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Concept of Economics in Construction Industry : Report

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Added on  2020-01-15

Concept of Economics in Construction Industry : Report

   Added on 2020-01-15

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CONSTRUCTION ECONOMICS
Concept of Economics in Construction Industry : Report_1
TABLE OF CONTENTSIntroduction..........................................................................................................................................1UK Construction market structure...............................................................................................1Costs in Construction industry.....................................................................................................1Transaction costs in Construction sector.....................................................................................2Impact of Transaction costs on Tendering process......................................................................2Factors affecting contractor’s bid prices......................................................................................3Conclusion............................................................................................................................................5References............................................................................................................................................6
Concept of Economics in Construction Industry : Report_2
INTRODUCTIONThe term construction economics can be defined as the process of economizingconstruction processes i.e. from the initiation to completion. The main purpose of economics inconstruction is that assist in ensuring practical and sustainable financial decisions are madeduring the course of entire project (Myers, 2013). Herein, researcher focuses on illustrating theconcept of economics in construction industry as well as illustrates that costs that is consideredunder this sector. Further, trending process and market price for construction of work isdetermined and lastly, factors that effects the contractors bid prices has been highlighted. UK Construction market structureLooking at the current contracting market structure of UK it can be said that there arelarge number of firms which are operating in it and making tons of efforts to satisfy theexpectations of the customers (Valence, 2010). There are different types of functional categorieswithin the firms in constructions such as builder, consultant, supplier and hybrid. Further,considering the market condition of construction industry in UK it has been evaluated that thereis high competition due to large number of small contractors. Along with this, there is lowbarriers to entry which indicates that firms can enter easily and sustain for longer period. Highlylabor intensive sector requires low level of invest in terms of resources and technology andconstruction sector does not exploit economies of scale (Drake, 2013). But at the present thereare several small level firms who are unable to generate better sales that leads to low productivityacross the sector. Costs in construction industryVaried types of costs are associated with the construction companies and in context totraditional theories of the firm the major profit maximization strategy of firms is to manage andcontrol costs (Chern and Lowe, 2013). Thus, contractor pay great attention to the need ofcontrolling the costs. However, there are several key costs concepts that contractors have tofocus on such as labor subcontracting assist in minimizing the variable costs, either to hire or buyplant and equipment, management of working capital and making decisions regardingbidding/estimating costs (Morton and Ross, 2008). In construction industry, contractors assessthe costs before the work is completed or done. In other terms, it is the reverse process from most1
Concept of Economics in Construction Industry : Report_3

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