Your assignment is to prepare and submit a paper on a basic outline of economic considerations that come to play in construction management. According to the research findings economic theory, despite its crucial impact upon the ultimate success of construction projects and corporations, is often insufficiently understood by construction management professionals. Warren argues that this is due, at least in part, to an insufficient linkage between economic theory and the contexts of construction applications that such professionals hold as their primary disciplinary concern. After all, most construction professionals enter the engineering and building field because they want to design and construct physical structures, not in order to apply economic theory. However, as Hillebrandt argues, basic economic theories must be weighed when approaching construction management because they impact everything from cost of contracts, procurement of resources, and pricing of services offered. In this section, a very basic outline of economic principles that apply in construction management will be offered. The presentation here is kept deliberately simple because, as De Valence argues, construction economics has yet to define a consensus approach to economic theory that accommodates the conditional realities of construction management. Specifically, De Valence argues that construction economies, as a “still emergent” field, has not yet developed a set of disciplinary applications of economic theories, but merely borrows from a number of other fields, such as finance or economics itself. This is clear in discussions offered by Warren, (2001), Ruddock (2000), Hillebrandt (20002, and others, who often argue from theoretical principles that are applied generally to specific construction case studies. While De Valence (2001) argues that construction management has developed as a discipline for managing the processes and stages of production, therefore, construction economics has not yet found a suitable approach for managing the various economic implications that come to play at each of the various stages. In light of this realty, the discussion of economic theory here will include only the most basic concerns as they apply to the more general applications of construction management. There is no economic factor that impacts upon construction management to a greater degree than the relationship between price and demand for construction services. Ruddock (2009) argues that demand constitutes a major concern for construction economists because it is at the heart of the problem of forecasting costs as well as setting prices that ultimately drive competitiveness. Table 1 provides a simple view of demand concerns as they apply to such pricing and cost impacts. Table 1. Relationship between Demand and Price/Cost Source: Riley, 2006.
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Your assignment is to prepare and submit a paper on a basic outline of economic considerations that come to play in construction management.