work required (and only the required work) is included.
- Project time management to provide an effective project schedule.
- Project cost management to identify needed resources and maintain budget control.
- Project quality management to ensure functional requirements are met.
- Project human resource management to development and effectively employ project personnel.
- Project communications management to ensure effective internal and external communications.
- Project risk management to analyze and mitigate potential risks.
- Project procurement management to obtain necessary resources from external sources.
- Project health, safety, security, and environmental management.
- These areas form the basis of the Project Management Institute’s certification program for project managers in any industry.
Careers in Project Management
Project management skills are versatile and applicable in numerous fields, including but not limited to:
- Business Owners
- Restaurant Managers
- Arts, Media, and Entertainment
- Health and Human Services
- Information Technology
- Building Trades and Construction
Understanding project management principles can open doors to a wide range of career opportunities.
Summary
Consider the project manager as the conductor of an orchestra, ensuring all parts play harmoniously to achieve a successful performance. This analogy highlights the critical role of coordination, management, and interpersonal skills in project management.
This Lesson provided an overview of project management, covering its definition, keys to success, constraints, and the requisite knowledge and skills. By understanding these fundamentals, you can apply project management principles to various careers and industries.
Engaging with Industry Experts 1.1
As we deepen our understanding of the construction industry, it’s invaluable to gather insights from various sources, especially those who are actively shaping the field today. Engaging with industry professionals provides a unique opportunity to gain first-hand knowledge and perspectives.
Instructions
As part of this module, we’ll be incorporating insights from notable industry professional Ann Tomalavage, PE, PMP, LEED AP, a licensed professional engineer who has spent the last 20+ years training engineering professionals on how to become great project managers. Ann provides some great project management tips for both Engineers and Project Managers.
Reflection
Once you’ve watched the videos, take a moment to reflect on the new information and perspectives shared. To guide your reflection, consider the following questions:
- Learning Takeaways: What is one new piece of information you learned from Ann Tomalavage’s insights? How does it add to your understanding of the construction industry?
- Connection to Class Topics: Did the videos help clarify any of the topics we’re covering in class? Describe any connections or insights you’ve made.
- Curiosity and Questions: Were there any questions you wished to ask Ann Tomalavage while watching the videos? If so, were these questions addressed in the content?
- Looking Forward: Based on what you’ve learned, what is one question you would like to explore further?
Evaluation Criteria
Your responses will be evaluated based on the completeness of your answers and the depth of your reflections. Aim to provide thoughtful and detailed responses, with each answer comprising at least one well-developed paragraph. Your complete reflection should not exceed two pages.
This exercise is not only about what you’ve learned from the videos but also about how you integrate this new knowledge with our classroom discussions and your personal curiosity about the construction industry.
Stop and Reflect 1.1: Your Pathway to Success
- Articulating Your Goals: Reflect on what you aim to achieve through this course. Are you looking to acquire new skills, satisfy a curiosity, fulfill a requirement, improve academically, or apply your learning in practical contexts? Document your primary goal and consider how this course might facilitate your journey towards achieving it.
- Support Mechanisms That Work for You: Think about your most effective learning experiences in the past. What instructional methods benefitted you the most (e.g., lectures, discussions, hands-on activities, group work)? Reflect on how these preferred methods might be integrated into your current learning process to achieve your goals for this course.
- Confronting Concerns: Identify any apprehensions you have as you embark on this course. Reflect on these concerns and contemplate strategies that could help mitigate them, enhancing your learning experience.
- Imagining Success and Challenges: Visualize the best possible outcome for your engagement in this course, as well as potential obstacles you might encounter. Reflect on strategies to overcome these challenges and how you can contribute to your own success.
- Creating a Productive Learning Environment: Consider the norms and behaviors that foster a positive and effective learning environment (e.g., mutual respect, active participation, time management). Reflect on how you can adhere to these norms to maximize your learning experience in this course.
Test your Knowledge!
Name two careers or job fields you could use project management skills.
Lesson 2: Construction Industry – Industry Sectors
Overview
The construction industry is quite large. As such, there’s a lot to cover when talking about it. We’ve split the following readings up into categories to help you better take in the information. The first here are the industry sectors, or major types of construction you can be involved in.
Major Types of Construction
The construction industry is the 2nd largest industry in the United States economy, second only to the healthcare industry. Within the United States market, the industry accounts for 6.1% (2016 data) of the annual Gross Domestic Product (GDP) of the economy. The GDP is the value of all goods and services within an economy. Therefore, the industry accounts for the same percentage of the economic transactions in the economy.
