Helwan University
Faculty of Engineer matarya
Civil Department
Cost Control Process for Construction
Projects
Dissertation Research in Partial Fulfillment of the Requirements for the Degree of master
Prepared By
Yasser M. Abouzeid
Supervision by
Prof. Dr. Adel El-Samadony
Prof. Dr. Randa kamel
i
ACKNOWLEDGMENTS
First and foremost, I would like to extend my heartiest gratitude to
Prof.
Dr. Adel El‐Samadony, as my supervisor during obtain M.SC degree. He
gave me the chance to finish the study and with his guidance, the study
can finish smoothly. Besides that, his patience and encouragement leads
me to complete this study in time.
In addition, I would like to thank Eng. Amr Dawood, as the
representative from the staff in Rowad modern Engineer (RME) for their
kindly advised and assistance in giving the information to complete this
study.
Not forgetting to present this research to spirit of my father. Mother,
brothers and sister, for their full support and coaching throughout this
research.
Lastly but not the least, to all my friends for their support, advise and
their help when the time I need them.
ii
ABSTRACT
With the competition in the construction market is fierce increasingly,
profit margin of construction enterprises is getting smaller and smaller,
and cost control of construction projects become more and more
important. The control of construction project cost becomes one of the
cores in project management.
Construction project management is a systematic, comprehensive,
dynamic subject, requiring construction project manager to regularize and
standardize the organization, goal, quality, safety, and cost of
construction project. In order to achieve the project cost control
effectively and create greater economic benefits. A study is carried out to
study the cost control method in a constructions project, to identify the
cost control process method frequently used by contractors in controlling
the cost of projects.
From the study, the main problem faced by contractors are shortage of
material, Labor costing more than estimated, difficulty in collection of cost
data, ever-changing environment of construction work ,qualified expertise
,duration of project and additional costs to carry out the cost control.
iii
INTRODUCTION
The cost control is a process that should be continued through the
construction period to ensure that the cost of the project is kept within the
agreed cost limits. The cost control can divide into two major areas; the
control of cost during design stages and the control of cost by the
contractors once the constructions of project have started.
Cost control of a project involves the measuring and collecting the cost
record of a project and the work progress. It also involves the comparison
of actual progress with planning. The main objective of cost control of a
project is to gain the maximum profit within the designated period and
satisfactory quality of work
Purpose: Due to the ever increasing competition and current climate in
the construction industry, this has lead construction companies to become
more competitive in their projects. The aim of this research was to
highlight the importance of proper monitoring construction and examine
what cost control Process that is in place. This will help all staff realise the
importance of monitoring constructions and cost control system by
suggesting recommendations to implement in future projects.
Objectives: The objective for this research is:
1- To study cost control Process in a construction project.
2- To identify the cost control method frequently used by contractor
during the construction stage.
3- To identify the main problem faced by contractor in controlling the
cost on site.
Methodology: A comprehensive review was under taken to get a better
understanding of cost control system knowledge transfer. For the current
research a case study was conducted on medium scale contractors by
means of semi- structured interview and questionnaire to look at how
their cost control system we monitored and any recommendation for
improvement the research will illustrate the basic process used in cost
control of construction project, in each process we explain the basic
information need to this process and who is responsible to do this process
and the form need to do the process (spreadsheets controls).
iv
CONTENTS
Title
INTRODUCTION
State of Art
1
1.1
1.1.1
1.1.2
1.2
1.2.1
1.2.2
1.2.3
1.3
1.4
1.4.1
2
Project Cost Control
Purposes of Project Evaluation
Cost Control Definition
Important Questions
Why we need Cost Management?
What the Project Manager Controls?
Who Needs Cost Management?
Project Life Cycle and Project Cost
Characteristics of a Project Control System
Elements of A Planning And Control System
Page
Number
iv
1
1
2
3
3
3
5
5
7
8
Proposed approach to construct model of cost
control
2.1
2.1.1
2.1.2
2.1.2.1
2.1.2.2
2.1.3
2.1.4
2.2
2.2.1
2.2.1.1
2.2.1.2
2.2.2
2.2.2.1
2.2.2.2
2.2.3
2.2.3.1
2.2.3.2
What Information do you need to construct the
model?
Estimating/Budgeting
Work Breakdown Structure (WBS)
Types of Work Breakdown Structures
Work Breakdown Structure Development
10
10
33
Cost Codes
36
39
41
Depreciation
44
Construct model template –Excel-Format
47
WBS template sheet
47
WBS sheet template Consist
WBS sheet template Form
Expenses template sheet
Expenses template sheet Consist
47
49
50
Expenses template sheet Form
Storage template sheet
Storage template sheet Consist
Storage template sheet Form
v
50
51
53
53
54
3
the application steps & methods
3.1
3.1.1
3.1.2
3.1.3
3.1.4
3.1.5
3.2
3.2.1
3.2.1.1
3.2.1.2
3.2.2
3.2.3
3.2.4
3.2.4.1
3.3
4
Collect Actual Cost data
Sources of information
Data Required From Procurement Department
Data Required From Storages
Data Required From Projects
Data Required From Finance Department
Actual Cost Allocations
WBS Sheet template form
Client Invoices
Variations Order
Expenses Sheet template form
Finance Report
Storage sheet template form
Storage Report
How do you make sure you are getting good
information?
55
55
59
63
68
83
85
85
86
87
88
90
91
92
93
Techniques of outputs & reports
4.1
4.1.1
4.1.2
4.1.3
4.2
4.2.1
4.2.2
4.2.3
4.2.4
4.3
4.3.1
4.3.2
5
The Earned Value Measurement System (EVMS)
Variance and Earned Value
Methods for Physical Progressing
Example – Synthetic EVA
Reporting Techniques
Report Content
Reporting Considerations
Sample Reports
Responses on Reports
Construction Cost Control Software
Advantages of Used Software in Construction Cost
Control
The Disadvantages of Used Software in Construction
Cost Control
96
98
100
104
108
108
109
110
125
126
127
130
Conclusions
5.1
5.2
Common Causes of Cost Control Problems
Keys to Effective Project Cost Control
131
References
144
vi
134
List of Table
Table
number
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
2.11
3.1
3.2
3.3
3.4
3.5
3.6
3.7
Title
3.8
3.9
3.10
3.11
Calculating the Estimate
Subcontractor /vendor list
Estimate summary for Office Building
General Overhead
Straight Line Depreciation
Sum of the Years’ Digits
Double Declining Balances
WBS sheet forms
Direct Expenses sheet forms
indirect Expenses sheet forms
Storage sheet forms
Time Cards
Log of material imported
Quotations Comparison Sheet
Recommended Subcontractors for Quotations list
Monthly Report about store movement
Monthly Report about material distributions
Monthly Report about material distributions and
location
Daily man power for Sub contractor
Daily man power for self performed time card
Weekly man power for self performed time card
Subcontractor productivity by location
3.12
3.13
3.14
3.15
3.16
3.17
3.18
3.19
3.20
3.21
3.22
3.23
3.24
man power daily production report
man power estimation & actual quantity
man power distribution by work package
Monthly Status log for manpower
Daily Equipment time card
Equipment distribution by work package
Monthly Status log for Equipment
Value of rent Equipment by work package
log for Concrete Casting
Report about Performance by activity
Monitor Report for Finishing item (masonry)
Cost report include labor, Equipment and material
Monthly Report for Finance department
vii
Page
number
21
23
24
25
45
46
47
49
51
52
54
57
60
61
62
65
66
67
70
71
71
72
73
73
74
75
76
77
78
79
80
81
81
82
83
3.25
3.26
3.27
3.28
3.29
3.30
3.31
3.32
3.33
3.34
3.35
3.36
4.1
4.2
4.3
WBS Sheet Form
Sample of Client Invoice
Sample of Cover for Variation Order
Sample of Variation Order
Direct Expenses sheet forms
indirect Expenses sheet forms
Finance Report forms
Deduction /Increase Storage Sheet Form
Storage Sheet Form
equate of (client/subcontractor) quantity
Concrete Casting Report
Steel losses Report
Example of Earned value report
Variance analysis Report
Overall Progress Report
viii
85
86
87
87
88
89
90
91
92
93
94
95
107
113
114
List of Figure
Figure
number
1.1
Project Manager Controls
Page
number
4
1.2
1.3
Project Control Cycle
Project Planning and Control System
7
9
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
2.11
2.12
2.13
2.14
2.14
3.1
3.2
3.3
Types of Estimates
the Estimating Process
the Estimation Build
Cost estimation Process
Forms of Cost Estimate
Forms of Cost Estimate
Forms of Cost Estimate
Forms of Cost Estimate
Forms of Cost Estimate
Diagram of WBS hierarchy
Product-based WBS
Example of OBS
example of a process-oriented WBS
The cost account intersection
Cost Account code breakdown
data flow between Procurement team and other
step of enter material to the project
data flow between Storage team and other
department
data flow between Projects team and other
department
data flow between Finance team and other
department
13
15
16
27
28
29
30
31
32
35
36
37
38
43
43
59
63
64
Determining the Status
Controlling both project schedule and cost
Earned value formulae
Analysis showing use of 50/50 rule
Cost data contractual
Physical progress versus time expended
Methods for physical progressing
Representation of Variance on a S- curve
graphical project status
Schedule Performance index
96
97
99
102
103
103
104
105
106
107
3.4
3.5
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
Title
ix
69
83
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
4.30
4.31
4.32
Graphical status reports
Data accumulation
Cost control and report flow
Performance Report
Progress Trends Report
Sample cost report
Cumulative cost report
Cumulative cost report
Cumulative cost line graph
Schedule status report
Summary Schedule status report
Weeks Status Performance
millstones Summary report
Sample report instructions
Event report
note on performance report
Critical Issues Report
Traffic signal as indicator of project status
Project Performance metric Definitions
Project Performance report
Sample of other Report
x
111
111
112
112
113
115
115
116
117
118
118
118
119
119
120
120
121
121
122
122
124
LIST OF APPENDIX
APPENDIX
Title
A
Cost Control Process Flow Chart
Page
number
136
B
Responsibility Matrix for Cost Control Process
143
xi
"State of Art"
Chapter 1
1-State of Art
"State of Art"
Chapter 1
1-State of Art
1.1-Project Cost Control
1.1.1-Purposes of Project Evaluation
Sports teams that practice without reviewing performance may get really
good at playing very badly. That is why they review game films to see
where they need to improve; there are two kinds of organizations those
that are getting better and those that are dying.
An organization that stands still is dying. It just doesn’t know it yet.
The reason? Your competitors are not sitting by idly. In fact, good
project management can give you a real competitive advantage,
especially in product development. If you are poor in managing your
projects, you don’t have good control of development costs.
That means that you have to sell a lot of product or else charge large
margins to cover your development costs so that the project is worth
doing in the first place. If you can’t sell a lot of widgets, then you have to
charge the large margin. In order to learn, people require feedback.
Furthermore, people tend to learn more from mistakes than from
successes, painful though that may be to admit. If your competitors, on
the other hand, have good cost control, they can charge smaller margins
and still be sure that they recover their investment and make money.
They have a competitive advantage over you because of their better
control of project work. In order to learn, people, like the team reviewing
game films, require feedback. The last phase of a project should be a final
audit so that the management of future projects can be improved.
However, such an audit should not be conducted only at the end of the
project. Audits should be done at major milestones in the project so that
learning can take place as the job progresses.
Another reason to do periodic audits is that, if a project is getting into
serious trouble, the audit should tell the difficulty so that a decision can be
made whether to continue or to terminate the work.
Periodic audits should enable you to:
• Improve project performance together with the management of the
Project.
• Ensure that quality of project work does not take a back seat to
schedule and cost concerns.
• Reveal developing problems early so that action can be taken to deal
with them.
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Chapter 1
• Identify areas where other projects (current or future) should be
managed differently.
• Keep client(s) informed of project status. This can also help ensure
that the completed project will meet the needs of the client.
1.1.2-COST CONTROL Definition
Cost control is the process of comparing actual expenditures to the
baseline cost plans to determine variances, evaluate possible alternatives,
and take appropriate action. To effectively control costs, be sure cost
plans are prepared with sufficient detail.
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1.2- Important Questions
1.2.1-Why We Need Cost Management?
The project manager is primarily concerned with the direct cost of the
project, but the trend in project management is that the role of the
project manager in cost control will increase to include more of the
nontraditional areas of cost control. In the future it will be expected that
more project managers will have a great deal of input into the indirect
costs and expenses of the project.
Regardless of what the project manager is or is not responsible for, it is
critical that the project be measured against what the project manager is
responsible for and nothing else. If the project manager does not have
responsibility for the material cost of the project, then it makes no sense
for the project manager to be measured against this metric.
Timing of the collection of cost information is also important to the cost
measurement system. The project budgets must be synchronized with the
collection of the project’s actual cost. For example, if a project team is
responsible for material cost, should the budget show the expenditure
when the commitment by the project team to buy the product is made,
when the item is delivered, when it is accepted, or when it is paid for?
Timing issues like these can make project cost control a nightmare.
If the project team does not properly control cost, the project will
invariably go out of control, and more money will be spent
1.2.2-What the Project Manager Controls?
The project manager has to measure many things during the course of a
project, and he or she must take actions to guarantee that control (see
Figure 1.1). The project manager must.
• Measure and review the project schedule progress against the plan
• Measure and review the project cost progress against the plan
• Measure and review project quality
•
Anticipate possible changes and alternatives
•
Manage issues and risks
• Control scope creeps through a change management process
•
Ensure that delivery of milestones takes place according to client
expectations
• Coordinate the project team
• Monitor physical resources by controlling the scheduling of
resources during the project
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State of Art"
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1.2.3-Who Needs Cost Management?
In every firm, cost management will exist in some form, usually under the
control of the finance function. Our problem as project managers is that
often that form is not consistent with the project management function, and
that the cost data cannot be integrated with the other project data. As a
result, many of the critical management questions concerning cost go
unanswered.
For instance, if the monthly accounting report notes that Omega Project has
accumulated costs of $123,999, is this good or bad? Without integrating
the accounting data with the other project data, much of the data is
worthless. How do we go about answering such common questions as?
• How much are you going to spend?
• How much did you spend? Is this good or bad?
• How much will you have spent when the project is over? Is this
good or bad?
• If I’m in trouble on costs, what can I do to turn things around?
• How shall the costs be distributed?
• How can I control my resource costs?
Effective cost management must address such questions. This requires an
integrated schedule and budget plan. It also requires integrated participation
by leaders of the projects, resources, and financial disciplines.
1.3-Project Life Cycle and Project Cost
Construction is a dynamic process, and no two projects are ever alike.
Even if you have years of experience, every job presents a new set of
circumstances and challenges no matter how good a job you do preparing
during the pre-construction stage. The project manager and
superintendent work together to come up with the best plan they can,
trying to anticipate every obstruction and difficulty that might delay
progress and put at risk the successful completion of the project, but they
still can’t foresee every contingency.
Even with this entire expert planning, the project must be monitored from
beginning to end to ensure that all of the targets for time, cost, and
quality are met. The whole process must be properly managed through a
project control system that utilizes the plans, specs, estimate, and
schedule. All of these documents taken together establish the road map
for getting from the start of construction to the final completion of the
project. Using this road map, the project manager and superintendent
must maneuver all of the resources in the right direction, making
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adjustments as they go, to keep the project on track and on target.
Project control requires continuous monitoring and evaluation of actual
performance relative to the estimated performance for all aspects of the
job that have an impact on cost, time, and quality.
The project control cycle begins with the project plan and ends with the
final project debriefing and evaluation. There are seven fundamental steps
to the process:
• Develop the project plan.
• Establish the project benchmarks.
• Monitor the project performance.
• Identify performance deviations.
• Evaluate corrective options.
• Make adjustments as needed.
• Document, report, and evaluate results. (see Figure 1.2)
It is important to track every aspect of project performance all the way
back to the planning stage. This is where every project begins, and it is
where every project should end with a complete debriefing and evaluation
of what worked and what didn’t work.
It is also a time to resolve actual costs and labor productivity information
to update existing company records in preparation for the next cycle of
project planning and estimating. It is an excellent opportunity to capture
lessons learned and to create some best practices for future
implementation.
Unfortunately, many construction teams fail to complete the last step in
the cycle and never properly assess their project’s overall performance.
Everyone is usually worried to move on to the next project, and it’s very
tough to get all of the parties together for even a couple of hours at the
end of the job. It takes a great deal of discipline to consistently take
advantage of this opportunity and learn from it.
In my experience, I have found the project debriefing to be one of the
most effective training mechanisms for every member of the team, from
the project engineer to the project manager.
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Chapter 1
1.4
4 Chara
acteris
stics off a Pro
oject Co
ontrol System
All good proje
ect contro
ol systems have seve
eral characteristics in common.
ese include
e:
The
1.
A focus
s on what is importa
ant.
T
The
contro
ol system must
m
focus on proje
ect objectiv
ves. The a
aim is to
e
ensure
tha
at the project missio
on is achieved. To do
o that, the
e control
s
system
sho
ould be de
esigned wiith these questions
q
in mind:
• What is
s importan
nt to the organizatio
o
on?
• What are we atte
empting to
o do?
• Which aspects
a
off the work are most importantt to track and contro
ol?
• What are the crittical points
s in the prrocess at which
w
conttrols shoulld
d?
be placed
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2.
3.
A system for taking corrective action.
A control system should focus on response. If control data do not result
in action, then the system is ineffective. That is, a control system must
use deviation data to initiate corrective action; otherwise, it is simply a
monitoring system, not a control system.
An emphasis on timely responses.
