How to approach cost management in civil engineering with new pragmatic method.

Purpose of cost management

In light of these issues, the purpose of this study was to shed light on the present costing practice and CW in the UK construction industry in order to build a framework that would guide stakeholders in cooperatively cost management projects. Adopting a qualitative study design technique, data from the UK’s building and infrastructure sectors were collected. A total of 50 interviews and three case study examinations were done. The study identified target costing, pioneering, and integrated value engineering as fundamental elements of collaborative costing.

In light of this, the study presented the concept of “costing cooperatively” (CC) as a process that integrates stakeholders (upstream and downstream) around a larger scheme budget, generating a sense of ownership that motivates positive behaviors to accomplish desired cost results. The investigation revealed, however, that the actual practice differs from this definition and does not support a broader application of CW, especially in commercial activities. Although the findings demonstrated some improvement and glimpses of CW coming from interdisciplinary settings, the costing process is still driven by price, and a lack of understanding continues to have a negative impact on the wider practice of collaboration in the UK construction sector.

The significance for industry and practice is that costing methodologies must transition from the traditional perspective to a more socially-based approach, involving commercial players, in order to enhance ‘flow’ and ‘value’ views for the efficient operation of production operations. This is partly due to the fact that the majority of the obstacles discovered to destabilize CW would persist regardless of the environment if commercial actors and their interests were not appropriately aligned in a “collaborative production” approach. So long as this inference persists, efforts to sustain an integrated practice and other construction changes in the United Kingdom will continue to stagnate. Therefore, the study devised a simple yet successful framework to help stakeholders through the required processes for cooperatively costing projects in practice.

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Cost Management, Civil Engineering, Estimate, Estimation, Whole Life Cycle Costing

Production and Business

Construction enterprise production and business purpose is the construction project through construction, to play in this enterprise technology, equipment, management capabilities, the rational allocation of production factors, optimize the construction program within the time stipulated by the contract to complete the agreed quality standards of construction tasks, obtain legitimate profits, and thereby contribute to social advancement. As the cost of doing business center projects is a major source of development dependent on corporate profits, its is crucial to attaining this objective.

Currently, construction enterprises in project cost control is still in a primary, extensive, based on the experience level of management, cost control system, lack of energy, lack of project manager incentives to stimulate creativity, competition and constraints mechanisms, and specific performance (Poza, 2018) stage.

  1. The placement of cost control is ambiguous, and its significance has not been fully acknowledged by project managers and business managers.
  2. There is no clear dividing line between the cost obligations for specific products among the many professional jobs with unknown costs.
  3. Cost control procedures, missing link, lack of systematic cost control procedures program.
  4. Cost planning approaches, the method is not scientific, empirical elements are also included, and there is a lack of trustworthy proof and an innovative program to support the program.
  5. Construction costs are frequently out of control due to subjective project managers, one-sided control objectives, and the absence of appropriate control mechanisms and methods. Organizational features of project management failure, cost control, missing data, failure to build a project cost control database that can be queried, reverse cost control, etc.
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Cost Management, Civil Engineering, Estimate, Estimation, Whole Life Cycle Costing

The Essential Principles Of Construction Project cost management

The composition of construction cost management

Direct cost refers to the process of forming the construction cost of the entity or entities that contribute to the creation of project expenses, such as labor and material costs and other direct costs. Indirect costs are the expenses incurred by each internal project manager for the preparation, organization, and management of the complete construction and production of construction costs, including staff pay and other employee welfare costs associated with labor protection.

The construction project

Through quota management, measurement and management tools, and construction quality control, the rational use of material and economical use of materials can be utilized to ensure compliance with design specifications and quality standards of the premise, prevent rework, and effectively control the consumption of material goods. Due to the fact that material prices are determined by the purchase price, transport fees, and transportation reasonable loss, the purchasing department is primarily responsible for controlling the material’s price during the procurement process. The purchasing department controls the material’s price through market information, inquiry, application of competition and economic means contracts, and other means.

