PROJECTION OF
CONSTRUCTION AND
MATERIAL DEMAND
December 2016
Projection of
Construction and Material Demand
Prepared by
Business Division
Policy and Corporat Sector
Construction Industry Development Board (CIDB)
Malaysia
December 2016
CONTENT
INTRODUCTION
Background
Objective
GUIDELINES ON PROJECTIONS
First Process:
Weightage on Material Cost of Building Project
Second Process: Standard Quarterly Construction S-Curve Model
Third Process:
Application of the Construction Material Constants to
the S-Curve
VALUE OF WORK DONE AND WORK TO BE DONE
Estimated Construction Work Done in 2014 - 2016
Projected Construction Work to Be Done in 2017
MAJOR CONSTRUCTION MATERIALS DEMAND
APPLICATIONS IN THE MALAYSIAN CONSTRUCTION INDUSTRY
ASSUMPTIONS MADE IN THE ANALYSIS OF PROJECTION MODEL
Assumptions Made In the Development of Projection Model in
Estimating Work to Be Done
Assumptions Made In the Development of Projection Model in
Estimating Material Demand
CONCLUSION
INTRODUCTION
Background
A review of the Malaysian Gross Domestic Product and the construction sector
growth trend over a 35 year period (1980 to 2015) revealed that the construction
industry performance is more volatile than our GDP’s cyclical movements during the
period. The construction sector is also the smallest contributor to overall GDP value
at an average of 3.9% for the years 2010 to 2015. Following this observation and in
an effort to provide an innovative and comprehensive advisory service in the
Malaysian construction industry, CIDB initiated a special methodology for the
projection of construction demand known as myPROJEXIS in 2016. The system
collates raw data from several sources as indicated below :
1. Awarded projects information from CIDB’s integrated database.
2. New projects announcement by the government & private sector
3. Construction materials prices
4. Construction wages
Statistics gathered from these sources are then incorporated into the development of
a methodology which enables the determination of a standard projection for
construction demand in terms of work done, material demand and worker demand.
Construction demand projections into a five year foreseeable future drawn on
specific levels of confidence based on reasonable assumptions are then compiled to
provide useful indicators for industry users in ensuring the continuity and completion
of ongoing and impending projects are carried out within stipulated financial and time
budgetary expectations.
Objective
The main purpose for the development of a standard projection methodology for
construction demand is to create a credible database for which current and future
requirements for construction materials and worker in relation to awarded and
ongoing projects based on project timelines can be easily determined. This serves
as a fundamental basis on which CIDB makes its consultative recommendations to
the Federal Government and the State Governments on matters related to the
construction industry. Hence swifter action can be made whenever there are
abnormal deviations in any projected construction demand and construction
materials demand trend within a review period; resulting in better management of
materials and financial resources. In addition, the construction sector has a multiplier
effect towards other economic sectors in the country and when well administered,
can positively impact our nation’s future growth.
GUIDELINES ON PROJECTIONS
First Process: Weightage on Material Cost of Building Project
In order to provide a standard projection methodology for construction demand, it is
important that a standard be ascertained for measuring construction and
construction materials demand. CIDB undertook a study in establishing standard
constants of construction materials that are used in building construction according
to categories of construction projects set by CIDB. The constant categories are:
1. Residential
2. Hotel
3. Office
4. Commercial & Industrial
5. Education
6. Health
7. Social Facilities
8. Safety
9. Auxiliary Building
Constants for construction materials and workers refer to the proportion of costs for
materials and workers of the total construction cost of the project. These constants
were adopted in the creation of a credible model that calculates the demand for 8
major construction materials and 7 related construction workers in relation to the
projected construction demand. The 8 major materials were selected based on their
high frequency of usage in building projects found in the study.
CIDB collected historical data for this empirical study from 114 projects all valued at
more than RM500,000 each; with individual project starting and ending dates.
Respondents for the study are relevant public and private sectors stakeholders
comprising of clients, consultants, contractors and suppliers. Bills of Quantities (BQ)
were collected from volunteer respondents who have secured projects related to
relevant construction products, via e-mail or personal encounter, or facsimile.
Projects taken into consideration are Building Projects and Civil Engineering
Projects. Building projects comprise of the construction of fully-enclosed structures
that include residential, commercial, administrative, social amenities, industrial,
agricultural and safety-related projects. Civil engineering projects are infrastructurerelated projects that cover utilities, transportation & road networks, drainage &
irrigation, landscaping and the like. A study was then conducted to establish an
average constant/coefficient of construction work done across 150 construction
products and 23 sub-categories as illustrated in Figure 1 below.
