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Started by : Pragya Kothari, Construction-Heavy, DLF   11 12 2008 15:03:19 +0000
Industry : ConstructionFunctional Area : Strategy Execution(Strategy & Execution)
Activity:  432 views;  last activity : 07 06 2010 20:18:09 +0000

Cost control has been order of the day for everyone & it is vital to the success of any construction project. Let us help each other on this note....

Any Ideas !!!

 
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1 2 3 4 5
1 Perform an Audit
2 (Actual Spent) + (ETC Qty x ETC Rate) + ETC Overheads within Revised Cost Baseline...!!!
3 practicle methods of cost control
4 Take a hard look at underutilized equipment
5 Working capital
6 Short term schedulling & control
7 Monioring the time over-run factors
8 Effective utilization of Resources
9 Better Management
10 Cost Control
11 Cost Control
12 Re concilation of Material
13 reduce wastage and use local available material for construction
14 Pre Plan the purchases
15 Procurement
16 Reduce rework
17 Discounted cash flow method.
18 BOQ and tracking
19 Cost Control Policy

Perform an Audit

idea posted by Pragya Kothari Construction-Heavy, DLF
I have been involved in many projects & I tend to see that many managers just forget about cost control mechanism & audit.It is better to perform an audit in house to check where we can cut cost in our projects & account for every penny with a construction cost control audit. And also involve accounting dept and experience professional in the firm to assist with a complete audit....
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by Anjali Bhatia, Construction-Heavy, Sobha Developers  | 04 15 2009 12:15:27 +0000

I agree with Giridhara sir auditing at regular intervals will certainly help in checking the costs in the construction process.

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by Giridhara Y.N, Senior Executive, Space Matrix Design Consultants  | 03 19 2009 07:24:52 +0000

For better result The same auditing can be done at regular intervals in the project period

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by srinivasalu. chintamani, Dy.General Manager(projects),Sunil Mantri Realty Ltd.,  | 02 12 2009 10:57:21 +0000

NO DOUBT AUDITING IS GOOD, BUT THE FORMAT FOR THE SAME IS ADVANTAGEOUS.

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(Actual Spent) + (ETC Qty x ETC Rate) + ETC Overheads within Revised Cost Baseline...!!!

idea posted by M NITIN SHENOY, PMP, IPMA-D, CEng MICE Manager

Yes.. any strategies to Control Cost should fall within the below Constraints...!!!

Actual Spent + (ETC Qty x ETC Rate) + ETC Overheads  <= Revised Cost Baseline

Actual Spent = From Summation of all cost heads in ur MIS

ETC Qty = Revised BOQ Qty - Actual Executed Qty

ETC Rate = Labour + Material + Plant Rate

(adjusted to actual Productivity Rates, Market Rates, Escalations and Wastages)

ETC Direct Cost =  ETC Qty x ETC Rate

ETC Overheads = Staff + Tem Structure + Water/Power + Stationaries + Insurance + Financing Costs + Sundries + Misc.

Revised Cost Baseline = Latest Approved Project Budget

Revised Project Estitmate =  Actual Spent + ETC Direct Cost + ETC Overheads

Any decision taken in the project should be towards minimizing all the above cost components contributing to Revised Project Estimates,  such that the above referred constraints always holds good...

i.e Revised Project Estimate <=  Revised Cost Baseline

There is no Shortcut to Cost Control, BUT only Skill and Experience to see the Complete Picture reffered above can result in successful Cost Control...!!!

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by RajasekarL , Planning Assistant, L&T ECCD  | 04 15 2009 14:34:53 +0000

My Opinion is instead of auditing just go on JCR (Job Cost Report)...It is the eye opener of the project at any time......It will help in find out the P/L Margin.

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by M NITIN SHENOY, PMP, IPMA-D, CEng MICE, Manager  | 03 23 2009 03:59:00 +0000

Mr. Srinivasalu,

Thanks for your comments..!

By saying REVISED COST BASELINE, I am trying to stress on the FACT that no PROJECT is free from SCOPE CHANGES in due course.

Hence any Approved SCOPE Change should be simultaneouly accompanied with REBASELINING OF COST which is nothing but REVISED COST BASELINE...!!!

Once there is an APPROVED SCOPE CHANGE, the ORIGINAL COST BASELINE is IMMATERIAL and OUTDATED.

