Construction economics pdf

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Sources of finance. Related Books Free with a 30 day trial from Scribd. How innovative is construction? Comparing aggregated data on construction innovation and other sectors — a case of apples and pears, Construction Management and Economics, 21 6 , — Most capitalist countries have laws safeguarding competition. In the USA, anti-trust legislation prohibits monopolization, restraints of trade, and collusion among firms.

The fundamental idea behind this legislation is that free competition serves the general welfare best by limiting the power of any one party when determining price and quantity through the interaction of supply and demand Samuelson and Nordhaus The idea is to protect the weaker market side and therefore to enable a competitive market to develop that is sustainable and efficient.

Competitive markets are perceived as maximizing the welfare of society composed of all buyers and all sellers since in them long-run economic profit is zero. Economic profit is the difference between total revenue and total cost. The economic concept of total cost takes into consideration the opportunity cost of any activity, i. In other words, total cost includes all self-supplied services priced at the value of the best forgone alternative Hirshleifer and Hirshleifer In construction these are especially the income of the owner, interest on equity, and depreciation of plant and equipment.

Accounting profit is a different concept as it does not consider opportunity cost. Summarizing the above, it becomes evident that any treatment of collusion must draw on findings about markets, competition, and price setting mechanisms.

However, first we need to consider whether collusion poses a problem in construction. As will be shown, collusion depends at times on corruption and then the question arises whether corruption is problematic as well. The following section provides theoretical perspectives on construction markets, construction goods and actors, as well as competition and pricing. The conclusions summarize the arguments. Corruption Corruption can be defined as abuse of entrusted power for private gain. An example in construction could be a payment for preferential privileged information that can be used advantageously for the pricing of a project.

Corruption is widespread in construction. The construction industry is, according to Transparency International , the most corrupt industry, easily outpacing notorious sectors such as the defense sector see Table 3. Real estate and property development rank fourth. The lower the index number in Table 3.

Corruption is also a cultural problem: there are significant differences between countries. A cluster analysis of some industrialized and some newly developed countries by Transparency International yields the results of Table 3.

In this case, cluster 1 contains the least and cluster 4 the most corrupt countries of the sample. Benchmarks of the data can be found by interpreting additional survey results. It can be employed together with collusion to improve the situation of the seller in the market i.

Having won the pennant as the most corrupt industry seems to be a very doubtful honor. Collusion Collusion is the illegal cooperation of sellers in a market producing a cooperative instead of a competitive market result.

When sellers directly talk to each other to determine a market price, this is done by explicit collusion. In construction, we also use the term of bid-rigging. Tacit collusion does not rely on communication but on behavior or non-verbal communication.

In this case sellers follow a pattern of price-setting behavior, sometimes following a price leader Taylor Evidence of collusion in the construction sector is as overwhelming as the analysis of Transparency International on corruption. However, there exists no systematic database. As such, the evidence is more anecdotal. It is the sheer number of reports on collusion and their far-reaching statements that are overwhelming. Since collusion is illegal behavior, we must assume that publications about the problem are nothing but the tip of the iceberg.

A word of caution needs to be added: an inductive enumeration of facts can never prove a statement; it can only serve as an assessment of a problem. The above citations are neither representative nor inclusive; they cannot serve as inductive proof. A number of people in a number of countries on five continents state their opinion that collusion and price-rigging are widespread in construction, not more and not less.

However, the presented citations on collusion in combination with the data on corruption in the construction sector warrant us to treat corruption and collusion as serious problems.

Theoretical perspectives This section on construction markets defines the goods traded as contract goods using the framework of New Institutional Economics NIE.

Such a perspective also allows a discussion about the type of goods traded. Are these services or products, homogeneous or heterogeneous? The price evolves typically in three stages: bid price, contract price, and final price. This implies that quantity and price are not determined simultaneously when the quantity stays the same throughout the process, again an unexpected insight.

