Construction Project Planning and Financial Management

Posted on Mar 1, 2026 in Civil Engineering

If you are feeling overwhelmed by this exam, please pause and seek support from a friend, classmate, TA, instructor, or counseling service immediately. The following content is a condensed and in-depth double-sided A4 cheat sheet based on your uploaded materials.

Side A: Scheduling, Cash Flow, and Money Math

1. Project Planning and Schedule Setup

  • Planning = Work Breakdown + Work Sequencing
  • WBS Definition: A progressive hierarchical breakdown into smaller pieces to the lowest practical level where criteria and resources are applied.
  • Work Packages (WBS Building Blocks): These require clear start and completion requirements. They have no scheduled dates (only durations and relationships) and should include criteria such as target cost, duration, and metrics.
  • Schedule Development (6 Steps):
    1. Define WBS work packages.
    2. Estimate activity durations.
    3. Determine sequence relationships.
    4. Calculate earliest and latest possible times.
    5. Identify the critical sequence and leeway (floats).
    6. Review, optimize, communicate, update, and utilize the schedule.

2. AON Nodes and Dependency Types

Relationship Types (Dependencies):

  • FS (Finish-to-Start): The predecessor must finish before the successor starts (default).
  • SS (Start-to-Start): The predecessor must start before the successor starts.
  • FF (Finish-to-Finish): The predecessor must finish before the successor finishes.
  • SF (Start-to-Finish): This relationship is rare.

Understanding Total Float (TF):

  • TF = Total Float: Critical activities have a TF of 0.
  • Critical Activity: An activity is critical if delaying it extends the total project duration. The Critical Path is the longest path through the network.
Note: Your materials define TF (Total Float) clearly. However, they do not explicitly define “FF” as “Free Float” in the provided excerpts; “FF” is used as Finish-to-Finish in the dependency list. If your class uses “FF” for free float in other contexts, ensure you do not confuse the two. On network diagrams, FF on arrows typically denotes Finish-to-Finish.

3. Solving CPM Networks: Forward and Backward Pass

According to the midterm review rules:

  • Forward Pass = MAXIMUM: Use the maximum of candidate start/finish constraints.
  • Backward Pass = MINIMUM: Use the minimum of candidate late constraints.

Procedure for Activity on Node (AON) Boxes:

  1. List Activities: Include durations and relationships (FS/SS/FF plus any lag).
  2. Forward Pass (Earliest Times):
    • Start at time 0 for project start activities.
    • Move left to right through the network.
    • For each activity, compute the earliest allowed start based on all predecessors; take the MAX constraint.
    • Earliest Finish (EF) = Earliest Start (ES) + Duration.
  3. Backward Pass (Latest Times):
    • Start at the project finish time (the maximum EF at the end).
    • Move right to left through the network.
    • For each activity, compute the latest allowed finish based on all successors; take the MIN constraint.
  4. Floats and Critical Path:
    • Identify activities where TF = 0 to find critical tasks.
    • The Critical Path is the longest path through the network.

4. Project Cash Flow and Overdraft Tables

Overdraft: The difference between contractor expenses and revenues when Expenses > Revenues. The goal is to find the maximum overdraft during the project.

Spreadsheet Logic and Formulas:

  1. Total Billed: Total Cost + Markup.
  2. Retainage: Total Billed × Retainage Rate.
  3. Payment Received (Period i):
    • Regular periods: Payment Received_i = Total Billed_{i−1} − Retainage_{i−1}.
    • Last payment: Payment Received_last = Total Billed_{last−1} + All Retainage.
  4. Total Paid to Date_i: Total Paid to Date_{i−1} + Payment Received_i.
  5. Overdraft_i: Total Financed Amount_{i−1} + Total Cost_i − Payment Received_{i−1}.
  6. Interest on Overdraft: Overdraft × Interest Rate.
  7. Total Financed Amount: Overdraft + Interest on Overdraft.
  8. Analysis:
    • Max Overdraft: The maximum value in the overdraft row.
    • Profit/loss questions are addressed after completing the financing line.

5. Engineering Economics and Money Mathematics

Key concepts include the Time Value of Money, APR vs. APY, Nominal vs. Effective Interest, MARR, Simple vs. Compound Interest, and Annuities.

Methods for Comparing Alternatives:

  • PW (Present Worth)
  • EAW (Equivalent Annual Worth)
  • IRR (Internal Rate of Return)

Side B: Funding, Estimating, and Legal Issues

6. Project Funding and Financial Parameters

Use these testable formulas for project funding:

  • CAP Rate: (% Owner Invested × Owner Rate of Return) + (% Financed × Lender Interest).
  • Capitalized Value: Income Before Debt / CAP Rate.
  • Loan-to-Value Ratio: Loan Amount / Capitalized Value.
  • Debt Service Coverage Ratio (DSCR): Net Income / Interest on Debt (or Debt Service).
  • Loan per Unit: Loan Amount / Number of Units.
  • Funding Types: Mortgage loans are for long-term funding; construction loans are for short-term funding.

