Procedure Cost Control

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Procedure for Cost Control | | |
Table of Contents 1. Purpose 2. General 3. Responsibilities 4. Procedure 5. Flowchart 6. References 7. Attachments 1. PurposeTo establish a system whereby developments which affect the costs of the project are timely reported, thereby allowing for corrective action when adverse trends are detected, and to inform about funding requirements for the execution of the project.To establish a procedure to control flow of information which affects anticipated final project cost.This procedure shall be used in combination with the "Procedure for Project Variations" [1], the "Planning Procedure" [2] and the "Procedure for the Project execution Control system" [3].2. GeneralAt project start, generally a high level budget is available and in many cases underlaying details about estimated costs are also available. These documents, however, are in most cases not adequate for effective cost control. Therefore, this procedure requires that in an early stage of the project a control budget is prepared, based on the available information and within the boundaries of the high level (AS SOLD) budget.Cost control within Company generally consists of the following categories:- Company Services (reimbursable Engineering, Procurement , Construction Management and outside services) also client cost reporting.- The investment cost reporting which includes all costs within the scope of the project (e.g. direct supplied materials, subcontracts, services including Company's services etc.).- Company internal cost report which is limited to Company's services, including non reimbursable costs.The requirement for the first two categories largely depends on the scope of work for the project and the contract type. Regardless of the scope of work and the contract type, internal cost reporting will always be required.The cost reports shall as a minimum contain the following information:- Original budget.- Current budget, being the sum of the original budget and the approved change orders.- Commitments to date.- Anticipated final, being the sum of the current budget, pending change orders and approved deviations from plan.Approved change notices which have not yet been converted into change orders are excluded from the anticipated final. They are reported in a change Order Register, which is part of the cost report.Cost forecasts shall be made regularly through sampling, trend analysis and bottoms up estimates to complete. Deviations from plan shall be made where cost forecasts at cost report line item level deviate from the current anticipated final.2.1 Company Services2.1.1 The Company services cost report includes manhours and costs of manhours, computer application, reproduction, communication, travel, outside services etc. The structure of the report has to be defined at the start of the project. Requirements for reporting in the client's code of account and grouping by client's work packages have to be carefully examined to determine the level of detail at which the costs are controlled.2.1.2 In general the level at which costs are controlled should be of sufficient detail to allow for consolidation in both Company's project cost codes and the combination of client defined work packages and code of accounts. The selected level of detail must allow for reliable progress reporting in combination with reporting of the expended manhours as required for trend analysis. Too much detail generally results in reduced quality and is a waste of effort.2.1.3 An "end of project breakdown" should be considered when the client requires to know the project cost in more detail than the level at which effective cost control is done.2.1.4 To ease time phased budgeting and forecasting at discipline level, the cost control system should follow the work breakdown structure of the planning and project execution Control (PEC) system.2.1.5 Based on the available information (budget, progress, actuals, schedule etc.),...
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