One challenge when discussing our industry is to define the scope and terminology used to describe the industry, or in some cases, subsets of the industry. At a broad level, some people refer to the industry as the Construction Industry, Building Industry, Architecture / Engineering / Construction (AEC) Industry, or even the Architecture / Engineering / Construction / Operation (AECO) Industry. People frequently use these terms interchangeably, and I will also do so. The industry typically focuses on all the employees and tasks required to plan, design, construct, operate, and manage the delivery and operations of the built environment (commercial buildings, infrastructure, and industrial facilities). It is important to note that when people use the term ‘Construction Industry’, they are typically referring to the design, construction, and operations of facilities, not just the process of delivering a new facility. And when they use the term ‘Building Industry’, they are typically discussing all types of facilities, not just commercial and residential buildings.
Since most owners are generally interested in acquiring only a specific type of constructed facility, they should be aware of the common industrial practices for the type of construction pertinent to them. Likewise, the construction industry is a conglomeration of quite diverse segments and products. Some owners may procure a constructed facility only once in a long while and tend to look for short-term advantages. However, many owners require periodic acquisition of new facilities and/or rehabilitation of existing facilities. It is to their advantage to keep the construction industry healthy and productive. Collectively, the owners have more power to influence the construction industry than they realize because, by their individual actions, they can provide incentives or disincentives for innovation, efficiency and quality in construction. It is in the interest of all parties that the owners take an active interest in the construction and exercise a beneficial influence on the performance of the industry.
In planning for various types of construction, the methods of procuring professional services, awarding construction contracts, and financing the constructed facility can be quite different. For the purpose of discussion, the broad spectrum of constructed facilities may be classified into four major categories, each with its own characteristics.
- Residential
- Commercial Buildings
- Infrastructure
- Industrial
Residential Construction
Residential construction addresses the housing needs of a society and are built to house individuals or families. Housing construction includes single-family houses including duplex or prefabricated units, and multi-family dwellings like high-rise apartments, condominiums, and townhouses.
During the development and construction of such projects, the developers or sponsors who are familiar with the construction industry usually serve as surrogate owners and take charge, making necessary contractual agreements for design and construction, and arranging the financing and sale of the completed structures. Residential housing designs are usually performed by architects and engineers, and the construction is executed by builders who hire subcontractors for the structural, mechanical, electrical and other specialty work. An exception to this pattern is for single-family houses which may be designed by the builders as well. Builders include custom builders, small-volume (<25 homes), and single-family production (>25 homes). Single-family production makes up about 80% of home building in the US.
The residential housing market is heavily affected by general economic conditions, tax laws, and the monetary and fiscal policies of the government. Often, a slight increase in total demand will cause a substantial investment in construction, since many housing projects can be started at different locations by different individuals and developers at the same time. Because of the relative ease of entry, at least at the lower end of the market, many new builders are attracted to residential housing construction. But, there are also many residential construction companies that fail each year. Hence, this market is highly competitive, with potentially high risks as well as high rewards.
Commercial Building Construction
Institutional and commercial building construction encompasses a great variety of project types and sizes, typically with a non-industrial purpose. This sector primarily addresses the needs of commerce, trade, and governments and makes up about 1/3 of the total construction market. Examples of commercial buildings include schools and universities, medical clinics and hospitals, recreational facilities and sports stadiums, retail chain stores and large shopping centers, religious facilities, amusement parks, warehouses and light manufacturing plants, government buildings, offices and hotels. The owners of such buildings may or may not be familiar with construction industry practices, but they usually are able to select competent professional consultants and arrange the financing of the constructed facilities themselves. Specialty architects and engineers are often engaged for designing a specific type of building, while the builders or general contractors undertaking such projects may also be specialized in only that type of building.
Because of the higher costs and greater sophistication of institutional and commercial buildings in comparison with residential housing, this market segment is shared by fewer competitors. Since the construction of some of these buildings is a long process which once started will take some time to proceed until completion, the demand is less sensitive to general economic conditions than that for speculative housing. Consequently, the owners may confront an oligopoly of general contractors who compete in the same market. In an oligopoly situation, only a limited number of competitors exist, and a firm’s price for services may be based in part on its competitive strategies in the local market.
Infrastructure and Heavy Construction
Infrastructure and heavy construction, often referred to as horizontal construction, impacts society in a very big way. Infrastructure facilities serve as core facilities that serve the public, which are not buildings. It includes projects such as roadways, mass transit systems, tunnels, bridges, pipelines, dams, airports, railways, drainage systems and sewage treatment plants. Most of these projects are publicly owned and therefore financed either through bonds or taxes. This category of construction is characterized by a high degree of mechanization, which has gradually replaced some labor-intensive operations.