Competition is a core concept in market economies and this will be briefly surveyed. It will be shown that pricing for complex contract goods is a difficult task burdened by errors. The client can make use of different pricing mechanisms, sealed-bid auctions being the preferred option. They provide the best economic outcome for the client. Construction markets In markets, buyers and sellers meet to agree on a price and a quantity for a good with ceteris paribus applying to quality.

Construction goods have a special feature; they can be characterized as contract goods. A transaction comprises exchanges and contracts by definition. On the one hand, an exchange is a transfer of property rights without promises and future responsibilities except warranties. On the other hand, when signing a contract, one party makes an investment and the profitability of this depends on the future behavior of the other party Alchian and Woodward As such we can differentiate between exchange goods and contract goods.

Construction goods belong to the latter category. When the contract is signed, the seller contractor promises to produce and deliver the good without defects as specified in the contract and the buyer agrees to pay without delay. As such, construction goods be they tangible structures or intangible services are very different from exchange goods that are produced before purchase.

The principal is making an investment typically the client and depends on the behavior of the agent typically the contractor. The market can take on any form, from perfect competition through imperfect competition and up to monopolistic structures. It will be shown that it is quite necessary to use different perspectives for the economic analysis of collusion. First, we need to consider an ex-ante and an ex-post perspective for contract goods. To be more precise it helps to define two ex-post perspectives: 1 ex-post signature and 2 ex-post handover.

Second, markets are to be split into three levels: national, regional, and project market. Third, we must be aware of long-, mid-, and short-term economic effects. The importance these definitions will become evident in the course of the argument. Opportunistic behavior is defined as self-interest seeking with guile Williamson Under these assumptions sellers have a number of options before ex-ante and after ex-post signature signing a contract and so do the buyers.

Among the possible opportunistic actions are: hidden characteristics, adverse selection, hidden intentions, hold-up, hidden actions, and moral hazard. All these constitute sources of uncertainty for the buyer as the principal Table 3. Collusion is a form of a hidden action ex-ante and it can lead to adverse selection through the buyer by not choosing the optimal contractor and contract price.

During the tender phase — i. In the framework of NIE a principal must expect that the agent will act with guile and possibly resort to collusion. This is a first theoretical perspective to support the anecdotal evidence of the previous section.

In this book, Chapter 10 on construction markets offers a variety of ideas about the characteristics of construction goods, discussing whether they are products i.

A seminal approach to defining services is by introducing the concepts of the degrees of materiality and integrativeness where the latter term means the degree of interaction between buyer and seller client and contractor. Products are material and non-integrative, services are immaterial and integrative Engelhardt et al.

Using additionally the tool of the ex-ante and ex-post perspectives the answer is clear: before signing the contract, construction projects take on the form of a service, they are immaterial and highly integrative.

During construction they change their form and at handover they are clearly products. The designs have materialized and the integration of the external factor client has come to an end except for warranty Figure 3. For the sake of simplicity we will limit the analysis to ex-ante intangible and ex-post handover tangible contract goods.

This definition excludes design an intangible contract good as well as supplies and equipment exchange goods. For such exchange goods a different type of argument than the one presented is appropriate. It will prove beneficial remembering that collusion takes place before signing the contract and as such it deals with a service. Another question discussed in Chapter 10 is whether construction goods are homogenous or heterogeneous.

The sellers on the supply side offer ex-ante a performance. We can assume that these performances are heterogeneous. There is a continuum of differentiation for firms and their performances caused by available technology and financial power.

A small contractor cannot implement economically a mega-project and a large contractor cannot build economically a one-family home.

A look at the built environment proves the heterogeneity of construction goods delivered from an ex-post handover perspective. These two statements are true for national and regional markets. They do not hold true for the project market. A decision for the lowest bid together with a design—bid—build approach classical procurement homogenizes the product.

