: Class 2

(Introduction to Construction Economics, CEcon)

.(Preface)
.(Structure of Construction
Industry, CI)
.(Categories of CI)
.(Introduction of PM)
.(CEcon and
Project Economics)
. (Research Topics
of CEcon)
2012/9/21

NTU, Dept. of CE, MT Wang

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NTU, Dept. of CE, MT Wang

1.?
:
/ /

(/)
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1. 1. 1.

2.
2. 3.

4.

1.
1.
2.
2.

2.
:3.
(),
,95/5/20
3.
4.
NTU, Dept. of CE, MT Wang
4.

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3.

1.
2.

3.
4.

1.
2.
3.
4.
5.

4.

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2.

1.
2.

NTU, Dept. of CE, MT Wang

1.?
(/)?
?
?
(/)?

(IT)?

(/)
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1.?

(/)

(industry)
(/)

(firm)
(project)

(/)

(site)
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1.?

*
*

*
*

*
*

*
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*
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*
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NTU, Dept. of CE, MT Wang

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1.1
1.2
1.2.1
1.2.2(//)
1.2.3()
1.2.4()
1.2.5()()
1.3
1.3.1
1.3.2
1.3.3
1.3.4
1.4
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1.?

2.1
2.2
2.3
2.4
2.5
2.6

3.1
3.2
3.3






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NTU, Dept. of CE, MT Wang

1.
2.
3.

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1.
()
()
()
()
(//
)

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1.

,:
(1)():
(2)():
(3)():
(4)():

()
()
()
()

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1.
(Delivery systems)
(Conventional, Design-Bid-Build)
(Design-Build, Turnkey)
BOT(Build-Operate-Transfer)
(Tender systems)



(Selection systems)



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NTU, Dept. of CE, MT Wang

1.
(, Construction Project
Management)

:
(1)
(2)
(3)
(4)
(5)

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2.
1.:

2.: (A/E/C EPC)

3.:

4.:
()

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2.

/
A/E/C (Architect/Engineer/Contractor)

(
)

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2.
:

95/5 :

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2.

1.
2.
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2.

3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

13.

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3.

(industry)

()

(firm)
(project)

()

(site)
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3.

(Site Construction Management)

(Construction Materials and Methods)

(Construction Safety and Quality)
(Construction Productivity and
Labor)
(Construction Automation)
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3.

(Construction Project Management)

(Project Planning and Design)

(Cost and Schedule Control)

IT

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3.

(POSDC)
(Planning) (Organizing)(Staffing)

(Directing)(Controlling)


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3.
-
()
):

//:

///

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13

3.
-
(,)

:

()()

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3.
-


()

()

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3.
-

(
)

()

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3.
-

()

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3.
(contract):

(governance):

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3.
:
Firm Strategic Alliance Joint Venture Integration

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3.
(contract):
Firm Strategic Alliance Joint Venture Integration
(//)
//

(governance):
?
?
////
//

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NTU, Dept. of CE, MT Wang

3.
Organization Theory
Organization Economics: to understand and improve the ways
in which organizations overcome agency costs, information
costs, and other obstacles to efficiency( /)
Organization Sociology
Organization Psychology
New Institution Economics



Contract Theory


/
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3.
-
vs.()


(--)

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3.
-

(
)

(
1 )

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3.
-

()
()
()

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.
1.
2.
3.

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19

1.

()

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2.

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3.
A.()
B.()()
C.()()

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NTU, Dept. of CE, MT Wang

3.
A.()

A1 ()
A2 ()

A3 ()
A4 ()

A5 () (PCM)

A6 () (design/build, turnkey)

A7 () () ()
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3.
B.()()

B1 ()
B2 ()

B3 ()
B4 ()

B5 ()

B6 () (design/build)
B7 () BOT
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NTU, Dept. of CE, MT Wang

3.
C.()()

C1 ()
C2 ()

C3 ()
C4 ()

C5 ()

C6 () (design/Build)
C7 () BOT
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.
1.
2.
3.

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1.
(Project Management Institute, PMI)

()

()(
)
(Progressive Elaboration)
(///)

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2.
1.:
/ / /
////

2.:

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2.
3.:

4.:

?
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3.
(project management, PM):

PDCA (Plan/ Do/ Check/ Action)

(Feed-forward System)

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NTU, Dept. of CE, MT Wang

4.
(PMBOK), PMI, 2000:

Knowledge &
Application of

Project
Management
Knowledge &
Application of

General
Management

Knowledge &
Application of

Domain
Area

:







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4.
(PMBOK), PMI, 2000:

:
:///
(stakeholders)://
/(sponsor)//
:///

:////
///
://
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NTU, Dept. of CE, MT Wang

4.
(PMBOK), PMI, 2000:
(Project Processes):

(Process Groups):
(1/21/7/8/2)
(Process Interactions):
//
(Mapping Table):
(39)

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4.
39:

4.1()

6.1()

4.2()

6.2()

4.3()

6.3()

6.4()

5.1()

6.5()

5.2()

5.3()

7.1()

5.4()

7.2()

5.5()

7.3()
7.4()
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NTU, Dept. of CE, MT Wang

8.1()

11.1 ()

8.2()

11.2 ()

8.3 ()

11.3 ()

11.4 ()

9.1()

11.5 ()

9.2()

11.6 ()

9.3()

12.1 ()

10.1 ()

12.2 ()

10.2 ()

12.3 ()

10.3 ()

12.4 ()

10.4 ()

12.5 ()

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12.6 ()

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27

4.
(General Management):
,

(Project Management, PM):

?
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4.