If there is no approved scope change then

REVISED COST BASELINE  =  ORIGINAL COST BASELINE...!!!

I hope I am clear.. 

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by srinivasalu. chintamani, Dy.General Manager(projects),Sunil Mantri Realty Ltd.,  | 03 19 2009 12:45:02 +0000

Mr.Nitin,

your calculation and formula are good,but why the revised cost baseline...?means there no cost control in the initial stage or by other means,hope you are clear what i meant to say.......!

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practicle methods of cost control

idea posted by srinivasalu. chintamani Dy.General Manager(projects),Sunil Mantri Realty Ltd.,

Most of the projects can have direct cost savings practically such as,

1) Freeze the construction schedule method as soon as tender is awarded.

2) employ the right contractor/PRW through his previous back ground.

3) Do not over mobilise the materials.

4) Procure the materials directly from the manufacturers.

5) Purchse the materials on cash where there is definet savings are envisaged.

6) prepare the clear bar bending schedules,

7) Identify the materials on ABC grade,

8) calibrate all the machineraries on regular intervals, for accurate recordings.

9) store all the empty cement bags/ waste steel rods, in a proper place for easy disposal.

10) conduct regular weekly meetings with the site staff to make them involve for project progress.

11) conduct regular auditing of materials.

12) Make the safety procedures mandatory.with a slogan "safety first-quality plus"

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Take a hard look at underutilized equipment

idea posted by Sumit Singh Construction-Heavy, Sobha Developers
In a downturn in the construction environment, the value of the equipment normally declines as contractors flood the market with underutilized assets because of the current worldwide shortage of steel and the increased international construction boom have worked together to keep used equipment prices high. Now is the time to look carefully at equipment that can be marketed without creating significant operation issues. Generating cash by auctioning equipment which are used less.
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by srinivasalu. chintamani, Dy.General Manager(projects),Sunil Mantri Realty Ltd.,  | 02 12 2009 10:55:04 +0000

WE CAN NOT DEPEND ON ONLY THE UNDER UTILISED EQUIPMETNS, BUT ALSO OTHER FACTORS, WHICH ARE PART AND PARCEL OF CONSTRUCTION FIELD

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by Joy Ranjan Hiwale, Construction-Sr.engineer .vascon engineers limited  | 02 10 2009 10:01:23 +0000

Many a times companies dont have proper stock inventory and lots of equipment , machineries or material remains unused resulting in a national loss. At this time of global crisis one must put emphasis on inventory control and redesign the future structures by taking account of unused material at other sites ie steel, granites, tiles, electrical cables and accesories etc. Renting some equipments and machiniries to local people is also an idle soloution.

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Working capital

idea posted by Mysore Purushtham Sunil Head/VP/GM-Corporate Planning/Strategy, Keppelland a singapore based MNC

I think we should be managing Nett working capital & Risk incoporated cash flow more than technicalities.

Contractors loose more on this account

Developers should concentrate on risk depletion by going in for scope control

 

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by Dilip Gopal Karnad, Consultant, Jump Project Management Consultants  | 03 16 2010 07:41:14 +0000

Working capital management among contractors is one of the major shortcomings in the construction industry.More often than not, projects tend to get cross subsidised by the contractor based on his cash flows. This in turn causes some projects to be starved for resources.

It is in this regard that the concept of activity linked budgeting and Earned Value management which has found favour in projects being executed today. Therefore tracking of plans and schedules is an important step in containing and mitigating WC risks in a project.

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by srinivasalu. chintamani, Dy.General Manager(projects),Sunil Mantri Realty Ltd.,  | 02 12 2009 10:51:33 +0000

WITH OUT PRACTICALITIES, YOUR NET BUDGETING/ CASH FLOW IS OF NO USE ?