Figure 1
Example of Work Progress or Construction Output
Second Process: Standard Quarterly Construction S-Curve Model
To establish a credible projection model, CIDB has initiated the development of a
methodology in determining a standard S-Curve construction model for each
category of construction projects awarded in the country. Incidentally the S-Curve is
a standard curve that takes the shape of the alphabet “S” when produced on a
project chart. The S-Curves are ascertained by formula that uses historical data from
similar construction projects, and are based on simple average (mean) whilst the
constants were developed based on multi-completion periods (duration in years).
The S-Curve indicates the levels of work done on a project at progressive junctures
from beginning to project end duration and hence allow for calculation of the
materials at any stage of project completion. This is illustrated in Figure 2 below.
Figure 2
Material Used by Project Element
Third Process: Application of the Construction Material Constants to the SCurve
Constants for materials used at various stages/element of construction were
subsequently applied to the S-Curve of relevant projects. Employing the
myPROJEXIS system, raw input of lists of projects of varying categories and
completion periods were matched to produce the output of “work done” and “work to
be done”.

Based on the different construction stages of project implementation, the
related materials utilised during a stage can be identified and calculated.

The sum of materials to be utilised for the value of work to be done generated,
to be translated as construction material demand.
VALUE OF WORK DONE AND WORK TO BE DONE
Estimated Construction Work Done 2014 - 2016
In layman’s terms Construction Demand is construction volume and according to the
Department of Statistics, Construction Output is equivalent to the value of work done
on a project during the year. CIDB research has found that construction output is
46% of construction demand.
The following table indicates an estimation of total construction output (work done on
projects for each referred year) for 2014 through expected work to be done in 2017.
Table 1
Estimated Total Projects Work Done for 2014 - 2017 in Malaysia
Total Projects
Work Done
Award
Year
Number
Value
(RM b)
2014
Number
Work To Be Done
2015
Value
Number
(RM m)
2016
Value
Number
(RM m)
2017
Value
(RM m)
Number
Value
(RM m)
2012
7,998
131.3
44
3,109.2
44
3,753.9
44
2,478.6
16
1,133.2
2013
8,199
136.7
251
7,676.6
251
9,399.4
251
3,999.7
41
325.1
2014
8,037
178.5
7,451
50,804.1
5,556
64,699.4
1,901
20,472.1
312
10,933.9
2015
7,700
146.0
-
-
2,156
40,880.0
4,620
87,600.0
1,132
19,992.1
2016
7,000ᶠ
154.0ᶠ
-
-
-
-
1,960
43,120.0
4,200
92,400.0
-
36,400.0
-
161,184.4
2017
Total
Note: ᶠ Forecast
130.0ᶠ
7,746
61,589.9
8,007
118,732.7
8,776
157,670.4
This table shows the number and value of work done from 2014 to 2017. Total
projects awarded in 2015 and 2016 estimates in number and value. The table also
indicate the time line in projects implementation where the first two columns show
the total number and value of projects that were awarded according to the years’
column. The subsequent columns show the number and value of work done and to
be done in year progression from 2014 to 2017. It can be seen that out of 7,998
projects that had been awarded in 2012, 44 each were completed in 2014, 2015 and
2016 with 16 expected to be done in 2017 at respective values of RM3,109 million in
2014, RM3,753 million in 2015, an estimated RM2,476 million in 2016 for spill over
projects of previous year. Work to be done in 2017 exclude those projects that had
been awarded in 2016.
It can be seen that there is a high concentration in values of work done in 2014 and
2015 for projects awarded in previous years; bearing in mind that work done in 2016
and work to be done in 2017 are pure estimates that had not taken projects awarded
in 2016 into account. The actual figures for 2014 and 2015 include late notifications.
It is worth mentioning here that some new projects have not been accounted for due
to inadequate project information such as project duration e.g there has been no
start up date announcement at the time of this report’s compilation.
