Cost Management In Construction

2. 2 PROJECT COST MANAGEMENT

Cost performance on a construction project remains one of the main measures of the success of a construction project (Atkinson, 1999; Chan and Chan, 2004). Several reasons are vital for consistent cost estimating for example – budgeting purposes, loan applications if necessary, for estimating commercial feasibility or viability of the project.

Cost management could be defined (include, consist of) as process of planning, interpretation, detailing, directing, agreement, cost control and evaluation of the construction during its preparation and constructing phases. This process is going on from throughout the building planning, projection and design, construction phases of a project until the final account is

The estimate should cover all the project phases and activities to take place. All estimates should also account for all people, materials bought, hardware and software.

• Achieve a standard budget - The involved board members or sponsor should sign off the projects estimated costs and ensure that the actual costs are accurately done so that the can release the allocated funds for the project.

• Create a monthly budget – control the budget by determining the projects monthly expenses based on the knowledge of your resource plan and schedule. Make sure that the monthly budget is documented on a spreadsheet covering the whole project from the initial stage to completion stage.

• Establish cost controls – arrange clear cost controls and consider the responsibilities for the different types of the project expenses. Assign the people that will be signing off and approving the timesheets, materials, hardware, software and vendor invoices. This is a very important stage as it will show where your actual costs will be booked for the

Quantify the amount of money the project has spent to the budget and how much the project is still expected to spend at that point in time. Your project reports should include your cost metrics and the people involved.

• Update forecasts - Your forecasts should be updated regularly to provide for any changed that might have taken place. The changes should show whether the running costs have increased or decreased from the actual budget.

• Communicate – communication is very vital for the management of the project costs. Communicate to the senior management team about the cost metrics, project reports and all the people that were involved. If costs are not accurate or behind schedule, the teams should address the matter quickly and make sure it’s being resolved before any commencement can take place.

2.2.2 Project cost management activities

• Recourse Planning - determining what recourses (people, equipment, materials) and what quantities of each should be used to perform project activities.

• Cost Estimating - developing an approximation (estimate) of the costs of the recourses needed to complete project activities.

• Cost Budgeting - allocating the overall cost estimate to individual work items.

• Cost Control - controlling changes to project budget

2.2.3 RESOURCE