Harvard -3- Over the long range annual expenditures for new construction average very close to 10% of Gross National Product. An application of this average to the forecast for Gross National Product measured against the expected family formation increase or population increase, will lead to the same conclusion that the outlook for construction is optimistic. Lest this entice some of you to rush into the industry, let me add this word of caution no industry has had more firms formed or more firms fail than the construction industry. Experience seems to indicate that the rich get richer and the poor get poorer and the novitiate who makes the grade is the exception to the rule. Rather than dwell longer on the economic outlook for the construction industry, I would prefer to devote the balance of the time available to me to a discussion of the management problems that one faces in operation of a construction company. What is it that those in top management worry about? How do they direct the affairs of their company in an effort to maximize its profits and minimize its risks? There are there broad approaches to the problem. The classic approach is that of the bidding contractor, whether large or small, who is characteristic of the vast majority of construction companies. He wins his work through offering the lowest price in the competitive bidding are. To keep himself in a position to perform work at the lowest possible cost he must necessarily exercise every economy and eliminate from his operations any expenses that are unneccessary or that do not contribute clearly and directly to his ability to perform work at the lowest possible price. In his efforts at cost control he is operating in a limited area, for many of his direct costs are identical or nearly so with his competitors. He hires his labor at the same rates, utilizes equipment purchased from the same manufacturers, buys materials and supplies from the same vendors, solicits bids from the same subcontractors, and even depends to a large extent upon hiring his project managers and key project personnel from this