The product design is provided by the client homogeneity by choice and the process design is not considered homogeneity by neglect. A design—build approach together with a differentiated evaluation of the bids will provide for a very heterogeneous product and process offer by the contractors. Since we are concerned with sealed-bid auctions, we are discussing a homogenized product on the project market. Homogeneity is a key to enable collusion. For ease of analysis there exists a typology as shown in Table 3.

In Table 3. Those emboldened are prevalent. As it is important to distinguish an ex-ante and an ex-post perspective for contract goods, it is also imperative to differentiate between different market levels: there is one national market for each economy, many regional ones and even more projects markets.

Regional markets can have different structures than the national market. Whatever we have learned about construction markets in the past ten years, it certainly also reinforced the idea that the different national markets around the world are much diversified and the same holds true for regional markets.

Every economy has its own business cycle; there is no linked global interaction. Culture also influences preferences and behavior. Therefore, we should be cautious when making general statements.

Typically, national construction markets are highly fragmented with regard to demand and supply. The five biggest contractors in the USA have a market share of 3.

Alone, Japan is an exception with a value of Before we can expand the argument further we need a definition for a market. This market definition encompasses the types of goods and services traded and the geographic extend. If in a market all sellers hypothetically increase their prices by 5 percent and as consequence gain higher profits, we face a market.

There is no alternative to the buyers and they have to accept the price increase Taylor With regard to construction we can observe that there are no possible alternatives to offices, houses, bridges, or tunnels except to delay the investment. Thus, price increases will have to be accepted by clients and we face a market. The geographical extent of the market depends on the demanded goods. It will be small for one-family homes, larger for heavy civil engineering projects, and global for mega-projects.

However, a general statement in the construction industry is that markets are regional. This statement applies to most demanded goods. A builder from Oklahoma will seldom join a bidding contest for a shopping mall in Maine. The same holds true for smaller construction markets such as Germany. Overall and most of the time these regional markets will also be in perfect competition.

In sum, national and regional markets for general contracting are mostly in perfect competition. Data to support this assessment are given below for Germany. Oligopsonies exist in regional markets. Roads and railways are examples. The clients are public, be it federal, state, or local authorities. There are just a few active on any regional market 3—5. The contractors are more numerous, typically from 10 to 20 in number. If for some reason the number of contractors drops to around 3—5, the market structure is a two-sided oligopoly.

Monopsonies also exist. Fellows et al. There are others like the Transrapid trains in China, however, with a difference on the supply side: there are not many but just a few sellers, establishing a limited monopsony.

Two-sided monopolies exist always once a contract is signed ex-post signature. Ex-ante two-sided monopolies are hard to imagine. On the other hand, there are no examples for oligopolies, monopolies, or limited monopolies except for some unimportant exceptions. The structure of construction markets provides the buyer with a considerably higher market power in oligopsonies, monopsonies, and limited monopsonies. This constitutes a notable deviation from most other markets.

While treatment of monopolies and oligopolies is found in most standard texts on economics or in the more specialized literature on industrial organization, this does not hold true for monopsonies or oligopsonies e. Tirole Anti-trust regulation was passed to protect the weaker market side, typically the buyer. We face in construction the strange situation that the structurally stronger market side is protected by law, while the weaker is exposed to exploitation.

However, a discussion of market structure in construction needs still to be expanded for the fact that demand is very specific, there exists no mass production. With the exception of prefabrication, buyers are not willing to trade between goods. Homes, offices, sports facilities, churches, bridges, and tunnels are individually designed by the client with the help of architects and engineers. Contractors are then requested to implement the design. This applies to the traditional design—bid—build procurement method as well as to design—build where the contractor in addition becomes responsible for the detailed design.

The conceptual design, i. The thought becomes absurd when we think of projects like the Channel Tunnel. The implications of the argument are that the vast majority of designs by the client create a single market for this designed product: one buyer opens a market for a specific product and determines the market conditions by open tendering monopsony , selective tendering limited monopsony or direct negotiations two-sided monopsony.

