Cost Control

Topics: Project management, Cost overrun, Cost engineering Pages: 7 (3561 words) Published: October 30, 2014

Term Project
Cost Control
CE-610 Construction Management
Professor: Alan Slaughter
Summer 2012
Table of Contents
Introduction……………………………………………………………………3-4 Control Estimating……………………………………………………………4-5 Conceptual Engineering…….………………………………………………..5-6 Cost Monitoring……………………………………………………………….6-7 Detailed Engineering………………………………………………………..7-10 Equipment Cost………………………………………………………………..10 Cost Control During Construction……………………………………......10-12 Labor Cost……….…………………………………………………………12-13 Summary………………………………………………………………………..13 References……………………………………………………………………..14 Vinicio Sulca 3

Cost control is one of the basic responsibilities of construction management. Effective cost control allows for projects to be completed on schedule and within the budget so that the owner can realize his expected profits and keep his financial requirements within predetermined limits. Cost control is inextricably linked with the project functions of quality control and schedule control. It is the job of project managers to make sure that equilibrium is achieved between quality, schedule and cost. The objectives of a typical cost control program are as follows: To identify potential cost problems in time for corrective action to be taken, and to prevent budget overruns before they occur. To keep each project supervisor advised of the budget for his particular area of responsibility, and to measure his expenditure performance against the budget. To set up a cost-conscious environment to demonstrate to workers the effect of their actions on project costs. To minimize project costs by viewing all project activities from a cost reduction point of view. Cost reporting and cost control are two different entities. The reporting of actual costs is the job of the project accountant. The job of cost control is to forecast cost trouble spots before the funds are committed and to determine corrective action to minimize these expenditures. There are five key elements of a good cost control system for any engineering or construction project: A planned project approach to realize maximum economy.

A realistic budget estimate.
Timely and accurate cost forecasts that cover the costs to completion for all activities. Comparison of forecasts to the budget on an item-by-item basis. Positive action to minimize or eliminate budget overruns (Clark & Lorenzoni, Vinicio Sulca 4

1988, p. 140).
Control Estimating
The budget estimate, sometimes called a control estimating, is the main tool of the cost engineer or manager. This estimate gives a detailed prediction of the project plan of execution. It reflects not only the schedule but also the physical and economic conditions for the execution of the project. It is almost always necessary to make changes during the progression of an engineering or construction project. These changes are known as project change orders. In order to achieve effective cost control, it is necessary to alter the project budget to reflect these changes as they occur. As each change is approved, its cost and impact on the project budget is determined and incorporated into the overall project plan. Through the use of the change order system, the project is kept up-to-date and on schedule. Costs are controlled by those managers who are responsible for project spending. The owner has a considerable impact in this area since he is directly responsible for the basic design specifications and for changes initiated during project execution. The owner must also enter into the details of contractor's work in sufficient depth in order to assure himself that effective cost control policy is being exercised. Projects typically evolve through four fairly distinct phases, i.e., evaluation and planning, conceptual engineering, detailed engineering and construction. Cost control is normally implemented for the last three of these phrases. Within these phases, the technique most frequently implemented by the engineer to identify...

References: Anthony, R. N. & Hekimian, J. S. (1997). Operations Cost Control. Homewood, IL: Richard D. Irwin, Inc.
Clark, F. D. & Lorenzoni, A. B. (1988). Applied Cost Engineering. New York: Marcel Dekker, Inc.
McNeill, T. F. (1996). Cost Estimating & Contract Pricing. New York: American Elsevier Publishing Co.
Newman, D. G. & Larock, B. E. (1998). Engineering Fundamentals. New York: John Wiley & Sons.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Cost Control and Cost Reduction Essay
  • Cost Control and Cost Planning in Construction Industry Essay
  • “the Role of the Project Manager Is to Command and Control.” Critically Discuss. Essay
  • Information Systems Development Project Management Control Essay
  • Cost Estimating Essay
  • Essay about cost reduction and cost avoidance
  • Project Scope And Estimation Of Time And Cost Essay
  • Life Cycle Cost Analysis Essay

Become a StudyMode Member

Sign Up - It's Free