LECTURE NOTES
ON
CONSTRUCTION
PROJECT MANAGEMENT
Emad Elbeltagi, Ph.D., P.Eng.,
Professor of Construction Management
Structural Engineering Department,
Faculty of Engineering,
Mansoura University
,Construction Project Management
2009
Copyright © 2009 by the author. All rights reserved. No part of this book may be
reproduced or distributed in any form or by any means, or stored in a data base or
retrieval system, without the prior written permissions of the author.
, PREFACE
In the Name of ALLAH the Most Merciful, the Most Compassionate
All praise is due to ALLAH and blessings and peace be upon His messenger and servant,
Muhammad, and upon his family and companions and whoever follows his guidance
until the Day of Resurrection.
Construction project management is a relatively young field. However, its impact has
been quite remarkable. It has become an important practice for improving the efficiency
of construction operations around the world. This book deals with some topics and tools
of the large field of project management.
This book is dedicated mainly to undergraduate engineering students, especially Civil
Engineering students where most of the applications are presented in the civil engineering
field. It provides the reader with the main knowledge to manage a construction project
from preliminary stages to handover. It includes eight chapters: Chapter 1 provides a
general introduction to construction projects in terms of their types, project life cycle and
the main players involved. Chapter 2 is dedicated for the contract strategy. The planning
stages of a construction project are presented in chapter 3. Chapter 4 is dedicated for
presenting different scheduling techniques along with the schedule representation.
Chapter 5 is dedicated to discuss the scheduling methods on non-deterministic activity
durations. The scheduling of linear projects is presented in chapter 6. Chapter 7 is dealing
with both the resource scheduling and smoothing problems. The schedule compression is,
also, presented in chapter 8. Chapter 9 is dedicated for the project finance and cash flow
analysis. Finally, chapter 01 is dedicated for project control. Many solved examples have
been added to enable the students to understand the material presented in this book. Also,
each chapter is followed by exercises for training purposes.
Finally, May ALLAH accepts this humble work and I hope it will be beneficial to its
readers.
i
, TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION
1.1 The Need for Project Management 1
1.2 The Construction Project 2
1.3 The Project Scope and Goals 3
1.4 The Project Life-Cycle 6
1.4.1 Preconstruction phase 9
1.4.2 Procurement phase (Bidding and award phase) 10
1.4.3 Construction Phase 10
1.4.4 Closeout Phase 11
1.5 Major Types of Construction Projects 11
1.5.1 Residential Housing Construction 11
1.5.2 Institutional and Commercial Building Construction 12
1.5.3 Specialized Industrial Construction 13
1.5.4 Infrastructure and Heavy Construction 13
1.6 Construction Projects Participants 14
1.6.1 The Owner (Client) 14
1.6.2 The Design Professionals 15
1.6.3 The Construction Professionals 15
1.6.4 The Project Manager 16
1.7 Exercises 17
CHAPTER 2: CONTRACT STRATEGY
2.1 What is a Contract 19
2.2 Selection of Contract Type 20
2.2.1 Project Objectives 21
2.2.2 Project Constraints 22
2.3 Project Delivery Methods 23
ii
, 2.3.1 Traditional Approach 23
2.3.2 Direct Labor 24
2.3.3 Design-Build 24
2.3.4 Turnkey 25
2.3.5 Build-Operate-Transfer (BOT) 25
2.3.6 Professional Construction Management (PCM) 26
2.3.7 Contractual Relationships 26
2.4 Types of Contracts 28
2.4.1 Lump-sum Contract 28
2.4.2 Admeasurement Contract 29
2.4.3 Cost-reimbursable Contract (cost-plus contract) 30
2.4.4 Target Cost Contract 30
2.4.5 Time and Material (T&M) Contract 31