Chart 1
Value of Awarded Project in 2012 – 2016
The above chart shows an estimated number of projects that were awarded from
2012 to 2016; 2016 being the first year in the implementation of the 11th Malaysia
Plan and 2015 being the 5th and last year of the 10th Malaysia Plan. The value for
projects awarded in 2016 is an estimate due to the fact that some projects have not
submitted details at the time of this report. The year 2014 recorded highest value for
total projects awarded. At this juncture, it must be significantly pointed out that during
the period 2011 to 2014, five development corridors, namely Iskandar Malaysia,
Sabah Development Corridor, East Coast Economic Region, Northern Corridor
Economic Region and Sarawak Corridor of Renewable Energy were launched.
These developments attracted committed investment amounting to RM307 billion, of
which, 57% or RM175 billion was realised. GDP leapt from RM71.1 billion in 1970 to
RM1.1 trillion in 2015. This explains the high volume of projects being awarded
during the 10th Malaysia Plan period especially during 2013 and 2014 at the height of
a flurry for technological advancement in the globalisation of commerce and industry,
given that Vision 2020 is only a few years away.
Projected Construction Work to Be Done in 2017
Though 2016 show an estimated value of RM154 billion in awarded projects, it has
the least number of projects being awarded. Being the first year in the last leg
towards becoming a high income nation and the 11th Malaysia Plan on the roll; the
focus of which is the people’s welfare, the next five years will see much of
infrastructure projects being awarded and implemented. This will comprise mainly of
economic high impact civil engineering projects in transportation and road networks
that will consume billions of ringgit to complete. Examples are the ongoing Pan
Borneo Highway, the RM6.6 billion 390km Central Spine Road, the RM9 billion
Bandar Utama-Klang Light Rail Transit Line 3 (LRT 3) project and the RM1 billion
Bus Rapid Transit (BRT) Kota Kinabalu to name a few. It was announced during the
2016 Budget announcement that The Refinery and Petrochemical Integrated
Development (RAPID) project in Pengerang, Johor will continue its development
through 2016 on a RM53 million investment.
Johor is a significant contributor in projects that are under construction in terms of
value, contributing to approximately 10% of nationwide works to be done as at
November 2016; requiring total materials demand at an estimated value of RM
13.3billion. This is an obvious outcome since Johor is home to mega project that is
The Refinery and Petrochemical Integrated Development (RAPID) project in
Pengerang that involves building and civil engineering works covering residential,
commercial and processing plants development. In addition Johor will see a mixed
development in residential, commercial and tourism of The Forest City with a GDV of
RM175billion.
In growing significance Wilayah Kuala Lumpur and Putrajaya, followed by Selangor
are prime ETP development locations with Urban Regeneration Programme for the
city center where extensive infrastructure and buildings projects are under way.
Composing a large part of the National Key Economic Area (NKEA), Greater Kuala
Lumpur/Klang Valley covered by 10 municipalities from Klang, Shah Alam, Sungei
Buluh to Sepang situated in Selangor is undergoing extensive transformation to
become a dynamic global center for living and business. One such development is
the
KLIA Aeropolis.
Selangor is also undergoing
extensive infrastructure
development in the RM286billion MRT2, and LRT3 projects that provides wider
connectivity between commercial and administrative centers within the state. The
RM26billion Tun Razak Exchange will transform Kuala Lumpur into a global Islamic
Financial Hub and the RM4 billion River of Life project covering Lake Titiwangsa and
the Gombak and Klang Rivers’ confluence is meant to promote Kuala Lumpur as a
global center for business and tourism. These projects are expected to be activated
in 2017. These facts pretty much explains why the three states top the list for
projects that are under construction as recorded in November 2016.
It is interesting to note that other mega projects located beyond the Klang Valley that
will see implementation in 2017 are the Melaka Gateway comprising a mixed
development in residential, commercial and tourism projects. There is also the RM55
billion infrastructure project announced under the 2017 Budget for an East Coast
railway connecting Klang in Selangor, through Kuantan in Pahang, Kuala
Terengganu, Kota Bharu and finally Tumpat in Kelantan.
MAJOR CONSTRUCTION MATERIALS DEMAND
In a study to determine constants for major construction materials in use,
calculations were made for different stages of construction with varying materials
being used. 8 major materials emerged as the most frequently required for building
projects.
The 8 major construction materials for building works defined from the constants are:
1. Brick
2. Ready mixed concrete
3. Steel reinforcement
4. Plywood
5. Paint
6. Cement
7. Sand
8. Glass
Average constants for construction materials for construction products under the
respective sub-categories are added up and averaged for each sub-category by the
mean method.