Take control of labor and material costs using the same control approach, the execution of “volume and price separation.” Manual labor by the number of project managers and construction contractor labor contracts, in accordance with the internal construction drawing a budget, reinforced turn-like single or template to calculate the amount of the fixed artificial man-days, and safe production, civil construction and sporadic man-days of labor by quota a certain percentage (typically 15 to 25 percent). The cost of machinery is mostly defined by the number of sets of classes and units priced in two classes; classes for effective console expenses are governed primarily by the following factors:

  • Reasonable preparations for the construction of production, an equipment rental program to strengthen management, and a reduction in idle equipment resulting from inappropriate arrangements. The use of machinery and equipment to strengthen work scheduling, avoid slowness, and increase equipment used on-site. Improve the upkeep of field devices to prevent incorrect use caused by parked mechanical equipment. To enhance productivity, the crew and auxiliary production personnel must have excellent coordination and cooperation. On-site construction management fees comprise a particular proportion of the total cost of the project, control and accounting are more difficult to comprehend, and projects and expenditures require greater flexibility when employing the following measures:
  • The total amount of construction management fees are determined by the construction project manager based on the proportion of the overall cost of the project construction plans that the on-site construction management costs represent. Develop project construction management of expenditures and responsibility scope for implementation of control lines and positions. Create and firmly enforce reimbursement procedures for the approval of construction costs by the construction project manager (Kueng, 2000).
Cost-Management-Civil-Engineering-Estimate-Estimation-Whole-Life-Cycle-Costing-Figure-3
Cost Management, Civil Engineering, Estimate, Estimation, Whole Life Cycle Costing

Construction Cost Control Operating Systems

Building project managment

In the building phase of the project, the project manager must adhere to the rise in income, total control, and the combination of the concepts of responsibility and rights to ensure that the actual construction costs are properly managed.

Materials and consumables used in building projects, including engineering entities with a turnover, constitute the majority of materials and components and contribute to the formation of the project entity. The worth of materials and supplies, which accounts for more than the overall cost of the project, is of paramount importance from a monetary standpoint.

Control of procurement and supply channels in the selection of material supply targets, they should adhere to the “high quality, low price, the road near the good reputation,, principles for the procurement of materials in all aspects of the work, combined with measurement of the material when entering storage acceptance, regular inspection, and control (Wiley, n.d.).

Party supply management

According to the number of construction plans and the budget, the construction unit typically determines the party responsible for the delivery of materials, and then, based on the building status of the project, supplies are provided. In construction, however, physical quantities and project costs will invariably grow or decrease due to design revisions and other factors. As a result, the number of materials engineering projects must be adjusted using the final settlement as the foundation.

Convergent procurement and supply scenario with construction schedule control. To satisfy the demands of engineering construction, businesses should establish a “Material schedule” based on the building timeline. But the real control material supply schedules sometimes appear to have delayed availability and an insufficient number of supplies, particularly when a material’s tight market supply is imminent. Consequently, you should use the material plan, as well as the supply time and the supply of various materials recorded on the “Material schedule”, by comparing the actual feeding programs and materials, to determine the degree to which the material supply and construction schedule are interrelated, and the degree to which the material supply is disconnected as a result of the construction schedule’s influence.

Bid control in cost management

Changes in bids are mostly induced by market forces, although internal control should be evaluated prior to establishing a roster of qualified vendors. When making a purchase, you must choose competent supplier list suppliers, execute price comparisons based on quality and quantity, and pay a minimum buy price. Additionally, the material sector and materials required for each project can be categorized as bulk purchases in order to lower the cost of the purchase.

The Shipping management

In order to cut costs, a sensible organization of material transport, the local acquisition of materials, and the selection of the most cost-effective transportation methods are required. To this aim, the department of material procurement requires providers of packaging to meet certain standards and deliver to a defined location, such as reducing package quality supply units and press payments that grow as a result of changes at the designated location.

