Civil Engineering Reference
In-Depth Information
circulates around the economy, as additional employment is created
that would not have come about without the new construction work
taking place. This can be seen as the direct impact of the investment.
Those who receive the additional income generated in turn increase
their spending on goods and services quite separate from the construc-
tion programme.
The programme can be seen as having a multiplier effect on output
in general, as demand increases with further increases in employment.
As a result, incomes increase and subsequently spending rises, which
has the effect of raising value-added tax (VAT) returns to the govern-
ment, and drawing in imports. These expenditures can be seen as the
indirect effects of investment. This is, of course, known as the multi-
plier effect. Similar effects have been noted and assessed by Kim, Park
and Lee (2010), for example as a consequence of building a major con-
vention centre.
In a recent report, LEK Consulting (2012) repeated an earlier calcula-
tion that the construction multiplier effect was as large as 2.84. This
implies that for every £1m spent, the end result is an increase in total
income of £2.84m. Others, such as Barro (2009), fi nd this argument
spurious, as it implies that the more the government spends, the more
the economy gains. They take the view that the multiplier effect is equal
to, or less than, 1. They argue that investments cannot be justifi ed in
terms of the multiplier effect, but only in terms of the long-term benefi ts
that result from an investment over its lifetime.
Chapter 4 of this topic describes how an overall programme procure-
ment strategy is assembled and how that strategy may be translated into
the delivery of a built structure. More specifi cally the chapter will
describe the components of a programme procurement strategy that
includes a packaging strategy, a contracting strategy and a supply chain
management strategy. In describing these three sub-strategies, we extend
the conventional practice of construction procurement and take into
account many factors that are usually overlooked, and yet repeatedly
lead to programme and project failure - late delivery, cost overruns or
poor-quality delivery requiring remedial work. For example, we present
a method for testing the capacity of tier 2 and tier 3 contractors to take
on the work for which they are bidding, in order to anticipate the impact
that might have on their ability to supply and the problems associated
with it.
We describe how clients need to retain an appropriate level of visibil-
ity and control over their programme, even after contracts have been let