Table 2
Estimated Material Demand for Construction Materials in 2016 & 2017
in Malaysia
Material
Category
Steel
Unit
Material Demand for
Material Demand for
Total Work Done 2016
Total Work To Be Done 2017
Number
Material
Material
Number
Material
Material
of
Value
Quantity
of
Value
Quantity
Projects
(RM m)
(million)
Projects
(RM m)
(million)
m.tonne
6,230
8,479.8
4.0
1,629
1,343.6
0.6
m3
6,326
6,677.5
32.8
1,646
1,557.5
7.7
Plywood
piece
6,324
4,190.3
73.7
1,646
1,251.9
22.1
Brick
pallet
6,036
4,470.3
22.0
1,578
1,445.9
7.1
Paint
5 liter
5,897
3,152.8
30.3
1,536
667.7
6.5
Sand
m.tonne
6,077
2,289.3
58.2
1,592
478.6
11.9
Glass
m2
5,885
2,174.5
49.3
1,532
324.6
7.1
tonne
6,077
1,932.0
5.4
1,592
469.5
1.3
Reinforcement
Ready Mixed
Concrete
Cement
The above Table 2 shows the estimated utilisation of 8 major construction materials
that were used in building projects and civil engineering works done in 2016 and
same construction materials estimated demand forecast for building projects and
civil engineering works to be done in 2017. We see less quantities and value in
construction materials demand expectation for work to be done in 2017 in tandem
with the volume of ongoing or newly started projects that are mostly spill over
projects from those awarded in previous years.
The lower level of periodic expenditure at the beginning of a contract (due to site set
up and relatively inexpensive enabling works) and the lower level of expenditure at
the end of a contract (due to the vast majority of materials being on site, reduced
number of trades on site and reduction of contractor's staff overhead). These Scurves are ascertained by formula, which uses data from previously similar
construction projects.
So basically when we are looking at a time frame whereby long awarded projects are
nearing completion and newly awarded projects are just commencing operations, we
will see less construction materials demand than at the time when building activities
are escalating during a construction project timeline i.e at the mid-section of the scurve. Other contributing factors to the lower construction materials demand forecast
for 2017 would be that newly announced projects have not determined starting and
ending dates and so could not set budgets for materials demand; the 11th Malaysia
Plan has set development focus on infrastructure and these mostly non-building
projects do not require the same construction materials as building projects. There is
a high probability that some projects are yet to be reported to and recorded at
CIDB’s integrated database system, the very core for which future demand for
construction materials are analysed and forecast.
APPLICATIONS IN THE MALAYSIAN CONSTRUCTION INDUSTRY
Projections on the demand for construction and construction materials demand is
important to the Malaysian Construction Industry for many reasons.
1. The foremost being that it can be used as budgetary control measure
whereby industry players are able to plan ahead collectively on materials
usage based on a common guideline where average prices and quantities are
provided via the use of constants. Thus, indirectly encouraging uniformity in
building works and cost efficiency.
2. The historical and current actual demand for construction and construction
materials demand statistics sets a trend line for forecasting the future path in
the country’s economic growth since construction output is an indicator of the
country’s GDP. It can help the government and its relevant agencies better
strategise the country’s development during the master plan periods.
3. A periodical review of the statistics can gauge the cost of a country’s
development over recorded and analysed years. The statistics can also be
used to justify the country’s rate of growth in comparison to development
expenditure. It can also be used as reference by other parties such as
students in the construction field, academicians, consultants and construction
industry players. The reviews have a potential in assisting in studies on
construction methodology and the development of innovations in building
technology.
ASSUMPTIONS MADE IN THE ANALYSIS OF PROJECTION MODEL
To have a better understanding of the construction demand and construction
materials demand projection and analysis, below is a list the assumptions adopted in
developing projection model for the estimation of Work Done, Work To Be Done and,
Material Demand.
Assumptions Made In the Development Of Projection Model In Estimating
Work To Be Done
1. The source of information on all construction projects awarded in the country
is CIDB’s integrated database where information on construction projects
valued in excess of RM500,000 are captured. Precise estimates depend on
the actual number of new construction projects that are reported by
successful contractors.
2. The method of procurement of construction is based on the conventional
method that refers to a design development stage that is separate from
construction. Design development is generally undertaken by consultants,
while construction by contractors. An aggregate of total methodologies
involving BOT, IBS and Business as Usual is adopted.
3. Estimates for construction output is based on 3 levels of confidence :
i.