The response to control data must be timely. If action occurs too late, it
will be ineffective. This is frequently a serious problem. Data on project
status are sometimes delayed by four to six weeks, making it useless for
taking corrective action. Ideally, information on project status should be
available on a real-time basis. In most cases, however, that is not
possible. For many projects, weekly status reports are adequate.
Ultimately, you want to find out how many hours people actually work on
your project and compare that figure to what was planned.
This means that you want accurate data. Some people may fill out weekly
time reports without having kept track of their daily working times. since
most of us cannot remember with any accuracy what we did a week ago.
When people fill out time reports each week without having written down
what they did daily, they are writing fiction. Such made-up data are
almost worse than none at all.
As difficult as it may be, you need to get people to record their working
times daily so that the data will mean something when you collect them.
What’s in it for the workers? Perhaps nothing. However, their better
estimates (made as a result of collecting accurate information on this
project) will help everyone who works on the next project. In any case,
you need accurate data, or it isn’t worth the effort at all. When
information collection is delayed for too long, the manager may wind up
making things worse instead of better
1.4.1-Elements of Planning and Control System
Figure 1-3 shows a generic model for a project planning and control
system that allows a project to react to the changing conditions of the
world.
• Define the problem or opportunity.
The first phase of project planning is to clearly define the problem to be
solved by the project or the opportunity of which the project will take
advantage.
This includes understanding the business reasons for the project and the
client’s motive in requesting it.
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•
E
Establish
p
project
objjectives.
ce you hav
ve clearly identified the proble
em or opp
portunity, tthe next step
s
Onc
is to define th
he basic objectives of the projject in terrms of time
e, cost, an
nd
sco
ope.
•
D
Develop
th
he plan.
amework of
o the projject objecttives, deta
ailed plans
s are
Witthin the fra
dev
veloped, in
ncluding th
he activitie
es, schedu
ules, cost plans,
p
and
d resources
s
required to co
omplete th
he projectt work.
• Begin
B
project work.
hen all plans are in place, app
proved, an
nd commun
nicated to project
Wh
Perrsonnel, prroject work can begin.
•
M
Monitor.
w
progre
esses, the
e project manager
m
gather status
As project work
info
ormation and
a
compa
are it to th
he plan to determine
e variances. These
dev
viations fro
om the pla
an are then analyzed
d to determine if corrective
action should
d be taken.
•
C
Close
proje
ect.
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Chapter 2
" Proposed approach to construct model of cost control "
2- Proposed approach to
construct model of cost control
Chapter 2
"Proposed approach to construct model of cost control"
2-Proposed approach to construct model
of cost control
2.1-What Information do you need to construct the
model?
So exactly what kind of information should you be gathering to create your
system of control which will maintain control of your Project? Below are
listed the specific pieces of information you should be requesting
2.1.1-Estimating/Budgeting
What Is an Estimate?
An estimate is an educated guess. We are all familiar with estimates. We
have obtained estimates for work on our car, for getting our house painted,
or for closing costs on a mortgage. And most of us have actually engaged in
doing an estimate. We’ve guessed or estimated or calculated how many
gallons of paint we needed to paint the living room.
The main differences between these simple estimating activities and the
estimates used to price construction are the complexity and what’s at stake.
When you estimate how many gallons of paint are needed to paint your
living room and you are off by a gallon or two, the stakes are pretty small.
But when you estimate the cost to build a nuclear plant or a super highway
or a hospital or even a house, the stakes are much, much higher. The
estimate is a summary, based on the best information available, of probable
quantities and costs of materials, labor, equipment, and subcontracts to
complete a project, including taxes, overhead, and profit.
It is the number used to develop the project bid price. The bid price is what
goes in the contract, and the contract obligates you to perform all work
needed to complete the project in accordance with the plans and
specifications. The consequences of any errors or omissions in the estimate
are borne by the contractor, and the contractor will not actually know what
the true cost of the construction is until the project is complete. If the
estimated cost is equal to or greater than the actual cost, the project makes
money for the contractor.
If the estimated cost is less than the actual cost, the contractor loses money
on the project. As you can see, estimators have an awesome responsibility.
First, they must come up with an accurate but competitive estimate that will
win the job. Second, their planning and calculations set the stage for the
overall management targets for the entire project. Once the estimator turns
the project over to the project manager and the on-site team, the estimator
shifts to a support role and really has no direct management duties
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Chapter 2
"Propo
osed apprroach to construct
c
model off cost con
ntrol"
ass
sociated with the day
y-to-day operations
o
s. Every tim
me contractors estim
mate
a jo
ob and sub
bmit a bid, they are taking a risk.
r
It is
s a high-sttakes gam
mble, and many
m
factors may in
nfluence th
he outcom
me.
The
e construction mana
agement te
eam is on the front lines of m
managing this
risk
k to a succ
cessful outtcome.
Types of Estimates
The amo
ount of info
ormation available
a
r
regarding
ct will dicta
ate the type of
the projec
estimate
e that can be preparred. Howev
ver, you must
m
keep in mind th
hat all
estimate
es are not equal the less information av
vailable, th
he less acc
curate the
estimate
e. But som
metimes ow
wners don’’t need a high
h
level of accurac
cy see Figure
(2-1).
1. Conce
eptual Estimate
E
es
nceptual estimates
e
a often called
are
c
ballp
park estim
mates. Typ
pically therre are
Con
no drawings available at
a all. You can use conceptua
c
l estimate
es when yo
ou are
t
idea orr concept stage
s
of a project. Often
O
an owner
o
does
sn’t really know
in the
whe
ether theirr idea is economically feasible
e, and they
y don’t wa
ant to starrt
spe
ending money on de
esign until they know
w that the project is
s at least
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possible. An experienced estimator can help out in a situation like this by
offering a rough order of magnitude (ROM) estimate. These estimates are
based upon a cost per primary unit for the facility.
For example, for hospitals, the primary unit of measure would be beds, and
you would multiply the proposed number of beds by the appropriate unit
cost. For a school, the calculation would be cost per pupil; for a highway,
the estimate would be based on a cost per mile. Once the owner suggests
how many primary units they would like to build, an estimator can whip out
a rough order of magnitude estimate within minutes; however, the accuracy
is limited.
2. Preliminary Estimates
If you have a preliminary set of drawings with overall dimensions, you can
move to the next level of estimating. Preliminary estimates provide a
somewhat higher level of accuracy and may be used to establish initial
budgets and preliminary financing scenarios. However, these estimates
should never be used to commit to a contract price because too many
factors can influence the reliability of the numbers.
Although there are numerous preliminary estimate methodologies, the most
common is probably the square foot method. In its simplest form, the
estimator calculates the area of the floor plan and multiplies that number by
a unit price. There are various levels of skill and detail that can be applied to
the square foot estimating method, and the degree of accuracy increases
with each step up, as will the time it takes to calculate the price.
3. Detailed Estimates
Whenever you have a complete set of plans and specs, you should do a
detailed estimate. This is where you count every brick and stick, so to
speak. Quantities and costs are calculated for every aspect of the project,
and this is by far the most reliable estimate if the contractor is being asked
to give a firm bid on a project.
Detailed estimates are the most accurate. But keep in mind that as the
accuracy increases, so does the time, effort, and skill required to complete
the estimate. Although computerized estimating has reduced the time
needed to compile project costs, it can still take two to three weeks and a
team of estimators to put together a detailed estimate for a large,
multistory commercial building such as an office or retail complex. The
estimators still have to put the bid packages together and spend time
soliciting subcontractor and vendor pricing. Throughout the rest of this
chapter, I will be talking about detailed estimates.
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Figure 2-1 Types
s of Estimates
The Estima
ating Prrocess
Acc
curacy and
d complete
eness are the fundamental ob
bjectives of the
con
nstruction estimate. The ultimate goal is
s to have the
t
estima
ated cost be
b
gre
eater than or equal to
t the actu
ual cost off the project. When you do a
con
nstruction estimate, you are concerned with three
e things:
m
(quan
ntities)
• How many
• How m
much (priciing)
• How lo
ong (produ
uctivity)
ese three componen
c
nts make up
u the construction estimate
e
a
and establish
The
the managem
ment targe
ets for the project te
eam. You will
w discov
ver that the
s the parameters forr the proje
ect budgett and sche
edule and will
w
estimate sets
ughout the
e construc
ction proce
ess to mon
nitor succe
ess. Now let’s
be used throu
look
k at what it actually
y takes to put an esttimate tog
gether see Figure (2-2).
Gettting Sttarted
hough an estimator
e
can work alone in developing
d
g an estimate, the quality
Alth
of an
a estimatte improve
es when th
here is inp
put from otther members of the
e
team. Fellow estimatorrs, projectt managers, superintendents,
bcontractors, material suppliers, and oth
hers can all
a add to tthe resourrce
sub
bas
se when trrying to make decisions during
g the estim
mating pha
ase.
The team wo
orks togetther to dev
velop a unique strategy that m
might prov
vide
an edge in th
he bidding process. In
I prepara
ation for th
he estimatting task, the
team become
es complettely familiar with the requirem
ments of th
he projectt by
doing the folllowing:
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1.
2.
3.
4.
"Proposed approach to construct model of cost control"
thoroughly reviewing the plans and specs
developing a list of questions and needed clarifications
attending the pre bid meeting
visiting the project site
1. Reviewing the Plans and Specs
It is important to get a “big picture” perspective of the project before you
get into the details of the work. Having an overall understanding of the
difficulty of the construction will assist the estimator when making judgment
calls that inevitably affect the accuracy of the estimate.
Ideally, the plans and specs are reviewed in detail before any estimating
takes place. Among the first things to look for when making the initial
review are any special conditions, clauses, or criteria that could adversely
affect the project schedule or cause unusual risks to be taken. Such items
should be highlighted during this process and red flagged for the project
team when the job is passed from the estimator to the project manager.
Remember the earlier example regarding the imported Italian marble tile.
Many of these red flag clauses are found at the front end of the project
manual in the instructions to bidders and supplemental conditions.
Taken into account during the estimating process.
2. Developing a list of Questions and needed Clarifications
In addition to discovering red flag issues, the plan and spec review provides
an opportunity for the estimator to uncover details that require clarification
or questions about the project that are not addressed in the contract
documents.
As the estimator thumbs through the drawings, they will prepare a query list
in anticipation of the pre bid meeting, site visit, or phone conference with
the designer. The designer typically responds to each of the questions in
writing. Those responses that result in a change to the original plans and
specifications become official addendum to the contract.
Checklists are a common tool used to make sure that nothing gets left out
or overlooked.
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3. The Pre
P bid Meeting
M
or to bidding, it is co
ommon for the owne
er and/or designer tto conductt a
Prio
pre
e bid meeting. This meeting
m
offten occurrs at the project site
e and provides
an opportunitty for the bidding co
ontractors to get ma
any of their question
ns
ans
swered. It is very im
mportant th
hat each of
o the bidd
ding contra
actors sends a
rep
presentativ
ve to this meeting.
m
T
The
estima
ator is ofte
en the rep
presentativ
ve
sen
nt, simply because that is the person wh
ho is the one
o
most ffamiliar wiith
the project att this stag
ge and who
o has deve
eloped a query
q
list a
after a
thorough rev
view of the
e plans and
d specs. Some
S
proje
ects requirre attenda
ance
at this
t
meetin
ng, and co
ontractors who fail to
t attend are
a not allo
owed to bid.
4. The Site
S
Visitt
No one should ever esttimate a jo
ob withoutt first visitting the job site. The
ere
are site conditions thatt just cann
not be und
derstood by
b merely looking at the
ns and spe
ecs. Only by walking
g around will
w you ge
et a good s
sense of the lay
plan
of the
t
land, which
w
will help you make
m
the necessary
y judgmentt calls that
ultimately afffect your pricing.
p
Ev
ven if the site
s
visit is
s not part of the pre
e bid
meeting, it is
s your obligation to make every effort to
o mitigate
e risks
ass
sociated with the bid
d. Visiting the site is
s one way in which y
you can
mittigate thos
se risks
Figure
e 2-2 the
stimatting Proce
ess
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Estimators sh
hould cons
sider the following
f
when
w
visiting the site
e:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Distance from offfice
Site co
onditions
Site ac
ccess
Soil da
ata
Ground
dwater
Securitty needs
Traffic considera
ations
adjace
ent structu
ures
possible contamination
y, and tele
ephone se
ervice
Water,, electricity
Obstru
uctions
Parking
g and storrage
Debris disposal
w
pa
atterns
Local weather
Local labor and sub
s
trades
s
w You Build the
e Estimate?
How
u build an estimate in
i very mu
uch the sa
ame order that you b
build the actual
a
You
faciility. Gene
erally, you start from
m the grou
und up and
d work thrrough the 48
diviisions of th
he 2004 CSI
C Masterr Format outline.
o
ch CSI diviision is bro
oken down
n into deta
ailed items
s of work. This form
mat is
Eac
one
e of the most common ways to organize
e the estim
mate. How
wever you
dec
cide to org
ganize the estimate, it is very importantt to stick w
with a
con
nsistent format, even if some divisions are
a not ap
pplicable to
o every prroject.
In this
t
way, the
t
estima
ate outline
e acts as a master ch
hecklist th
hat should be
con
nsulted forr every pro
oject to make sure that
t
nothin
ng gets lefft out of th
he
estimate see Figure (2-3).
Figu
ure 2-3 th
he
Estim
mation Bu
uild
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Organizing the Work of the Estimate
Estimating the cost of a multistory office building, high-tech manufacturing
facility, or state-of-the-art concert hall is no easy task. It is a big job and takes
great deal of planning and organization. So, how do you conquer this challenge?
Well, the same way you eat an elephant—one bite at a time! Although the
CSI Master Format 2004 gives us an overall outline to follow, thousands of
activities and materials must be considered before you can begin to price
the project. As large as the task may seem, there actually is a logical
method for organizing all of the work activities, materials, and labor
associated with a project. Let’s take a look at just how you eat this
elephant!
1. The Work Breakdown Structure
The primary organizational tool utilized by the construction estimator is the
work breakdown structure (WBS). The work breakdown structure establishes
the basic building blocks of both the estimate and the schedule. The purpose
of the work breakdown structure as it applies to the estimate is to organize
and identify the work of the project by breaking each division of work into a
separate work package or bid package.
The work package identifies each step in the process of that work item.
Work packages are usually assembled around the work activities typically
performed by a single subcontractor or work group.
Obviously, being familiar with construction materials and methods is pretty
important here. One of the primary goals in creating a work package is to
not overlook any of the steps needed to complete the work.
A sample work package looks something like this:
Work Package—Concrete Floor Slab
•
•
•
•
•
•
•
•
•
Excavate the footings.
Install the edge forms.
Install under slab fill.
Install vapor barrier.
Install the reinforcing.
Place anchor bolts.
Place the concrete.
Finish the concrete.
Strip the form work.
Once each step associated with a particular item of work is identified, it can
be quantified and priced. But let me stop here and back up a minute to
make sure that you remember how the work of the project is actually
accomplished. The contractor has two options:
• self-perform the work with their own forces
• Subcontract the work to various trade contractors.
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The contractor will have to do all of the quantifying and pricing of each step
of the work if the contractor decides to self-perform a particular section of
work. If the contractor decides to subcontract out some of the work, then
the subcontractor will quantify and price the work and submit a bid to the
general contractor. The greatest challenge either way is to make sure that
nothing gets overlooked or left out of the estimate.
Sometimes the general contractor calculates their own quantities and
estimates for subcontracted work even though the subcontractor will be
submitting a bid. This is called a fair value estimate; it’s done as a check to
guard against inaccurate quantity surveying by the subcontractor and
unreasonable pricing.
2. Calculating Quantities
Now that you have assembled all of your work packages and identified all of
the steps necessary to do the work, you can start doing your quantity
takeoff. You must quantify all of your materials, labor, and general
conditions before you can price any of the work. You need to calculate “how
many” before you can calculate “how much.” Once you determine the
quantities, you can apply a unit price factor to the equation. Junior
estimators often start off as quantity surveyors.
The primary attributes of a good quantity surveyor are the ability to read
and interpret plans, knowledge of common units of measure for construction
materials and labor, and basic estimating mathematics.
You will use algebra to measure ratio and proportion, plane geometry for
lineal and area measurements, solid geometry for cubic measurements, and
plane trigonometry for lineal, area, and cubic measurements.
3. Quantifying Materials
Quantifying materials is the least risky of all the estimating activities. You
are simply counting and calculating all of the parts and pieces that will go
into the project. Quantity surveying represents more of the science of
estimating. That’s because you are working with known sizes and
dimensions depicted in the drawings.
If the plans are drawn correctly and include all of the information needed to
do the takeoff, the estimator should be able to come up with very accurate
quantities, assuming the estimator doesn’t overlook anything and doesn’t
make mathematical errors. The estimator reviews the plans, the elevations,
the sections, and the details; pulls the dimensions needed to make the
appropriate calculations; and comes up with the lengths, areas, and
volumes of work and material required for the project.
Probably the most difficult part of the quantity survey is making sure that
the quantity is taken off in the proper unit of measure. The unit of measure
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for takeoff must be the
e same as the unit of
o measure
e for pricin
ng. For
exa
ample, con
ncrete is priced by th
he cubic yard.
y
The quantity
q
su
urveyor must
m
take off all co
oncrete by
y the cubic
c foot (leng
gth × widtth × depth
h) and the
en
con
nvert to cu
ubic yards to match the pricing
g unit. It takes
t
a litttle time to
o
learrn all of th
he pricing units for the
t
various
s materials and labo
or, but this
s
kno
owledge is an absolu
ute necess
sity if you are an esttimator.