New infrastructure projects typically require a long planning and design phase. The engineers and builders engaged in infrastructure construction are usually highly specialized since each segment of the market requires different types of skills. However, demands for different segments of infrastructure and heavy construction may shift with saturation in some segments. For example, as the available highway construction projects are declining, some heavy construction contractors quickly move their workforce and equipment into the field of mining where jobs are available.
A new subset of this industry, which some claim should be its own sector is Environmental Construction. This is said to be comprised of projects that improve the environment, maintain public health, and contribute to a community’s quality of life. Think clean water, sanitary sewers, and waste management.
Industrial Construction
Specialized industrial construction usually involves very large-scale projects with a high degree of technological complexity, such as oil refineries, steel mills, manufacturing facilities, chemical processing plants and electrical generating facilities such as coal-fired or nuclear power plants. Industrial facilities house core industrial processes and the facility’s design is focused on the industrial process. The design of these facilities heavily depends on the process they support, so specialty engineers, in collaboration with civil engineers, frequently design them. Most of these projects are privately funded. The owners usually are deeply involved in the development of a project and prefer to work with designer-builders such that the total time for the completion of the project can be shortened. They also want to pick a team of designers and builders with whom the owner has developed good working relations over the years. This sector is highly specialized and requires firms with significant resources and expertise, making the number of qualified contractors limited.
Although the initiation of such projects is also affected by the state of the economy, long-range demand forecasting is the most important factor since such projects are capital-intensive and require a considerable amount of planning and construction time. Governmental regulations such as the rulings of the Environmental Protection Agency and the Nuclear Regulatory Commission in the United States can also profoundly influence decisions on these projects.
**Note: This is not a perfect set of categories since it is sometimes difficult to define clear lines between the categories, as well as defining how to separate a large project into smaller components, but these categories do help us define the types of players in each market and the typical characteristics of these different market sectors.**
Journal Reflection 1.1: How Important is Construction Project Management?
In this module, you’ve been introduced to the world of construction project management, at least on a superficial level. We’ve also explored our own connections to project management, the trades, and construction industries.
In about 150 – 250 words, write a clear and thoughtful paragraph providing your own definition of construction project management. What does it include? What does it exclude? Then, reflect on how important you think construction project management is to the built environment.
The goal of this reflection question is to situate your understanding of the construction project management space within your own experience, you may find it helpful to write your definition using your own experience and background.
Lesson 3: Construction Industry – Economic Impact
Overview
The construction industry is quite large. As such, there’s a lot to cover when talking about it. We’ve split the following readings up into categories to help you better take in the information. This section is focused on the economics around construction including what is spent on construction and the average pay for construction workers.
The Economic Impact of Construction in the United States
As mentioned previously, Construction is a major contributor to the U.S. economy, accounting for approximately 4-6 percent of the gross domestic product. In the U.S., $1 out of every $8 goes toward construction. The construction industry is a major source of employment, especially if you also consider all the manufacturing industries that are supported by construction. The industry has more than 733,000 employers with over 7 million workers (approximately 4.5% of the overall workforce) and creates nearly $1.4 trillion worth of structures each year. Construction is one of the largest customers for manufacturing, mining and a variety of services. The equivalent of a New York City is built in the world EACH MONTH, and all that is possible due to construction.
The Bureau of Labor Statistics is estimating that the workforce is growing at a rate of 1.1% per year between 2018 and 2028. Note that these employment figures do not include all professional service employment related to the industry, nor do they include all the manufacturing jobs related to building supplies or transportation services for products to be shipped to the job site.
It is important to note that the number of employees within the construction industry can be significantly impacted by economic conditions. The economic recession in 2007 and 2008 had a very significant impact on employment, going from approximately 7,600 employees in 2006 to 5,500 in 2009. This significant employment fluctuation can be a significant challenge. Once people leave the industry, it can be challenging to hire new workers. In fact, the most frequently cited challenge of general contractors right now is the lack of a skilled workforce. It is interesting to note that the recent COVID-19 pandemic has been the latest impact on employment in our industry. The initial onset of the pandemic in early 2020 caused a very abrupt, significant negative impact on employment, but that impact was very short-lived. It is interesting to note that the current employment (as of December 2021) is almost the same as the employment prior to the COVID-19 pandemic.
