I've done this project a few times with different groups of kids and they just love it! Basically the kids collect various found objects. The more variety the better. The purpose is to take the objects and turn them into anything they want. It could be a sculptural piece of art or a model. Through the process of creating we discuss the different materials and how they can be altered, manipulated, and fastened together. It's a wonderful learning process. Along with the construction process comes the story telling. This is a project that can keep evolving if you allow it. Even when the project has been completed the kids usually move on to playing with it and adding playmobil, lego figures or just about anything you can think of to extend their enjoyment of it.
A few things I would recommend:
1) put a time limit on the building (3-4 days worked for us)
2) have the kids supply a selection of found objects (cardboard, plastic, metal, wood, fabric, smaller than a glue stick, larger than a cereal box, etc...)
3) give the kids a lot of freedom to come up with their own ideas
4) when ideas hit a wall, start creating your own designs and let the kids see what is possible
5) make suggestions and let them run with them
We had a house with backyard playground, a race track with garage, and a very complicated space station. We were so busy creating that I missed out on many photographic moments!
This is another neat project, a multiplication wheel, that we did with an older friend. It worked out really well.