Capturing of costs in construction is a necessity to build and complete a successful project, insure budgets are met, and provide historical data for estimating future projects. Once costs are stored they can be analyzed for accuracy, forecasting the final cost, and usefulness of accurately tracked cost in future bidding processes. The cyclical nature of construction projects, when tracked and managed effectively, provide excellent historical data. Cost tracking methodologies require activity codes for each specific scope of work, type of units, and number of units or quantity (qty). Activity codes are generally established in an estimating template and are typically 4 to 8 digits in length. The first few numbers represent a general type …show more content…
Production tracking is usually accomplished with the use of a spreadsheet or cost capturing software that provide cumulative costs and quantities by summing the daily timecard inputs ($t and qty). Reports can then be generated from the spreadsheet or cost tracking software that show cost to date, unit costs to date and quantities to date compared to the budgeted values. Analysis of this information is then necessary to properly control the construction process.
Olawale and Sun (2010) state that in the construction industry, the aim of project control is to ensure that projects finish on time, within budget and achieve other project objectives. If after analyzing the data it is found that more costs were spent than quantity was claimed, based on the percentages, then it can be inferred that that activity is on track to exceed the budgeted cost and potentially the budgeted time. Performing this analysis daily provides the opportunity to make adjustments to the approach of each activity before there is no chance to
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Heagney (2012) also finds that no learning takes place without feedback. Estimate, then track actual time to improve estimating ability. Historical data must be analyzed based on numerous factors including similarity of projects. The historical data for the construction of a gas station should not be used for the construction of a large warehouse without careful analysis and adjustments based on the complexity of each project. Additional analysis is also necessary for activities affected by weather compared to the anticipated time of year that the work will be
Activity-based costing (ABC) is a costing method that is usually used as a supplement to a company’s usual costing system, and is therefore used for internal decision-making. It is designed to inform managers of costing information for decisions (strategic and others) that potentially affect capacity and consequently “fixed” as well as variable costs. In addition, ABC can also be used to pinpoint activities that would benefit from process improvements.
Kerzner, H. (2013). Project Management: A Systems Approach to Planning, Scheduling and Controlling. Hoboken, NJ: Wiley.
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Jugdev, K. (2012). Learning from Lessons Learned: Project Management Research Program. American Journal of Economics and Business Administration , 4(1), 13-22.
Kezner, H. Project Management: A Systems Approach to Planning, Scheduling, and Controlling. 6th. New York: John Wiley and Sons, Inc, 1998. Print.
A definitive estimate provides an accurate estimate of project costs. Definitive estimates are used for making many purchasing decisions for which accurate estimates are required and for estimating final software development project costs. As an example, if a software development project involves the purchase of 50 copies of a compiler suite from an outside provider in the next 2 months, a definitive estimate would be required to aid in evaluating supplier proposals and allocating the funds to pay the chosen supplier. Definitive estimates are made one year or less prior to the software development project completion.
Project Management Institute (PMI) (2013). Project Management Professional (PMP) Handbook. [ONLINE] Available at: http://www.pmi.org/certification/~/media/pdf/certifications/pdc_pmphandbook.ashx. [Last Accessed 20 April 2014].
Cost allocation is the process of identifying, aggregating, and assigning of cost to various separate activities. There is no overly precise method of charging cost to objects, hence resulting to approximate methods being used to do so. Amongst the approximation basis used includes square footage, headcount, cost of assets employed, and electricity usage amongst others. The main aim of cost allocation is to spread cost in the fairest possible method and also to impact the behavior pattern of the cost.
Cost estimation is another essential part of the construction profession. Spreadsheet programs such as Microsoft Excel are useful for cost estimation. Instead of figuring every single cost factor for every single project, you can do it once, and then input values for further projects.
...pplied. Cost estimation and analysis could ultimately determine major decisions in both the business and political worlds today, and play a crucial role even in our day to day lives. Through activity based costing one is able to see what areas need improvement and also whether or not a business will be successful after considering all the factors. These tools are very powerful in drawing wise conclusions from cost analysis and can be a priceless tool to have even in the field of engineering.
Wang, N., & Horner, M. (2007). CSI Model for Estimating Road Maintenance Projects. Construction Management and Economics, 25,
Brooke (1997), explains Estimation as the technical procedure of anticipating the value of the project. Building construction estimation is the process of acquiring the construction value for the whole project before the project starts. Thus, construction attaining process depends hugely on financial management to sustain workability and smooth operations. The delay in construction is a global issue which is due to improper preparation of estimates and lack of drawings (Ajanlekoko, 1987). In accordance to Gkritza (2008), the source of delay in a project are identified to be in the initial stages, like bad quantification, errors in design and ground conditions. Thus, the purpose of a proper estimate is to foretell the cost needed to finish the
When planning a new project, how the project will be managed is one of the most important factors. The importance of a managers will determine the success of the project. The success of the project will be determined by how well it is managed. Project management is referred to as the discipline that entails the processes of carefully planning, organizing, controlling, and motivating the organization resources so as to foster and facilitate the achievement of specific established and desired goals and meet the specific criteria of success required in the organization (Larson, 2014). Over the course of this paper I will be discussing and analyzing the importance of project management.
Different building materials will be brought in at different times in the project (Sadeghpour & Andayesh 2015). Once the project is started, materials will be constantly coming in and being stored on site before use. there must be room for these new materials to come in when they are needed. Equipment will be needed at certain points in a project, and there must be space for the equipment to operate on location. If there is not enough room to operate the equipment, materials can be damaged causing progress to slow down and possibly stop completely. Knowing the timeline of a project will greatly improve the effectiveness of the preplanned site
Crashing is a practice of shortening an activity or a project to improve timely completion (Larson & Gray, 2014). Consequently, there is an extra cost associated with crashing, such as extra resources but it is cost well spent in order to complete the project on time or earlier (Klansek & Psunder, 2010). However, in order for crashing to be effective, a review of project cost-duration, as well as activity charts, and graph is critical to identify the crashing point. Further, project managers need to identify the activity which needs to be shortened by applying the following rationale by Larson and Gray (2016), which states, “activity with the smallest increase cost per unit of time” (p.314). In a sample case project where normal costs, normal times, max crash time and crash costs are provided along with the indirect costs for each project duration, a project manager is asked to compute the total project cost for each duration (see Appendix A). Furthermore, the optimum cost time schedule and what is the cost also needs to be computed using the following equation to determine the cost slope. The cost slope is denoted as Cost Slope = Rise/Run = (Crash cost-Normal cost)/(Normal time-Crash time) (Larson & Gray,