Each year, Engineering News Record (ENR) performs a survey of all larger contractors, as well as designers and owners. ENR then compiles lists of the largest companies by category. One of the reports that they perform is the Top 400 Contractors list. It is important to note that this list is compiled from company self-reported data, not audited financial statements, and the rankings within the list are specific to revenue, which is the value of the revenue that the company receives for annual work performed. For large construction management firms, much of the revenue that they receive is then paid to their subcontractors and suppliers. But this data does show some interesting information. Figure 1-4 shows the breakdown of the revenue by ENR’s project categories. This shows that in 2017, 53% of the revenue from the Top 400 contractors was from Buildings. It also shows that the second-largest category is Transportation, but it is a significantly smaller percentage, at 14%.
Chart indicating the market’s share of total revenue with building ranked the highest and hazardous waste the lowest.
The Economic Impact of Construction in Colorado
It was mentioned that the industry is impacted by the current trends of the economy. The economy will be slightly different depending on what state you live in. The data included here shows the impact of the construction industry in Colorado as of 2022. The Associated General Contractors of America (AGC) is an organization dedicated to the needs and concerns of the construction industry.
Economic Impact of Construction
- U.S. gross domestic product (GDP)—the value of all goods and services produced in the country—totaled $23.0 trillion in 2021; construction contributed $959 billion (4.2%).
- In Colorado, construction contributed $25 billion (5.8%) of the state’s GDP of $422 billion.
- There were 872,000 construction establishments in the U.S. in 2021, including 21,700 in Colorado. (An establishment is a fixed business location; about 99% of construction firms have only one establishment.)
Construction Spending
- Nonresidential spending in the U.S. totaled $823 billion in 2021 ($486 billion private, $338 billion public).
- Residential construction spending in the U.S. totaled $803 billion ($423 billion single-family, $101 billion multifamily, $269 billion improvements, $9 billion public).
- Private nonresidential spending in Colorado totaled $6.1 billion in 2021. State and local spending totaled $5.9 billion. (Totals are not available for residential, railroad, power, communication, or federal construction spending).
Construction Employment (Seasonally Adjusted)
- Construction (residential + nonresidential) employed 7.7 million workers in August 2022, an increase of 311,000 (4.2%) from August 2021, and an increase of 1.1% from February 2020, the peak pre-pandemic month.
- Construction employment in Colorado in August 2022 totaled 185,700, an increase of 9,100 (5.2%) from August 2021, and an increase of 6,300 (3.5%) from February 2020.
- Contractors are having trouble filling positions, impeding the industry’s recovery. In the August 2022 AGC-Autodesk Workforce Survey, 93% of firms in the U.S. and 96% in Colorado had unfilled hourly craft positions.
Construction Industry Pay
- Construction jobs pay well. In Colorado, 4 of the 5 most numerous construction occupations had median annual pay exceeding $52,000 in 2021. (Half of workers earn more than the median; half earn less.)
- The median wage for a construction manager in Colorado is $97,990.
- Interested in further detail or for construction wages in a different state? Check out this website showing labor statistics: Web Page – O*Net Construction Managers
Journal Reflection 1.2: Economic and Workforce Dynamics in Construction Management
In about 250-500 words, write a clear and thoughtful two-paragraph reflection providing your thoughts on the following questions:
- Economic Contributions – Reflecting on the construction industry’s contribution to the U.S. GDP, why do you think construction accounts for a significant portion (approximately 4-6 percent) of the gross domestic product? Consider the scope of activities encompassed by construction and its support for other industries.
- Workforce Growth – Given the Bureau of Labor Statistics’ estimate of a 1.1% annual growth rate in the construction workforce from 2018 to 2028, discuss the potential factors that could influence this growth. How might economic conditions, such as the recession of 2007-2008 and the COVID-19 pandemic, impact these estimates?
- Skilled Workforce Challenge – Considering that the most frequently cited challenge by general contractors is the lack of a skilled workforce, reflect on why attracting and retaining skilled workers is a significant challenge in the construction industry. How do economic fluctuations and industry perceptions contribute to this issue?
- Revenue Distribution by Project Type – Based on the ENR Top 400 Contractors list indicating that 53% of revenue came from buildings, with transportation as the second-largest category at 14%, what does this distribution tell you about market demand and construction industry priorities?
- Colorado’s Construction Impact – Reflect on the economic impact of construction in Colorado, particularly the fact that construction contributed 5.8% of the state’s GDP. How does this compare to the national average, and what might this indicate about Colorado’s economic landscape and construction activity?
Lesson 4: Construction Industry – Changing Environment
Overview
The construction industry is quite large. As such, there’s a lot to cover when talking about it. We’ve split the following readings up into categories to help you better take in the information. This section has to do with the internal and external factors that affect our ability to build well, and how quickly it may be changing.