In this
t
typica
al quantity surveying
g exercise,, you will estimate
e
tthe cubic yards
y
of concrete
c
n
needed
for this found
dation. All inches arre converte
ed to decimals
of a foot. Herre are the steps
• Section
n area of foundation
f
n:
Foo
oting = 2.0
0 feet *0.6
66 feet = 1.32 square feet
Wall = 0.66 feet
f
*2.0 feet
f
= 1.32 square feet
f
e feet + 1..32 square
e feet = 2..64 square
e feet.
Tottal section area = 1.32 square
• Perime
eter of building:
24.0 feet + 24.0
2
feet + 24.0 fee
et + 24.0 feet
f
= 96 feet
f
• Section
n area*perimeter = cubic feett
f
*96 fe
eet = 253.44 cubic feet
2.64 square feet
• Convert to cubic
c yards (un
nit of measure for co
oncrete):
3.44 cubic feet ÷ 27
7 cubic fee
et = 9.39 cubic
c
yards
253
The
e answer is
s 9.39 cub
bic yards of
o concrete
e in foundation.
4 Quantifying La
4.
abor and
d Equipm
ment
Qua
antifying la
abor and equipment
e
t is a little
e riskier. That’s beca
ause you must
m
dea
al with crew sizes an
nd producttivity rates
s. In otherr words, w
working witth the
hum
man factorrs of consttruction is not quite the same
e as workin
ng with ha
ard
and
d fast dime
ensions on
n a set of drawings.
d
Productivity is the a
amount off work
that can be placed
p
or installed in
n a specifie
ed unit of time. Prod
ductivity varies
v
cause of site conditio
ons, weath
her, crew makeup, crew
c
skill level,
bec
com
mplexity off the proje
ect, and se
everal other factors discussed
d earlier in the
cha
apter.
This
s is where
e estimatin
ng moves way over on the artt side of th
he equatio
on. It’s
all about
a
judg
gment. Th
he individu
ual estimattor will dettermine th
he producttivity
for any given
n crew regarding any
y given ite
em of work
k. Fortuna
ately,
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ntrol"
pro
oductivity is
i somethiing that is studied quite exten
nsively in tthe
con
nstruction industry, and there are datab
bases and references available
e that
can
n help the estimator make sen
nsible judg
gment regarding lab
bor and
equ
uipment qu
uantity tak
keoffs. In the follow
wing, I show some av
verage cre
ew
size
es and pro
oductivity rates for concrete
c
work:
w
5 Quantifying General Conditio
5.
C
ns
Also
o called jo
ob overhea
ad, genera
al condition
ns make up
u the indiirect costs
s
ass
sociated with any giv
ven projec
ct. Time, not
n produc
ctivity, is the normal unit
of measure
m
fo
or generall condition
ns. Therefo
ore, the prrimary tas
sk of the
estimator is to
t come up with a tiime estima
ate for the
e overall jo
ob duratio
on.
e estimato
or must ma
ake an edu
ucated guess as to how
h
many
y days, we
eeks,
The
months, or years the constructio
c
on will take
e to complete. Here
e’s a sampling
g
co
ondition ite
ems and th
heir respec
ctive units
s of measu
ure:
of general
6 Generral Condition Ite
6.
em Comm
mon Uniit of Mea
asure
Sup
pervision (salary)
(
W
Week
Job
b trailer (re
ent) Month
h
Matterial stora
age trailerrs (rent) Month
M
Tem
mporary uttilities (us
sage) Montth
Porrtable toile
ets (rent) Month
M
Dum
mpsters (rrent) Montth
Job
b photographs Lump
p sum
On--site webc
cam Lump sum
Job
b office sup
pplies Lum
mp sum
Pric
cing the Work
W
Onc
ce all of yo
our quantiities are ca
alculated, you are halfway the
ere. Now all
a
you
u have to do
d is plug in the unit cost for each item
m of materiial, labor,
equ
uipment, and
a
genera
al conditio
ons in yourr estimate. You can see the price
extensions diisplayed in
n Table 2.1
1. As an estimator,
e
your prim
mary conce
ern is
ere the costs will co
ome from and
a
their reliability.
r
whe
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Table 2-1
Som
metimes itt is not possible to accurately
a
determine
e the costs
s of items at
the time of th
he estimatte because
e there are
e decisions regardin
ng quantities
d quality th
hat simply
y can’t be made until the proje
ect is unde
er constru
uction.
and
When this ha
appens, it is a comm
mon practic
ce for estim
mators to plug in an
n
n
fu
ully disclos
sed to the client, ba
ased upon a best guess at
“allowance” number,
the time.
ce the info
ormation needed
n
is available,
a
the allowa
ance is adjjusted up or
Onc
dow
wn to refle
ect the actual cost of the item.
If the actual cost is less than the
e allowanc
ce, the estimator retturns the
s to the cliient. If the
e cost is greater than the allow
wance, the
e
surplus funds
clie
ent pays th
he differen
nce.
owances are often used for fin
nish items that require owner involveme
ent
Allo
regarding sty
yle, color, or quality such as carpet,
c
tile
e, or light ffixtures. They
T
may also be used when
n there are simply too
t
many unknown
u
v
variables to
t be
able
e to accurrately quan
ntify the cost of the work, suc
ch as rock excavatio
on or
drilling.
7 Source
7.
es of Infformatio
on
cing inform
mation com
mes from a variety of
o sources. When it comes to
Pric
materials, yo
ou can obv
viously gett prices dirrectly from
m your ven
ndors and retail
pliers. Or you
y
can ch
heck the various con
nstruction cost guide
es
building supp
ch as R.S. Means. Th
hey list un
nit costs fo
or every se
ection of w
work for labor,
suc
material, and
d equipment.
Man
ny constru
uction com
mpanies cre
eate their own cost databases
s based on
n
histtorical perrformance.. They trac
ck actual job
j
costs from
f
vario
ous projectts
ove
er a numbe
er of years
s and com
me up with average unit
u
prices
s for their selfperrformed wo
ork. If a company has an excellent costt reporting
g system in
plac
ce, then th
his may be
e the bestt way to go
o. Howeve
er, not all companies
s
hav
ve such a system
s
in place, and
d many re
ely on published cost data for their
pric
cing.
The
ere is one more alternative wh
hen it com
mes to pricing labor. Some
estimators ch
hoose to use
u the pro
oductivity data from
m the vario
ous guides but
wn unit pric
ces by using local wage
w
rates in the formula.
then calculate their ow
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8 Obtain
8.
ning Sub
bcontrac
ctor and Vendorr Bids
The
e final com
mponents of
o your esttimate are
e subcontrractor and vendor biids.
Tod
day, subco
ontractor and
a
vendor bids mak
ke up the bulk of the construc
ction
estimate.
eam is puttting togetther their own pricin
ng for self-While the esttimating te
ork, they must also be gatherring prices
s from sub
bcontractors for
perrformed wo
the work they
y are not going
g
to self-perform
m.
e team mu
ust also be
e soliciting vendor pricing for all
a of the m
materials and
a
The
equ
uipment as
ssociated with
w
the work.
w
The management of this
s process is
verry important. If one of the trades neede
ed to comp
plete the p
project is not
n
cov
vered, therre will be a big hole in the esttimate, wh
hich will lead to a big
g
pro
oblem on bid
b day. Th
here are fo
our steps to
t ensure that the s
solicitation of
the subcontra
acted work and vendor pricing
g are complete and thorough:
•
•
•
•
Solicit the bids.
Receiv
ve the bids
s.
Analyz
ze the bids
s.
Choose
e the bids.
9 Soliciting the Bids
9.
Afte
er a complete review
w of the plans and specs,
s
the estimatorr will creatte a
list or chart representin
r
ng all the work of th
he contrac
ct, showing
g which arreas
of work
w
or tra
ades will be
b self-perrformed, which
w
will require
r
subcontracto
or or
ven
ndor quote
es, and wh
hich will re
equire both
h. Table 2.2 shows a sample
sub
bcontractor/vendor list.
l
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Table 2-2
Afte
er it is dettermined which
w
area
as of work will require a price quote from a
ven
ndor or a subcontrac
s
ctor, a form
mal solicittation proc
cess gets u
underway..
Alth
hough sub
bcontractors and ven
ndors watc
ch the trad
de journals and
con
nstruction news serv
vices for bid notices as closely
y as the ge
eneral
con
ntractors do,
d most estimators choose to
o send out their own
n requests for
quo
otation to a selected
d list of subcontracto
ors and ve
endors with whom th
hey
hav
ve a past history.
h
Th
hey usually
y send outt requests to severa
al companiies
rep
presenting the same trade.
It is
s importan
nt that the
ese reques
sts go out very early
y in the es
stimating process
p
to give
g
the su
ubcontracttors enoug
gh time to
o put togetther a pric
ce or notify
y you of
their decision
n not to bid on the project.
p
It is crucial that
t
the estimator be
b aware
w
they
y can expe
ect to rece
eive quote
es from on bid day. T
Trust me, you do
of whom
nott want to be
b left han
nging on bid day waiting for an expected subcontractor
quo
ote that do
oesn’t arriv
ve. At the last minu
ute, you will be left tto guess what
w
the
estimated cost of the work
w
in question mig
ght be. Estimators d
do everyth
hing they
n to avoid this situattion.
can
And
d even tho
ough it tak
kes a lot off time to solicit
s
all of
o the bids, it is far better
b
to
play
y it safe th
han to be left standiing withou
ut a trade covered b
by a reliablle price.
Puttting It All Together It’s time to
t compile
e all of you
ur self-perfformed wo
ork and
sub
bcontracted work intto one estimate sum
mmary. All of the subtotals calculated
on the materrial takeofff sheets arre transferrred to the
e estimate
e summary
y sheet
w
The estimator
e
must be very
v
carefu
ul to accurrately tran
nsfer all off the
as well.
num
mbers. As you can see
s
in Tablle 2.3, the
e estimate summary
y follows th
he CSI
Mas
ster Forma
at discusse
ed earlier in the cha
apter. How
wever, a fe
ew very im
mportant
num
mbers hav
ve been ad
dded down
n at the bo
ottom. Onc
ce you calculate the
e cost of
the project, you
y
must also
a
apply
y taxes, ge
eneral overhead, and
d profit to come
d to as pro
oject addup with your final bid. These lastt few items are often referred
s.
ons
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Table 2-3
3
1 Taxes
10.
s
You
u include two
t
types of taxes in
n your con
nstruction estimate: sales tax and
pay
yroll taxes. That’s why it is im
mportant to
o divide yo
our summa
ary into fo
our
colu
umns: material, labor, equipm
ment, and subcontra
acts. The s
subcontrac
cted
worrk and equ
uipment bids will alrready have
e taxes inc
cluded, bu
ut sales tax
x
must be adde
ed to the material
m
column, an
nd payroll taxes
t
mus
st be adde
ed to
the labor colu
umn. We all
a know what
w
sales taxes are, but you may not be
b as
fam
miliar with payroll taxes (also referred to
o as labor burden). Some of the
t
pay
yroll add-o
ons are not taxes at all, but yo
ou merely refer to them as ta
axes
to keep
k
it sim
mple.
When I was running
r
my own con
nstruction company,, employin
ng
app
proximatelly 14 to 20
0 people, it
i really su
urprised me
m to learn
n just how
much “burden” labor re
eally did put
p on the payroll. Sometimes
S
s this facto
or
alon
ne will cau
use a gene
eral contra
actor to su
ubcontract work thatt otherwise
they might se
elf-perform
m. The perrcentage is significant. Those costs thatt I am
ssifying as
s payroll ta
axes includ
de the following:
clas
• Employ
yer’s portiion of Social Securitty tax
• Workers’ compensation
ployment tax
t
• Unemp
• Employ
yee benefits (health
h insurance
e, life insu
urance, vacation, pa
aid
holiday
ys, and so
o on)
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11. General Overhead
I’ve already mentioned job-specific overhead. These costs include such
things as the job site office trailer, portable toilets, and job photographs.
They are estimated item by item relative to a specific job.
General overhead is a different story. Basically, general overhead
represents the cost of doing business. These are expenses that would be
incurred by the company whether they had a job to build or not, such as
office expenses, executive salaries, and automobile insurance. General
overhead is applied to the estimate as a percentage of total cost. This
percentage will vary from company to company see Table (2-4).
Table 2-4 General Overhead
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12. Profit
The goal for every project is to make a profit. Profit is what’s left after all
costs and expenses associated with the job have been paid. The estimate
represents the contractor’s best guess as to what those costs and expenses
are going to be. Profit is expressed as a percentage of the total estimated
cost. Profit is rarely a fixed percentage in construction.
The estimating team will make a determination as to how much that
percentage should be for any given job. As previously stated, when times
are tight in construction and there is very little work to bid, profit margins
may be quite small. On the other hand, when there is a lot of construction
going on in a particular market and demand is high, profit margins will be
adjusted upward. Either way, profit is an estimated number just like every
other number in the bid. It is highly unusual for the actual cost of the
project to exactly match the estimated cost of the project.
If we consider each division of our estimate summary, and each of our addons, the most likely scenario will be that some divisions (and add-ons) will
be over the individual division estimates, and some will be under the
individual estimates. However, it’s the final number that you are most
concerned with. The goal is to have the actual overall cost of the project at
the estimate or under after all point we described we can illustrate the cost
estimation in figure (2-4).
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Figure 2-4
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Sa
ample Forms
F
o Cost Estimat
of
E
te
Fig
gure 2-5 Forms
F
of Cost Estiimate
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Figure
e 2-6 Form
ms of Cos
st Estima
ate
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Figu
ure 2-7 Fo
orms of Cost
C
Estim
mate
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Figure 2-8 Form
ms of Cos
st Estimatte
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Figure 2-9 Form
ms of Cost Estimatte
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2.1.2- Work Breakdown Structure (WBS)
To plan the project we must convert these into individual pieces of work that
must be done to complete the project. For this we need the ‘‘work breakdown
structure,’’ or WBS .The work breakdown structure is the most central item in
the project plan. Without it we do not have a definition of the work that has to
be done to complete the project.
Without knowing the work that has to be done we cannot possibly determine
the cost of the project or determine the schedule of the project.
Without knowing the cost or schedule of the project how will it be possible to
control the project or determine how much should be spent to complete it?
The amount of resources that must be used on the project and when they
must be made available cannot be determined without knowing the schedule.
Funding to do the project cannot be scheduled to be in place when the project
needs it without a time-phased budget for the project.
According to the Guide to the PMBOK, the definition of a work breakdown
structure is: ‘‘a deliverable oriented grouping of project components that
organizes and defines the total scope of the project work. To create a WBS is
a simple task: the project is first broken down into a group of subprojects.
Each of these subprojects can be broken down to sub subprojects. The subsubprojects can be broken down again and again until the desired level of
detail is reached. The level of detail is termed the' work package’’ level. The
work package is the lowest level of management that the project manager
needs to manage.
Below the work package other project team members may break down their
parts of the project into additional levels .Work packages can be broken down
into ‘‘activities,’’ and activities can be further broken down into ‘‘tasks.’’ The
reason that technique is so effective is that it follows the principle of ‘‘divide
and conquer. 'So, initially the project is broken up into a group of subprojects.
These subprojects are further broken down into sub-subprojects, and so on.
In this way the largest project we can imagine could be broken down into
subprojects. Since each of these subprojects could be considered to be a
project in its own right, any large project can be thought of as a family of
smaller projects that are interrelated. The important thing about project
management is that it is a powerful Methodology that adapts to any size
project or program. The tools and methodology that are used are similar in all
projects. The WBS is the tool that allows all projects to be broken down into
smaller, more manageable projects.
The end result of the WBS is a group of individual pieces of work defined.
Each of these small individual pieces of work must be assigned to. It is then
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possible to break the work packages down further before the actual work
assignments at the detail level are made.
The WBS is a hierarchical structure in which all of the major phases of project
work are organized in a logical manner. Simply stated, it is a layout of how
the work of the project ought to be performed and managed.
The WBS links together the project scope, the schedule, and the cost
elements, and forms the basis for the entire project information structure. It
provides the framework that captures the project’s work information flows, as
well as the mechanism for tracking the project’s schedule and progress.
It also provides the basis for summarizing and reporting the project’s cost
data. In essence, the WBS creates a common framework that.
