Professional Documents
Culture Documents
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For this week
n 1. The relationship between the basic
construction and the construction industry
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1.1 The concept of the basic
construction
n Simply described as: construction
companies use a variety of available
capital investment to expand
production capacity, improve the work
and life, thus to conduct construction
business activities including
construction, alteration, expansion,
etc. for factories, shops, houses,
schools, hospitals, railways, roads, etc.
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1.1 The concept of the basic
construction
n Also known as Capital Construction.
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1.1 The concept of the basic
construction
n Traditionally described as: new
construction, reconstruction,
expansion, restoration projects and
work associated with it all related to
the extensive reproduction of fixed
assets. (we will talk about fixed
assets later)
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1.2 The contents of the basic
construction
n 1. Construction of fixed assets.
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1.4 Classification of the basic
construction
Industrial construction
etc.
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1.5 Fixed assets
n Buildings, factories, real estate and
railway etc. are good examples of fixed
assets.
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1.7 Main sectors of the construction
industry
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1.7.2 Building construction
n Including office buildings, large apartment
complexes, shopping malls, theaters,
schools, universities, and hospitals.
n relation n difference
the construction industry different nature
complete the main contents of BC: investment behavior, activity
the basic construction CI: material production sector
the basic construction
investment is the objective different content
needed to promote the BC: including construction engineering
construction industry and purchase of equipment which
completed by CI
CI: including BC investment formed
construction and installation task,
BC: basic construction renewal and maintenance task
CI: construction industry
different task
BC: the formation of fixed assets
CI: to provide construction products and
gain profit 18
n 2. The meaning for construction
project management
n 2.1 What is a project?
n 2.2 The characteristics of project
n 2.3 Project management
n 2.4 Construction project
n 2.5 Construction project
management
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2.1 What is a project?
n A project is a temporary work undertaken
to create a unique product or service.
n Example:
n A new building
n A wedding ceremony
n The introduction of a new computer
software in a company
n The development of a new car model
n The fusion of two companies
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2.1 What is a project?
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2.2 The characteristics of project
n Has a unique and clear terminal target
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2.2.1 An activity
n Is a defined piece of work.
n A project may has a number of
activities that must be completed in
some specified order or sequence.
n The sequence of the activities is
based on technical requirements, not
on management prerogatives.
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2.2.2 Activities
n Unique activities
n A project has never happened exactly in the same
way before, and it will never happen again under the
same conditions.
n Complex activities
n The activities that make up the project are not simple,
repetitive acts, such as build a house or design a user
interface for a software is a complex activity.
n Connected activities
n Connected implies that there is a logical or technical
relationship among activities. For example: usually
the main structure completed and the decoration start.
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2.2.3 Subprojects
n Very large or complex projects may be
divided into several subprojects, each of
which is a project in its own right.
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2.2.4 A program
n Is a collection of related projects and is
larger in scope than a single project.
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These constraints are interdependent from each other - a change in one constraint can
require a change in another constraint in order to keep balance of the project.
For every project, there 5 parameters should be in a certain balance.
For example: A foundation part of a certain building project, was originally complete
within 1 month, but now have to complete within half month, that usually means less
time, then more cost more resources (originally two piling machines, now 4 piling
machines) in order to complete.
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2.3 Project management
n Can be defined as: the art and science of
coordinating people, equipment, materials,
money, and schedules to complete a
specified project on time and within
approved cost
n From Garold D. Oberlender, Project
Management for Engineering and
Construction. McGraw-Hill International
Editions, Singapore 2000, P. 8
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2.3.1 Why Using Project
Management (PM)
n Achieve the project targets within the project
resources;
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2.3.2.3 Staffing
n Is the selection of individuals who
have the experience to produce the
work for design, construction,
consultancy etc. the numerous
problems that arise throughout the
life of a project are solved by those
people.
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2.3.2.4 Directing
n Is the guidance of the work required
to complete a project. The individual
technical expertise must be
developed into an effective team. All
individuals must be collectively
directed in a common effort and in a
common direction.
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2.3.2.5 Controlling
n Predict and against the deviations then take
corrective actions
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2.4 Construction project
n Our projects normally deal with buildings.
n Such as:
n Any human-made structure used or intended
for supporting or sheltering, any use or
continuous occupancy or an act of construction.
n For example: apartment, a hospital etc.
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2.4.1 Building's life cycle
n Building's life cycle refers to the view of a building over the
course of its entire life.
Feasibility Analysis
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2.5 Construction project
management
n Under some conditions (time, money
etc.), take the construction project
as the object, to achieve the goal of
the peoject, based on the civil
engineering project responsibility
system, linked with contract,
systematic manage the construction
project by planning, organizing,
controlling etc.
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2.5.1 Who will join project?
n 2.5.1.1 Owners: public owners, private owners,
owner representatives
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2.5.1.1 Owners
n Owners can be individuals seeking a home
for their growing family, a large
organization responding to a change in
technology, a municipality seeking to
improve its infrastructure, or a developer
working to make benefit by filling a
perceived market need.
n Homeowner
n Multinational Company
n Developer
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2.5.1.1 Owners
n Owner representatives
n Facility managers are the most common
professional owner representatives.