The Changing Environment of the Construction Industry
The construction industry is a conglomeration of diverse fields and participants that have been loosely lumped together as a sector of the economy. The construction industry plays a central role in national welfare, including the development of residential housing, office buildings and industrial plants, and the restoration of the nation’s infrastructure and other public facilities. The importance of the construction industry lies in the function of its products which provide the foundation for industrial production, and its impacts on the national economy cannot be measured by the value of its output or the number of persons employed in its activities alone.
To be more specific, construction refers to all types of activities usually associated with the erection and repair of immobile facilities. Contract construction consists of a large number of firms that perform construction work for others, and is estimated to be approximately 85% of all construction activities. The remaining 15% of construction is performed by owners of the facilities and is referred to as force-account construction. Although the number of contractors in the United States exceeds a million, over 60% of all contractor construction is performed by the top 400 contractors. Not to be ignored is the fact that as the nation’s constructed facilities become older, the total expenditure on rehabilitation and maintenance may increase relative to the value of new construction.
Owners who pay close attention to the peculiar characteristics of the construction industry and its changing operating environment will be able to take advantage of the favorable conditions and avoid the pitfalls. Several factors are particularly noteworthy because of their significant impacts on the quality, cost and time of construction.
New Technologies
In recent years, technological innovation in design, materials and construction methods have resulted in significant changes in construction costs. Computer aids have improved capabilities for generating quality designs as well as reducing the time required to produce alternative designs. New materials not only have enhanced the quality of construction but have also shortened the time for shop fabrication and field erection. Construction methods have gone through various stages of mechanization and automation, including the latest development of construction robotics.
The most dramatic new technology applied to construction has been the Internet and its private, corporate Intranet versions. The Internet is widely used as a means to foster collaboration among professionals on a project, to communicate for bids and results, and to procure necessary goods and services. Real-time video from specific construction sites is widely used to illustrate construction progress to interested parties. The result has been more effective collaboration, communication and procurement.
The effects of many new technologies on construction costs have been mixed because of the high development costs for new technologies. However, it is unmistakable that design professionals and construction contractors who have not adapted to changing technologies have been forced out of the mainstream of design and construction activities. Ultimately, construction quality and cost can be improved with the adoption of new technologies which are proven to be efficient from both the viewpoints of performance and economy.
Labor Productivity
The term productivity is generally defined as a ratio of the production output volume to the input volume of resources. Since both output and input can be quantified in a number of ways, there is no single measure of productivity that is universally applicable, particularly in the construction industry where the products are often unique and there is no standard for specifying the levels for aggregation of data. However, since labor constitutes a large part of the cost of construction, labor productivity in terms of output volume (constant dollar value or functional units) per person-hour is a useful measure. Labor productivity measured in this way does not necessarily indicate the efficiency of labor alone but rather measures the combined effects of labor, equipment and other factors contributing to the output.
While aggregate construction industry productivity is important as a measure of national economy, owners are more concerned about the labor productivity of basic units of work produced by various crafts on site. Thus, an owner can compare the labor performance at different geographic locations, under different working conditions, and for different types and sizes of projects.
Construction costs usually run parallel to material prices and labor wages. Actually, over the years, labor productivity has increased in some traditional types of construction and thus provides a leveling or compensating effect when hourly rates for labor increase faster than other costs in construction. However, labor productivity has been stagnant or even declined in unconventional or large-scale projects.
Public Scrutiny
Under the present litigious climate in the United States, the public is increasingly vocal in the scrutiny of construction project activities. Sometimes it may result in considerable difficulty in siting new facilities as well as additional expenses during the construction process itself. Owners must be prepared to manage such crises before they get out of control.
The Council on Environmental Quality published a report on public attitudes towards the siting of new facilities. It indicated that public opinion varies based on distance from their homes. For example, over fifty percent of the people surveyed would accept a ten-story office building within five miles of their home, but only twenty-five percent would accept a large factory or coal-fired power plant at a similar distance. An even lower percentage would accept a hazardous waste disposal site or a nuclear power plant. Even at a distance of one hundred miles, a significant fraction of the public would be unwilling to accept hazardous waste facilities or nuclear power plants.
This objection to new facilities is a widespread public attitude, representing considerable skepticism about the external benefits and costs that new facilities will impose. It is this public attitude which is likely to make public scrutiny and regulation a continuing concern for the construction industry.
Contractor Financed Projects
Increasingly, some owners look to contractors or joint ventures as a resource to design, to build and to finance a constructed facility. For example, a utility company may seek a consortium consisting of a design/construct firm and a financial investment firm to assume total liability during construction and thereby eliminate the risks of cost escalation to ratepayers, stockholders and management. On the other hand, a local sanitation district may seek such a consortium to provide private ownership for a proposed new sewage treatment plant. In the former case, the owner may take over the completed facility and service the debt on construction through long-term financing arrangements; in the latter case, the private owner may operate the completed facility and recover its investment through user fees. The activities of joint ventures among design, construction and investment firms are sometimes referred to as financial engineering.