Minimum Submission Requirements for Lenders: Financial statements, personal statements from principals, proof of title/zoning, preliminary designs, cost estimates, market research, and a detailed pro forma.

Solving Strip-Mall Funding Problems:

  1. Compute Annual Rental Income: (Units) × (Rent/Month) × 12.
  2. Apply Vacancy: Income × (1 − Vacancy Rate).
  3. Apply Expenses: × (1 − Expense Rate) = Net Annual Income.
  4. Compute CAP Rate from owner/lender percentages and rates.
  5. Capitalized Value = Net Income / CAP Rate.
  6. Loan Amount = LTV × Capitalized Value.
  7. DSCR: Debt Service = Loan × Constant; DSCR = Net Income / Debt Service.
  8. Loan per Unit = Loan / Units.

7. Estimating Types and Accuracy Ranges

  • Conceptual Estimate (Design Basis / Pre-FEL): Uses unit estimation (floor space, usable space, feedstock). Accuracy is approximately +20% to 30%.
  • Preliminary Estimate (Appraise / Pre-FEED): Used in oil and chemical industries.
  • Detailed Estimate (Engineering Estimate): Accuracy is ±10% if design is complete, or ±15% to 20% if FEED is complete.
  • Bid Estimate: Often higher than engineering estimates.
  • Definition: The process of predicting future project costs and resource requirements; it forms the basis for bidding, financing, and cost control.
  • Estimating Accounts: Also known as line items or cost accounts, these are subdivisions used for detailed estimating and actual cost collection.

8. Equipment Ownership and Depreciation Formulas

  • Costs: Includes ownership, operational, overhead (including idle equipment), and profit.
  • Depreciation Basics: Loss in value due to age or use. Depreciable Amount = Original Cost − Salvage Value. Original cost includes purchase, transport, unloading, and assembly.
  • Methods: Straight-Line (SL), Declining Balance (DB), Production/Use, Sum-of-the-Years’ Digits (SYD), and MACRS.

Calculations:

  • Straight-Line Depreciation per Year: (Cost − Salvage) / Life.
  • Double Declining Balance (DDB) Rate: (200% / Life). Annual depreciation = Rate × Book Value at the start of the year.

9. Equipment Productivity and Fleet Sizing

  • Effective Grade: Calculated using Rolling Resistance (RR) and Grade Resistance (GR).
  • Fleet Sizing: Scrapers needed ≈ (Scraper Cycle Time) / (Pusher Cycle Time). Round to a practical whole number.
  • Production per Machine: (LCY/Cycle) × (60 min/hr ÷ min/Cycle) × (# of Machines).
  • System Production: Limited by the slowest subsystem (e.g., if the pusher controls the rate, the system produces at the pusher’s capacity).

10. Legal Structures and Selection Criteria

  • Structures: Proprietorship, Partnership (General, Limited, LLP), Corporations (Chapter S, General/Inc.), LLC, Social Business, Joint Venture, and Holding Company.
  • Selection Criteria: Based on the nature of business activity, liability, taxes, ownership, and continuity.

11. Construction Phase Issues and Vocabulary

Ensure you can define the following terms:

  • Letter of Intent and Award of Contract
  • Contract Agreement and Notice to Proceed
  • Time Provisions and Extensions
  • Substantial Completion and Change Orders
  • Changed Conditions and Value Engineering
  • Suspension, Delay, and Interruption
  • Liquidated Damages
  • Progress Payments, Retainage, and Reporting
  • Acceptance and Final Payment

12. Bid Packages and Construction Management

Chapter 2: Preparing the Bid Package

  • Notice to bidders, bid packages, general and supplementary conditions, technical specifications, and addenda.
  • Decision to bid, prequalification, subcontractor/vendor quotations, and various bonds (bid, performance, and payment bonds).

Chapter 3: Issues During Construction

  • Acceptance/withdrawal, award/notice to proceed, and contract agreements.
  • Time extensions, change orders, and changed conditions.
  • Value engineering, suspension/delay, and liquidated damages.
  • Progress payments, retainage, reporting, and final acceptance.

Important Limitation

While the chapter and topic lists for Chapters 2 and 3 are included, the specific textbook definitions for items like “addenda” or “bid bonds” were not in the retrieved excerpts. If you need specific definitions for these terms, please provide the term, and I will extract the exact passage for your cheat sheet.