Chapter 6.

0:
Construction Process

Content of Chapter
• Site surveying and preparation
• Arrangement of facilities / Job layout
• Material Handling system
• Financial Management and Cash flow management

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 6.1 Site surveying and preparation:
• Site Surveying is an inspection of an area where work is proposed, to gather
information for initiating construction work, to stake out reference points and
marks that will guide the construction of structures.
• It can determine a precise location, access, best orientation for the site and the
location of obstacles
Elements of the construction survey
• Survey existing conditions of the future work site, including topography,
existing buildings and infrastructure, and underground infrastructure
whenever possible.
• Stake out reference points and markers that will guide the construction of
new structures
• Verify the location of structures during construction;
• Conduct an As-Built survey
Construction Site preparation is the preliminary works to be done for
starting construction works. The selected construction site preparation
needs to be completed properly before the start of construction
process. 2
 6.2 Arrangement of Facilities / Job layout

• Before starting a construction, a job layout plan is

prepared which indicates the site arrangements to
facilitate the work to proceed in a smooth and
ordinary manner.
• The basic requirements of construction job namely
human, material, machine must be controlled and
placed at a site in such manner that
a) Machines are placed in most advantageous position.
b) Materials are placed / stored near the place of their
utilization
c) General site circulation to manpower is orderly and their
site accommodation is available. 3
Fig: Typical Job-Layout of a multi-story building project 4
Factors to be considered in construction site planning / job layout
1. Access to site
There should be separate entrance and exit to site. Besides there should be a track
on the site for easy and efficient movement of all site traffic.
2. Storage of material
 Cement bags should be stacked on raised platform covering with water proofing
material. It should be kept 30 cm away from the wall and stack should not
exceed 12 bags.
 Bricks, tiles and concrete blocks are stacked at ground level/ height of stack
should not exceed 2 m.
 Aggregates (both fine and coarse) are stacked on a clean hard surface in stacks
of 2m x 2m x 0.5 m.
 Inflammable materials must be stacked separately from other materials and
should be protected from fire hazards
 Explosives are kept in safe place
 Rebars should be kept away from moisture to prevent rusting
 Timbers must be stacked in well ventilated shady areas
 Material of common use must be stacked near the place of their use to minimize
handling
 Heavy items must be stacked away from trenches, soft ground or unsure support
 Cement should be kept constantly moving by using earliest arrival first
 Materials must be stored / stacked in secured place
 Adequate precaution against fire should be provided. 5
3. Location of machinery and equipment:
 Equipment should be kept near the material it utilizes and as
well as near the place of its use.
 For costly equipment, temporary shed should be provided for
weather protection
 Provision should be made for essential fuel and lubrication
 Adequate space should be left for scaffolding as well as
erection, removal and shifting.
 Adequate parking facility should be provided.
4. Main office should be located near the entrance.
5. Location of security check points should be in such a place so
that materials/equipment could not pass in or out without proper
authorization.
6. Accommodation for site manager, technical personnel, guards,
labors are essential.
7. Miscellaneous facilities such as drinking water, telephone,
fencing, hoarding board shall located properly. 6
 6.3 Material Handling system
• Material Handling is concerned with solving the pragmatic problems
involving the movement, storage, control and protection of materials, goods
and products throughout the processes of cleaning, preparation,
manufacturing, distribution, consumption and disposal
• Materials are of various nature – some need to be stored under roof, some in
open area and some need to be stored very carefully as they are volatile and
dangerous to be used by common people
• Materials are stored in such a quantity which can run up to the day on
which material can be delivered in the site from the date of order.
• Indent forms are used to get material at the site. The indent is kept in a
book form and page numbered. Indenting officer fills the indent form and
sends the form with blank invoice to the issuing officer, who is in charge of
stock.
• The Issuing officer checks the quantity available in the stock and can
correct the quantity , filled in the indent form with actual quantity and send
the corrected invoice to the demanding officer for signature. The receiving
officer signs the invoices and sends back to issuing officer as an
acknowledgement of the receipt. 7
 6.4 Financial Management and Cash flow management
• Financial management is the effective control of all monetary
related issues associated with a project. The areas include
―controlling expenditure, advising on cash flow and payments
• Understanding what, when and why costs will be incurred
before the project commences and then during the project
knowing ―what costs have been incurred when this expenditure
happened and what future costs are planned.

Financial Management is the use of a company’s financial

resources. This includes the use of cash and other assets—such as
equipment. Many everyday decisions affect a company’s
financial future.

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• For example, the decision to bid on a large project can have great
impact on the finances of a company. When deciding whether to
bid on a project, a manager may need to address the following
questions:
– Does the company have enough cash resources to perform this work
or will the company need outside financing? Can the company get
bonded for this work?
– If not, what changes need to be made in the company’s financial
structure so the company can get a bond for the project?
– Should the company hire employees to perform the work or should
the company subcontract out this labor?
– Should the company lease or purchase the additional equipment
needed for this project?
– If the company purchases the equipment, how should it be financed?
Will this project require the company to increase its main office
overhead?
– And, finally, what profit and overhead markup should be added to the
bid? 9
The answers to all of these questions will affect the
company’s finances. The answer to one of the
questions may change the available options to other
questions.
For example, if the manager decides to hire employees
to perform the work on the project, the project will
require more financial resources than if the company
had hired subcontractors to perform the labor and may
leave the company with insufficient resources to
purchase the additional equipment, leaving leasing the
equipment as the only option

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 Cash Flow Management
• The level of insolvencies in the construction industry is
high, when compared to other industry sectors. Lack of
financial control and poor management is seen in
construction industry. This indicates that with a good
cash flow management, companies could be kept
operating and financially healthy. It is possible to
prevent failure.
• Cash Flow Management is the process of monitoring,
analyzing, and adjusting business' cash flows. It is a
key aspect of financial management of a business,
planning its future cash requirements to avoid a crisis
of liquidity.
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 Project Budget

The project budget integrates monetary objectives,

responsibilities and allocated resources. The base
of the budget is the project plan and its schedule of
work. Finally, the project financial plan is
presented in the form of the master budget, which
summarizes all the budgetary information
including the profit and loss statements, balance
sheets, capital expenditure budget, and cash flow
forecasts shown below

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 Contractor's Construction Budget Breakdown

Contractor's
Constuction
Budget Breakdown

Sales budget Production budget

Manpower Materials Equipment Overheads

budget budget budget budget

Inventory
budget

Purchase
budget

P and L Cash flow Blance sheet

forecast forecast forecast
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 Profit and Loss Forecasting for Contractor
Gross profit
margin
Breakeven point

Time
Fig. 'S' curve pattern graph of cumulative earned
and cumulative production costs of a project.
The gross operating profit = Earned values revenues – Cost of production. 14
 Cash flow Forecasting of Contractor

Contract margin
100
V E
75 V = Value curve (Earned value)
C C = Cost curve (Production cost)
50 R = Revenue curve (Amount of cash -in flow)
E = Expenditure curve (Cash out flow)
25 R
N = Net cash flow curve

0 Contractor margin
Months
Capital lock up

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Thank You

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