This type of joint venture has become more important in the international construction market where aggressive contractors often win contracts by offering a more attractive financing package rather than superior technology. With a deepening shadow of international debts in recent years, many developing countries are not in a position to undertake any new project without contractor-backed financing. Thus, the contractors or joint ventures in overseas projects are forced into very risky positions if they intend to stay in the competition.
Lean Construction
“Lean manufacturing” had a revolutionary effect on many industries, especially automotive assembly companies. Characteristics of this approach include:
- Improvement in quality and reduction of waste everywhere. Rather than increasing costs, reducing defects and waste proved to improve quality and reduce costs.
- Empowering workers to be responsible for satisfying customer needs. In construction, for example, craftsmen should make sure their work satisfied the design intent.
- Continuous improvement of processes involving the entire workforce.
Lean construction is intended to spread these practices within the construction industry. Of course, well-managed construction projects already have many aspects of lean construction. For example, just-in-time delivery of materials is commonplace to avoid the waste of large inventory stockpiles. Green building projects attempt to re-use or recycle all construction wastes. But the systematic attention to continuous improvement and zero accidents and defects is new.
International Competition
A final trend that deserves note is the increasing level of international competition in the construction industry. Owners are likely to find non-traditional firms bidding for construction work, particularly on large projects. Separate bids from numerous European, North American, and Asian construction firms are not unusual. In the United States, overseas firms are becoming increasingly visible and important. In this environment of heightened competition, good project management and improved productivity are more and more important.
A bidding competition for a major new offshore drilling platform illustrates the competitive environment in construction. As described in the Wall Street Journal:
Through most of the postwar years, the nation’s biggest builders of offshore oil platforms enjoyed an unusually cozy relationship with the Big Oil Companies they served. Their top officials developed personal friendships with oil executives, entertained them at opulent hunting camps- and won contracts to build nearly every major offshore oil platform in the world….But this summer, the good-old boy network fell apart. Shell [Oil Co.] awarded the main contract for [a new] platform – taller than Chicago’s Sears Tower, four times heavier than the Brooklyn Bridge – to a tiny upstart.
The winning bidder arranged overseas fabrication of the rig, kept overhead costs low, and proposed a novel assembly procedure by which construction equipment was mounted on completed sections of the platform in order to speed the completion of the entire structure. The result was lower costs than those estimated and bid by traditional firms.
Of course, U.S. firms including A/E firms, contractors and construction managers are also competing in foreign countries. Their success or failure in the international arena may also affect their capacities and vitality to provide services in the domestic U.S. market.
Unique Aspects of Construction
Projects and the structure of the industry have several unique characteristics that influence our management approaches. Several characteristics include:
- All projects are unique. Even if a project is a duplicate design of another project, the project will be located on a unique site, which includes unique constraints.
- Projects are performed outside, at least until an enclosure is developed. This is different from manufacturing which may occur within a controlled environment. Therefore, construction is influenced by the environmental conditions of the geographic location of the project.
- The Construction Industry has many companies. The AGC states that there are over 753,000 companies that employ workers within the construction industry. This is a very large number of firms, and some of these companies may only have one employee. But it is also important to note that the largest contractors are quite large, but it is still a fragmented industry with many companies.
- There are many organizations that work together to deliver a project. It is not uncommon to have more than 20 companies working on the construction of a project, with workers in the field, and there are many other companies involved in designing the facility and supplying materials and equipment to the project.
- Design and Construction companies do not tend to perform much research and development. Due to the lower profit margins in the industry, and a shorter-term focus, most firms do not invest in research. There are certainly exceptions, but as a percentage, the industry has very low investments in R&D.
- The industry is impacted by geographic ties. Since buildings are constructed in many different locations, there are different code requirements in different locations and different companies with employees and experience in working in the local markets.
- The industry has a high rate of business failures. Due to a large number of smaller firms, it is not uncommon for businesses to fail.
- There is a low barrier to entering the construction market. In fact, it is quite easy for an individual to open a construction company. It may only require some simple paperwork, or they may need to apply for a contractor license.
- Organizations change from project to project. It is very rare to have the same organizations work together on multiple projects. This requires members in the industry to specialize in working with new team members since the mix of team members, including designers and contractors, will change on each project.