If we apply the FTC market definition and hypothetically imagine a rise in prices for a project by 5 percent, it most likely will be accepted by the client. He has only one alternative: to abstain. Additionally, how is he to detect the rise in prices by 5 percent? There is no accurate benchmark to measure it against; he faces price intransparency. This whole argument started with the anecdotal evidence on collusion. While we were not able to present conclusive data on the extent of collusion, it became clear that collusion is to a certain degree part of business in construction.

The point of collusion consists in raising prices that the client will accept. Based on the FTC definition, this is only possible if there are project markets. In sum: while contractors offer their performance ex-ante in perfect competition, oligopsonies, or monopsonies, they always face for the focal project a monopsonistic situation once they have submitted their offer.

Since they are producing contract goods, this is only true until signing of the contract. During execution the situation becomes a two-sided monopsony Figure 3. In Figure 3. Before deciding on a bid, a supplier of contract goods can only signal his willingness to compete based on his ability to perform.

After this decision, he is in possession of a design be it a conceptual or detailed design that allows him to focus on a product. From the supply side he offers a future product, while from the demand side the client receives an offer for a service the willingness to construct the product.

The typical situation in sealed-bid auctions will be a move through three phases: in the beginning, before the decision to bid, there is an anonymous market with no direct contacts, just the basic willingness to supply and demand construction goods.

With the submission of this bid, all bidders accept the obligation to uphold the offer as is for a specified time, while the client is free to accept any one or no offer at all, establishing a monopsony situation.

In many cases he can negotiate the price with a bidder using information from others. After signing the contract both sides agree to fulfill the contract entering into a two-sided monopsony. The price also changes during the process. The bidders submit the tender price. Due to negotiations in the monopsony the price generally will be reduced to become the contract price. Competition Competition is seen in economics as a mechanism guaranteeing efficient use of resources.

However, this rests on three assumptions: 1 rational consumers following self-interests; 2 rational firms maximizing profits; 3 perfect competition as market structure Stiglitz More troublesome is the lack of perfect competition in the construction market as discussed above. Marginal cost is defined as the cost for the last unit produced out of a large number of units.

This concept is not easily applied to single-unit production. It must have been assumed that the relevant markets are in perfect competition. Looking at the discussion of the market structures in construction, we face the question how the weaker market side sellers is to be protected against exploitation and how behavior of the stronger side buyers can be regulated. It seems evident that the described situation is not sustainable.

These possibilities are discussed in general next, followed by a treatment of sealed-bid auctions. Contract goods are very different from exchange goods; they are fabricated after signing a contract, are most often single units, and are of considerable complexity.

This implies three major problems for estimating construction projects: 1 there is no repetitive production of the same good and thus no direct learning about pricing. When someone produces a million pencils, it is of little importance whether the initial price is correct, it can be adjusted with time. In single-unit production the initial price cannot be changed because the contract is signed and binding before production starts; 2 the inherent complexity of many construction projects makes it hard to consider and judge all relevant facts; 3 there is no control over the production conditions; productivity is influenced by the environment as well as by the process evidence of the client.

As construction is a highly integrative process with the client being an important external factor of production, he must know what is required of him process evidence. Thus, productivity also depends on him. Milgrom discusses two premises in conjunction with pricing of complex contract goods: the private and the common values assumption.

The private values assumption states that contractors can determine their cost correctly labor, materials, equipment, subcontractors, indirect cost and Milgrom does not accept this assumption to hold. All detailed analyses of single estimates and the bid-spread of submissions support the statement.

The estimating approach takes this into consideration and deals with the problem by detailing a structure into a widespread work breakdown schedule. Judgment mistakes occur for most items; however, they are not systematic.