()://

(PCM)

, PCM
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4.
(1)
(2), WBS(Work Breakdown Structure)
(3), OBS(Organization Breakdown Structure)
(4),/:
:

(5),
(6),(PDCA)
(7)

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1.
2.

3.
4.

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1.

(Firm)

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1.

(
()

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30

2.
()

()
(/)
()
(/)
()


()



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2.

(/)?

?

?
?
?

?

??
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3.
(Construction Economists)
(Investment appraisal)
(Cost control during design)

(Estimating)
(Preparation of contract document)
(Evaluation of tenders)

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NTU, Dept. of CE, MT Wang

3.
(Construction Economists)
(Cost control post contract)
(Preparation of interim valuations)

(Preparation of final account)

(Life-cycle costing)
(Value engineering)
(Maintenance economics)

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3.
(Construction Economists)
(Environmental economics)
(Contractual disputes resolution)

(Procurement selection)
(Project management)
(Management of construction

programs)

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4.

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4.1

()

()

()

()

()

()

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NTU, Dept. of CE, MT Wang

4.2
production function:

given a specific level of technique, we can have

Quantityf(k, l), k: capital, l: labor, q: quantity, p: price
Costg(quantity)
revenue function:
Revenueh(price, quantity)pq
Pricep(q)
profit function:
ProfitRevenueCost
p(q)qg(q)
maximize profit:
let d/ d q0, given QualityDQualityS
General equation: :

f(k, l, q, c) = 0
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NTU, Dept. of CE, MT Wang

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4.3
cost function:
Costf(k, l, time, quality)
revenue function:
Revenuebidding price
= g(k, l, time, quality , competitors)
profit function :
ProfitRevenueCost, QualityDQualityS

f(k, l, time, quality, c) = 0

if we neglect the influence of competitors.

General equation:

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NTU, Dept. of CE, MT Wang

4.4
Project Economics
Project-Oriented Economics
Production Function:

q = f1(k, l)
q: quantity,
k: capital, l: labor,
k and l are input factors
This implies a quantity produced per unit time.
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NTU, Dept. of CE, MT Wang

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4.4
Cost Function:
c = f2(q)
c: cost, depending on fixed cost and variable
cost
therefore,
c = f2(f1(k, l)) = f3(k, l)
This is derived at a given level of production
technique (at a certain level of products
quality) and within a given unit time.

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NTU, Dept. of CE, MT Wang

4.4
It can be generalized as the following

equation if we consider production duration

and quality:
cost = f4(k, l, time, quantity, quality )
or
f5(k, l, time, quantity, quality, cost) = 0

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NTU, Dept. of CE, MT Wang

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4.4
For a typical manufacturing product, time =

1 and quality = constant. Therefore this

equation can be simplified as:
f6(k, l, time =1, quantity, quality = constant,
cost) = 0 => f6(k, l, q, c) = 0

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NTU, Dept. of CE, MT Wang

4.4
For a project product, quantity = 1.

Therefore the generalized equation can be

simplified as:
f7(k, l, time, quality, cost) = 0

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NTU, Dept. of CE, MT Wang

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4.4
Construction is a project-oriented product.

As it can be imagined, how to integrate the

three factors of cost, time, quality is always
the critical issue in construction
management area.

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NTU, Dept. of CE, MT Wang

4.4
As a result,

the generalized demand-supply equation

f5(k, l, time, quantity, quality, cost) = 0

can be used to explain the demand and supply

behaviors of both project oriented products and
repetitive production products.
Manufacturing product: f(k, l, q, c) = 0
Project product: f(k, l, time, quality, c) = 0
by neglecting the influence of competitors.
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NTU, Dept. of CE, MT Wang

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4.4
Quality is a kind of information.
Project economics has to do with quality

economics and information economics, which is

also a kind of transaction cost.
Competition has to do with game theory in the
construction industry.
Therefore, this course will introduce the
following theories: game theory, information
economics, transaction cost theory.
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NTU, Dept. of CE, MT Wang

4.4
According to quality characteristics,

product or goods can be classified as:

Search Goods: quality is known before it is

sold.
Experience Goods: quality is unknown until it
is used (consumed).
Credence Goods: quality is limited to be
understood even it is used (consumed).

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39

1.
2.
3.

4.
5.
6.
7.
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NTU, Dept. of CE, MT Wang

1.
(1)
(2)
(3)
(4)
(5)
(6)

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1.

?
?
?

?

??
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1.
(4)(6)

?

?

?
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2.
(7)
TOP500
(8)ENR
TOP500
(9)ENR
TOP500
(10)
ENR TOP500
(11)
ENR TOP500
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NTU, Dept. of CE, MT Wang

2.

?

?
??

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2.

A.(

WTO)?
B.(
)
?
C.(
)
?

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2.

A.(
)
B.(
)
C.(
)

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3.

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3.

?
?

?

?
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4.

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5.
(Firm)?

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6.

BOT

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6.

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7.

A.

B.

D.

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2005.1.31

Bolton and Dewatripont, Contract Theory, MIT

Press, 2005.
Drake, B. Construction Economics in the Single
European Market, the Committee of European
Construction Economists (CEEC), E&FN SPON, 1995.

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