- Construction is a hybrid industry. Some tasks are service tasks, e.g., the design of a facility or managing the delivery of a facility. Other tasks are closer to manufacturing, with a focus on producing the facility. Examples of these tasks include building the structure, installing the mechanical/electrical/plumbing (MEP) equipment, or installing the facade. Therefore, the industry is a hybrid between a service and manufacturing industry.
Understanding the Construction Project Environment
In addition to the above factors, there are also many factors that need to be understood within your project environment. At one level, you need to think in terms of the cultural and social environments (i.e., people, demographics, and education). The international and political environment is where you need to understand about different countries’ cultural influences. Then we move to the physical environment; here we think about time zones, annual rainfall, heat and cold effects on our construction. Think about different countries and how differently your project will be executed whether it is just in your country or if it involves an international project team that is distributed throughout the world in five different countries.
Project Environment Factors to Consider:
- Cultural
- International
- Social
- Political
- Physical
Of all the factors, the physical ones are the easiest to understand, and it is the cultural and international factors that are often misunderstood or ignored. How we deal with clients, customers, or project members from other countries can be critical to the success of the project. For example, the culture of the United States values accomplishments and individualism.
Americans tend to be informal and call each other by first names, even if having just met. Europeans tend to be more formal, using surnames instead of first names in a business setting, even if they know each other well. In addition, their communication style is more formal than in the United States, and while they tend to value individualism, they also value history, hierarchy, and loyalty. The Japanese, on the other hand, tend to communicate indirectly and consider themselves part of a group, not as individuals. The Japanese value hard work and success, as most of us do.
It is often the simplest things that can cause trouble since, unsurprisingly, in different countries, people do things differently. One of the most notorious examples of this is also one of the most simple: date formats. What day and month is 2/8/2009? Of course, it depends on where you come from; in North America it is February 8th while in Europe (and much of the rest of the world) it is 2nd August. Clearly, when schedules and deadlines are being defined it is important that everyone is clear on the format used.
The diversity of practices and cultures and its impact on products in general and on software, in particular, goes well beyond the date issue. You may be managing a project to create a new website for a company that sells products worldwide. There are language and presentation style issues to take into consideration; converting the site into different languages isn’t enough. It is obvious that you need to ensure the translation is correct; however, the presentation layer will have its own set of requirements for different cultures. The left side of a website may be the first focus of attention for a Canadian; the right side would be the initial focus for anyone from the Middle East, as both Arabic and Hebrew are written from right to left. Colors also have different meanings in different cultures. White, which is a sign of purity in North America (e.g., a bride’s wedding dress), and thus would be a favored background color in North America, signifies death in Japan (e.g., a burial shroud). The table below summarizes different meanings of common colors.
Table: The meaning of colors in various cultures
| Color | United States | China | Japan | Egypt | France |
| Red | Danger, Stop | Happiness | Anger, death | Death | Aristocracy |
| Blue | Sadness, melancholy | Heaven, clouds | Villainy | Virtue, faith, truth | Freedom, peace |
| Green | Novice, apprentice | Ming dynasty, heavens | Future, youth, energy | Fertility, strength | Criminality |
| Yellow | Cowardice | Birth, wealth | Grace, nobility | Happiness, prosperity | Temporary |
| White | Purity | Death, purity | Death | Joy | Naturality |
Project managers in multicultural projects must appreciate the cultural dimensions and try to learn relevant customs, courtesies, and business protocols before taking responsibility for managing an international project. A project manager must take into consideration these various cultural influences and how they may affect the project’s completion, schedule, scope, and cost.
Test your Knowledge!
Have projects been cancelled due to cultural differences?
Reflection Assignment 1.1: “Project Management and You”
Overview
The purpose of this reflection paper is to think about your own experiences and how you can apply what you’re learning to them. Everyone has been involved in projects of one size or another. In this first reflection, we want you to consider what you’ve learned and apply it to both the definition of project management and any project you may have participated in. This example can be anything from a school project to a home improvement project, or perhaps you just called it a project in your mind.
Instructions
Reflect on the following questions and answer them in your own words:
- If someone had asked you to define project management before you read this module, how would you have defined it? How did your definition differ from what has been presented in this module?
- Think of the largest project you were involved in.
- Write one sentence that describes the objective of that project
- Describe how the project meets the definition of a project used in this module (Unique, Time-Bound, Meets an Objective)
- What was your role?
- Did you anticipate any risks at the outset? Did the project experience any outside forces that caused a change in either the objectives or the approach to meeting those objectives
Your assignment will be evaluated on:
-
- Completeness: Have you answered all the questions?
- Insightfulness: How thoughtfully have you reflected on and answered the questions?
