Reference no: EM132431768

Construction Economics and Procurement - Glasgow Caledonian University

Assignment Brief

This assignment is based on the proposed extension to the Edinburgh Tram system from York Place through to Newhaven.

Task:

Estimate the impact of the project on the local economy during the construction phase. This should focus on the direct, indirect and induced effects of the works on: Gross Domestic Product, Employment, Income, and Imports. Use the Input-Output Tables for Scotland provided for the basic estimate making any adjustments deemed necessary. The negative impacts of the construction including traffic disruption should be considered. Please state any assumptions made.

This deals essentially with backward linkages from the construction works to the local economy in terms of output, expenditure and jobs created.

The key thing about spending on construction is that it is temporary. Hence expenditure of £60 million in one year will lead to increases. However, if the expenditure is at £55 million the next year, this will equate to a reduction of £5 million. So over the profile of the project, spending, jobs, imports etc., will end up exactly where they started.

Year	Dates	Actions	Construction Spend
2017	Q4	Tendering Process	£1 million
2018	To Q4	Tendering Process	£1 million
2018	From Q4	Preparation	£4 million
2019	From Q2	Construction	£15 million
2020	Q1 to Q4	Construction	£55 million
2021	Q1 to Q4	Construction	£78 million
2022	To Q1	Testing	£11 million
2022	From Q2	Operation	-
Total			165 million

Notional capital spending pattern

The expenditure on construction for the development plan for each of the years of the development plan is given above. The increase in construction output brought about by the investment programme in 2017 (£1 million) should be inserted in cell B12 of the sheet "Construction". This will enable the direct implications on Employment, Income, GDP, and Imports to be read from cells F20, G20, P20, and V20 respectively.

These are limited to the direct effects of the construction work. If the direct plus indirect effects are needed, the results can be read from D39, F39, H39, and J39 respectively. This will incorporate the implications on other industries such as materials supply from the additional construction work.

This will generate additional income throughout the economy. The direct plus indirect plus induced effects can be read from cells D58, F58, H58, and J58 respectively.

Insert the annual spend (in £ million) in Cell B12 of Construction. The main figures on spending etc. can be read off the sheet (in £ million). The impact on employment can be read (in thousands) from cells F20, D39 and D58.

For the second year (2018) the increase in construction output from 2018 will be £4 million. That is a total spend of £5 million (£1 million tendering plus £4 million preparation) less £1 million for 2017.

This can be inserted in cell B12 of a new sheet based on ‘Construction'. The above process should be repeated.

For the third year (2019) the increase in construction output will be £10 million (£15 million less £5 million). By 2021, the construction spend will have peaked. By 2022, the output should fall by £67 million (£78 million less £11 million). This should be inserted into cell B12 of a new sheet as a negative number.

Some adjustment may be taken for the negative effects of the construction process, on the key economic variables, including road closures and partial closures.

Please note that a project of this type would normally involve significant imports from the Rest of the World (RoW) as the trams concerned were manufactured in Spain by CAF, and the electrical equipment plus signalling gear and rails would almost certainly have been imported from RoW. However, in this instance all such equipment is already in the possession of Lothian Trams having been purchased under the previous contract and stored. Lothian Trams have more than enough trams to service this extension and beyond. Hence the costs of such are not required to be considered.

Attachment:- Construction Economics and Procurement.rar