2.5 Contract Administration 31
2.5.1 Contract Documents 32
2.5.2 Conditions of Contract 33
2.5.3 The Standard (general) Forms of Conditions of Contract 34
2.5.4 Special Conditions of Contract 36
2.5.4 Construction claims Contract 37
2.6 Selecting the Contractor 38
2.7 Sub-Contracting 38
2.8 Exercises 39
CHAPTER 3: PROJECT PLANNING
3.1 Introduction 42
3.2 Project Planning Steps 43
3.2.1 Work Breakdown Structure (WBS) 44
WBS and organizational breakdown structure (OBS) 47
WBS coding 47
iii
, 3.2.2 Project Activities 48
3.2.3 Activities Relationships 52
Logical relationship considering resource constraints 54
Overlap or lag 55
Types of activities relationships 58
3.2.4 Drawing Project Network 58
Activity on arrow network (AOA) 59
Activity on node network (AON) 60
Comparison between AOA and AON 61
3.3 Estimating Activity Duration and Direct Cost 65
3.4 Exercises 68
CHAPTER 4: PROJECT SCHEDULING
4.1 The Critical Path Method 75
4.2 Calculations for the Critical Path Method 76
4.2.1 Activity-On-Arrow Networks Calculations 76
Forward path 77
Backward path 79
Float calculations 81
Identifying the Critical Activities 83
4.2.2 Precedence Diagram Method (PDM) 83
4.3 Time-Scaled Diagrams 84
4.4 Schedule Presentation 88
4.5 Criticisms to Network Techniques 89
4.6 Solved Examples 90
4.6.1 Example 1 90
4.6.2 Example 2 91
4.6.3 Example 3 92
4.6.4 Example 4 93
4.7 Exercises 94
iv
,CHAPTER 5: STOCHASTIC SCHEDULING
5.1 Scheduling with Uncertain Durations 100
5.1.1 Program Evaluation and Review Technique 102
5.1.2 Criticism to Program Evaluation and Review Technique 109
5.2 Monte Carlo Simulation 110
5.2.1 Monte Carlo Simulation Characteristics 110
5.2.2 Monte Carlo Simulation Process 110
5.2.3 Criticality Index 113
5.3 Exercises 113
CHAPTER 6: SCHEDULING OF LINEAR PROJECTS
6.1 Linear Projects 116
6.2 Resource-Driven Scheduling 117
6.3 Summary Diagrams 117
6.3.1 Summary Diagrams Using One Relationship 117
6.3.2 Summary Diagrams Using Two Relationships 120
6.4 Line of Balance (LOB) 123
6.4.1 Basic Representation 123
6.4.2 LOB Calculations 125
Crew synchronization 126
Meeting a deadline duration 127
Calculating resource needs 128
Drawing the LOB Schedule 130
6.5 Exercises 134
CHAPTER 7: RESOURCES MANAGEMENT
7.1 Resource Definition 136
7.2 Resource Management 137
Resource leveling (smoothing) 138
Resource scheduling 138
v
, 7.3 Resource Allocation 129
7.4 Resource Aggregation (Loading) 129
7.5 Resource Leveling (Smoothing) 141
7.5.1 Method of Moments for Resource Smoothing 142
7.5.2 Heuristic Procedure for Resource Smoothing 143
7.6 Scheduling with Limited Resource 152
7.7 Case Study 154
7.8 Exercises 161
CHAPTER 8: PROJECT TIME-COST TRADE-OFF
8.1 Time-Cost Trade-Off 164
8.2 Activity Time-Cost Relationship 165
8.3 Project Time-Cost Relationship 169
8.4 Shortening Project Duration 170
8.5 Exercises 180
CHAPTER 9: PROJECT FINANCE AND CONTRACT PRICING
9.1 Contract Cash Flow 182
9.1.1 Construction Project Costs 183
Project direct costs 183
Project indirect costs 184
9.1.2 The S-Curve 186
9.1.3 Project Income (Cash-in) 188
9.1.4 Calculating Contract Cash Flow 190
9.1.5 Minimizing Contractor Negative Cash Flow 195
9.1.6 Cost of Borrowing (Return on Investment) 197
9.2 Project Cash Flow 202
9.2.1 Project Profitability Indicators 203
9.3 Discounted Cash Flow 205
9.3.1 Present Value 205
9.3.2 Net Present Value (NPV) 206
vi
ON
CONSTRUCTION
PROJECT MANAGEMENT
Emad Elbeltagi, Ph.D., P.Eng.,
Professor of Construction Management
Structural Engineering Department,
Faculty of Engineering,
Mansoura University
,Construction Project Management
2009
Copyright © 2009 by the author. All rights reserved. No part of this book may be
reproduced or distributed in any form or by any means, or stored in a data base or
retrieval system, without the prior written permissions of the author.
