Cost Control and Cost Planning in Construction Industry

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Introduction

Profit is always the main consideration for a company to make decision and it is the main reason to run a project. But how we can gain profit by running project?

A proper planning is always help to reduce the risk on running project. There are a lot of tools or methods offer by project management, cost planning and control is a very important tool for project management.

A good cost planning is because it can help on forecasting the expenses that need to spend for the project. And cost control will minimize the wastage during execution of project.

This report will emphasize the objectives, benefits, methods and other matters on construction cost planning and cost control.

Cost Planning

Cost planning normally will conduct in the prior stages of construction project. After the owner has allocated the budget, cost planning will determine whether the project will over budget. If yes, the project is not feasible in its current state and should be re-plan or re-schedule to reduce costs.

The general advantages of cost planning include:


The tender sum is more likely equate with the approximate estimates.



Reduce the unnecessary quantities being required



Cost effectiveness and a value for money design are more likely to be achieved



A balanced distribution of expenditure is likely to produce a more rational design



Cost considerations are more likely to be taken into account because of the greater involvement of the quantity surveyor during design process. This will result in the BQ preparation becoming easier, since the quantity surveyor will be more familiar with the project and have a greater understanding of what the designer is attempting to achieve.



The amount of pretender analysis by the architect and quantity surveyor should enable more decisions to be taken earlier, resulting in a smoother running of the project on site.



Cost planning provides a basis for comparing different projects.

The aims of cost planning are as follows:


To establish a realistic cost limit which is determined by client’s availability of money, market demand, and consultant’s estimate.



Ensure that the client’s cost limit is not exceeded



Ensure that the client obtain good value for money.


Rational realistic distribution of money spent on the design.



Design is economical: standard amenity, finish and equipment specified by client at the least cost consistent with good design.



No need to spend the total budget offered by client.

Cost Control
Cost control in construction stage is the key to take effective way for construction. Cost control is a process that should be continued been implement throughout the whole construction period.

The purpose of cost control:


To monitor the client’s expenditure to be tally with the project budget.



To achieve a balanced design expenditure between the various elements of the buildings.



To provide the client with a value for money project.

A proper cost control is serving:


Easier to control or monitoring the remaining job.



Cost effectiveness. To maximise the value of money for the project.



Waste reduction. To maximise the feature of the element that we purchase with the minimum costs.

Conclusion
There are a lot of things that we might take it under consideration when running a project, e.g.: cost, schedule, man power, profit and etc. Profit is always the main consideration of a company, and we are able to maximize the profit through the proper cost planning and cost control.

By the cost planning, we are able to find out the problem of manpower and scheduling arrangement if any. It is because; the cost planning will show a peak time of cost when other time is fairly low. The Cost Plan enables you to allow for any issues identified during the preliminary stages that may also have a cost impact during construction, thereby saving you...
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