Construction Management Terminology

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the term for the process of estimating the future amount of costs of a construction project?

Resources Smoothing

Cost Forecasting (correct)

Retention

Cash Flow analysis

What is the term for the resources that may be used again and again, such as manpower and equipment?

General Resources

Non Consumable Resources (correct)

Direct Cost

Key Resources

What is the term for the ratio of the total present value of cash inflows to the cost of the initial investment?

Profitability Index (correct)

Internal Rate of Return

Cash Flow analysis

Net Present Value

What percentage of the cumulative retention is released on project completion?

50% Signup and view all the answers

What is the term for the difference between the present value of the cash inflows and the amount of the original investment?

Net Present Value Signup and view all the answers

What is the term for the rate of return at which the initial amount of investment equal the present value of all future cash inflows?

Internal Rate of Return Signup and view all the answers

What is the markup percentage for the contractor’s project budget?

20% Signup and view all the answers

What is the interest rate for calculating the additional cost of financing?

15% annually Signup and view all the answers

What is the term for a contractual agreement by the borrowers to pay the holder of the instrument fixed amounts of money at regular intervals until a specified date?

Bond Signup and view all the answers

What happens to the amount of capital required by a firm when the interest rate increases?

It decreases Signup and view all the answers

What is the purpose of preparing a worksheet of cash flow calculations for both monthly and bi-monthly measurements?

To calculate the additional cost of financing Signup and view all the answers

What is the term for the amount of money retained by the owner from every invoice before a payment is made to the contractor?

Retention Signup and view all the answers

What is the purpose of preparing graphs of cumulative cash in and cash out?

To visualize the project’s cash flows over time Signup and view all the answers

What is the relationship between the quantity of money demanded and the interest rate according to the demand curve for money?

Inverse Signup and view all the answers

What is the term for a financial analysis by which the size and timing of cash inflows is compared with the size and timing of the cash outflows used in the activity?

Cash Flow analysis Signup and view all the answers

What happens to savers' behavior when negative real interest rates are imposed on the national currency?

They decrease their savings in the national currency Signup and view all the answers

What method can be used to rank projects in terms of attractiveness to the company?

All of the above Signup and view all the answers

What is the period after which the remaining half of the cumulative retention is released?

Six months Signup and view all the answers

Which of the following statements is true about risk in project management?

Risk is highest in the earliest phase of the project life cycle Signup and view all the answers

Why does the owner propose to make measurements and payments every two months?

To reduce administrative costs Signup and view all the answers

What is the correct formula for Project Total Cost?

Project Total Cost = Direct Cost + Project Overhead + General Overhead Signup and view all the answers

What happens to the incentive for lenders to provide borrowers with funds when real interest rates become negative?

It decreases Signup and view all the answers

Which of the following is a characteristic of commercial risk?

The inability of a company to accurately predict the market's acceptance of its new product or service Signup and view all the answers

How can risks be quantified?

By multiplying the likelihood of a failure occurring by the impact of the failure Signup and view all the answers

Study Notes

Construction Management Terms

Direct Costs: Costs directly related to a specific project activity, including labor, material, equipment, and subcontractor costs.
Cost Forecasting: The process of estimating the future costs of a construction project.
Simple Linear Regression Analysis: A statistical analysis that establishes the relationship between independent and dependent variables to evaluate the impact of independent variables on dependent variables.

Resource Management

Non-Consumable Resources: Resources that can be used again and again, such as manpower and equipment.
Key Resources: Resources that are most important, expensive, and scarce, such as skilled labor or equipment.
General Resources: Resources used by all or most activities on the project.
Resource Smoothing: Modifying resource profiles to reduce fluctuations in resource usage during project implementation.

Financial Analysis

Cash Flow Analysis: A financial analysis comparing the size and timing of cash inflows with cash outflows used in the activity.
Retention: The amount of money retained by the owner from every invoice before payment is made to the contractor.
Net Present Value (NPV): The difference between the present value of cash inflows and the amount of the original investment.
Profitability Index (PI): The ratio of the total present value of cash inflows to the cost of the initial investment.
Internal Rate of Return (IRR): The rate of return at which the initial amount of investment equals the present value of all future cash inflows.
Bond: A contractual agreement by borrowers to pay the holder of the instrument fixed amounts of money at regular intervals until a specified date.

Financial Concepts

Interest Rates: The higher the interest rate, the greater the incentive for individuals to reduce current consumption and increase saving rates.
Keynesian Theory: Claims that the interest rate is determined in the money market at the intersection of the demand curve for money with the supply curve for money.
Nominal Interest Rate: Does not accurately reflect the cost of finance due to inflation.
Negative Real Interest Rates: Leads to savers' reluctance to save in the national currency and directs savings to a foreign currency.

Risk Management

Risks: Can be quantified by multiplying the likelihood of failure by the impact of the failure.
Technical Risk: Highest in the earliest phase of the project life cycle, especially with unproven technology.
Commercial Risk: Inability to accurately predict the market's acceptance of a new product or service.
Financial Risk: Exposed by a large up-front investment of capital.

Problems and Solutions

Project Budgeting: Total cost = direct cost + project overhead + general overhead.
Cash Flow Calculations: Worksheet preparation and graphs for both monthly and bi-monthly measurements.
Additional Financing Cost: Calculation of extra funding needed due to bi-monthly measurements.

Project Evaluation

Ranking of Projects: Based on maximum capital needed, profit, and payback period.
Project Attractiveness: Determined using net present value, profitability index, and internal rate of return.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

Test your knowledge of construction management terms, including cost estimation, forecasting, and analysis. Identify key concepts and their definitions.