Lack of command

Acceptance of the project site’s material requirements for employees must adhere to stringent acceptance standards in a timely way, with precise measurement, in order to prevent the loss or shortage of materials and to account for their associated costs.

Using quota management, measurement, and management tools, and construction quality control to ensure compliance with design specifications and quality standards of the premise, the rational use of materials, and economical use of materials while avoiding rework and other substances in the effective control of material consumption.

Quota control

For quota-based projects with predetermined material consumption quotas, the quota system implementation sends the material. Each project’s foreman is restricted to prescribing a maximum number of beneficiaries at each stage. If a recipient needs more than the allowed amount, he or she must first identify the reason and then undergo specific approval procedures prior to selection.

Indicator control

Through the deployment of program management and control indicators, fixed material is not utilized. Develop a requisitioned materials index based on long-term real consumption, the month’s special conditions, and conservation needs, and apply this index to control hair material that exceeds the target material and must be vetted prior to distribution, as seen in the given table.

Dawood has power over a big quantity of money. Small and random materials, such as nails, wire, etc., are subject to a lump-sum control technique in the course of the materials’ utilization. The specific approach is based on the quantities of materials required for the settlement, which were converted into cash and issued to the construction team during the monthly settlement. Once the package expired, the team was equipped with the necessary materials to purchase materials from the project staff.’

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Automatic regulated materials process by the project manager table

Construction site temporary facility costs are integral to the direct costs of the project. In project construction management, there are two ways to reduce construction costs: hard and soft means. Hard means refer to the so-called hard-optimized construction technology solutions, the value engineering approach, combined with the construction of the design suggestions for improvement, and the rational allocation of temporary construction site facilities. Soft means primarily relates to enhancing management, enhancing efficiency, and overcoming waste in order to reduce unit construction products’ consumption of materialized labor and living labor. Diagram depicts the link between construction production, construction costs, and construction time monthly profit per unit.

Cost-Management-Civil-Engineering-Estimate-Estimation-Whole-Life-Cycle-Costing-Diagram
Relationship between output, costs, and earnings Diagram

Where the overall building cost is separated into fixed and variable components. As can be seen, if the value of the unit time to complete the construction is treated as fixed costs, construction profits will decline, while the size of the fixed costs of the size and construction of various types of temporary facilities on-site configuration, construction machinery and equipment sets course fees, management personnel wages, etc. To control the size of temporary site facilities, construction organizations must employ careful design, meet the construction speed requirements of the planned duration, and, to the greatest extent possible, implement balanced construction in order to reduce the scale of construction and the number of all types of construction control configuration facilities.

The prudent selection of construction machinery and equipment and the prudent application of mechanical equipment is of critical importance for project construction and cost management, particularly in the construction of tall buildings. Transport machinery accounted for roughly 6 to 10 percent of the overall cost of the above-ground component of high-rise buildings, according to various project sample statistics. Due to the fact that different handling equipment has different uses and characteristics, when selecting material handling equipment, you should first determine what combination of different ways to make handling equipment in accordance with engineering characteristics and construction conditions, in determining what kind of when the combination should first meet the construction requirements, while also considering the level and whether better overall economic costs.

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#estimate, #costmanagement

Cost Comparison of a Project

The primary function of project cost analysis is cost control for the project being undertaken. That cost control, project costs incurred to examine, assess, and identify reasons for cost savings or cost overruns, in order to achieve improved management, and enhance economic efficiency. Two types of analysis comprise the project cost analysis: a comprehensive analysis and detailed analysis.

Cost study of the project in its entirety. A complete examination of the cost of the project reveals that labor costs, material costs, construction machinery royalties, other direct costs, and construction management fees comprise the cost of the project. A complete analysis of the project’s cost is conducted to compare the actual construction costs and annual budget units. Through a detailed analysis of the project, it is possible to determine the primary reasons for taking the necessary steps to minimize project costs or overruns and maintain cost management within the target range.

A comprehensive cost analysis of the project. Analysis of the project’s costs can be broken down into labor costs, material costs, construction machinery royalties, and other direct and indirect costs, among other analyses.