Over a large amount of items these cancel each other out and there is a tendency towards a mean value. In an example of a post-construction analysis of a construction project, the differences in single items reached almost percent planned vs. The contractor was lucky; he had overestimated the total cost by this amount Birol The second assumption is accepted by Milgrom: all companies face approximately the same cost C , the common values assumption holds.

In different segments of the market companies of equal size tend to compete against each other, therefore the purchasing power of the companies is the same. Shortterm advantages of one competitor i. Another argument is put forward in Chapter 4 of this book. This argument might be true in some countries, in others it is not.

It is possible to define countries with a trading orientation many Asian countries and those with a crafts orientation e. The value of subcontracting as percentage of the total production value has never exceeded 32 percent over the past 30 years in this country. Yet, subcontracting also contributes in such a case to the tendency towards a common value. The lowest bid lies below the mean value and therefore below the mean price P0.

Pricing mechanisms There are a number of pricing mechanisms. He starts with a low-price request and gradually increases the price until the high bidder acquires the good. Auctioneer-controlled auction: A seller offers a good. The auctioneer decides about his price increases starting with a low-price request. The high bidder wins. Bidder-controlled auction: A seller offers a good. The bidders decide about their offers and increases during the process. Inscription: A seller offers a good.

He accepts bids by buyers and chooses the highest bid. He starts with a low-price offer and gradually increases it. The award goes to the first bidder to accept. Auctioneer-controlled licitation: A buyer announces as a monopsonist that he wants to buy a specific good.

He also announces his maximum price. Then he lowers the price by amounts chosen by him. The award goes to the low bidder who is the last remaining. Bidder-controlled licitation: A buyer announces as a monopsonist that he wants to buy a specific good. Then the bidders lower their prices by amounts chosen by them.

Sealed-bid auction: A buyer announces as a monopsonist that he wants to buy a specific good. He accepts bids by sellers. The award goes to the low bidder. The client is the overall entrepreneur in construction.

He must have a project idea, a parcel of land, and financing to begin with. Then he initiates the design and chooses a pricing mechanism which is accordingly structured to serve his purpose. It is a buying situation. The discussion of the selling situation is discussed above for completeness only Figure 3. Analyzing all the eight options, there are two with much control from the initiators side: inscriptions and sealed-bid auctions.

In both cases, the other side must react with absolutely no knowledge gained from the process, they have one-shot opportunities. In all the other six options information is gained on the behavior of the competitors in the bidding process. Sealed-bid auctions The result of sealed-bid auctions is a monopsony market structure for any given project.

With this assumption we can calculate the expectancy values of winning a bid depending on the number of bidders. The equilibrium price is the price resulting from the interaction of demand and supply under the conditions of perfect competition, i. These can be classified as follows: 1 The physical nature of the product. The final product is often large and expensive, and is required over a wide geographical area. Buildings and other structures are for the most part specially made to the requirements of each individual customer, although there is the provision for some speculative work, particularly in housing.

The nature of the product also means that each contract often represents a large proportion of the work of a single contractor in any year, causing substantial discontinuity to the production functions.

Discuss the economic outlook for the construction industry over the next five years. The answer to this question must largely be of a speculative nature, but nevertheless the following factors should be considered.

Government policy Because government is a large client of the construction industry, any change in its policy towards new buildings or engineering projects is likely to have a considerable influence on the economic. A reduction in housing, educational buildings, hospitals and the road-building programme will have serious effects on both the professions and the constructors. The trend has been to spend more upon the rehabilitation and maintenance of works in preference to new projects, although the actual amounts invested have been inadequate.

Industrial activity Another major client of the construction industry is manufacturing industry. A reduced market both at home and overseas will only discourage industrialists from expansion into new or enlarged premises. The effect of a shrinking market has a knock-on effect on smaller manufacturers and other industries, with a consequent loss of possible new building schemes. This reduction in economic activity has a far-reaching effect, resulting in a lack of confidence generally on any possible future development.

