CstM 460 – Construction Cost Management
The Project Budget
“Budgeting”: (Definition in this course):
Breaking down a construction project total contract amount into planned expenditures for
every item of work, for the purpose of monitoring, reporting and controlling actual costs during
the course of construction.
Think of the items of work as “cost tasks”.
HOW IS “BUDGETING COSTS” DIFFERENT FROM “ESTIMATING COSTS”?
Typical Process:
Bid accepted by Owner (Contractor is elected and notified)
Estimating hand-off mtg. w/ Proj. Mgmt.
NTP approx. 2 weeks
Buy-out process begins, immediately triggering Accounting need for the project budget so that commitments (labor, material, subs)
can be entered into “the system”, plus
PM’s need to monitor, report and control costs
Characteristics of Good Project Budgets and Budget Line Items:
1.
Internalized (Processed through the PM’s head, not just transferred from the estimating
department). In real life the estimators did not have much time to prepare the estimate
and submit the bid.
2.
Organized and cost coded in a manner that promotes standard cost accounting and
effective cost retrieval and analysis. Standard cost accounting is CSI #-based.
3.
Neither too many nor too few tasks and subtasks
Enough so that you can control your job
Not so many that you spend all your time collecting meaningless data
4.
Provides cost-to-date data IN TIME TO DO SOMETHING ABOUT IT. Ideally, cost task work
should take more than a week to complete.
In light of the above 4 characteristics of a good construction project budget, consider the following
examples of a semester budget for a college student:
“Clueless Collette”
Cost Task
Budget
Make it until Summer
$5,000
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“Weird Wally”
A 5,000-task budget
Task
Day 1:
Buy White Socks
$3.50
Buy Brown Socks
$3.50
Drive to Buy Socks
$1.22
Get Shoes Resoled
$47.39
Drive to Pick Up Shoes
$2.13
Portion of Drive to stop by to buy extra batteries for
solar calculator
($0.13)
Net for Drive to pick up shoes =
$2.13-0.13=$2.00
What if a $5 Million commercial building job was budgeted with 2 Tasks?
Build
Punch list
$ 4,980,000
$
20,000
Lump Sum
Lump Sum
What if the same project was budgeted with 250,000 tasks?
Pick up plans
$3.50 214 pages
Open to page one $0.75 Lump Sum
Take out pencil
$0.25 Lump Sum
Etc.
Basic budget format:
An Excel Spreadsheet
Easily manipulated / modified to suit. Although several commercial
formats are available (i.e., Timberline, JobView, etc.)
From the top:
“INPUT FORM”
Few companies actually allow PM’s to access the “root” spreadsheet.
Too easy to mess up the template. You will be given a copy of the
template.
Date:
Date submitted by PM
Contract Type:
Cost Plus, Cost Plus w. GMax, Stipulated Sum, (not Unit Price)
Project Manager:
Typed and Signature
Cost Code:
One code for every task
Used in field when filling in time cards
Used (by computer) to retrieve actual costs for similar tasks from other
projects)
At a minimum:
Job Number
Task Number
CSI number appropriate to task
(Summary on Handout, Entire format on server)
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Example:
Task = “Install Anchor Bolts”
CC = 252 – 19 – 03186
252
Job Number 252
19
Task Number
03186
03
Concrete
031
Formwork
0318 Form Ties and Accessories
03186 “6” = Standard Company # for AB’s
Description: CSI Order
No categorical separation between self-performed work and subcontracted
work. Self-performed and sub’d work will be “mixed in” together
CSI Division Names as Major Headings (no need to code division names)
Task Names: Simple, clear, descriptive of “what is being done”
Quantity:
How many units (see below)?
Unit:
The measurement you can most easily see and count in the field.
Ask yourself: “What will I actually measure when I try to determine the %
complete of some task?
In many cases the unit of measure used in your budget will not be the same as
the unit of measure used by the estimators.