, PREFACE
In the Name of ALLAH the Most Merciful, the Most Compassionate
All praise is due to ALLAH and blessings and peace be upon His messenger and servant,
Muhammad, and upon his family and companions and whoever follows his guidance
until the Day of Resurrection.
Construction project management is a relatively young field. However, its impact has
been quite remarkable. It has become an important practice for improving the efficiency
of construction operations around the world. This book deals with some topics and tools
of the large field of project management.
This book is dedicated mainly to undergraduate engineering students, especially Civil
Engineering students where most of the applications are presented in the civil engineering
field. It provides the reader with the main knowledge to manage a construction project
from preliminary stages to handover. It includes eight chapters: Chapter 1 provides a
general introduction to construction projects in terms of their types, project life cycle and
the main players involved. Chapter 2 is dedicated for the contract strategy. The planning
stages of a construction project are presented in chapter 3. Chapter 4 is dedicated for
presenting different scheduling techniques along with the schedule representation.
Chapter 5 is dedicated to discuss the scheduling methods on non-deterministic activity
durations. The scheduling of linear projects is presented in chapter 6. Chapter 7 is dealing
with both the resource scheduling and smoothing problems. The schedule compression is,
also, presented in chapter 8. Chapter 9 is dedicated for the project finance and cash flow
analysis. Finally, chapter 01 is dedicated for project control. Many solved examples have
been added to enable the students to understand the material presented in this book. Also,
each chapter is followed by exercises for training purposes.
Finally, May ALLAH accepts this humble work and I hope it will be beneficial to its
readers.
i
, TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION
1.1 The Need for Project Management 1
1.2 The Construction Project 2
1.3 The Project Scope and Goals 3
1.4 The Project Life-Cycle 6
1.4.1 Preconstruction phase 9
1.4.2 Procurement phase (Bidding and award phase) 10
1.4.3 Construction Phase 10
1.4.4 Closeout Phase 11
1.5 Major Types of Construction Projects 11
1.5.1 Residential Housing Construction 11
1.5.2 Institutional and Commercial Building Construction 12
1.5.3 Specialized Industrial Construction 13
1.5.4 Infrastructure and Heavy Construction 13
1.6 Construction Projects Participants 14
1.6.1 The Owner (Client) 14
1.6.2 The Design Professionals 15
1.6.3 The Construction Professionals 15
1.6.4 The Project Manager 16
1.7 Exercises 17
CHAPTER 2: CONTRACT STRATEGY
2.1 What is a Contract 19
2.2 Selection of Contract Type 20
2.2.1 Project Objectives 21
2.2.2 Project Constraints 22
2.3 Project Delivery Methods 23
ii
, 2.3.1 Traditional Approach 23
2.3.2 Direct Labor 24
2.3.3 Design-Build 24
2.3.4 Turnkey 25
2.3.5 Build-Operate-Transfer (BOT) 25
2.3.6 Professional Construction Management (PCM) 26
2.3.7 Contractual Relationships 26
2.4 Types of Contracts 28
2.4.1 Lump-sum Contract 28
2.4.2 Admeasurement Contract 29
2.4.3 Cost-reimbursable Contract (cost-plus contract) 30
2.4.4 Target Cost Contract 30
2.4.5 Time and Material (T&M) Contract 31