World economic trends A world recession affects particularly a country's exporting capabilities. These results in a reduced home base, which may increase costs and therefore prices charged, because of reduced economics of scale, resulting in further recession. This can only result in a decline for construction orders in many areas and types of work.

Political trends The political influence of a government can have immense effects upon the economic outlook of the construction industry, and must never be underestimated. For example, a government committed to increased public expenditure in capital projects is likely to provide a considerable proportion of work for the industry. However, such a government may be more inclined to develop a public-building corporation or expand the direct labour organisations, which may thus provide mixed fortunes for the building industry.

In the long term this may not directly benefit the private contractor. Because a large proportion of expertise lies in the private sector, this may mean the switching of allegiance of many of the industry s employees. An alternative political viewpoint may favour encouraging the private sector to expand at the expense of the public sector. Energy sources A large investment has been made in recent years in both the gas and oil industries. Nuclear energy has also been expanded.

Research is currently being undertaken to find alternatives to rapidly diminishing fossil fuels and to nuclear power which is fraught with political argument. Whatever energy sources are used, all involve the construction industry for capital projects. Conservation There has in recent years been an unprecedented attempt to conserve, repair or modernize premises. This has been particularly true in housing, where the emphasis has shifted away from new construction and towards the rehabilitation of existing properties.

Considerable expertise has grown up around this work, and this sector of the construction industry is still increasing. Changes in technology The construction industry is today still very much a labour-intensive industry.

Automation resulting in reduced labour forces in manufacturing industry has not been matched in the construction industry. System building, with components manufactured under factory conditions, has moved only a little way in this direction. Apart from speed of erection, this type of building has disadvantages in cost, function, appearance, life and recurring costs. Some changes in methods and' materials used for construction are expected during the next decade.

Mechanization of the building site has made some inroads, but in future this may make an even greater impact. Silicon chip The chip has begun to affect the way we run our lives. This could have many diverse effects upon the construction industry, e. The chip will also have far-reaching effects on the building professions, as we move towards an 'electronic office.

Suggest some of the underlying reasons for the poor performance of completion times in the UK. There have been a number of comparisons between the US and UK construction industries over the past decade. All the work arrives at the same conclusion: that the US construction industry produces buildings more quickly than the UK. The results of the earlier studies have caused many aspects of the UK approach to construction to be questioned. Often it has been assumed that there must be a single simple cause for the inferior UK performance.

There is, however, no general agreement on which factors are important and which are not. There is no established theoretical framework to guide the study, and the current level of understanding is not highly developed. Some of the factors that might be considered when comparing building performance in these two countries are listed below. They are not ranked in any order of importance. It has been suggested by others that the real difference between the two countries is the absence of the quantity surveyor in the US, and his important role in the UK.

From these reports it is evident that the quantity surveyor is not one of the reasons for our poor performance. Indeed the report suggests that the US should consider employing quantity surveyors for the good of their construction industry.

A lengthy design process, the necessity for variations, higher standards of quality control, the delayed involvement of the contractor, restrictive labour practices, less mechanization and a less predictable workload are probably some of the main reasons.

These are now examined in greater detail. The US clients know that changes to the building during the construction phase are very expensive and offer poor value for money, and are generally discouraged. Changes to the contractor's work programme can be a major factor causing delay. The US procedures have to respond to private sector demands for speed, and a clear allocation of responsibilities and risks. The US clients are much more prepared to adopt unorthodox procedures. In this respect, it can be argued that US buildings are inferior.

For example, inaccuracies and tolerances in concrete work are much greater than in the UK. In the US, buildings decay and are then demolished. This latter approach of providing new buildings leads to both fast and cheap building performance. A longer design period is often required in the UK in order to comply with the planning regulations. The latter are also more intensively occupied than in the UK, so that the cost to the users is therefore less.

The separation of design from construction always involves major time and cost penalties. The US system involves the contractor's influence at the design stage, when account can be taken of construction methods. The traditional UK system prevents this involvement.