• Presents the entire project as a series of logically interrelated
elements
• Facilitates project planning
• Provides the basis for estimating and determining project costs and
budgets
• Provides the mechanism for tracking project performance, cost, and
schedule
• Provides the basis for determining the resources needed to
accomplish project objectives
• Provides the mechanism for generating project schedule and status
Reports
• Triggers the development of the project network and control
systems
• Facilitates the assignment of responsibilities for each work element
of the project
• Graphically, we can imagine a WBS along the lines shown in
2.10
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Figurre 2-10
ome imporrtant featu
ures to notte here. First, the brreakdown of
There are so
oject activities is hierarchical, moving from the ov
verall proje
ect level, down
d
pro
thro
ough spec
cific projec
ct deliverables (and sometime
es sub deliverables),, and
finis
shing with
h work pac
ckages. Ac
ccording to
o the Proje
ect work p
packages are
a the
elem
mental tas
sks at the lowest lev
vel in the WBS
W
and represent basic projject
activities for which durration and budget fig
gures can be assigned.
ned projectt scope do
ocument, a WBS witth sufficien
nt levels
Along with a well-defin
d
is an
n invaluable tool for managing
g scope ch
hange.
of detail
Project scope
e can easily be expa
anded or diminished by including or elim
minating
ate work packages,
p
aking the necessary
y adjustme
ents in
the appropria
and by ma
ms of reso
ources and
d schedule
es.
term
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2.1.2
2.1- Types of Work
W
B
Breakdo
own Strructures
s
It is
s importan
nt to recog
gnize that there are many oth
her types o
of breakdo
owns
use
ed in proje
ects. The WBS
W
that we
w have been discus
ssing mus
st be used only to
gen
nerate the individual pieces off work that must be done in th
he projectt. To try
to use
u the WBS to deve
elop anyth
hing else would
w
conffuse the effort and make
m
the identification of wo
ork less efffective. Otther break
kdown stru
uctures tha
at are
ed that sho
ould not be confused
d With the
e WBS are:
use
Con
ntractual WBS (CW
WBS). Thiis breakdo
own is used to define the repo
orting
info
ormation and
a
the tim
meliness of
o informattion that a supplier w
will supply
y to the
buy
yer. It is usually nott as detaile
ed as the WBS
W
that is used to
o plan the work
that is going to be done.
oduct-bas
sed WBS is most su
uitable for projects that
t
have a tangible
e
Pro
Figure 2-11
ch as the design and
d construc
ction of a tunnel,
t
or a new fighter Jet
Outtcome, suc
pro
ototype. In
n these kin
nds of prod
duct-based
d work bre
eakdown s
structures,, it is
rela
atively eas
sy to break
k the proje
ect into de
eliverables
s, sub deliv
verables, and
ultimately intto manage
eable work
k packages
s. A produ
uct-based WBS Also
st estimation of the various product com
mponents,, which in turn
faciilitates cos
pro
ovides a ba
asis for comparison with the project’s
p
actual cost Performance. An
exa
ample of a product-b
based WBS
S is shown
n in Figure
e 2.11
ganization
nal break
kdown strructure, known
k
as OBS, the organizational
org
unitts respons
sible for co
ompleting the work requireme
ents of the
e project are
a
inte
egrated intto the stru
ucture. The clear advantage of
o an OBS is that it
esta
ablishes, in a hierarrchical form
mat, accou
untability, responsib
bility, and
rep
porting rela
ationships for the va
arious orga
anizationa
al units tha
at are invo
olved in
com
mpleting th
he work. Example
E
of OBS is shown in Figure 2.12
2 that projject
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Figure 2-12
invo
olves a series of pha
ases or tasks, such as in an in
nformation
n systems
pro
oject,
Pro
ocess-orie
ented WB
BS is more
e appropriate. Unlike
e a produc
ct-based WBS,
W
a
pro
ocess-orien
nted WBS involves completion
c
n of majorr tasks in s
sequence as
a the
pro
oject evolv
ves over tim
me. In gen
neral, a prrocess-orie
ented WBS
S can be better
b
inte
egrated wiith the ove
erall project, becaus
se the task
ks can be delineated
d to the
low
west level, while the product-b
based WBS
S is most useful
u
for accumulatting
pro
oduct cost\\ information. In add
dition, a hybrid
h
structure thatt involves a
com
mbination of features from botth productt- and process-base
ed structurres can
be used. An example
e
o a proces
of
ss-oriented
d WBS is shown
s
in F
Figure 2.13
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Figure 2--13
In the
t
presen
nt-day pro
oject enviro
onment, with
w
its pro
oliferation of computerized
pro
oject mana
agement systems, both types (product and proce
ess) of WBS can
be used. How
wever, the choice really depen
nds on the
e particular project, its
ystem and how it intterfaces with
w
the
purrpose, the organizattion’s inforrmation sy
other organiz
zational un
nits, and, ultimately, how useful it is as a plannin
ng aid.
M). The va
arious prod
duct comp
ponents are
e included
d in the
Billl of material (BOM
BOM
M in a hierrarchical way.
w
Produ
ucts produ
uced, suba
assemblies
s, and lowe
er level
of assembly
a
a shown
are
n as a ‘‘goe
es into’’ hiierarchy
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2.1.2.2 Work Breakdown Structure Development
Before any Work Breakdown Structure can be produced, it is essential that
careful thought is given to the number and size of networks required. Not only
is it desirable to limit the size of network, so we should be considered in
relation to the following aspects:
1. The geographical location of the various portions of the project.
2. The size and complexity of each Project.
3. The process or work being carried out in the Project when the plant is
complete.
4. The engineering disciplines required during the design and construction stage
5. The erection procedures.
6. The stages at which individual Project or systems have to be
completed.
7. The site organization envisaged.
8. Any design or procurement priorities.
So Constructing a WBS is a group effort. The responsibility for the top three
levels usually lies with the project manager, who typically works with other
managers to develop the major deliverables found there. At the lower levels,
however, input into the details should come from that Responsible for the
day-to-day work. In addition to the project team, each person responsible for
a specific work package must be consulted.
There are no universal standards as to the number of levels to use in a WBS.
This is typically dictated by the complexity of the project, and the number and
nature of the activities. Most have three or four levels at a minimum, although
more may be needed if there are significantly more sub deliverables and work
packages.
As a rule, the greater the number of work packages, the greater the amount
of time, effort, and cost incurred in developing the WBS. However, the
increased number of packages also significantly enhances the accuracy of
project status monitoring and reporting. On the other hand, larger but fewer
work packages reduce the cost of WBS development, but the accuracy of
project status monitoring and reporting suffers.
In most practical situations, a compromise on the number and size of work
packages is struck.
The most important levels in the WBS development process are the top few
levels, which represent the project and associated major deliverables, and the
lowest levels, which represent the work activities that are to be scheduled and
resourced.
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Typically, the intermediate levels are an aggregation of the lower-level
activities, and serve as the mechanism for reporting. The intermediate levels
can also be used to set up cost accounts through which cost and budgetary
information can be gathered and monitored. A WBS should be constructed by
separating the total work, in a hierarchical framework, into discrete and
logical sub elements that reflect completeness, compatibility, and linkage to
the project’s end item.
This hierarchical structure facilitates the aggregation of budget and actual
costs incurred into larger cost accounts. In this way, the total value of the
work at one level is an aggregation of all the work completed one level below,
which enables project work and cost performance to be monitored. The WBS
should also reflect all of the project requisites, as well as functional
requirements, and should incorporate both recurring and nonrecurring costs.
In a WBS, the lowest level consists of tasks of short duration that have a
discrete start and end point. Because they consume resources, costs are often
reported at this work package level. Work packages serve as control point
mechanisms for monitoring and reporting performance, in terms of whether
associated tasks were completed according to specifications, on time, and
within budget.
The responsibility for completing work Packages should be assigned to the
appropriate organizational units and individuals, and the resulting WBS should
reflect the reporting requirements of the organization. We can develop a WBS
by one of two methods:
• Top-down approach begins with the total work required to
produce the project’s end product. This is successively broken down,
First into major work blocks and then into more detailed work
package levels until a required level of detail has been achieved.
• Bottom-up approach begins with a comprehensive list of all the
activities or tasks required to complete the project. Then it moves
up, in a hierarchical format, first to work packages, then to cost
accounts, and so on, until the top level represents the total work to
be performed. It is highly unlikely that the first version of the WBS
will be the last.
More often than not, it will undergo frequent revisions in response to
Feedback that works must be broken into more detailed tasks. Clearly, only
individuals who have a thorough knowledge of the work to be performed can
conduct the appropriate level of detailed breakdown.
In addition, it is impossible to establish estimates of task duration, resource
requirements, and the network of precedence relationships among activities
without complete agreement on details at the lowest level.
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2.1.3- Cost Codes
Once the budget, WBS is confirmed, each activity in the budget is assigned a
cost code. Cost codes are used to track all items of work contributing to the
overall project Costs. That includes material, labor, equipment, subcontracts,
and overhead. All job information regarding cost is tracked via these cost
codes as shown in Figure 2.14
Every item on a material invoice, every man-hour logged on a time card, and
every subcontractor payment are assigned a cost code and recorded. These
codes are used to compare actual job costs with the estimated job costs
throughout the construction process. These cost codes usually start with the
original CSI reference number associated with the activity, and then for
further detail another number is assigned that represents the type of cost. For
example:
Activity Code
•
•
•
•
•
Material 1
Self-performed labor 2
Subcontracted labor 3
Equipment 4
Job site overhead 5
So, if I were the job superintendent tracking building insulation cost on a
project, I would assign the following cost codes to the invoices that came
across my desk:
Item Cost Code (CSI Number — Type of Cost)
• Material invoice 07 21 00-1
• Subcontractor bill 07 21 00-2
• Equipment rental 07 21 00-3
Larger contractors will also assign a year and job number to the cost code.
For example, assuming that the previous project was a large contractor’s 14th
job of this year, the material invoice might be coded as follows:
•
•
•
•
•
Year project started: 2010
Project no.: 14
CSI division: 07 21 00
Type of cost: 1 (material)
Cost code: 2010 14 07 21 00-1
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Smaller contractors might simply identify each of the invoices by the client
name along with the cost code.
Smith 07 21 00-1 the point is to make the codes as user-friendly as possible
while still providing the level of detail needed to properly analyze the project
costs. Each invoice amount would be recorded according to the cost code
assigned to it by the superintendent.
Material costs, labor costs, and equipment costs could be tracked separately,
or you could combine them into a single work package total. Either way, you
could compare the actual cost to do the building insulation with the budgeted
amount and note any discrepancies.
All invoices and subcontractor billings are eventually transferred to the
contractor’s cost accounting department. The accounting department also
tracks the project according to the cost codes and submits reports identifying
total material, labor, subcontract, equipment, and overhead costs incurred on
the job. The project manager uses these and other reports to monitor the
project performance from a big-picture perspective.
Spot Check the Cost Coding
It’s not uncommon for a vendor to list more than one cost code item on a
single invoice. For example, the same invoice could have materials that fall
under three different divisions — let’s say lumber (Work packages 6), mortar
(Work packages 4), and rebar (Work packages 3). When this happens, it is
important to make sure that someone is taking the time to separate the
material costs according to their respective Codes as shown in Figure 2.14.
Unfortunately, people get lax, and they start lumping all of the material under
one code. This, of course, taints the accuracy of the information, which results
in faulty reporting. As a construction manager, I was always vigilant about
doing random checks on job tickets just to make sure everything was being
properly coded. It was part of my management systems quality assurance
program.
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Figurre 2-14
Figu
ure 2-14
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2.1.4- Depreciation
Depreciation is a necessary function in financial management, because
without Depreciation the irregularities in the fundamental financial reports of a
company would vary considerably and make it difficult to compare one year or
one quarter to the next. This is because large investments in assets do not
occur on a regular basis.
If the total cost of an investment were reflected in the financial time period in
which it occurred, the effect on net profits would be considerable in this
period, and then the net profit would rise significantly in the next period. What
is done with depreciation? The cost of the new asset is spread out over the life
of the asset. This allows the company to claim some of the cost each year
rather than the total cost of the asset all at one time.
• Straight Line Depreciation
Straight line depreciation is the depreciation method that allows an equal
amount of depreciation to be taken each year. The amount of depreciation is
determined by subtracting the salvage value of the asset at the end of its
useful life from the purchase price of the asset. The remaining value is called
the book value. The book value is divided by the number of years, and this
amount is expensed from the asset each year.
For example, a company buys a large machine for $1 million. The purchase is
made with cash. In the accounts for this transaction, the cash account is
reduced by $1 million, and the machine account is increased by the amount of
$1 million. There is no effect on the liabilities or owner’s equity side of the
accounting equation and it remains balanced.
The cost of this machine must eventually be recognized. The machine has a
useful life of ten years and is worth $100,000 at the end of its useful life in
terms of scrap value or the ability to sell the machine to someone else. This
means that the value of the machine that must be depreciated is $900,000.
Since the life of the machine is ten years, the value depreciated each year is
$90,000. This is known as straight line depreciation (table 2-5).
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T
Table
2-5
• Accele
erated De
epreciatio
on
Acc
celerated depreciatio
d
on method
ds are used to allow the expen
nses that are
dep
preciated from
f
the assets
a
to be
b applied earlier in the usefull life of the
e asset.
The
e reason fo
or this is to
t reduce the
t
net pro
ofit after taxes
t
(NOPAT). If NOPAT is
reduced in a given year, the amo
ount of tax
x that a co
ompany pa
ays is less
s by this
amount. In accelerated
d depreciation methods the to
otal amoun
nt of depre
eciation
is the same as
a in straig
ght line de
epreciation
n, but the time that it is taken
n is
much earlier in the use
eful life of the asset..
This
s means that more equipmen
nt expense
e is recogn
nized and lower taxe
es are
paid
d in the ea
arly part of
o the usefful life of the asset purchased
p
. In later years
y
the taxes will be higher than in straight
s
lin
ne depreciation.
t
presen
nt value off the mone
ey, taxes that
t
are de
eferred to later
Because of the
ars allow us
u to use that money
y in the prresent Yea
ars. Two ty
ypes of
yea
acc
celerated depreciatio
d
on are com
mmonly us
sed: sum of
o the years’ digits and
a
dou
uble declin
ning balanc
ces.
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"Propo
osed apprroach to construct
c
model off cost con
ntrol"
• Sum of
o the Yea
ars’ Digits
ts.
The
ere is no scientific ba
asis for the sum of the
t
Years’’ digits me
ethod. There is no
fina
ancial reas
son for using this calculation except
e
tha
at it has be
ecome a standard
acc
counting practice. Th
he calculattion is mad
de by tota
aling the digits repre
esenting
the years of the
t
useful life of the
e equipment. Thus, as can be seen in ta
able 2f a ten Year
Y
useful life, the total
t
is 55
6, for
T
Table
2-6
The
e amount of
o depreciation in th
he first yea
ar is deterrmined by taking the
e
highest digit year and dividing th
his by the sum of th
he years’ d
digits. In th
he first
ar the last year’s dig
git is used,, making the
t
calcula
ation 10 diivided by 55.
5 This
yea
num
mber is the
en multiplied by the
e book value. In the remaining
g years, th
he next
low
wer year’s digit is use
ed. In the second ye
ear the de
epreciation
n is calcula
ated by
diviiding 9 by 55. Each year the numerator
n
r declines by one ye
ear.
• Doublle Decliniing Balances
ke the sum
m of the ye
ears’ digits
s depreciation, there
e is no scie
entific bas
sis for
Lik
the double de
eclining ba
alance calc
culation eiither. It is, howeverr, a consisttent
o equipme
ent and ha
as become
ea
method for accelerating the deprreciation of
ounting prractice. Th
he percentt of deprec
ciation is ttaken on th
he
standard acco
preciable value
v
of th
he item. Th
he next ye
ear’s depre
eciation is taken on the
dep
rem
maining de
epreciable value of the item, and
a
so on until the s
salvage va
alue is
reached. With
h this metthod the amount tak
ken as dep
preciation in the earrly
ars is much
h higher than in the
e later years (table 2-7).
2
yea
Table 2-7
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Chapter 2
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2.2- Construct model template –Excel-Format
2.2.1- WBS template sheet
2.2.1.1- WBS sheet template consist:
The sheet consist of a group of column which we will fill it with date which we
will knowing later the kind of date but first we will know the format of data
but before illustrate the sheet format we must know the difference between
budget & price
Budget: it consist of dry cost only the direct cost of item
Price: it consist of direct cost, percentage of in direct cost & over head
1234-
The first set will consist of WBS code according to BOQ
The second set will consist of item description and unit of measure
Third set it will consist of rate the budget rate (direct cost) & price rate
it will the Quantities column that is:
• Contract Quantity which we sign our contract about this Quantity
• Actual Quantity it describe the situation of our quantity if it is above or
below the contract quantities
• Invoice Quantity it describe the quantity we take from the client
• Provision Quantity it describe we are execute but it doesn't add to the
invoice quantity
5it will the Budget / price column that is
• Contract Amount it describe the amount of money according to Price this
by multiply the contract rate with contract quantity
• Budget Amount it describe the amount of money according to budget this
by multiply the budget rate with contract quantity
• budget Forecast Amount it describe the amount of money according to
budget after change of quantity this by multiply the budget rate with
Actual Quantity
• budget Allowance Amount it describe the amount of money according to
budget but for invoice quantity this by multiply the budget rate with
Invoice Quantity and Provision Quantity
• invoice Amount it describe the amount of money according to Price but for
invoice quantity this by multiply the Price rate with Invoice Quantity and
Provision Quantity
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osed apprroach to construct
c
model off cost con
ntrol"
2.2.1.2- WBS
S sheet te
emplate forms: as
a shown in table (2-8)
Table (2-8) WBS
W
shee
et forms
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Chapter 2
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2.2.2- Expenses template sheet
2.2.2.1- Expenses sheet template consist:
Expenses sheet it contain with every pent we spend on the project which
consist of two major item
1- Direct Expenses which are
•
•
•
•
first set of column it describe the codes which we used with direct
expenses
The second ser will consist of item description and unit of measure
the third set of columns it describe the monthly expenses (unit, cost)
that last set is the cumulative cost , units
2- indirect Expenses which are
•
•
•
•
first set of column it describe the codes which we used with direct
expenses
The second ser will consist of item description and unit of measure
the third set of columns it describe the monthly expenses (unit, cost)
That last set is the cumulative cost , units
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osed apprroach to construct
c
model off cost con
ntrol"
2.2.2
2.2- Expe
enses sheet temp
plate for
rms: as shown in table (2-9), (2-10)
• Direct Expenses sheet form
ms
Table (2-9)
(
Direct Expenses sheet forms
f
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osed apprroach to construct
c
model off cost con
ntrol"
• Indirecct Expense
es sheet te
emplate fo
orms
T
Table
(2-10
0) indirectt Expenses
s sheet forrms
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Chapter 2
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2.2.3- Storage template sheet
2.2.3.1- Storage template sheet consist:
1- material storage
•
first set of column it describe the codes which we used with material
•
The second ser will consist of item description and unit of measure
•
the third set of columns it describe the amount of material that will
deduct or increase about expenses sheet (unit, cost) this material that
doesn't include in work
2- Subcontractors reserve
•
first set of column it describe the codes which we used with material
•
The second ser will consist of item description and unit of measure
•
the third set of columns it describe the amount of work that will deduct
or increase about expenses sheet (unit, cost) but to Subcontractors
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Chapter 2
"Propo
osed apprroach to construct
c
model off cost con
ntrol"
2.2.3
3.2- Storage template sheet form
ms: as sho
own in table
e (2-11)
Table (2--11) Stora
age sheet forms
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Chapter 3
" the application steps & methods "
3- the application steps & methods
Chapter 3
" the application steps & methods "
3- The application steps & methods
3.1-Collect Actual Cost data
Once project work begins, the project manager systematically collects
status information according to the methods and frequency previously
determined. When status information is collected, the project manager
compares it with the schedule, budgets, and scope identified in the project
plan to determine the variances.
