Construction Economics Report: Key Development Conditions

This report delves into construction economics, analyzing key development conditions crucial for financiers' decisions, especially in the context of a retail building project. It examines the viability of development projects, financial capacity, company profiles, market knowledge, and project details, all of which influence financiers. The report then outlines significant cost items, including capital, construction, operating, out-turn, and whole-life costs, alongside the benefits of the retail building project, such as reduced traffic, cost efficiency, design flexibility, ease of management, and land acquisition advantages. Furthermore, the report touches upon the practical implications of adopting project alliancing in a project, emphasizing the integration of operations and goals between different parties involved. The report provides a comprehensive overview of the financial and practical aspects of construction projects, offering valuable insights for both developers and financiers.

Running head: Construction economics 1
CONSTRUCTION ECONOMICS
Name of Student
Institution Affiliation

Construction economics 2
KEY DEVELOPMENT CONDITIONS WHICH ARE CENTRAL TO FINANCIERS’
DECISIONS
Below are some key development conditions which are central to Financiers’ decisions. The
financiers have to consider this conditions before starting to finance any given company.
i) The viability of the development project
The financiers have to find out how realistic the development projects which the company is
dealing with are. In that way I will explain the viability of the various projects which the
company is currently undertaking in various parts of New Zealand and the projects which the
company is also intending to venture into.; This will guide the financiers accordingly on what
our development company is working on and its aims and missions. In this way the financiers
Will be in a position to make decision on how much they will be able to fiancé the company.
ii) Financial capacity of the company
I will include the financial capacity of the company, this will show the credit history of the
company, and its ability to operate a successful. Various ways through which the acquired
finances will be used will also be highlighted in the business case in order to enlighten the
financier on the plans of the company so as to evaluate the various risks that are associated with
the planned ventures in order to be in a position to determine how much they will be able to
finance the company. The financial capacity of the company plays a very significant role the
decision to be made by financiers as it indicates directly on what the financed finances will be
used for.
The history of the company regarding the various financiers will also be presented to show the
financiers how the company has been relating to various financiers who have been financing

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thyme. This can give a clear impression of what the company is and if there are any risks
associated with financing it.
iii) The company profile
The first impression is a very first impression is a very important factor which influences the
financiers’ decision. I will include an updated profile of the company in the business case in
order to inform the financiers of what our company is exactly and what they have been involved
in. The n the profile will include various aspects of the company will be mentioned for instance
who the company is managed.
The development projects which it has undertaken and the main mission of the company. By
providing the company profile to the financiers they will be able to make decisions regarding to
how much they will be able to finance our company. Poor presentation of the company profile
can result to withdraw of the financiers while proper or good presentation of the company profile
will greatly influence the financiers to give more resources or finances to the company.
iv) The company’s knowledge regarding the market and competition involved.
The financiers will need to know what the company has built their plan on based on the current
market and the competition from other companies. The financiers will what to know how much
research the company has carried out regarding the market. in that way the financiers will be in a
position to assess how much the company is aware of the market trends, risks and opportunities
that are likely to present themselves. I will present in the business case the various researches
that have been carried out regarding to the current market and the risks and opportunities that are
likely to occur in the project.
v) The company development projects
I will need to include the various projects which the company is undertaking currently and the

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projects which the company is intending to venture intro. This will enable the financiers to
evaluate if the mentioned project is worth to be financed. The decisions made by the financiers
are greatly influenced by the nature of the projects which the company is undertaking or
planning to undertake.
SIGNIFICANT COST ITEMS AND SIGNIFICANT BENEFITS OF RETAIL BUILDING
PROJECT
Significant cost items of the retail building project
The concept of cost in relation to the construction of buildings is not simple as perceived by
many. Because there is a wide range of construction costs which are incurred during the
construction and operation of as building some of the construction costs include;
i) Capital costs
These are costs which are associated with one-off expenditure regarding the acquisition,
construction or improvement of important b fixed assets. For this project the capital costs that
were considered to facilitate the location of the building was the cost of acquisition of land. In
most cases it is very important to analysis the capital cost which are directly related to
implementation of any given project so as to acquire the assets such as land and buildings at a
lower cost. For the retailing building project its location out of town shopping units will enable
the acquisition of the location site at cheaper cost as compared to the alternative projects that are
located in the town’s shopping units. The capital costs can be assessed by determine the current
value of land at the site of construction
ii) Construction costs
These refers to the costs which are directly involved in the construction of the building. Such