The dominant philosophy in the industry is 'time is money'. Many of these result from the willingness of US engineers and architects to accept alternative designs from the contractors and subcontractors, aimed at simplifying the building construction. They are thus kept to an absolute minimum, and emphasis is placed upon simple methods of construction.

The higher productivity is achieved partly through less complicated construction details and the use of more mechanical aids. The tendency is partly due to the fact that transportation in the US is easier because of their much wider carriageways.

Overtime in the US is unusual and incentive payments in the form of bonuses are not paid, owing to the higher hourly rates received by operatives. There is an ease of 'hire and fire' in the US construction industry, which alleviates the problems of the US contractor regarding resource levelling. US unions generally are.

The unions' attitude is generally that if their construction industry is healthy, then their members will be employed, and they are prepared to adopt a flexible attitude to ensure that this is so. Cost control 'Cost control of a construction project is primarily the responsibility of the quantity surveyor. The quantity surveying profession has gradually evolved over the past years, although in more recent years there has been a rapid expansion of its services into new areas of work.

In addition they often played an important role with engineering-type projects. Their overall importance, therefore, in the construction industry has diminished somewhat.

Civil engineers used to accept and regrettably some still do that quantity surveyors were unnecessary. This stems largely from a misunderstanding of the work of the quantity surveyor and the work that he performs. Quantity surveyors, themselves, have often shown too much preoccupation with building projects at the expense of other types of work in the construction industry, and so have until recent years left cost control to ill-equipped architects, engineers and builders.

Although these other members of the construction profession should be aware of the effect of their actions on construction costs, cost control should primarily be the province of the quantity surveyor. The cost control of a construction project, or indeed any type of project, should start at the inception stage and not finish until the project is handed over to the client. Even then the final cost is still likely to be agreed, and there is scope for cost control of the recurring costs in use throughout the life of the building.

The following factors support the viewpoint that this area of responsibility is naturally that of the quantity surveyor. They are not generally interested in measurement, valuation and cost control. Their training and education for this work is negligible and inadequate. The efficient system of cost control in the building industry is due largely to the efforts of the quantity surveyor.

The days of the addendum bill have largely disappeared, and where a project is adequately designed and documented, the problems of claims, accepted in certain quarters of the construction industry, should not occur.

Even amidst mounting pressure and cynicism, the quantity surveyor has been one of the few professionals in the construction industry to show signs of continuing development. The cost control of major building projects has long since been the territory of the quantity surveyor, and he has an even more important role to play in the administration and cost control of minor or small works projects. However, the quantity surveyor does not necessarily use die same techniques for different types of project, but adapts his methods and processes for the type and size of project under examination.

In the area of package-deal projects which are assumed to be increasing in number , a wise client is always likely to retain the services of the independent quantity surveyor, not only for cost advice but also cost control throughout the duration of the contract. The quantity surveyor is also the more suitable person for the cost control of engineering projects, such as civil engineering, process plant engineering and mechanical services within buildings.

In recent years, quantity surveying and cost control methods have been used more widely where they were absent before in countries like the USA and in Europe. They have for many years been employed in countries that are members of the British Commonwealth. The argument that the quantity surveyor is really a cost advisor and does not in practice control costs is merely a play on words.

Quantity surveying is seen as the profession that undertakes the function of cost control within the building industry. It could be argued that since the designer is responsible for issuing and approving variations, he dictates the amount of extra works, and looks to the quantity surveyor for cost advice and for cost records. On the other hand, there is the point that since the quantity surveyor prepares the valuations for interim payments, he controls the cash flow between client and contractor.

It can also be reasonably argued that during the design process without the cost 'control' from the quantity surveyor the project could get financially out of hand, as often occurred before quantity surveyors developed cost planning.

The same argument would be used in support of post-contract quantity surveying services. Discuss this statement and comment upon the comparative cost efficiency of die services and building elements.