1. Construction Industry

Construction Industry

The construction industry is:

~ big business in the aggregate

~ about 15% of the nation's GNP

~ about 15% of the nation's employment

~ predominantly small businesses, over half-a-million of them

Construction contractor's expected life is 7 years with about 13% failing annually.

Fewer than 1% of construction contractors account for about 1/3 of all construction work.

Construction contractors:

~ general contractors (prime)

~ speciality contractor (Elec, HVAC, excavation, etc.)

~ sub and sub-sub relationships (tiering)

Types of construction:

~ heavy (horizontal, sub-surface, massive)

~ building (vertical)

Many types of construction breakdown refinements:

~ residential (single, multi)

~ non-residential, light commercial

~ commercial, institutions

~ industrial, plant facilities

~ engineering (utilities, dams, highways, bridges, piers, etc.)

Business composition:

~ individual proprietorship

~ partnership

~ corporation

~ joint-venture

Parties typically involved in construction:

~ owner (private, public)

~ design professional (engineer, architect, A-E)

~ contractor(s) (subcontractors, sub-subs, materialmen)

~ others: financier, construction manager, surety, legal counsel, etc.

Contractor's motives/objectives:

~ make a profit

~ stay in business

~ complete projects on time, as specified and within budget

National economics and construction:

~good times: construction boom, demand exceeds supply, generous profits, high wages, full employment

~bad times: construction slump, unemployment, increased bankruptcy, fierce competition for projects

~construction is a high risk venture with many impacts beyond the contractor's control (i.e., cost of money, labor agreements, economy factors, weather, strikes, delays, owner changes, etc.)

Contract (privity) relationships:

~ contractor - owner

~ contractor - subcontractor

~ contractor - supplier (material men)

~contract is an agreement enforceable at law that creates an obligation for the parties

Contract elements are:

~ agreement (offer and acceptance; bid and award)

~ competent parties

~ consideration (obligation)

~ lawful purpose (legal subject matter)

~ form (written vs oral)

Five M's of construction - our basic resources:

~ Manpower

~ Materials

~ Machines

~ Management

~ Money

Linear nature of the construction process (see chart)

Organizational relationships of the parties involved in construction (see chart)

Contractor's organization at head office and field levels (see chart on following page)

Competitive bid process:

~ advertisement - invitation for bids

~ bid submittal IAW instructions to bidders (an offer)

~ bid opening - public or private

~ bid evaluation

~ bid acceptance - award to lowest responsible, responsive bidder

~ bid bonds provided

~ contract is signed

~ notice to proceed to work

Negotiated bid process:

~ request for proposal

~ proposal submitted

~ proposal evaluated

~ negotiation until agreement on scope and price

~ contract documentation is completed

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