Reliability and cost analysis

Liability expenses In accordance with the requirements of the project’s economic responsibility, the project organization at all levels of duty within the system breaks down the project’s whole budget content to form “budgetary responsibility,” also known as liability costs. Liability costs to draw a range of economic responsibility of the project cost, the responsibility for the implementation of the budget to be measured, recorded, and performance reports on a regular basis is a scientific approach for enhancing the management of the project cost (Sciencedirect, 2007).

Responsibility cost management necessitates the establishment of a number of responsibility centers within the enterprise, and their economic activities in the division responsible for planning and control, responsibility center control area, and the size of their area of responsibility can be categorized as cost centers, profit centers, and investment centers, respectively. In the project organization, project management, and engineering teams, the team is a cost center. Similarly, the project economics department of government departments such as finance, technology, and materials are cost centers. According to the distribution of responsibilities and levels of “budgetary responsibility,” liability costs, management, and control can be determined.

Civil-Engineering-Estimate-Estimation-Whole-Life-Cycle-Costing-Figure-5
Estimate, Estimation, Civil Engineering, Cost Management, Whole Life Cycle Costing, Optimism Bias

Comparison Of Costs And Profits

We are aware that the fundamental principles of project management and control are based on pre-formulated management plans and control benchmarks undertaken periodically in the implementation of comparative analyses, and then adjusting the plan to return to the implementation of the plan. Effectively carrying out the project cost and schedule control is the key to monitoring the condition of the actual cost and schedule, on a timely and regular basis, compared with the control photographs, and in conjunction with other possible changes, to take the necessary corrective measures to amend or update the project plan, and to predict when the project will be completed regardless of cost overruns or schedule advancements or regressions.

Visible parts of project management include controlling quality, schedule, and budget. The objective of project management is to ensure quality, cost, and schedule by determining the ideal solution to ensure cost,schedule, and effective control. Earned value analysis is a thorough way of measuring the cost of a project and monitoring the progress of effective methods. Consequently, this section highlights earned value analysis, which is the evaluation of the project’s schedule and cost using the most sophisticated analytical methodologies.

Cost and schedule control, respectively, the conventional notion is to manage them, lack the required link between the two types of control, the existence of which is plainly debatable. For instance, when the cumulative cost and cumulative program budget to spend a considerable amount, but the actual progress has been accomplished and did not reach planned capacity, the results of the project budget has been exceeded and the remaining amount to complete the project as well, to complete the project costs must increase further; at this point, it is already too late to plan to complete the project within budget cost control. This demonstrates that the comparison between the overall actual cost and the cumulative budget cost only reveals one side and does not accurately reflect the project’s cost management status.

Cost and schedule are actually in close proximity. The relationship between cost size and speed, lead, or lag schedule is direct. In general, the cumulative costs of a project are proportionate to its duration. But merely observing the size and cost of consumption does not reveal cost trends, and the progress made is a completely accurate and effective state estimation, schedule or cost overruns will influence the size’s lead-lag cost savings. That is, at a particular point in time during the course of the project, only the monitoring plan and the actual costs of this consumption cannot determine whether an investment incurs cost overruns or savings, as the cost may be due to the consumption of large quantities ahead of schedule, or it may be due to the cost being within budget. For cost management to be truly effective, the amount of money spent on the project must be continuously monitored and compared to the work’s progress. The whole purpose of earned value analysis is to overcome this issue. Earned value analysis is a comprehensive measure of the project’s ability to progress, the overall cost of the status of the method, which uses the form of money instead to measure the progress of the project work, it is not how much money to invest to reflect the progress of the project, but in the capital has been converted into the outcome of the project amount to be measured, is a comprehensive and effective project monitoring indicators and methods. Many applications in engineering projects are particularly effective.