High confidence:
Target population is based on awarded projects only
ii.
Moderate confidence:
Target population is based on future projects announced by the
government
iii.
Fair confidence:
Target population is based on future projects announced by private
clients
4. The project date of commencement is that which is stated in the Letter of
Award.
5. The construction end date is according to the original expected date of
completion without consideration of extension time.
6. Construction
technology
to
be
used
on
projects
are
conventional
methodology, meaning the client is to provide full documentation (through
their consultants where applicable) before the contractor can be invited to
tender for carrying out of works.
7. Overheads and profit margin of any construction project is estimated at 15%
of the cost, of goods sold and construction workers.
8. It is assumed that the construction project is variation free, neither additional
nor omission variation.
9. The amount spent for prime cost sum and provisional sum (if any) for a
construction project is as stated amount allocated in the project.
10. The quarterly constants are equally distributed for projects other than new
projects (repair, renovation, extension, upgrade and maintenance projects)
which represent an average of 10% from total projects awarded.
Assumptions Made In the Development Of Projection Model In Estimating
Material Demand
1. The source of information on all construction projects awarded in the country
is CIDB’s integrated database where information on construction projects
valued in excess of RM500,000 are captured. Precise estimates depend on
the actual number of new construction projects that are reported by
successful contractors.
2. The method of procurement of construction is based on the conventional
method that refers to a design development stage that is separate from
construction. Design development is generally undertaken by consultants,
while construction by contractors.
3. Estimates for construction output is based on 3 levels of confidence :
i.
High confidence:
Target population is based on awarded projects only
ii.
Moderate confidence:
Target population is based on future projects announced by the
government
iii.
Fair confidence:
Target population is based on future projects announced by private
clients
4. The project date of commencement is that which is stated in the Letter of
Award.
5. The construction end date is according to the original expected date of
completion without consideration of extension time.
6. Conventional/traditional method is adopted for the procurement of projects,
meaning the client is to provide full documentation (through their consultants
where applicable) before the contractor can be invited to tender for carrying
out of works.
7. The construction technology used in construction projects is based on the
conventional method. Ready mixed concrete is used in lieu of aggregate.
8. Cement and sand are used for plastering and finishing.
9. Overheads and profit margin of any construction project is estimated at 15%
of the cost, of goods sold and construction workers.
10. The range, type, brand, specification, performance and constructability of
construction materials are of equivalent value and criteria.
11. It is assumed that the construction project is variation free, neither additional
nor omission variation.
12. The amount spent for prime cost sum and provisional sum (if any) for a
construction project is as stated amount allocated in the project.
CONCLUSION
This empirical study on the methodology for projection/forecast of construction
demand and construction materials demand is not without its limitations. For starters,
a narrow sample was acquired in the development of a construction s-curve model.
The samples used to generate the formula for monthly/quarterly constants for
construction of an s-curve model may be small for certain construction products to
be considered as national average. Awarded projects had been confined to those
valued in excess of RM500,000 as recorded in CIDB’s database.
Proposals were drafted to highlight identified areas to improve the reliability,
accuracy and credibility of the projection of construction demand :
1. Project category
Review of the project category in the construction of s-curve models so as to
reflect a standard categorisation in the construction industry to include special
projects such as the Mass Rapid Transit (MRT) and similar projects.
2. Samples of Construction S-Curve models
Employment of more samples for construction S-Curve models to develop
more precise and accurate statistical formula for quarterly and monthly
constants or, at more flexible time intervals.
3. Variation Orders
It is necessary to establish the impact of variation orders on final construction
cost, and to set the national average so as to include the External Factor in
the formula in the projection of construction demand.
4. Extension of Time (EOT)
To determine of the impact of EOT and the amount of Liquidated Ascertained
Damages (LAD) on projects as those in the SMB database, so as to capture
the actual date and revision of construction period in the projection of
construction demand.
5. Constants for Projects Other Than New Projects
To undertake research in other projects than new projects (repair, renovation,
extension, upgrade and maintenance projects) in order to establish more
realistic constants.
Beyond the above recommendations to improve the projection for construction
demand and construction materials demand projection methodology, most important
of all that industry players such as contractors and clients; and professionals such as
quantity surveyors, architects and engineers provide support for the endeavour by
furnishing CIDB with BQ samples. A bigger sample database will provide more
acceptable and truer constants in forecasting future demand for construction and
construction materials.