USE “PM UNITS”, NOT “ESTIMATOR UNITS”
Example:
For wall framing
Estimator unit:
PM unit:
MBF
LF
For formwork:
Estimator unit:
PM unit:
SFCA
LF
For slab on grade:
Estimator unit:
PM unit:
CY
SF
THIS MEANS THAT MANY TIMES YOU WILL NEED TO TRANSLATE YOUR ESTIMATE INTO
PM UNITS.
Labor:
How much you think the total labor cost will be for this task.
Use the same labor rates ($/mh) you used in your estimate/bid.
Material:
How much you think the total material cost will be for this task.
Use cost plus any appropriate taxes and shipping (FOB jobsite)
Equipment:
How much you think the total equipment cost will be for this task
Use time multiplied by reasonable rental rate. Company-owned equipment will
be “rented” to your job by your company.
3
Subcontract:
Other:
How much you think any subcontracted portion of this task (it usually will
be the entire task) will cost.
Use your bids (or a reasonable number if you did not receive a bid)
Like a “permit fee”, or “special inspection fee”, or any other non-LMES “task”
Total Budget: Labor + Material + Equipment + Subcontract + Other
Will often be different than your estimated cost.
Original Estimate:
The original estimate re-distributed into the budget cost tasks you have
created.
You may have many estimate “holes” to fill in. If so, a $0 would go into this
cell.
Over (Under):
The difference between the amount of money in your estimate for this
task, and the amount of money you think it will really cost (your budget).
Selected Pointers in Budget “Cost Task” Preparation:
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Be sure to check the project manual and CSI check list to find any obvious holes in your
estimate (i.e. who is going to dry-pack under the steel column base plates?)
Use whole dollars (never cents)
Multiple buildings may require multiple task-similar budget formats. i.e. you may have a cost
task for Framing 8’ Walls for Bldg. #1, and an identical task for Bldg. #2.
Actual work sequencing should “drive” cost task sequencing, with CSI organization, within the
sequence.
Self-performed work requires much more control, therefore many more cost tasks, and LMESO
breakout, than the one task needed for subK’d work.
Ideally, costs tasks should take longer than a week to complete.
The units of measurement for a cost task should be units a “superintendent” can see (should
not require much calculation or should be very easily field measured) for the purpose of
determining the current % complete of the task.
Consider the following budget line items: (assume rough carpentry and concrete are self-performed),
and the possible budget entries in the columns at the right of the cost component:
Code:
Description:
Quantity:
Unit:
Labor:
Material:
Equipment:
Subcontract:
Other:
Total Budget:
Original Estimate:
Over (Under) OE:
751-24-01000
Job Supervision
52
Working Days
$50,000
$15,000
$0
$0
$0
$48,000
$25,000
$23,000
751-13 - 03300
Bldg. 1, SOG Place/Finish
345
CY
$15,000
$12,075
$2,200
$5,555
$0
$34,830
$36,075
($1,245)
$
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HINTS ON “INTERPRETING” YOUR ESTIMATE when preparing the initial Project Budget:

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You are stuck with the amount of your bid. This will always be the initial contract amount (and
how much you will get paid for the work you bid and budgeted).
Organize your Budget cost tasks first, and then dissect and plug in your bid.
You will often find a need for “proportionate budgeting”, dividing a large estimated cost for
multiple “jumbo” tasks (like “wall framing”)into several smaller costs tasks (like “layout”, “cut
plates”, “frame”, “stand & brace”, etc.) for cost monitoring and control purposes. Become
very familiar with this process.
You are assumed to be familiar enough with the project and typical task costs in order to
recognize, and revise, an obviously wrong estimate amount and/or quantity for a task. Start
your budget for a cost task with your estimate number, then perform the “level 1 filter” check
and revise your estimate-based budget number if it is “not possible”. Don’t worry beyond this
for now. You will re-budget all line items soon.
Fill obvious holes in the estimate with reasonable quantities and cost estimates. Use a cost
guide if you have to.
Double-check your indirect (general requirements) costs. Keep in mind the project duration.
i.e. if you have $20,000 in your budget for a superintendent, and he/she gets paid
$60,000/year, and the project is 12 months long, then you only have a superintendent on your
job for about 17 weeks). Will that work?
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