Civil-Engineering-Estimate-Estimation-Whole-Life-Cycle-Costing-Figure-6
Estimate, Estimation, Cost Management, Civil Engineering, Whole Life Cycle Costing

The Cost Variance Analysis For Projects

Deviation of the number of project cost analyses, the construction cost of the project is to analyze deviations from budgeted costs compared to each other, planned cost, and the actual cost of the deficiencies to find a cause, in order to promote the project cost analysis, cost management to promote and enhance the level of cost reduction. Comparison of the costs associated with plan deviation and actual bias, respectively.

A program that is budgeted cost deviation compared to the planned cost difference represents the cost of pre-control targets attained, plans deviation is determined as follows: Plan variance = estimated costs minus plan costs.

Budget Expenses

Here are three layers of budget expenses: the estimated cost of construction drawing budget costs, the projected cost of the bidding contract target cost, and project management responsibility. The program cost is the target building budget for the site. The variance between the two plans also reflected variances in the average plan costs and social expenses, plan costs and competitive pricing differential costs, and the cost gap between the budget and business plan target cost. If the plan deviation is positive, demonstrating the cost-effectiveness of the pre-control plan, then the planning process also shows the investment-related expertise and experience of managers.

That plan costs and actual deviation compared to the difference between the actual cost to indicate the performance of construction project cost control, but also reflect the level of cost control and project assessment, computed as follows:

Actual deviation = budgeted expenses minus actual costs.

The goal of analyzing the actual deviation is to determine the expenses associated with implementing the inspection program. Its negative difference highlights the inadequacies and faults in the cost control program, highlighting the potential of cost control, the need to reduce and correct target deviation, and the importance of achieving the planned cost. Analysis of cost control deviations is essential; rectification is essential. To achieve effective control of the project cost, the cost should be the project manager’s responsibility to decompose into various positions, and to the individual, the entire process of cost control should be subject to full control and dynamic control. For the people’s control responsibility system, the cost of responsibility is the development of a clear division of labor.

Technical measures throughout the construction phase should do more to generate technical and economic comparisons of various construction programs, the methods in this field including value engineering, OR methodologies, integrated approach, ABC analysis, and the main and interest analysis method. Economic measurements consist of a number of forecasting and cost estimation systems. On a range of expenses, a solid plan for the use of funds must be implemented, and building expenditures must be tightly controlled.

Contract selection is crucial for ensuring that the project’s contractual structure is appropriate. In the contract provisions, care must be taken to consider all elements that affect cost and efficiency. Particularly, possible risk factors, produced by changes in the cost of risk factors to discover and analyse, must be identified and analysed in order to implement the necessary risk countermeasures.

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Final Thoughts

The ultimate objective of project management in the construction industry is to obtain more profits through low-cost, high-quality, and short-duration projects, with cost being the foundation and core of this objective. The level of cost management determines the number of companies whose profits are directly affected. By using various strategies to lower project costs, we may increase the profitability of construction enterprises, so enabling them to meet their profit objectives and generate positive economic returns.

Reference list

Kueng, P. (2000). Process performance measurement system: A tool to support process-based organizations. Total Quality Management, 11, pp.67–85. doi:10.1080/0954412007035.

Poza, M. (2018). Integrated Cost and Schedule Control. [online] DTU. Available at: http://apppm.man.dtu.dk/index.php/Integrated_Cost_and_Schedule_Control#:~:text=It%20is%20generally%20known%20that,is%20highly%20unpredictable%20and%20uncertain. [Accessed 17 Jul. 2022].

Wiley.com. (n.d.). Project Partnering for the Design and Construction Industry | Wiley. [online] Available at: https://www.wiley.com/en-us/Project+Partnering+for+the+Design+and+Construction+Industry-p-9780471107163 [Accessed 17 Jul. 2022].

www.sciencedirect.com. (2007). International Journal of Project Management | Vol 25, Issue 8, Pages 745-834 (November 2007) | ScienceDirect.com by Elsevier. [online] Available at: https://www.sciencedirect.com/journal/international-journal-of-project-management/vol/25/issue/8 [Accessed 17 Jul. 2022].

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