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costs include costs for construction materials, which purely involves the costs incurred in
acquiring the required construction material for the project. This kind of costs will include the
cost incurred on transporting the material from the source where they are available into the
construction site together with the costs which will be incurred in handling the materials such as
loading and offloading. Labour costs which comprises all the costs that are incurred on hiring
various types of staff who will be involved in implementing he project, site management cost,
this are the cost which are incurred when hiring professional who will be responsible of
managing the construction project such as the construction managers, clerk of works among
other professionals. machinery and equipment costs include the cost which are used to hire or
purchase the machineries and equipment that w9ll be used during the construction of the project.
All the above discussed costs related directly to the actual construction of the project.
It is very important to analysis the construction costs that are to be incurred regarding to
construction of any building or structure as they play a very important role on the overall cost of
the building. Construction costs forms part of the overall cost which is incurred during the
development of a project such as a building. In general, the construction refers to the costs
incurred by the actual construction works and at the same time may refer to the value of the
contract with the main contractor (Denny McGeorge, 2011).
In general, the construction costs will be much lower for this project since it is located in areas
near construction materials which will greatly reduce the total amount of the transportation cost
for the materials at the same time there is cheap available labour out of the town’s shopping
units. Due to that the overall construction cost of this retail building project will be much lowest
as compared to the alternative projects that will be constructed in other areas within the town.
The construction costs can easily be assessed by preparing the bill of quantities of the retail

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building project.
iii) Building operating costs
This refers to the costs which are incurred regarding to the day to day operation of the building
this costs might include the utility cost, maintenance and repair costs, general administrative
expense. The utility expenses include the costs which are incurred when paying for utilities such
as electricity bill, water, fibre optics bills, telephone bills among many other. The utility costs
that are incurred in building vary from one location to another and therefore they have an impact
on the location of the project. The administrative costs also greatly vary from one location to
another and therefore when the cost analysis of the building is carried out it has to be considered.
The bills for utilities are usually much lower when the project is located out of the town due to
the lower demand in areas out of town’s shopping units with that the utility bills are expected to
be low in the retail building project as compared to other alternative projects. The building
operating costs can easily be determined by carrying out case study of a similar project in the
same location.
iv) Out-turn costs
This refers to the actual construction costs that are calculated at the end of the project. But at the
same time may refer to the cost of a specific contract or the total costs incurred over a given
period. This contrasts with costs estimates kind of construction costs or target costs that are
calculated of the cost that is expected or the cost that should be achieved.
v) Whole life costs
Whole life costs refer to the related to the life of building from the inception stage to the
construction stage, occupation and operational to disposal. One must analysis costs associated
with all those stages. In order to ascertain the total cost, the project will consume in its lifetime.

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The whole life costs can be determined by carrying a case study of a similar project within that
region.
Significant benefits of retail building project
There are many Significant benefits that were analysed in the retail building projects as
compared to other alternative projects. some of the Significant benefits that were analysed
include;
i) Reducing traffic and the environmental pollution.
By having the retail building project located in an area out of town’s shopping units will greatly
assist in reducing the traffic congestion that is witnessed in the urban area and which at the same
time greatly contributes to the air pollution in the town. Comparing this project to the other
alternative projects it much conservative of the environment. This can be assessed by
determining the number of vehicles visiting this facility.
ii) The retail building project is cost efficiency
The construction of this project comparing to the alternative projects is much cost efficient since
its initial cost of construction is low, it requires shorter construction period as compared to the
alternative projects. This can be assessed by constructing a project delivery timeline which will
show all the activities that will be carried.
iii) The retail project is flexible in terms of design and building options.
As compared to the other projects this project is much flexible in terms of design and
construction which makes its implementation much easier.
iv) The retail project is easier to manage.
Due to its small size as compared to the other alternative projects the project is easier to manage.
This will require hiring small number of construction managers to be involved in delivering the

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project.
v) Easy and cheap acquisition of land
For this project the capital costs that were considered to facilitate the location of the building
was the cost of acquisition of land. In most cases it is very important to analysis the capital
cost which are directly related to implementation of any given project so as to acquire the
assets such as land and buildings at a lower cost. For the retailing building project its location
out of town shopping units will enable the acquisition of the location site at cheaper cost as
compared to the alternative projects that are located in the town’s shopping units. The capital
costs can be assessed by determine the current value of land at the site of construction.
PRACTICAL IMPLICATIONS FOR ADOPTING PROJECT ALLIANCING IN A PROJECT
The concept of alliancing refers to an agreement and an association between different players
aimed at integrating their operations and goals. An arrangement of the type developed for a given
project is referred to as project alliancing or alliancing contract.
Project alliancing is defined as a project delivery technique based on a joint contract between the
main players to a project., whereby the stakeholders assumes a joint responsibility for the process
of design and construction of the project to be implemented through a joint organisation. And
whereby the stakeholders share both negative and positive risks related to the project and keenly
observes the principles of accessing information in order to purse close collaboration (Sweet,
2011).
Project alliancing is a collaborative delivery technique by nature, which is projected to safeguard
cooperation through the contract forms used. Project alliancing give emphasis to trust between
the parties involved in the project implementation, commitment to the aims and cooperation. In a