So before the project begins, the project manager should consult with the
project team, the customer, and the client to determine the information
needs, data collection methods, and frequency of data collection.
3.1.1- Sources of information
At the heart of every project control system are information and a good
reporting process. Successful construction management and project control
depend on sound information, which comes from actual project performance
data. This data originates in the field and is reported on a daily, weekly, and
monthly basis. The following are some of the sources of information used
to track job performance and feedback into the project control system:
1.
2.
3.
4.
5.
6.
7.
Job logs
Diaries
Daily field reports
Time cards
Visual Records
Correspondence
Subcontractor billing statements
However, this information serves two critical functions: It is used to detect
variances between the actual cost, time, and productivity performance and
the planned estimate and schedule. It is used to develop the historical
estimating databases and productivity factors used on future projects. Let’s
take a look at some of these mechanisms now.
1. Job Logs
Logs are used to track a number of regular activities occurring on the job
site.
•
Transmittal logs track the dates and addressees of all transmittals
as well as the actual information being transmitted, such as shop
drawings; product cut sheets, samples, or some other submittal.
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Chapter 3
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•
Delivery logs help keep up with all of the material and equipment
deliveries that are made to the site. The log contains the date of the
delivery and the material received, and it notes any problems with
the order and the actions taken.
• RFI logs track all requests for information submitted to the project
participants and their responses. The date the RFI was sent and the
date that the response was received are also noted in the log.
2. Diaries
Every member of the project team, but especially the superintendent,
should be encouraged to keep a project diary. The diary is used to track all
of the day’s events in a summarized fashion and in the individual’s own
words. Diaries are used to note daily work activities, conversations,
observations, and any other information worth recording.
It is important that each member of the team keeps their own diary,
because different people will have different interactions and conversations
throughout the day. The diaries provide a reliable historic record and can
become very important when disagreements or discrepancies arise on the
job. Handwritten diaries are often permissible in courts as evidence of
actual events and conversations.
3. Daily Field Reports
In addition to the informal project diaries, most construction companies
require that a more formal record be kept. These field reports are intended
to simplify the capture of some fundamental information needed to track
job progress and confirm that various project requirements are being met
the following are the types of information recorded:
•
•
•
•
•
•
•
•
•
•
The name of the individual making the report
The date, project name, and location
A brief description of the day’s activities
The temperature and general weather conditions
The contractor’s own work forces on the job
The subcontractors’ personnel on the job site
Materials or equipment delivered
Equipment used on the job
Visitors to the job site
Other notable events
Daily reports are often summarized into weekly or monthly reports that are
distributed to upper management within the company. These reports make
up some of the data used to analyze project performance and make
adjustments to the overall project plan.
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Chapter 3
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on steps & method
ds "
T
card
ds
4. Time
If the popular adage “T
Time is mo
oney” hold
ds true, then labor rrepresents
s the
eatest risk to the con
nstruction schedule and budge
et Keepin
ng accurate
e
gre
labo
or records
s is one of the most importantt functions
s of constrruction
managers in the field. The data that
t
they collect by way of tim
me cards is
aluable to the
t
constrruction com
mpany.
extremely va
e time card
ds provide
e the payro
oll clerk with
w
all of the
t
information need
ded
The
to calculate
c
w
wages
and
d distribute
e paycheck
ks which is pretty im
mportant,
esp
pecially if you
y
are on
ne of the workers
w
ex
xpecting a check. In addition, time
cards provide
e the fundamental in
nformation
n needed by
b the con
nstruction
t
and monitor
m
prroductivity
y and labo
or expendittures.
manager to track
Table (3-1) Time Cards
s
On large projjects, time
e cards are
e usually filled
f
out by
b supervis
sory perso
onnel for
eac
ch trade orr labor gro
oup workin
ng on the job.
j
If it is
s a small job, the individual
worrkers record their ho
ours on a weekly tim
me card. In either in
nstance, once the
cards are com
mpleted, they should
d be revie
ewed and checked
c
by
y the supe
erintenden
nt
o the payrroll clerk see table (3-1).
for accuracy before beiing sent to
The
e information gatherred from the time ca
ards is use
ed to creatte a weekly
labo
or report, typically prepared
p
b the sup
by
perintende
ent or assis
stant
sup
perintende
ent. The re
eport track
ks labor ho
ours and dollars
d
spe
ent on various
asp
pects of the work. La
abor is cattegorized and
a
tracke
ed by costt codes, th
he
purrpose of th
he report is to summ
marize cum
mulative la
abor costs and comp
pare
them with bu
udgeted labor costs. This inforrmation he
elps the m
management
he project on target for meeting its costt and sche
edule goals
s.
team keep th
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ds "
V
Records
5. Visual
u’ve heard the expre
ession “A picture
p
is worth
w
a th
housand w
words.” Thiis is
You
certtainly the case in co
onstruction
n. There are many reasons
r
for visually
recording work progres
ss on the job
j
site. Progress ph
hotos help
p documen
nt
nstruction methods, highlight and captu
ure problem
m areas, a
and supple
ement
con
writtten reporrts.
6. Correspon
C
ndence
Eve
ery day, nu
umerous communic
c
ations are
e generated among tthe projec
ct
parrticipants. Emails, le
etters, and
d faxes fly back and forth amo
ong the
architects, en
ngineers, owner
o
reps, building
g officials, subcontra
actors, ma
aterial
ppliers, tes
sting organ
nizations, governme
ent agencies, and co
ommunity
sup
gro
oups. All off the corre
espondenc
ce must be
e field and recorded throughout
the duration of the pro
oject. The types of documents
s that mus
st be saved
d
incllude the fo
ollowing:
•
•
•
•
•
•
•
•
Submittals
Payme
ent reques
sts
Punch lists
Change orders
sts for info
ormation
Reques
Letters
s
Emails
s
Faxes
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Chapter 3
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3.1.2- Data Required From Procurement Department
1. Requirements
• Log every 15 days with all material imported to each project log contain
(material item ,code of material , supplier name , unit of price & quantity of PO)
• List of material that finished its finance benefits to double check on the
data from finance department.
• The procurement team shall record every material item in this log and
attached with statement.
• The sub contractor contract shall be review by control team and soft copy
of the contract shall be send to our team.
2. Flow chart
It describe the process between Procurement team and other department
as shown in figure (3-1)
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Chapter 3
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on steps & method
ds "
Figure
e (3-1) data
a flow betw
ween Procurement tea
am and othe
er
3. Forrms
We will descrribe differe
ent form re
equired from Procurrement De
epartment as
we shown in table (3-2
2), (3-3), (3-4)
(
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a
on steps & method
ds "
Ta
able (3-2) Log
L
of mate
erial importted
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Chapter 3
" the applicatio
a
on steps & method
ds "
Ta
able (3-3) Quotations
Q
s Compariso
on Sheet
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Chapter 3
" the applicatio
a
on steps & method
ds "
Table (3--4) Recomm
mended Subcontracto
ors
for Quo
otations listt
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" the applicatio
a
on steps & method
ds "
Chapter 3
3.1.3-- Data Require
R
ed From
m Storag
ges
1. Req
quiremen
nts
deliver perriodic repo
ort from th
he storage
e team con
ntain the c
code of ma
aterial , alll
• d
a
asset
in prroject and date of in
n and out the
t
value of
o bill if it exist.
T
importtant of this report to
o specify the
t
accura
ate losses o
of materia
al
• The
eps of wo
ork
2. Ste
• How
H
we en
nter the material
m
to the projec
ct see figu
ure (3-2)
i. Record th
he importe
ed materia
al on the entrance
e
gate
ate sign offf the bill or
o receiving
g balance
ii. The man on the ga
age man re
eceive the
e material and take copy
c
of the bill or PO
O
iii. The stora
after chec
ck of existt the sign of entranc
ce gate
age make material card
c
and ta
ake the ap
pproval fro
om the pro
oject
iv. The stora
manger
unt take the informa
ation and make the report of received
v. The accou
material daily
d
,wee
ekly month
hly
Figure (3-2) step of enter mate
erial to the project
O of matterial from
m the stora
age
• Out
i. The sign of the Forrman or en
ngineer
e will take it
ii. The place
ken material
iii. The purpose of tak
T
roll of site accou
unt
• The
i. Get daily report fro
om the sto
orage abou
ut in/out material
m
unt make every 15 day report about in /out mate
erial the re
eport
ii. The accou
must invo
olve the co
ode of material the amount off money frrom the bill
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Chapter 3
iii.
" the applicatio
a
on steps & method
ds "
The acco
ount make
e every 15 day reporrt about out materia
al the plac
ce of
received and purpo
ose of usag
ge.
anger then
n after app
proval willl
iv. The reporrt will raises to the project ma
raises to control manger
ow chart
3. Flo
It describe
d
th
he process
s between Storage team and other
o
depa
artment as
s
sho
own in figu
ure (3-3)
Figure (3-3) data
a flow betw
ween Storag
ge team and
d
other
o
deparrtment
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Chapter 3
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a
on steps & method
ds "
4. Forrms
ent form re
equired from Storag
ge Departm
ment as we
w
We will descrribe differe
sho
own in table (3-5), (3-6),
(
(3-7
7)
Table
e (3-5) Mon
nthly Repor
rt about sto
ore
m
movement
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Chapter 3
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a
on steps & method
ds "
Table (3-6) Monthly Repo
ort about
material distributions
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Chapter 3
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a
on steps & method
ds "
Table
e (3-7) Mon
nthly Repor
rt about
mate
erial distribu
utions and location
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Chapter 3
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3.1.4- Data Required From Projects
1. Requirements
• Site send to the control team the client invoices with its supported survey.
• Sub contractor invoices.
• The pouring log for concrete to get the actual losses and for sure the quantity we
pied to the supplier
• Bar binding list for steel to get the actual quantity &looses for steel and
comparison with tender quantity.
• Summary for labor work during the period every 15 day with their activity
attached with labor time card.
• Summary for the rent equipment and the activity the make during the
period attached with their invoices.
• The equivalent between the client invoices and sub contractor.
• Periodic report for finishing item to know the actual quantity this will help
us and the tender to make actual estimate for this items.
• The technical office update the quantity of the contract to get good
forecasting to this contract.
• The technical office will submitted every variation order.
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Chapter 3
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ds "
2. Flo
ow chart
It describe
d
th
he process
s between Project te
eam and other department as
sho
own in figu
ure (3-4)
Figure (3-4)
(
data flow betwe
een Projectts team and
d
otther departtment
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Chapter 3
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a
on steps & method
ds "
3. Forrms
We will descrribe differe
ent form re
equired from Projec
ct Team
• La
abor
Rep
ports required for labor as we shown in table (3-8
8), (3-9), (3-10), (3
3-11),
(3-12), (3-13
3), (3-14),, (3-15)
Table
e (3-8) Daily man pow
wer for Sub
b contractorr
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on steps & method
ds "
Table (3-9) Daily
y man powe
er for self performed
p
ttime card
Ta
able (3-10) Weekly man power for
f
self perfformed time card
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on steps & method
ds "
Table (3-11
1) Subcontrractor productivity by location
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Chapter 3
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on steps & method
ds "
Table
e (3-12) ma
an power daily
d
produc
ction reporrt
Tab
ble (3-13) man
m
powerr estimation
n & actual quantity
q
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a
on steps & method
ds "
Tab
ble (3-14) man power distributio
on by work package
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Chapter 3
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a
on steps & method
ds "
Ta
able (3-15) Monthly Sttatus log fo
or manpowe
er
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Chapter 3
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a
on steps & method
ds "
• Eq
quipmentt
Re
eports required for Equipment
E
t as we sh
hown in tab
ble (3-16)), (3-17), (318
8), (3-19)
Table
e (3-16) Da
aily Equipment time ca
ard
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on steps & method
ds "
Table (3-17
7) Equipment distributtion by worrk package
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a
on steps & method
ds "
Table (3--18) Monthly Status lo
og for Equip
pment
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a
on steps & method
ds "
Table (3-19
9) Value off rent Equip
pment by work
w
packag
ge
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Chapter 3
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on steps & method
ds "
• Rep
port
Re
eports required for Different
D
ittems as we
w shown in table (3-20), (3-2
21),
(3
3-22), (3-2
23)
Table (3-20) log for Concrete Casting
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Chapter 3
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a
on steps & method
ds "
Ta
able (3-21) Report abo
out Perform
mance by activity
Tab
ble (3-22) Monitor Re
eport for Fin
nishing item
m (masonry
y)
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a
on steps & method
ds "
Tab
ble (3-23) Cost reportt include lab
bor, Equipm
ment and m
material
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Chapter 3
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a
on steps & method
ds "
3.1.5-- Data Require
R
ed From
m Financ
ce Depa
artmentt
1. Req
quiremen
nts
• Th
he finance departme
ent gives the
t
control department the ex
xpenses no
ot all
ex
xpenses on
nly the expenses he
e had the supported
s
documentts-of the
prroject during the mo
onth maxim
mum afterr 7 day of the new m
month.
xed asset and the amount of depreciate
ed per mo
onth.
• Fix
• Fo
or fully dep
preciated asset
a
we put
p rent amount witth help of procureme
ent
de
epartmentt.
2. Flo
ow chart
It describe
d
th
he process
s between Finance te
eam and other
o
depa
artment as
s
sho
own in figu
ure (3-5)
Figure
e (3-5) data
a flow betw
ween Finance team an
nd other department
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Chapter 3
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ds "
3. Forrms
Rep
ports required for Diifferent ite
ems as we
e shown in table (3-2
24)
Table (3-24
4) Monthly Report for
r Finance de
epartment
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" the applicatio
a
on steps & method
ds "
Chapter 3
3.2-Ac
ctual Co
ost Allo
ocations
s
Now
w after we
e create th
he model for
f cost control and we get the
e differentt
type of data how we alllocate this
s data in our
o model before we
e summariize
the cost conttrol model in
1- WBS sheet
ses sheet
2- Expens
3- Storag
ge sheet
3.2.1-WBS Sheet templat
t
te form
m
As shown in Table
T
(3-2
25)
Table (3-2
25) WBS Sh
heet Form
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on steps & method
ds "
Chapter 3
3.2.1.1-cliient inv
voices
Afte
er we get the client invoices we
w start to
o take the data and fill it into the
WB
BS form we
e put the final
f
quanttity in the form of WBS
W
sheet and in every
upd
date to the
e cost conttrol we rep
place the old
o quantity with ne
ew quantitty in
lastt invoice th
his shown in Table (3-26)
(
T
Table
(3-26
6) Sample of
o Client Inv
voice
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on steps & method
ds "
Chapter 3
3.2.1.2-Va
ariation
ns Orderr
In case
e of appro
oved chang
ge order (v
variations) we inserrt the
variations activa
ate in WBS
S form and
d put the new
n
quanttity in actu
ual
p zero qu
uantity in contract q
quantity
quantitty column and we put
column
n in WBS form
f
the variation
v
order
o
show
wn in table
e (3-27), (328)
Table (3-27) Sample
e of Cover for
f
Variatio
on Order
Table (3-28) Sample of Variation
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Chapter 3
" the applicatio
a
on steps & method
ds "
3.2.2
2- Expe
enses Sheet
S
te
emplate
e form
• Diirect expen
nses
We put the Direct exp
panses in that
t
form that show
wn in table (3-29)
Ta
able (3-29)
) Direct
Exp
penses she
eet forms
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on steps & method
ds "
Chapter 3
• In
ndirect exp
penses
We put the indirect ex
xpanses in
n that form
m that sho
own in table (3-30)
Tablle (3-30) in
ndirect Expenses shee
et forms
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" the applicatio
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on steps & method
ds "
Chapter 3
3.2.3
3-Finan
nce Rep
port
The
e finance departmen
d
nts make the
t
report of monthly expense
es for projject
we take this data and put
p it in th
he expense
es sheet iff it direct o
or indirectt
this
s shown in
n table (3-31).
T
Table
(3-31
1) Finance Report
R
form
ms
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Chapter 3
" the applicatio
a
on steps & method
ds "
3.2.4
4-Stora
age She
eet template Form
It is contain the
e deduct or increase
e value of money
m
if it material in store area
a
k for sub contractor
c
that will deduct
d
fro
om expens
ses sheet that
t
or value of work
shown
n in table (3-32)
(
Ta
able (3-32)
) Deduction
n /Increase
e Storage Sheet
S
Form
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on steps & method
ds "
Chapter 3
3.2.4
4.1-Sto
orage Report
The sto
orage dep
partment sent
s
month
hly report about the
e quantity in
the sto
orage that you dedu
uct from yo
our month
hly expens
ses that yo
ou
take frrom
Financ
ce departm
ment that shown
s
in table
t
(3-33
3)
Ta
able (3-33) Storage Sh
heet Form
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Chapter 3
" the applicatio
a
on steps & method
ds "
3.3- How
H
Do You Ma
ake Surre You Are
A
Gettting Go
ood
Inform
mation?
