1. Importance of Labor Cost and Material Cost Knowledge to Construction Contractor?

Labor and material costs are among the direct costs that a contractor must estimate and submit during competitive bidding. Labor costs outline how much the contractor is required to pay for the labor, and they provide the contractor a checklist to estimate the total cost they will incur for the project with regards to issues regarding the availability of skilled labor, market conditions, contract wage regulations, and issues of laborer insurance and benefits should they get the tender (Bennett, 2004). For materials costs, different factors affect the availability or quality of materials such as whether the materials to be used are in ready supply, whether the materials required can be measured accurately among others (Bennett, 2004). This information is inherently vital to have during bidding because once a bid is accepted and the contract goes through, these amounts become contractual obligations, implying that the contractor must do the work for the exact amounts that they present (Bennett, 2004). Having this knowledge therefore, implies that they are in better positions to have accurate approximations about these direct costs that they expect to incur in the project, and that they receive adequate compensation for all the costs they incurred.

2. Importance to Contractor who builds and modifies items for homes and businesses

A contractor who builds and modifies items for homes and business should have near accurate information about labor costs and the costs of materials (Bennett, 2004). This is extensive to knowledge about these within the current market and depending on the type of project they are going to undertake. This is because, a contractor such as this faces immense risks with regard to the availability of skilled labor, changing labor market conditions, the availability of materials, and whether the current materials in use can affect any future materials to be used in modification. Having this knowledge is therefore important because the contractor can aptly estimate the entire costs they are going to incur, and input correct information during the bidding process (Bennett, 2004). The aim here is to ensure that the diverse projects they get are not affected by either hiked costs due to unique materials, or lack of skilled labor to complete the project.

3. Effects of the Business cycle and the general economy to the construction industry

Because business cycles occur irregularly, they result in economic fluctuations that either affect the construction industry positively or negatively. A strengthening economy, results in increased employment and in consequence increased household income which drives the need for individuals to spend more (Bykau & Khvalko, 2017). Therefore, entrepreneurship is encouraged and is witnessed in the construction industry in the increase in opportunities for the construction of industrial, commercial and residential real estate due to rising demand. On the downside however, a weakening economy implies increased rates of unemployment and thus low income and in consequence low spending habits. Hence individuals are do not invest in projects within the construction industry.

It is important to consider, however, the counter cyclical demands that increase with economic downturn. Essentially, while individuals may not be purchasing homes for single families, they are looking for accommodation in apartments, or government funded multiple family residences or instead of building new office suites, business owners are repairing their older facilities (Bykau & Khvalko, 2017). This is a circumstance that construction industry players can take advantage of in economic downturns.

4. Impact of changes in home and property values on the construction industry players.

Home and property values are determined by the expansion or decline in the economy. Therefore, with economic expansion comes increased employment, output, construction, and price. This is because people in the construction industry are confident that there are more prospective buyers in the industry, more than those selling their homes (Bykau & Khvalko, 2017). These prices therefore, affect the rate at which homes are constructed implying that people in the construction industry have higher rates of employment. With the decline in the economy however, people in the construction industry may face increased rates of unemployment, unless they are agile and lean enough to respond to these macroeconomic changes by shifting their services to other projects such as repair or modification that are in demand at the time.

References

Bykau, A., Khvalko, T. (2017). Conditions and limitations for growth in construction industry:

the empirical evidence from Belarus. Issues in Business Management and Economics, 5(3), 37-44.

Bennett, L. (2004). The management of construction: a project lifecycle approach. Butterworth-

Heinemann, Oxford.