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working project alliance, the stakeholders keep up team work and keep active and proactive
information exchange. The project parties respect each another’s opinion and consider them in
their own activities (Scott, 2012).
From the past experience regarding to the project alliancing have been up to date exclusively
positive. The technique has been reported to speed up the implementation, cut the project costs,
and has greatly assisted in attaining other several qualitative aims of the project. Implementing
this technique into anew project, earlier experience must however be regarded as possibilities,
there is no certainty of the project success.
By adopting this technique of project alliancing into a new project there are potential weakness
and benefits as discussed below.
Possible benefits for adopting project alliancing technique into a project.
The project can be implemented quickly by adopting the project alliancing method, this is due to
the early selection of service providers and cooperation. The earlier selection of the service
providers and other parties who are usually included in the implementation of the project gives
sufficient time to do proper plann9ng on how the project will be implemented.
Project alliancing allows the transfer of knowledge and skills; this can be attributed to high levels
of collaboration among the various players in the implementation of the project. Also the
collaboration can result into professional development of the various staff. Who are involved in
the implementation of this project.
Adopting the project alliancing technique into the project can greatly help in decision making
since it is based on the comprehension know-how, and at the same time the project risks are
clearly understood more holistically than normally.
With the implementations of project alliancing in the project the life cycle economy of

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implementations improves together with increased responsibilities because of the joint approach
on how the project will be implemented.
The innovation opportunities on how the project will be implemented will improve due to the
collaboration that is associated with project alliancing at the same time the sector development
will also improve due to the collaboration of the various parties who are involved in the
implementation of the project (Chan, 2015).
Project alliancing permits benching from the other projects that were carried out by various
parties who alliance to work on the current project. With that it is possible to eliminate the errors
that were likely to occur since the parties who are involved in the implementation already are
aware of them and will try in all ways possible to
eliminate them.
Adopting project alliancing into the project will minimise the need for contract management
because of the changes that will be witnessed during implementation and various interpretations
from the various parties involved in the project.
The incentives associated with project alliancing will boost the realisation of qualitative goals
which are related to the interest groups i.e. the environment, society among others. With that the
project will be of great importance and will benefit many as compared to when it was to be done
in a sole way.
Limitations of adopting project alliancing into the project.
By adopting the project alliancing method into a project there is usually shared risks and
collaboration model which limits the possibilities of seeking compensation for the mistakes that
have been committed by others. With that majority of those who are to be compensated end up
not being compensated and due to that the morale of various parties is lowered.

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In the alliance relationship the liability insurance may not be in a position of covering damage
caused by one alliance partner to another.
The joint discharge duty of warranty of duties after the implementation of the project alliancing
technique is a great problem as the organisation has practically dissolved.
The close cooperation and changed roles associated with the project alliancing method offers an
opportunity for the evaluation and recruitment of staff and equipment from other companies.
The project alliancing model needs commitments by the involved partners ‘s upper management
which may be a great challenge on a daily rush (Schlabach, 2016).
The project alliancing is a new concept and its introduction into the project may fail which can
be a big blow to the project and to the reputation of partners in general.
The introduction of project alliancing into a project may result in abandoning of the old set ways
in favour of this new concept of a collaborative culture, this change of this is very demanding
and laborious and due to that the chances of failing are very high.
The establishment of an alliance and maintaining it requires alloy of resources and efforts which
may take a lot of time to accumulate, and due to that a project is likely to fail in meeting the set
deadlines.
It is very easy to deviate from the initial aims of the project, when the project alliance technique
is introduced into the project. This is because it is very difficult to direct the project initiatives
according to the project goals when the measurable goals deviate from the original once (Derek
Walker, 2016).
Conclusion,
In conclusion, adopting project alliancing into a project will speed up the implementation, cut the
project costs, and has greatly assisted in attaining other several qualitative aims of the project.

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The innovation opportunities on how the project will be implemented will improve due to the
collaboration that is associated with project alliancing at the same time the sector development
will also improve due to the collaboration of the various parties who are involved in the
implementation of the project.
Strategies for controlling construction costs for both suspended ceiling and GIB based
ceilings on timber frames
The suspended ceilings hung from the ceiling joists having a metal grid. This kind of a ceiling
creates a cavity where wires, ductwork or pipes can be installed, the construction of a suspended
ceiling is not hard to install and does not require exotic tools. Some of the tools that are required
for the construction of a suspended ceilings include; 20-25-foot metal tape, nails, straightedge,
handsaw, ladder, face mask, safety goggles, hammer among others, the materials that are used in
the construction of the suspended ceilings include; runners, cross tees, wall moulding, lighting
fixtures, moulding nails, hanger wires, tiles and eyehooks. The suspended ceilings are known to
absorb sound and therefore they greatly contribute in sound controlling in a room. They come in
various sizes, styles and colour.
Any construction project can go wrong. When running construction projects one has to ensure
that the costs are kept as low as possible at all times. Nit is always good for the client, good for
the staff and good for the company. But for the mega projects the budget can get out of control
easily. Below are some of the strategies through which the budget can be maintained as tight as
possible and reduce the overall costs of installing the ceilings.
i) Hiring tactical labour
By hiring staff with multiple skills will be a great benefit to the overall construction of the
suspended ceiling and GIB based ceilings on timber frames. Because the moment they are fully