?
1-y
you must equate
e
bettween the quantity you
y
putted
d in the client invoic
ce
and
d the subcontractor invoice as
s Shown in
n table (3--34) in som
me cases you
y
take less than the subc
contractorr so you ha
ave to two
o solutions
s.
ease the quantity of client till it equivale
ent to the sub
a-- you incre
co
ontractor and
a
the ad
dd quantity
y putted in
n the prov
vision colum
mn.
b-- You dedu
uct from th
he sub con
ntractor co
olumn in storage
s
she
eet in deduct
co
olumn thatt in case you
y
are sure that you will take
e this quan
ntity from the
cliient.
Ta
able (3-34)
) equate off
(clientt/subcontr
ractor) quantity
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Chapter 3
" the applicatio
a
on steps & method
ds "
you must sure
s
that the
t
quantitty of concrete in the
e Finance report tha
at
2-y
told
d you what we paid almost eq
qual to the
e pouring log that yo
ou take fro
om
the project sh
hown in ta
able (3-35) this happen becau
use some ttime the
sup
ppler import the stattement de
elayed so actually
a
yo
ou poured this quantity
putt still you don’t
d
paid so you must sure frrom this point
p
in thiis case you
u
incrrease the quantity of
o concrete
e in storag
ge sheet
Table
e (3-35) Co
oncrete Cas
sting Reportt
you must take
t
the su
urvey of stteel rebar in case off RFT inclu
ude in
3-y
con
ncrete quantity in cliient invoic
ce you make this to get the ac
ctual losse
es
of steel
s
rebarr as shown
n in table (3-36) als
so you mus
st sure tha
at from the
qua
antity of stteel imporrted to the
e site and the
t
quantiity of steel in financ
ce it
the same cas
se of concrrete
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Chapter 3
" the applicatio
a
on steps & method
ds "
Tab
ble (3-36) Steel
S
losses
s Report
a
you must
m
track
k and comp
pare betwe
een the da
ate you ha
ave like the
4- also
qu
uantity in storage
s
re
eport and finance
f
report and in case of any conflic
ct
yo
ou must make
m
some
e communication bettween the
e different party thatt
yo
ou take fro
om them the
t
information to make
m
sure and get th
he final
de
ecision
5- also
a
you must
m
track
k and comp
pare betwe
een the nu
umber of llabor from
m
fin
nance repo
ort and nu
umber of la
abor you get
g from project
p
6- you
y
must have repo
ort that Dis
stributed the
t
non sk
kill labor on differentt
ty
ype of work
k package
e
7- final
f
to ma
ake sure of
o date you
u must hav
ve greaterr than one
e source off
da
ate to com
mpare and reach to the
t
accurate data yo
ou based o
on it your
an
nalysis
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Chapter 4
"Reporting Techniques"
4- Reporting Techniques
Chapter 4
" Tech
hniques of
o outputts & repor
rts"
4- Techn
T
iques of ou
utputs
s & rep
ports
4.1- The Earn
ned Vallue Mea
asureme
ent Sys
stem (E
EVMS)
In the
t
early years
y
of prroject man
nagement, it becam
me evident that proje
ect
managers we
ere having
g difficulty determiniing projectt status. S
Some peo
ople
beliieved thatt status co
ould be dettermined only
o
by a mystical a
approach, as
sho
own in (Fig
gure 4–1). The critic
cal questio
on was whether projject manag
gers
werre managing costs or
o just monitoring co
osts. The project m
managers
wan
nted costs
s to be managed
m
rather th
han just monitored
d, accounte
ed
for,, or reportted. Projec
ct manage
ers need to
o have the
e necessarry tools an
nd
abillities to monitor and
d report ac
ccurately on
o their prroject perfformance at a
moment's no
otice. Earned value offers
o
this ability.
mply put, earned va
alue is a prroject tech
hnique tha
at project m
managers can
Sim
use
e to monito
or, track, and reportt on the performanc
ce of any p
project. Itts
use
e is not lim
mited just to
t the sup
per projectts, as it ap
pplies equa
ally to both
sma
all and me
edium size
ed projects
s. The tech
hnique len
nds itself to jointly
plottting both the project schedulle and cos
st values on
o an S-curve chart or
table. Once used,
u
the project
p
ma
anager can
n very quickly highliight positiv
ve or
gative variances. The project manager cannot
c
jus
st measure
e the proje
ect
neg
schedule alon
ne and ma
ake the assumption that proje
ect tasks a
are ahead of
schedule and
d that the project is doing well.
m
very well
w
be the
e case that the proje
ect is exce
eeding pro
oject costs
s,
It may
making it unp
profitable. This is why both sc
chedule an
nd cost have to be
multaneou
usly to gain
n a more accurate
a
p
picture
(se
ee Figure 4.2).
4
measured sim
Fiigure (4-1)
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" Tech
hniques of
o outputts & repor
rts"
Chapter 4
Figurre (4-2)
This
s need res
sulted in th
he creation of the EVMS. The basis for the EVMS.
Earrned value
e is a managemen
nt techniq
que that relates res
source
plan
nning to schedules
s and tec
chnical pe
erformance
e requirem
ments. Ea
arned
valu
ue management (EV
VM) is a sy
ystematic process th
hat uses e
earned value as
the primary tool
t
for inttegrating cost,
c
sched
dule, and technical performan
nce
e EVMS, de
etermining
g status ca
an be diffic
cult.
managementt? Withoutt using the
e EVMS provides
p
t
the
follow
wing bene
efits:
The
•
•
•
•
accurate display of project
a
p
sta
atus
E
Early
and accurate
a
id
dentification of trends
E
Early
and accurate
a
id
dentification of prob
blems
B
Basis
for course corrrections
The
e EVMS can answe
er the following qu
uestions::
•
•
•
•
•
What
W
W
What
W
What
W
What
W
What
is the true stattus of the project?
are the
t
problems?
can be
b done to
o fix the problems?
is the impact of
o each pro
oblem?
are the
t
presen
nt and futu
ure risks?
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Chapter 4
" Techniques of outputs & reports"
4.1.1- Variance and Earned Value
The EVMS emphasizes prevention over cures by identifying and resolving problems
early. The EVMS is an early warning system allowing for early identification of
trends and variances from the plan. The EVMS provides an early warning system,
thus allowing the project manager sufficient time to make course corrections in
small increments. It is usually easier to correct small variances as opposed to large
variances. Therefore, the EVMS should be used continuously throughout the project
in order to detect the variances while they are small and possibly easy to correct.
Large variances are more difficult to correct and run the risk that the cost to correct
the large variance may displease management to the point where the project may
be canceled.
A variance is defined as any schedule, technical performance, or cost deviation
from a specific plan. Variances must be tracked and reported. They should be
mitigated through corrective actions and not eliminated through a baseline
change unless there is a good reason. Variances are used by all levels of
management to verify the budgeting system and the scheduling system.
The budgeting and scheduling system variance must be compared because:
• The cost variance compares deviations only from the budget and does not
provide a measure of comparison between work scheduled and work
accomplished.
• The scheduling variance provides a comparison between planned and actual
performance but does not include costs.
• Budgeted cost for work scheduled (BCWS) is the budgeted amount of
cost for work scheduled to be accomplished in a given time period.
• Budget cost for work performed (BCWP) is the budgeted amount of cost for
completed work, within a given time period. This is sometimes referred to as
“earned value".
• Actual cost for work performed (ACWP) is the amount reported as actually
expended in completing the work accomplished within a given time period.
BCWS represents the time-phased budget plan against which performance is
measured. For the total contract, BCWS is normally the negotiated contract plus
the estimated cost of authorized but UN priced work.
It is time-phased by the assignment of budgets to scheduled increments of
work. For any given time period, BCWS is determined at the cost account level
by totaling budgets for all work packages, plus the budget for the portion of inprocess work.
● Cost variance (CV) calculation:
CV = BCWP - ACWP
A negative variance indicates a cost-overrun condition.
● Schedule variance (SV) calculation:
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Chapter 4
" Tech
hniques of
o outputts & repor
rts"
S
SV=
BCWP – BCWS
A ne
egative varriance indic
cates a behind-schedu
ule condition. In the an
nalysis of both
b
costt and sched
dule, costs are used as the lowes
st common denominattor. In othe
er
worrds, the sch
hedule varia
ance is give
en as a function of cos
st. To allev
viate this
problem, the variances
v
are usually converted
c
to
t percenta
ages:
C
Cost
variance % (CVP) =CV/BCW
WP
S
Schedule
va
ariance % (SVP)
(
=SV//BCWS
e schedule variance
v
may be repre
esented by hours, day
ys, weeks, or even dollars.
The
As an
a example
e, consider a project that is scheduled to sp
pend $100K
K for each of
o the
firstt four week
ks of the prroject. The actual expe
enditures at the end o
of week fou
ur are
$32
25K. Thereffore, BCWS
S $400K and
d ACWP $325K. From these two parameterrs
alon
ne, there arre several possible
p
ex
xplanations as to proje
ect status.
How
wever, if BC
CWP is now
w known, sa
ay $300K, and
a
then th
he project is
s behind
sche
edule and overrunning
o
g costs Using earned value, project managers are able
e to
simultaneously
y monitor and
a
control both sched
dule and co
ost using th
he set of
form
mulae show
wn in (Figurre 4.3).
Fig
gure (4-3)
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Chapter 4
" Techniques of outputs & reports"
4.1.2- Methods for Physical Progressing
(The 50-50 and 0–100
Rules)
Many project managers traditionally report project schedule progress by
using an incremental estimation method. This method normally starts by
estimating tasks at levels such as 15 percent, 40 percent, 78 percent, or 98
percent, incrementally moving forward until 100 percent complete.
This process is based on no proper quantitative measurement and is often
inaccurate. Additionally, this information is, in turn, submitted to either the
project office or executives to review, and perceptions at the senior level
are based on inaccurate project data. Project managers could possibly
consider adopting a more accurate method of reporting on project progress.
In the project world, two of these methods are the 50-50 and 0–100 rules.
However, the 50-50 rule is more commonly used. The important thing to
remember is to keep it simple .Remember that keeping the schedule
variance simple on the progress reporting side makes calculating the EV
easier to manage.
The way to implement the 50-50 rule is fairly straightforward.
• Assign 50 percent of the BCWP to the task the moment the task is
started. At this point it is assumed that half the work has been done
already.
• Assign 100 percent of the BCWP the moment the task ends. This is only
allocated once the task actually finishes.
The cost variance relates to the real cost. However, the problem with SV is
how it relates to the real schedule. The schedule variance is determined
from cost account or work package financial numbers and does not
necessarily relate to the real schedule. The schedule variance does not
distinguish between critical path and non–critical path work packages.
The schedule variance by itself does not measure time. A negative schedule
variance indicates a behind-schedule condition but does not mean that the
critical path has slipped. On the contrary, the real schedule (i.e.,
precedence networks or the arrow diagramming networks) could indicate
that the project will be ahead of schedule. A detailed analysis of the real
schedule is still required irrespective of the value for the schedule variance.
Permitted variances may be dependent on such factors as:
•
•
•
•
•
Life-cycle phase
Length of life-cycle phase
Length of project
Type of estimate
Accuracy of estimate
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" Techniques of outputs & reports"
Chapter 4
By using both cost and schedule variance, we can develop an integrated
cost/schedule reporting system that provides the basis for variance analysis
by measuring cost performance in relation to work accomplished. This
system ensures that both cost budgeting and performance scheduling are
constructed on the same database. In addition to calculating the cost and
schedule variances in terms of dollars or percentages, we also want to
know how efficiently the work has been accomplished.
The formulas used to calculate the performance efficiency as a percentage
of EV are:
Cost performance index (CPI) =BCWP/ACWP
Schedule performance index (SPI) =BCWP/BCWS
The difficulty in performing variance analysis is the calculation of BCWP
because one must predict the percent complete.
The simplest formula for calculating BCWP is:
BCWP = (% complete) X BAC
Most people calculate “percent complete” based upon task durations.
However, a more accurate representation would be to calculate
“percent work complete.” However, this requires a schedule that is
resource loaded. To eliminate this problem, many companies use standard
dollar expenditures for the project, regardless of percent complete.
For example, we could say that 10 percent of the costs are to be “booked”
for each 10 percent of the time interval. Another technique, and perhaps
the most common, is the 50/50 rule: Half of the budget for each element is
recorded at the time that the work is scheduled to begin, and the other half
at the time that the work is scheduled to be completed.
For a project with a large number of elements, the amount of distortion
from such a procedure is minimal. (Figures 4-4, 4-5 and 4–6 illustrate this
technique.) One advantage of using the 50/50 rule is that it eliminates the
necessity for the continuous determination of the percent complete.
However, if percent complete can be determined, then percent complete
can be plotted against time expended, as shown in (Figure 4–6). There are
techniques available other than the 50/50 rule:
• 0/100: Usually limited to work packages (activities) of small duration (i.e.,
less than one month). No value is earned until the activity is complete.
• Milestone: This is used for long work packages with associated
interim milestones, or a functional group of activities with a milestone
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Chapter 4
" Tech
hniques of
o outputts & repor
rts"
established
e
d at identified control points. Value is earned
e
whe
en the
m
milestone
ese cases, a budget is assigne
ed to the
is completted. In the
m
milestone
rather tha
an the worrk package
es.
Figure (4-4))
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Chapter 4
" Tech
hniques of
o outputts & repor
rts"
Figure (4-5)
Figure (4
4-6)
• P
Percent complete:
c
: Usually
y invoked for long-duration wo
ork packages
(
(i.e.,
three
e months or
o more) where
w
mile
estones ca
annot be id
dentified. The
T
v
value
earn
ned would be the rep
ported perrcent of th
he budget.
• E
Equivalen
nt units: Used forr multiple similar-un
nit work pa
ackages, where
w
e
earnings
are on com
mpleted units, ratherr than labo
or.
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" Tech
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o outputts & repor
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Chapter 4
• C
Cost form
mula (80/
/20):
d
duration
w
work
packa
ages.
A variation of
o percentt complete
e for long-
• L
Level of effort: This metthod is ba
ased on the passa
age of tim
me,
o
often
used
d for supe
ervision an
nd manage
ement work packages. The va
alue
e
earned
is based
b
on time
t
(Figure 4-7) illu
ustrates th
hree meth
hods for
p
physical
prrogressing
g
Figure (4-7)
4.1.3-- Examp
ple – Sy
ynthetic
c EVA
Con
nsider the case-exam
mple discu
ussed thro
oughout th
his chapterr and supp
pose
that the Budg
get Value at 10 mon
nth into th
he project was sched
duled to be
e
60,000 corrrespondin
ng to 60%
% of progre
ess. Recalling of the figures fo
or the
$66
ove
erall projec
ct provides the following:
•
•
•
•
Budget at Completio
B
on (BAC) = $1,100,0
000
B
Budget
Value (BV) = BCWS = $660,000
0
A
Actual
Valu
ue (AV) = ACWP = $700,000
E
Earned
Value (EV) = BCWP = $621,280
0
It is
s possible to compute the varriances of the overall project:
• Resource
R
F
Flow
Variance = BV – AV
6
660,000–7
700,000 = –40,000$
$
• Cost
C
Variance = EV – AV
6
621,280–7
700,000 = –78,720$
$
Notte that $40
0,000 are the accou
unted extra
a costs consumed to
o reach
56.48% prog
gress, whe
ere the min
nus sign means
m
a loss of money. Althou
ugh,
8,720 are the costs that will be
b consumed to atta
ain the 60%
% progres
ss
$78
that was sche
eduled to be perform
med within
n 10 montths. Here a
also the minus
m
n indicates
s loss of value.
sign
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" Tech
hniques of
o outputts & repor
rts"
Also
o, the schedule variance is:
• SV
S = 621,280–660,0
000 = –38
8,720$
Tha
at is exactly the diffe
erence bettween the cost and the resource flow
varriance. This tells that the proje
ect is cons
suming $4
40,000 as more actu
ual
cos
st than esttimated, as
s well as $38,720
$
to
o perform the sched
dule delay..
Syn
nthetic calculation of variance
es for the overall
o
pro
oject, using weighted
sum
ms of prog
gress and overall
o
vallues, is of great convenience tto the project
manager for communic
cation and
d rapid rep
porting.
Figure (4--8)
Also
o, resourc
ce, cost an
nd schedule variance
es can be represente
ed in a
time/cost cha
art using S-curves
S
o BCWS (d
of
dotted line
e in Fig. 4--8), ACWP
P
ashed line in Fig. 4-8
8) and BCW
WP (solid line in Fig. 4-8). This enables
sa
(da
quic
ck graphic
cal understanding off the proje
ect status for sugges
stion of global
corrective acttions to th
he project strategy. Planned (Scheduled
d), Actual and
e S-curves
s can have
e six possib
ble arrangements, a
as in the chart
Earrned Value
pre
esented with Fig. 4-9
9. One mu
ust look at the positiion of the EV S-curv
ve as
the reference
e curve line: whethe
er the AV or
o the PV above
a
the EV curve
s over budget or is behind
b
sch
hedule.
indicates the project is
e best case
e-scenario
o is the one where both
b
the AV
V and the BV curves
s are
The
belo
ow the EV
V: in this case both the
t
cost an
nd the durration are performin
ng
bettter than scheduled. The more
e the dista
ance of the
e AV and B
BV curve liines
from
m the PV one,
o
the la
arger the loss
l
or gaiin of value
e and sche
edule.