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2.5.1.2 Design professionals
n Design professionals Engineers
n Engineers responsibility on projects is varied
depending on their major
n Specialty contractors
n Material suppliers
n Equipment suppliers
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2.5.1.3 Construction professionals
n Constructor
n Constructor is the general term used to
define the professional responsible for all
construction activities, whether she or he
works as a general constructor or a
construction manager.
n Construction offers many options.
n Estimators
n Schedulers
n Purchasing agents
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2.5.1.3 Construction professionals
n Specialty contractors
n Generally known as subcontractors,
these specialty firms include
mechanical, electrical, excavation,
and demolition contractors.
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2.5.1.3 Construction professionals
n Materials suppliers
n Materials and building components
are manufactured, fabricated, and
sometimes installed by suppliers.
n Insurance
n Lawyers
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n 3. The category and meaning of
economic evaluation in construction
project
n 3.1 Construction project economic
evaluation
n 3.2 The composition of investment in
construction project
n 3.3 Sources of investment in
construction project
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3.1 Construction project economic
evaluation
n Construction project economic evaluation
is an important part of the project, and it
is an important means for project scientific
decision-making.
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3.1 Construction project economic
evaluation
n For 2: enterprise economic evaluation
(financial evaluation) is based on the
project itself as an independent system,
analysis of the project's profitability.
n advanced technology
n reasonable economic
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3.1 Construction project economic
evaluation
n Content of project economic evaluation:
n Costs including:
n construction cost
n equipment purchase cost
n Equipment installation cost
n expenses for tools, etc.
n other costs: land acquisition, survey design,
personnel training, etc.
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3.2 The composition of investment in
construction project
n 2. Working capital the money
needed in order to organize the
production
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3.3 Sources of investment in
construction project
n 1. financial allocation: from state or local
government
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4. The calculation method of
depreciation of fixed assets
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4.1 Straight-line depreciation
n 4.1.1 Meaning
n 4.1.2 Example 1
n 4.1.3 Formula
n 4.1.4 Example 2
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4.1.1 Meaning
n Method for average amount of
depreciation in the estimated service
life for a fixed asset.
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4.1.3 Formula
n 1. annual depreciation of fixed asset = (original value of fixed
asset net residual value of fixed asset) / service lives
(depreciable lives)
n Note: the fixed assets usually service more then one year's time,
so service lives (depreciable lives). Remember when we describe
fixed assets before.
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4.1.4 Example 2
n annual depreciation = 20000 X (1
5%) / 8 = 2375
n Formula
n 6. annual depreciation of fixed asset
= original value of fixed asset X (1 -
net salvage) / service lives
(depreciable lives)
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4.2 Workload method
n 4.2.1 Meaning
n 4.2.2 Example 3
n 4.2.3 Formula
n 4.2.4 Example 4
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4.2.1 Meaning
n Method of calculating depreciation
according to the actual working
hours or the proportion of completed
work or workload measure units.
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4.2.2 Example 3
n Supposes a lager construction machine in
a certain construction site, the original
value is 200K, the estimated net residual
value is 3K, can be used 2K workload
measure units as estimated.
n Please use workload method to calculates:
n 1. depreciation value per measure unit;
n If this machine has been used 30
workload measure units this month.
n 2. depreciation value of this month.
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4.2.2 Example 3
n For 1:
n depreciation value per workload
measure unit = (200K - 3K) / 2K =
98.5
n For 2:
n depreciation value of this month =
30 X 98.5 = 2955
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4.2.3 Formula
n 1. depreciation value per workload measure unit
= (original value of fixed asset - estimated net
residual value) / total workload measure units
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4.2.4 Example 4
n Supposes another lager construction
machine in another certain construction
site, the original value is 1200K, the
estimated net residual value is 30K, can
be used 300K workload measure units as
estimated.
n Please use workload method to calculates:
n 1. depreciation value per measure unit;
n If this machine has been used 50K
workload measure units this year.
n 2. depreciation value of this year.
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4.2.4 Example 4
n For 1:
n depreciation value per workload
measure unit = (1200K - 30K) /
300K = 3.9
n For 2:
n depreciation value of this year =
3.9 X 50K = 195K
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4.3 Double declining balance method
(accelerate depreciation method 1)
n 4.3.1 Meaning
n 4.3.2 Example 5
n 4.3.3 Formula
n 4.3.4 Example 6
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4.3.1 Meaning
n Calculation based on net value and fixed
depreciation rate, its depreciation rate is 2
times of the straight-line depreciation, is
one of the accelerate depreciation method
(another one is sum of the years digits
method which we will talk about later).
n For 2:
n the amount of depreciation for the first year
= 40K X 40% = 16K
n the amount of depreciation for the second
year = (40K 16K) X 40% = 9600
n the amount of depreciation for the third year
= (40K 16K - 9600) X 40% = 5760
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4.3.2 Example 5
n For 3:
n net book value of the fixed asset =
original value of fixed asset -
accumulated depreciation in certain
year
n 8640= 40000 16000 9600 5760
n Or
n 4. depreciation of the final 2 years = (net book value of the
fixed asset - original value of fixed asset X net salvage) / 2
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4.3.4 Example 6
n For 1:
n annual double straight line depreciation rate = (2 / 10) X 100% =
20%
n For 2:
n Unit: K
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