2.5 Contract Administration 31
2.5.1 Contract Documents 32
2.5.2 Conditions of Contract 33
2.5.3 The Standard (general) Forms of Conditions of Contract 34
2.5.4 Special Conditions of Contract 36
2.5.4 Construction claims Contract 37
2.6 Selecting the Contractor 38
2.7 Sub-Contracting 38
2.8 Exercises 39
CHAPTER 3: PROJECT PLANNING
3.1 Introduction 42
3.2 Project Planning Steps 43
3.2.1 Work Breakdown Structure (WBS) 44
WBS and organizational breakdown structure (OBS) 47
WBS coding 47
iii
, 3.2.2 Project Activities 48
3.2.3 Activities Relationships 52
Logical relationship considering resource constraints 54
Overlap or lag 55
Types of activities relationships 58
3.2.4 Drawing Project Network 58
Activity on arrow network (AOA) 59
Activity on node network (AON) 60
Comparison between AOA and AON 61
3.3 Estimating Activity Duration and Direct Cost 65
3.4 Exercises 68
CHAPTER 4: PROJECT SCHEDULING
4.1 The Critical Path Method 75
4.2 Calculations for the Critical Path Method 76
4.2.1 Activity-On-Arrow Networks Calculations 76
Forward path 77
Backward path 79
Float calculations 81
Identifying the Critical Activities 83
4.2.2 Precedence Diagram Method (PDM) 83
4.3 Time-Scaled Diagrams 84
4.4 Schedule Presentation 88
4.5 Criticisms to Network Techniques 89
4.6 Solved Examples 90
4.6.1 Example 1 90
4.6.2 Example 2 91
4.6.3 Example 3 92
4.6.4 Example 4 93
4.7 Exercises 94
iv
,CHAPTER 5: STOCHASTIC SCHEDULING
5.1 Scheduling with Uncertain Durations 100
5.1.1 Program Evaluation and Review Technique 102
5.1.2 Criticism to Program Evaluation and Review Technique 109
5.2 Monte Carlo Simulation 110
5.2.1 Monte Carlo Simulation Characteristics 110
5.2.2 Monte Carlo Simulation Process 110
5.2.3 Criticality Index 113
5.3 Exercises 113
CHAPTER 6: SCHEDULING OF LINEAR PROJECTS
6.1 Linear Projects 116
6.2 Resource-Driven Scheduling 117
6.3 Summary Diagrams 117
6.3.1 Summary Diagrams Using One Relationship 117
6.3.2 Summary Diagrams Using Two Relationships 120
6.4 Line of Balance (LOB) 123
6.4.1 Basic Representation 123
6.4.2 LOB Calculations 125
Crew synchronization 126
Meeting a deadline duration 127
Calculating resource needs 128
Drawing the LOB Schedule 130
6.5 Exercises 134
CHAPTER 7: RESOURCES MANAGEMENT
7.1 Resource Definition 136
7.2 Resource Management 137
Resource leveling (smoothing) 138
Resource scheduling 138
v
, 7.3 Resource Allocation 129
7.4 Resource Aggregation (Loading) 129
7.5 Resource Leveling (Smoothing) 141
7.5.1 Method of Moments for Resource Smoothing 142
7.5.2 Heuristic Procedure for Resource Smoothing 143
7.6 Scheduling with Limited Resource 152
7.7 Case Study 154
7.8 Exercises 161
CHAPTER 8: PROJECT TIME-COST TRADE-OFF
8.1 Time-Cost Trade-Off 164
8.2 Activity Time-Cost Relationship 165
8.3 Project Time-Cost Relationship 169
8.4 Shortening Project Duration 170
8.5 Exercises 180
CHAPTER 9: PROJECT FINANCE AND CONTRACT PRICING
9.1 Contract Cash Flow 182
9.1.1 Construction Project Costs 183
Project direct costs 183
Project indirect costs 184
9.1.2 The S-Curve 186
9.1.3 Project Income (Cash-in) 188
9.1.4 Calculating Contract Cash Flow 190
9.1.5 Minimizing Contractor Negative Cash Flow 195
9.1.6 Cost of Borrowing (Return on Investment) 197
9.2 Project Cash Flow 202
9.2.1 Project Profitability Indicators 203
9.3 Discounted Cash Flow 205
9.3.1 Present Value 205
9.3.2 Net Present Value (NPV) 206
vi