Close reasoning can be
e conducte
ed for Costt and Sche
edule perfformance
inde
exes: aggregate ind
dexes can be obtaine
ed for the overall prroject by
weiighted sum
m of activity perform
mance inde
exes. (Figu
ure 4-10) is a chart
sho
owing that the best case-scen
c
ario is when both th
he aggrega
ate CI and
d
agg
gregate SI for a projject are more
m
than 1.
1
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" Tech
hniques of
o outputts & repor
rts"
Whereas a sy
ynthetic re
eport of the overall project
p
pe
erformance
e prevent from
ormation overload
o
to
o direct th
he project’s decision-makers tto the major
info
issu
ues, analytic EVA prrovides gre
eater details to allow
w a better understan
nding
of the
t
job sta
atus through investigation of individual
i
activity pe
erformanc
ce. A
dettailed repo
ort based on
o activity
y breakdow
wn informs
s the proje
ect manag
ger
abo
out the parts of a job that are behind sc
chedule an
nd over bu
udget and helps
in finding
f
outt why the job
j
is in itts current status.
Figure (4
4-9) graphica
al project sta
atus
Earrned value
e (EV). Forr example,, A1 indica
ates both cost
c
overruns and
schedule dela
ay, with more
m
seriou
us problem
ms on costt than on s
schedule. A2 is
ere schedu
ule delay is more sig
gnificant than extra cost
a siimilar situation, whe
The
e Cost Varriance Report for the
e example-project is
s given in (Table 4.1
1). It
is worth
w
notin
ng that the
e activity “Columns
“
procurem
ment” is the
e only one
e
recording a positive
p
va
alue of the RV. This is pretty tricky: inde
eed, that task
t
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is the one witth the bigg
gest problems (a ne
egative CV
V of $43,20
00) with both
b
an increased unit cost and a schedule
Figurre (4-10)
Table (4-1)
Delay. The re
eason may
y be found
d in the pro
ocurement process of column
ns as
a whole:
w
it se
eems that the pre-cast columns manufa
acturer sto
opped to
pro
ovide mate
erials up to
o a 49% of
o units. A timely perrformance
e reporting
g
wou
uld have been
b
highlighted the
e supply prroblem ahead of tim
me to have
e the
pro
oject team tightly wo
ork with th
he supplier and avoiid the inco
onveniency
y.
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4.2–Reporting Techniques
4.2.1- Report Content
The program team member may receive a team critical variance report that
lists variances in his organization at the lowest level of the work breakdown
structure at the division cost center level by cost element. Upon request of
the program manager, analyses of variances contributing to the variances
on the team critical variance report are summarized by the responsible
program team member and reviewed with the program manager.
The preparation of status reports, whether they are for internal
management or for the customer, should, at minimum, answer fundamental
questions:
• Where are we today (with respect to time and cost)?
• Where will we end up (with respect to time and cost)?
• What is the problem causing the variance?
• What is the impact on time, cost, and performance?
• What is the impact on other efforts, if any?
• What corrective action is planned or under way?
• What are the expected results of the corrective action?
The information necessary to answer these questions can be obtained from
the following formulas:
• Budgeted cost for work scheduled (BCWS)
• Budgeted cost for work performed (BCWP)
• Actual cost for work performed (ACWP)
• Estimated cost at completion
• Budgeted cost at completion
• Cost and schedule variances/explanations
• Traceability
• Percent complete
• Percent money spent
• Estimate at completion (EAC)
• the remaining critical path
• SPI (trend analysis)
• CPI (trend analysis)
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We can use CPI and SPI to forecast the expected final cost and the expected
end date of the project. We can express the cost at completion, EAC, as:
EAC =BAC/CPI
The time at completion uses SPI for the forecast and can be expressed as: ETC
New project length = original project length/SPI
Care must be taken with the use of SPI to calculate the new project length
because a favorable vale for SPI (i.e., 1.0) could be the result of work
packages that are not on the critical path. Once EAC and the new project
length are calculated, we can calculate the variance at completion (VAC)
and the estimated cost to complete (ETC) using the following two formulas:
VAC = BAC - EAC
and
ETC = EAC – ACWP
Percent complete and percent money spent can be obtained from the following
formulas:
Percent complete =BCWP/BAC
Percent money spent =ACWP/BAC
Where BAC is the budget at completion. The program manager uses this
information to review the program status with upper level management.
This review is normally on a monthly basis on large projects.
4.2.2- Reporting Considerations
As you prepare reports, use the following guidelines: Maintain concise, topquality project plans and status reports. Be sure everything you publish is
accurate. Keep all stakeholders appropriately informed, including team
members, customers, clients, functional managers, and senior
management. Determine for each audience what information they need to
perform their functions and design reports accordingly.
Keep them informed—but not over-informed—with the information they
need to make decisions and take corrective action. Use exception reporting
by including only major variations from the plan. Stakeholders don’t have
time to digest pages and pages of project information, and there is little
need to report on items where status matches the plans. Use software
programs to analyze project information and report on variances from the
project plans. Establish problem-reporting thresholds.
Determine how significant a variation from the plan needs to be before you
report on it. For example, establish thresholds for how many dollars over
budget or how many days late. Choose the best format for the report, such
as a table, line graph, histogram, or bar or Gantt chart. On each report,
clearly state the purpose of the report and the action to be taken.
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4.2.3- SAMPLE REPORTS
1. STATUS REPORTING
One of the best ways of reducing executive meddling on projects is to
provide executives with frequent, meaningful status reports. Figure 4–11
shows a relatively simple status report based upon data accumulation in the
form of Figures 4–12, 4–13, 4-14 and 4-15. These types of status reports
should be short and concise, containing pertinent information only.
Status can also be shown graphically. As the available project management
software becomes more sophisticated, so does project reporting. There are
four types of reports that are generally printed out from the earned value
measurement system:
• Performance Reports: These reports indicate the physical progress to
date, namely, BCWS, BCWP, and ACWP. The report might also include
information on material procurement, delivery, and usage, but most
companies have separate reports on materials.
• Status Reports: These reports identify where we are today and use the
information from the performance reports to calculate SV and CV.
• Projection Reports: These reports calculate EAC, ETC, SPI, and CPI as
well as any other forward-looking projections. These reports emphasize
where we will end up.
• Exception Reports: These reports identify exceptions, problems, or
situations that exceed the threshold limits on such items as variances,
cash flow, resources assigned, and other such topics. Reporting
procedures for variance analysis should be as brief as possible. The
reason for this is simple: the shorter and more concise the report, the
faster that feedback can be generated and responses developed. Time is
critical if rescheduling must be accomplished with limited resources. The
two most common situations providing constraints on resource
rescheduling are that:
⎯
The end date is fixed
⎯
The resources available are constant (or limited) With a fixed end
date, program rescheduling generally requires that additional
resources be supplied. In the second situation, program slippage may be
the only alternative unless a constant stream of resources can be
redistributed so as to shorten the length of the critical path.
Once the variance analysis is completed, both project and
functional management must diagnose the problem and search for
corrective actions. This includes: finding the cure for the problem &
developing a plan to recover the position
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F
Figure
(4-11))
Figure (4--12)
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Figure (4-13)
Figure (4-1
14) Performa
ance Report
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F
Figure
(4-15) Progress Trends
T
Reporrt
2. Varriance an
nalysis
As shown in table
t
(4-2), (4-3)
Table (4-2
2) Variance analysis Rep
port
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Tab
ble (4-3) Ove
erall Progres
ss Report
MARY
3. COST SUMM
e simple sp
preadshee
et in Figure
e 4-16 listts the sam
me steps as
s the previous
The
schedule repo
orts, but provides
p
financial da
ata (ratherr than schedule data
a) for
a given perio
od.
C
ve Cost Report.
R
• Cumulativ
The sprea
adsheet in Figure 4-17, 4-18 is similar to
t the costt report bu
ut
shows cum
mulative costs
c
to da
ate and the
e anticipatted total c
costs at the
e
completion of the project.
C
ve Cost Line
L
Graph
h
• Cumulativ
The
e report in Figure 4--19 shows the same information as the previous
rep
port, but in
n graphical form.
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Figure (4-1
16)
F
Figure
(4-17)
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Figure (4-18) Cu
umulative co
ost report
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Figure (4-19
9)
HEDULE SUMMARY
S
Y
4. SCH
cause everryone invo
olved with the projec
ct is familiar with th
he baseline
e
Bec
plan
n, a projec
ct manage
er may decide to use
e the same chart to monitor and
a
rep
port on pro
ogress thro
oughout th
he life of the
t
projectt (see Figu
ure 4-11). As
activities are completed, solid lin
nes are dra
awn through the gra
ay activity
y bars
d actual start and Finish dates
s appear in
n the apprropriate co
olumns.
and
• Summary
S
eport
Schedule Status Re
e chart in Figure
F
4-1
12,4-13 is identical to
t the chart in Figurre 4-11 ex
xcept
The
the individual activities
s have bee
en remove
ed, leaving
g only the summary
steps. This re
eport is se
ent to recip
pients who
o only requ
uire summ
mary
info
ormation. It is also called a milestone
m
schedule
s
a seen in figure 4-1
as
14.
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Figure (4
4-20)
Figure (4-21)
(
F
Figure
(4-22) Weeks Sta
atus Performance
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Figure (4-23) millstones Summary report
structions
s on Repo
orts
5. Ins
ports are most
m
helpfful when they clearly
y explain the
t
purpos
se of the
Rep
rep
port and th
he action requested.
r
Consider the reporrt in Figure
e 4-15 from
m
one
e company
y division to
t anotherr.
.
Figure (4-24)
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ception & note Report
6. Exc
ception rep
port a rep
port that shows only
y major de
eviations frrom the project
Exc
plan
n as show
wn in Figure
e 4-16, 4--17 and 4--18 ratherr than all d
deviations..
Perrcent comp
plete. A method of reporting
r
where
w
the amount o
of work
com
mpleted on
n an activity is expre
essed as a percent of
o the tota
al work
required for the
t
activity
y
Figure
e (4-25)
Figure
e (4-26) note
e on perform
mance reportt
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Figure (4-27) Crittical Issues Report
7. GR
RAPHICAL
L REPORT
TS
s importan
nt to make
e reports easy
e
to rea
ad. The firrst step is to be sure
e
It is
rep
ports conta
ain only the information neede
ed by the recipient. Next, determine
whe
ether the reports ca
an be furth
her simpliffied by con
nverting da
ata to graphics.
This
s is particu
ularly usefful in summary repo
orts sent to
t upper m
manageme
ent.
A simple pie chart or line graph may be much
m
easier to interp
pret than a
pag
ge full of te
ext or num
mbers. Som
me reports use the symbol off a traffics
sign
nal as a viisual indica
ator of pro
oject statu
us (see Fig
gure 4-19, 4-20 & 4-21).
Gre
een means
s the proje
ect is on trrack, yello
ow indicate
es minor trouble, an
nd
red.
Figure (4-28)
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Figure (4-29
9)
Figure (4-3
30)
Project Peerformance metric
m
Definitions
Project Performance
P
report
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8. Oth
her Form of Reporrt
As shown in figure 4-2
22
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Figure (4
4-31)
Sample of other Re
eport
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4.2.4- Responses on Reports
This by no means implies that all variances require corrective action. There
are four major responses to a variance report:
• Ignoring it.
• Functional modification.
• Re planning.
• System redesign Permissible variances exist for all levels of the
organization. If the variance is within these permitted deviations, then
there will be no response, and the variance may be ignored.
In some situations where the variance is marginal (or even within limits),
corrective action may be required. To avoid dual standards and red tape,
management must establish the decision-making policies associated
with cost and control systems. The following is a policy guide.
• Approving all estimates, and negotiating all estimates and the definition
of work requirements with the respective organizations.
• Approving the budget, and directing distribution and budgeting of
available funds to all organizational levels by program element.
• Defining the work required and the schedule.
• Authorizing work release. The manager may not, however, authorize
work beyond the scope of the contract.
• Approving the program bill-of-materials, detailed plans, and program
schedules for need and compliance with program requirements.
• Approving the procuring work statement, the schedules, the source selection,
the negotiated price, and the type of contract on major procurement.
• Monitoring the functional requirements.
• When cost performance is unacceptable, taking appropriate action
with the affected organization to modify the work requirements or to
stimulate corrective action within the functional organization so as to
reduce cost without changing the contracted scope of work.
• Being responsible for all communications and policy matters on
contracted pro- grams so that no communicative directives shall be
issued without the signature or concurrence of the program manager.
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4.3– Construction Cost Control Software
Project control software enables real-time and historic job and project
cost management designed for use by your operational teams. Project
control provides performance indicators on all project cost areas providing
valuable insight to make quick decisions resulting in profit margin
increases on every job. Centralization of key information provides
collaboration and reporting across multiple jobs, projects and
organizational departments. The project control system is outside the
company’s sensitive accounting system providing the flexibility and
manipulation capabilities required for testing alternatives and maximizing
profit outcomes. Project control provides integration to over 50 different
accounting systems, out of the box, which eliminates re-entry of data
between systems saving personnel time and eliminating reproduction
errors. Although many construction companies are still using spreadsheets
and shoeboxes to manage their projects, the use of industry-specific
project management software is becoming more prevalent. One reason for
this is that more construction software providers are developing
integrated project management modules to compete with the leading
stand-alone project management systems. In my experience, there are
two important aspects of cost management that separate it from the other
project management functions. The first is that each firm has a very
specific way that they do it and a very specific set of terms that they
apply. It would be difficult to apply a pre-defined practice and a canned
program, out of the box, that would satisfy the firm’s accounting
requirements. We need only look at the Enterprise Resource Planning
(ERP) applications to see the effect of this situation. Firms such as
Oracle, PeopleSoft, Baan, SAP, and J.D. Edwards sell project financial
management systems for several hundred thousand dollars (or more) and
then charge that much again to tweak the system to the client’s specific
needs. now let's see some kind of cost control software like, Project
Costing System (PCS), Construction Industry Software (COINS), and
WinQS. The general purpose Microsoft Excel spreadsheet is also used
by some professionals. In fact, the largest option is Bespoke/in-house
Systems, which is used by 29% of contractors and 38%
consultants in UK. Software packages used for project cost control in UK
Contractors
Consultants
Bespoke/in-house Systems
29%
38%
Microsoft Project
20%
32%
Project Costing System (PCS)
15%
11%
Asta Power Project
15%
5%
Primavera SureTrak
8%
5%
Microsoft Excel
7%
3%
COINS
5%
3%
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4.3.1- Advantages of Used Software in Construction Cost Control
1- Timesheets and Time Management Tracking
Enter timesheets and daily diary information for projects from wherever
they happen to be. Record hours worked by cost code, quantities
completed, and daily diary notes, and synch that information with the
home office using a laptop or handheld device. Analyze fresh data to
optimize resources for the next day and provide real-time integration with
accounting to accelerate cash flow for faster project billing.
2- Direct Accounting Integration
Collect and store timesheet data from jobsites, while sharing data
electronically with accounting systems to eliminate double entry. Maintain
time sheet standards with labor classifications, and other user defined
tags. Import timesheet data from third-party systems or to any
accounting system. Record notes for each cost item including
assumptions, jobsite observations, and more. Increase communication for
issues that include staging and additional information to the field
operators. Provides crew based timesheets with pre-defined data
streamlining foreman or supervisor completion.
3- Field Resource Tracking
Manage field resources efficiently. Analyze information about productivity
and accurately track customer information including account status,
equipment usage and service history. Easily make changes when a
resource is identified with high performance. Ownership costs and
operation costs can include information on depreciation, insurance, and
other unique resource costs in order to determine true ownership cost as
well as operational use cost.
4- Anywhere Project Analysis
Web-based reporting and dashboards make it easy to get information
from anywhere. Meet with customers on-site to discuss projects with total
access to historical information, as well as the ability to develop
preliminary budget estimates for project or job budget creation on the fly.
Eliminate printing unnecessary reports by remotely focusing what the
customer is looking for.
5- Provide Progress, Resource and "Actual Cost" Updates
Updating Software with data from your other systems is easy when using
the Software API. The Software API (Application Programming Interface)
provides an automated method for updating Software with data from
other systems to create new records, update existing records, or delete
records automatically. By extracting the data from your other systems
into an XML format supported by Software and submitting the XML data,
Software will “listen” for the data and automatically update the
appropriate projects. Currently, the Software API supports two types of
data, Resource Rates and Job Tracking Details.
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6- Monitor "Actual" Project Costs without Accounting Delays
Stay up to speed on job and project progress on a daily basis without
waiting for accounting information. Preliminary and actual cost data is
available daily to assess the need to make potential changes while there's
still time to have an impact on the project's success and gross profit
margin. Recognize time and other valuable information the moment it is
entered without waiting for accounting and not having to re-enter data
into multiple systems.
7- Remote Time Management Tracking
Control and monitor vendor commitments and activity, including original
contract project components, insurance and bond monitoring status,
change orders, invoices, requisitions, retention processing, and payments.
8- Collaboration and Updates
Save valuable man-hours eliminating the need to hand off estimates from
one team member to the next. Allow last-minute updates until the bid is
due, leveraging last minute pricing changes on materials and resources,
while allowing multiple estimators to work on a single, or multiple
estimates simultaneously.
9- Remote Data Access
Save gas, time and frustration by accessing information from anywhere
including the office, remote offices, home, or client sites. Leverage untethered information access with synchronization, putting everything at
your fingertips without being connected to the internet or network.
Updates are entered throughout the day into a laptop or handheld device,
and when convenient, a connection is made to the network to receive and
send changes. Entry straight from the field eliminates duplicate data entry
into numerous systems. Provide remote project access to managers,
foremen and superintendents providing complete access to critical
information needed to manage jobs remotely in one central location. Track
cost and productivity positions of projects, responsibilities of team
members, related documents, and ongoing project activities.
