L1 BUILDING ECONOMICS INTRODUCTION.ppt

Introduction to building economics with particular reference to Zambia

1. ESA/B 250/1 – BUILDING
ECONOMICS 1
ECONOMICS OF THE CONSTRUCTION
INDUSTRY – INTRODUCTIN TO
BUILDING ECONOMICS

2. INTRODUCTION
•According to Ashworth (2004) economics in
general is about the choice of the way in which
scarce resources are and ought to be allocated
between all their possible uses.
•Building economics consists of the application of
the techniques and expertise of economics to
construction projects.
•It is also a small part of a much larger subject of
environmental economics.
•Mainly concerned with the study of man’s needs
for shelter and a better environment to live in.

3. Introduction Continued
It also seeks to ensure that efficient use of resources
available to the industry, and to increase the rate of
growth of construction work in the most efficient
manner. This may include:
 Client’s requirements
 The Assessment of the initial costs
Possible effects of the surrounding areas if
development is done
Relationship of space and shape
Estimation of the life of a building

4. History of Building Economics
•This is a subject barely 50 years old.
•Largely developed due to the building boom
that was experienced after the 2
nd
World War.
•Its origin can be traced to the profession of
Quantity Surveyors, but its application and use
is not limited to them.

5. Building Economics Drivers
The main drivers of this study included;
a)Value for money in the provision of;
- Roads
- Housing
- Schools
This was due to the rapidly expanding population
and need to replace old and damged buildings.
b) Researchers (the academia).

6. Building Economics Drivers Cont’d
Other drivers over the years include:
•The need to meet the aspirations of a new
generation.
•Changes in the manufacture industry, with new
industries requiring investment in property.
•Advancement in technology
•Development of the motor car, necessitating for
the construction of better roads and
maintenance.
•Welfare needs.

7. Historical Context – Milestones
Early Years – 1950s
•Building economics in this period mainly centred
on forecasting of contractors tenders through
approximate quantities.
•These estimates were mainly for budgeting
purposes.
•Also acted as guide through which architects
completed their detailed designs.
•Unfortunately this resulted in major
discrepancies between the estimate and final
cost.

8. Historical Context – Milestones
1970s and 1980s – these years were characterised
with;
a)Ability to forecast contractors’ costs with
precision. To achieve this, cost modelling,
regression and simulation analysis were
introduced.
b)Value for money in building works – This
necessitated evaluating various designs,
construction methods, technology and
procurement routes in order to adopt the viable
one(s).

9. Historical Context – Milestones
The Later Years – 1980s and beyond
•Building Economics has built on past studies
and research.
•Value for money has remained a constant
theme for the construction industry.
•This has resulted in themes such as value
management/engineering
•Concepts of whole life cycle costing

10. Historical Context – Milestones
The 21
st
Century – 2000s
Value for money has been the theme for the 21
st
century
•This involves the reduction of construction costs
through design, procuring and constructing works in a
different way.
•Basically doing more with less by removing
unnecessary costs.
•Improving advice quality in order for clients to make
sound decisions.
•Use of IT and technology in cost estimating and
production of designs and construction related
information.

11. Building Economics – The Future
•It is believed that clients will continue demanding for
value for money, even more.
•Meeting the Quality, Time and Costs will still be a
challenge.
•Hence construction costs will always need to be
forecast, budgeted, controlled, accounted and
evaluated.
•Increased use of IT
•Supply chain management through partnering
•Essentially, construction professionals ought to be
aware and sensitive to the clients’ needs instead of
focusing on the cost of the project.

12. What else?
A wider consideration or understanding must be taken. It is
also worth noting the economic aspect of the following:
•The Role of the surveyors, architects, engineers, quantity
surveyors and builders employed in the industry.
•The division of the industry between the design and
construction processes
•The size of the industry, its relationship with other
industries and the national economy
•Types of development undertaken
•Types and sizes of construction firms
•Variations in building costs and factors that influence these
variations – market conditions, regional location, site
location etc.

13. Building Economics in summary
It is worth noting Ashworth’s (2004) comments;
Project cost control (essentially Building
Economics) is the application of economic
principles to the construction project. It
examines not only the costs appropriate to a
specific project, but also the factors and
influences of the determinants of this costs.

14. Building Economics in summary
Hence Building economics further focuses on;
•Maximizing any social benefits
•Minimizing risk and uncertainty
•To maximise safety, quality and public image
•To achieve maximum profitability from the
project concerned
•To minimise construction costs within the
criteria set for design, quality and space.

15. Any questions?

16. The End
Thank you!