Module 1 Recap
In this module, we embarked on a journey to understand the breadth and impact of construction project management (CPM) in the contemporary world. Let’s review the core concepts and reflect on what we’ve learned about the role CPM plays in any chosen career path.
What We Learned
Understanding Construction Project Management:
- We defined CPM as a temporary endeavor with a definitive start and finish, distinct from ongoing operations.
- The importance of CPM lies in its ability to shape our built environment and meet societal needs.
Attributes of a Project:
- Projects are unique, time-bound, and objective-driven.
- Success is measured by the delivery of the promised scope, on time and within budget, satisfying stakeholder expectations.
Construction Industry Sectors:
- The construction industry is diverse, contributing significantly to the economy and encompassing residential, commercial, infrastructure, and industrial sectors.
- We delved into the various market segments and their unique demands, practices, and economic impacts.
Project Environments and Constraints:
- We recognized how different environments affect project management strategies.
- Key project constraints like cost, scope, quality, risk, resources, and time were examined for their impact on project execution.
Reflecting on Personal Experiences:
- By considering our own experiences, we tied the theoretical aspects of project management to real-world applications.
- We explored how past project involvement can shape our understanding of project execution.
Defining Project Management:
- The PMI’s definition provided a foundation, while personal definitions allowed us to contextualize project management within our experiences.
- A project’s success hinges on meeting its unique objectives within the set constraints.
Examining Project Constraints:
- Recognizing the importance of balancing constraints is essential for effective project management.
- We considered how these constraints play a critical role in planning and executing a project.
Applying the Knowledge
Through lessons, discussions, and a scenario-based approach, you’ve been equipped to:
- Identify and describe various environments and their influence on CPM.
- Assess the role of CPM in shaping the built environment.
- Analyze the success of a project based on its attributes and constraints.
- Evaluate the impact of cultural differences on the success of international construction projects.
Looking Forward
As we move to the next module, keep these foundational concepts at the forefront. Consider how the skills and knowledge you’ve gained can be applied to future learning and your career path in CPM or related fields. Reflect on how this module has shaped your understanding of the construction industry’s pivotal role in economic development and societal advancement.
Reflection and Engagement:
- How have your views on project management and its relevance to your career path evolved through this module?
- What aspects of CPM do you find most compelling, and how do you see them influencing your approach to projects?
Let’s carry these insights forward as we continue to explore the dynamic field of construction project management.
Module One Quiz
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1. True or false: The equivalent of a New York City is built in the World each month.
a. True
b. False
2. The industry sectors I can get into for Construction are:
a. Residential, Commercial, Heavy, and Industrial
b. Residential, Industrial, and Commercial
c. Retail, Health & Safety, Educational, and Horizontal
d. Civil, Environmental, Commercial, and Single-Family
3. Heavy Civil Construction is also known as:
a. Roadway and Bridge Construction
b. Horizontal Construction
c. Impactful Construction
d. Movement Construction
4. True or false: 80% of homes in the US are built by only 20% of the builders.
a. True
b. False
5. I want to construct amusement parks. This is a type of:
a. Residential Building
b. Industrial Construction
c. Commercial Building
d. Environmental Construction
6. Which of the following is part of the definition of a project?
a. It is time-bound
b. It is unique
c. It ends when the objective(s) are achieved or abandoned
d. All of these
7. True or false: A restaurant manager can be considered a project manager.
a. True
b. False
8. Which of the following is the most effective measure of project success?
a. On Time
b. Delivered the promised Scope
c. Customer is Satisfied
d. On Budget
9. True or false: Project Management requires a lot of management, interpersonal skills, and general knowledge to be successful.
a. True
b. False
10. Which of the following are considered a project constraint?
a. Risk
b. Resources
c. Quality
d. All of these
11. Which of the following is a part of Project Environment?
a. Political
b. Physical
c. Cultural
d. All of These
12. True or false: Color can have a different meaning depending on the culture.
a. True
b. False
- Hendrickson, C., Hendrickson, C. T., & Au, T. (2008). Project Management for Construction: Fundamental Concepts for Owners, Engineers, Architects, and Builders. Chris Hendrickson. The license allows reproduction for educational purposes with citation.
- Watts, A. (2014). Project Management. Victoria, B.C.: BC campus. Source is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.
- Messner, J. (2022, August 22). Fundamentals of Building Construction Management. John I. Messner. Source is licensed under Creative Commons except where otherwise noted.
- Engineer Academy. (2022, April 5). Project Management Tips for Engineers – Become a Great Manager [Video]. YouTube. https://www.youtube.com/watch?v=2xxBlTrxvVk