10-
Centralize Project Information
Eliminate storing project information on local drives and multiple network
locations. Project job tracking data is conveniently stored in one location
and shared for easy access to all team members. Multi-office estimating
provides synchronization between team members to accommodate realtime estimation updates.
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You can access it from anywhere
To many people, the biggest advantage of cloud software is that it’s truly
available on any computer or device anywhere in the world. This is
particularly useful when the project team members are in the office, in the
field and in a variety of geographical locations. There’s no hassle with
synchronizing data or uploading changes to a centralized server.
Everything is centralized already – so collaboration is built-in. You no
longer face moments of not knowing if you’re looking at the most up-todate version of a report; or those crushing times when you’re on your way
to a customer meeting and, whoops, the report you need is on Dave’s
laptop and, too bad, Dave’s in Mexico this week. Everything’s connected,
integrated and constantly current
With Construction Cost Control Software solution you will have greater
access to the following information:
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
Which materials are due during this week, and which ones are still on
back order?
What's our profit margin for all approved change orders?
Which change orders are pending on this project?
We haven't received the new design changes for the final phase. When
was the last time we requested this information?
Our actual labor hours are about the same as the original estimated
hours and yet we're not finished. Where can I find the "projected to
complete" hours?
How many downtime hours (non productive time) did we accumulate
last year? Are we doing any better this year?
Now that this project is complete, are all vendor invoices accounted for?
I don't want to be blindsided with any "surprise billings" later on.
The bonding company is asking for future receivables, unbilled contract
dollars, work-in-progress, contracts won but not started, current
retained dollars, budgeted hours remaining on projects, and more. Is
there one source that pulls all this information together?
Which workers have been assigned tools and equipment on this project?
What's our percent complete vs. percent billed – can we do another
progress bill?
What are the committed dollars remaining on this project?
Can we attach job site pictures to the project so we can look at them
during our meeting with the owner?
What's our total cost on returned materials for this project? Which items
were returned to the vendors for credit and which were returned to
inventory?
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4.3.3- The Disadvantages of Software in Construction
Cost Control
1- Disadvantages in Percentage-of-Completion
Points to problems in the percentage-of-completion method as a distinct
disadvantage of cost control. This method, used to estimate costs under
cost control, uses a mathematical formula to determine how much of a
project a company can finish in a period, usually a financial quarter or
year. Percentage-of-completion is based entirely upon estimation,
meaning gross differences may occur between projected goals and
actual achievement, giving rise to misleading figures in cost control
analysis. Furthermore, the government may elect to tax a company
based on estimated percentage-of-completion rather than actual
completion rates. If significant disparities arise between estimates and
actual completion, companies suffer tax problems.
2- Disadvantages in Interlocking Systems
Bhabatosh Banerjee, author of "Cost Accounting Theory And Practice,"
points to problems in interlocking cost control systems. These systems
create cost control budget estimates and actual totals for different
aspects of a company's business and production. The disadvantage of
this lies in bookkeeping methods. If a single cost or expenditure applies
to two areas of a company with separate cost control budgets, that cost
or expenditure appears twice in the company's books.
3- Mismanagement of Cost Control
Mismanagement in cost control can lead to severe problems for
companies. For instance, cost control requires the consideration of a
broad palette of variables. If a company uses the wrong variables in
creating estimates for cost control or when creating figures displaying
total expenditure and total profit, the system produces widely inaccurate
figures regarding the cost effectiveness of procedures and processes.
What's more, human error may lead to severe inaccuracies -- all
employees involved in the process of calculating cost control, which
includes managers, foremen and more, must understand the system and
its requisite procedures
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Chapter 5
5- Conclusions
" Conclusions "
Chapter 5
5- Conclusions
5.1- Common Causes of Cost Control Problems
1. Poor budgeting practices, such as basing the estimates on vague
information from similar projects rather than the detailed specifications of
the project at hand.
2. Failure to plan sufficient contingency budget.
3. Failure to correctly estimate research and development activities.
4. Failure to consider the effects of inflation on the cost of materials or labor.
5. Receiving or analyzing status information too late to take corrective action.
6. A climate that does not support open and honest disclosure of information.
7. Indiscriminate use of the contingency budget by activities that overrun
their budgeted cost.
8. Failure to re budget when flaws are discovered, technical performance
falls below performance standards, or changes in project scope are
approved. During the course of the project.
9. Many small decisions are made that ultimately impact costs. For
example, when engineering decides on the final design of a product
feature, conventional accounting reports may not show the impact of
these design decisions on production costs. In that case, the project
manager must make sure that the cost impact is known before such
decisions are made.
10. Weather conditions: Weather is probably the most common and
most obvious reason for work slowdown resulting in cost overruns. Work
proceeds much more slowly under adverse weather conditions, and such
conditions can impact the quality of the work as well.
11. Quality of the workforce: As a general contractor who hires
subcontractors, you don’t really have any control over the subcontractors’
workforce. Therefore, you have to trust that your subcontractors will
provide experienced workers on your job. This is why, in my opinion, all
subcontractors should be prequalified.
The risks associated with poor work quality are significant. If there is a
problem, the poor quality will result in rework, and rework slows down
job progress and can impact safety. The potential losses due to poor
quality can put the entire project in a tailspin, and if this occurs, the
project manager must take immediate steps to mitigate the situation.
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" Conclusions "
Chapter 5
12. Quality of the supervision: Obviously, if you don’t have proper
supervision on the job, there are going to be problems. Many issues have
to be addressed every single day on the job, and everyone looks to the
superintendent for direction and clarification regarding those issues.
If you have an inexperienced superintendent who is not up to speed on
the project, the type of work, or the systems in place to manage the
project, you are going to have a disaster, plain and simple. As I’ve said
before, this is why good superintendents are worth their weight in gold.
13. Incorrect sequencing of work: Unfortunately, there are times
when pressure from an owner or from the main office can cause a
superintendent to schedule work out of sequence and before it is ready,
just to appease some unrealistic demand for action.
But no one knows better than the superintendent and the field personnel
how the work needs to be scheduled to keep things on track. Sometimes
a work activity is initiated just to give the appearance of making progress
when in reality these artificial starts just waste time and cause all kinds
of havoc on the job. If this occurs too often, the inefficiencies will
eventually show up and expose the real story.
14. Change orders: Change orders can be one of the most insidious
factors influencing project performances. A little change here or there
often seems like no big deal. Many contractors fail to ask for additional
time when they process the cost of the change, thinking that they can
wiggle the extra work into the existing schedule. Then all of a sudden,
these seven or eight little change orders are causing the job to run two
weeks behind, and then it is a big deal!
15. Overcrowded job site: One of the things that can actually hinder
work productivity is having too many people on the job. I have heard
more than one subcontractor complain about packing too many workers
in tight quarters trying to get a job done. It becomes so
counterproductive that it actually slows down the job instead of speeding
it up as planned.
16. Defective materials: Discovering that the material or equipment
that you were planning to install is defective is a real problem. It is
certainly one that can be avoided with proper quality control. But in some
cases, this defective material is not discovered until the workers are on
the job ready to start the project. By this time, it is way too late. The
time has already been wasted, and it will take time to reorder the
material and reschedule the crews to install it.
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Chapter 5
17. Inadequate tools and equipment: Having the right tools and
equipment on a construction job may seem like a no-brainer. But again,
when so much of the work of the contract is passed on to subcontractors,
you don’t always have control over even these simple aspects of the job.
I can’t tell you how many times I have seen work installed improperly
because the craftspeople didn’t have the right piece of equipment
18. Late deliveries: Late deliveries are probably one of the most
frustrating causes of schedule delays and cost growth in construction.
Once again, the contractor has very little influence or control over the
manufacturing or fabrication processes involved in the making of many of
the products or equipment used on the project. However, the stakes can
be very high for the project if items arrive late. That’s why on projects
with critical lead- time items, it is best to assign someone to do nothing
but expedite deliveries and stay on top of the project buyout schedule.
19. Subcontractors Risks: Sometimes a subcontractor reneges on a
price before the subcontract is executed. When this happens, the general
contractor has three options: contact one of the other original bidders
and try to negotiate a price that both parties can live with; rebid the
section of work altogether; or go out and negotiate on the open market,
trying to secure the original pricing or better.
The most difficult situation to remedy is when a subcontractor gets into
financial trouble and goes out of business before the job is complete.
When this happens, it puts the project in a real tailspin, especially if the
subcontractor in trouble ends up being one of your primary
subcontractors such as steel or mechanical.
Often the bonding company will step in and provide another specialty
contractor to complete the work, but you can imagine what this sort of
disruption does to the schedule and therefore the budget. The
ramifications can be severe, and there may be no recovery from the
damages. During a crisis like this, it is best for the owner, the contractor,
and the architect to sit down and come up with a plan to mitigate the
potential losses for everyone.
20. Quantity errors: When a simple quantity takeoff error into our
budget calculations. When this happens, it is best to find the error as
soon as possible, preferably before you has committed to any purchase
order or subcontract. If you find the error before committing to any
pricing, you still have time to go out and negotiate your very best deal on
the affected materials and labor in an effort to mitigate the obvious loss
that you will suffer because of the inaccurate takeoff.
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Chapter 5
21. Labor expenses are exceeding budget: The cause of this problem
may be that phases are taking longer than estimated. Several actions
should be taken:
22. Variable expenses are exceeding budgeted levels: This may
occur because original assumptions were wrong or because you are not
exercising enough control over spending. Consider these actions:
23. Out-of-sequence starting and completion of activities and events.
24.
Inadequate work breakdown structure.
25.
No management policy on reporting and control practices.
26.
Poor work definition at the lower levels of the organization.
27.
Management reducing budgets or bids to be competitive or to eliminate “fat”.
28. Inadequate formal planning that results in unnoticed, or often
uncontrolled, increases in scope of effort
29.
Poor comparison of actual and planned costs
30.
Comparison of actual and planned costs at the wrong level of management.
31.
Unforeseen technical problems.
32.
Schedule delays that require overtime or idle time costing.
33.
Material escalation factors those are unrealistic.
5.2-Keys to Effective Project Cost Control
Effective project cost management is an extremely complex process that
begins very early during a project life cycle, and long before its actual
start. Among the factors that influence success is a reasonable and
accurate system for estimating costs. Highlights some of the most
important considerations when creating a cost management system.
1. A clear, complete, of the project and the scope of work involved.
2. A thorough assessment of the potential risks involved, with well
thought- out action plans to minimize their possible impact
3. A well-trained and competent project manager
4. A thorough understanding, by all stakeholders, of the various types
of costs that are likely to be incurred throughout the life of the
project
5. A project organizational culture where there is a free flow of
communication, so that all project participants clearly understand
their responsibilities
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Chapter 5
6. A well-defined project work structure where work packages are
broken down into manageable sizes
7. Meaningful budgets, where each work package is allocated its
appropriate share of the total budget, adequate to the work
involved
8. An accounting system and coding scheme that are well aligned with
the work breakdown structure and are compatible with the
organization’s management information system
9. A cost accounting system that will accumulate costs and allocate
them to their relevant cost accounts as and when they are incurred
10.A prioritized and detailed work schedule, drawn from the work
breakdown structure, which assigns and tracks the progress of
individual tasks
11.Effective management of well-motivated staff, to ensure that
progress meets the work schedule
12.A mechanism for comparing actual and planned expenditures for
individual tasks, with the results extrapolated to cover the entire
project
13.The ability to bring critical tasks that are late back on schedule,
including providing for additional resources or taking other prompt
remedial measures
14.Adequate and effective supervision to ensure that all activities are
done right the first time
15.Supervision of staff time sheets so that only legal times are booked
to various cost codes
16.Proper drafting of specifications and contracts
17.Careful investigation to confirm that the customer is of sound
financial standing, with sufficient funds to make all contracted
payments
18.Similar investigation, though not necessarily as discreet, of all
significant suppliers and subcontractors (especially those new to the
contractor’s experience)
19.Effective use of competitive tendering for all purchases and
subcontractors to ensure the lowest cost adequate with quality and
to avoid committing to costs that exceed estimates and budgets
20.Proper consideration and control of modifications and contract
variations, including charging all justifiable claims for price
increases to the customer
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Appendix A
Appendix A
Cost Control Process Flow Chart
Cost Control Processes for
Construction Project
Level 1
Gathering supporting
document
Level 2
Create cost Control
model
Level 3
Level 4
Level 5
Level 6
Level 7
Collect Current Cost data
Actual Cost
Allocations
Analysis data with EV
Reporting
Decision making
Basic Process of Cost Control
in Construction Project
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1/7
Gathering supporting
document
Level 1
Estimated
Budget
Baseline
Time Baseline
Contract of
Sub Contractor
Cash flow
Baseline
Direct Cost
BOQ
Contract
Document
Drawings
Specification
Indirect Cost/
Overhead
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Level 2
From BOQ, Budget
Estimation, Sub
contractor, supplier
contract
Create WBS
Create cost Control model
Fixed Asset
Sheet
Expenses
Sheet
Storage
Sheet
Deprecations
system
Coding
system
Develop
cost
Control
model
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3/7
Collect Current Cost data
Level 3
Finances
Department Report
Material
Expenses
Technical
Office Report
Labor Expenses
Other Expenses
Client Invoices/
Subcontractor
Storage Department
Report
Equipment
Expenses
Variations order
Quantity survey
according to
shop drawing
Material storage
Report
Concrete
pouring log
Labor number &
allocation report
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Level 4
Actual Cost Allocations
Cost Control model
WBS sheet
Technical
Office Report
Client Invoices
fixed assets
sheet
Expenses
sheet
Finances
Department
Report
Finances
Department
Report
Equipment Expanses
according to
Deprecations system
Subcontractor
Invoices
Storage
sheet
Storage Report
All Expenses
Report
Material storage
Report
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Level 5
Earned Value Rule
Analysis Data with Earned Value
Earned Value
Parameter
Earned Value
Analysis
Earned Value
Report
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Level 6,7
Payment status
according to client
invoice
Project Summery
original/update
Time
Reporting
Forecasting
Mony
Analysis of WBS
Reason of profit or loose
Direct
Indirect
Decision
making
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Appendix B
Appendix B
Responsibility Matrix for Cost Control Proces
References
[1] Preparing for the Project Management Professional (PMP) Certification
Exam Second Edition Michael W. Newell, PMP, ENP, pp. (25-30) & (77-102)
[2] Project management step-by-step / Larry Richman pp.(49-51),(136143)&(153,165)
[3] Project Management Nation—Tools, Techniques, and Goals for the
New and Practicing IT Project manager by Jason Charvat Copyright? 2002 by
John Wiley & Sons, Inc., New York. (Chapter 7 - Controlling the Project)
[4] Construction management jumpstart Second Edition by Barbara J. Jackson
Copyright © 2010 by Wiley Publishing, Inc., Indianapolis, Indiana pp. (140168) & (260-280)
[5] Cost and Value Management in Projects. Ray R. Venkataraman and
Jeffrey K. Pinto Copyright @2008 John Wiley & Sons, Inc. pp.(32-38),(43-56)
,(105-114) & (127-148)
[6] Fundamentals of Project Management Third Edition by JAMES P. LEWIS
[7] Practical Project Management Tips, Tactics, and Tools by Harvey A. Levine
Copyright © 2002 by Harvey A. Levine.pp(159-162)
[8] PROJECT MANAGEMENT A Systems Approach to Planning, Scheduling, and
Controlling Tenth Edition by HAROLD KERZNER, P h. D. Senior Executive
Director for Project Managenment, Copyright © 2009 by John Wiley & Sons,
Inc.pp(633,685)
[9] Project Management Gary R. Heerkens, PMP Copyright © 2002 by the
McGraw-Hill Companies, Inc.(159,183)
[10] Project Planning and Control Fourth Edition Eur Ing Albert Lester, CEng,
FICE, FIMechE, FIStructE, FAPM.pp(25-38)&(220-256)
[11] Project Management for Facility Constructions A Guide for Engineers and
Architects by Alberto De Marco.pp(119-136)
[12] Skills & Knowledge of Cost Engineering Fifth Edition With New Appendix
Listings Edited by Dr. Scott J. Amos, PE.
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Stoarge Manger
Administrative Staff Support
Technical Manager
Quality Manager
Project Scheduler
Contorol Manager
Contract Manager
Financial Analyst
(Select from drop down list)
Project Manager
(Contributor or Reviewer)
I - Information Only
Tender Manager
P - Primary Responsibility
A - Approval Authority
S - Supporting Responsibility
Procurement Manager
Resource Responsibility
Gathering supporting document
Time base line
Budget base line
Cash flow
BOQ
Drawings
Specification
Sub contractor Contract
A
I
A
I
S
I
I
P
S
P
P
P
I
A
A
P
I
A
I
I
I
P
I
P
P
I
S
A
I
I
I
P
I
P
I
I
I
I
I
I
I
I
I
I
I
I
Cost Control model
Create WBS
Fixed Asset Amount
Deprecations system
Expenses Amount
Storage Amount
Coding system
S
S
I
S
P
I
A
S
S
P
S
I
I
I
I
S
S
I
I
S
S
P
I
Collect data status
Material expenses
Labor expenses
Other expenses
Equipment expnses
Subcontracto/client invoices
Variations order
Quantity survey
Concrete pouring log
Labor number & allocation report
Material storage report
I
I
P
P
A
A
P
I
I
I
S
S
S
S
S
I
I
I
I
I
I
I
I
I
I
I
I
S
S
S
S
P
P
P
P
A
A
I
P
P
P
I
A
P
P
P
Requirements Analysis
Actual Cost Allocations
Analysis data with EV
Reporting
I
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