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Short term schedulling & control

idea posted by Shravan Kumar Construction-Heavy, Sobha Developers
I feel the audit just provides guidance on what control actions should be taken and therefore it is rather a cost information system but the actual control is achieved through the ultimate decision of the manager that some action should be taken. I have seen that in most construction cost control systems have an inordinately long response time. Even the best cost control system would provide information on what was happening last week or last month. Since, in construction projects some activities might finish in a week or a month, then nothing could be done if the performance of such activities was reported to overrun estimates of respective costs. It is better to schedule things for short term & take appropriate action. This will ensure smooth planning & supervision and hence you can be more alert on cost control where your response time has improved drastically.
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Monioring the time over-run factors

idea posted by joshi avinash achyutrao Head/VP/GM-Corporate Planning/Strategy, water resources dept, govt of maharashtra

The main reason of the cost increase in the construction projects is it's time over-run effect. In this field, unlike the electronics/ IT the cost escalation is the reality. The component of overheads is skyrocketing in the delayed projects. The construction manager should always keep in mind the periodical cash flows and match his construction program accordingly. In fact, it should be over-planned to certain extend so that resources are fully utilized.

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by Anjali Bhatia, Construction-Heavy, Sobha Developers  | 04 15 2009 06:02:10 +0000

I agree with joshi ji.If the project goes on beyond the allocated time then its bound to incur extra costs and that will definitely reduce the profits. So the supervisors should keep a watch on the work whether it is getting over in time or not.Moreover there should be proper utilization of all the materials,equipments and resources to avoid any unnecessary costs.

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Effective utilization of Resources

idea posted by Syed Fazlullah Khan C E O & M D, SYNCON CONSTRUCTIONS PRIVATE LTD

We all know that Construction Cost can be controlled if resources are utilised effectively whereas in many projects, resources are not deployed as planned during the Construction period either due to lack of planning or inability to mobilize the resources in time which results in increase of Construction Cost to meet the target (delivery date).

 

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Better Management

idea posted by Vishnu Upadhyay Head/VP/GM-Project Finance, Topworth Group of Companies

By way of better management of resources, timely completion of project is a best control over cost of project.

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by Jyoti Rath, Sr. Associate, Barclays  | 04 06 2009 06:28:57 +0000

Mr.Vishnu i completely agree with you . Indeed the two most important things to control the costs are better management of resources and timely completion of work. Because if you are optimising the resources that are available with you and doing the work on time then you will not incur any unnecessary costs which is profitable for the business.

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Cost Control

idea posted by SRINIVAS CHADA Consultant, STRATEGIC PLANNING & COST ENGINEERS , MUMBAI

First Identify the  " Cost Cascading areas " , for example , Wastages , Housekeeping , Impacts of delay of project during monsoon , and ensuring to have reconcillation at the end of every update of a Bar Chart .

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Cost Control

idea posted by SRINIVAS CHADA Consultant, STRATEGIC PLANNING & COST ENGINEERS , MUMBAI

First Identify the  " Cost Cascading areas " , for example , Wastages , Housekeeping , Impacts of delay of project during monsoon , and ensuring to have reconcillation at the end of every update of a Bar Chart .

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by Dilip Gopal Karnad, Consultant, Jump Project Management Consultants  | 03 16 2010 08:26:35 +0000

Today most projects use either Primavera or MS Projects for scheduling and tracking costs. Organisations have an urgent need to maintain a risk log as a knowledge bank along with their mitigation plans. Therefore planning engineers need to identify risks and plan the construction activity accordingly. Cost of quality, wastage etc as a cascading cost escalator can be best avoided by following standardised work procedures which are audited periodically for weaknesses and improvement as good practices. Activity based costing and resource loading is imperative to ensure that cost creep is avoided.

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Re concilation of Material

idea posted by RAJIV KUMAR Project Engineer, PARSVNATH DEVELOPERS LTD.

Construction cost control can be done by Reconcilation of Material. In reconcilation of material we can reduce the westage of material by doing monthly basis. By this the managemant arrange to shift material to other site if the material is surplus to that site. If the procedure is taken seriously it help to control the construction cost.

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by srinivasalu. chintamani, Dy.General Manager(projects),Sunil Mantri Realty Ltd.,  | 02 12 2009 10:49:34 +0000

RECONCILIATION IS O.K. BUT IN WHAT WAYS? HAVE YOU CLEAR IN MENTIONING THE PERCENTAGE OF WASTAGES FOR DIFFERENT TYPES OF MATERIALS/ OR IS THERE ANY STANDARD TO BE FOLLOWED.

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reduce wastage and use local available material for construction

idea posted by syed junaid razvi Construction-Residential, self empld

if we reduces the wastage and works one step beyond of tradetional materials used in constructin.let us use the available material in our area only.

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by srinivasalu. chintamani, Dy.General Manager(projects),Sunil Mantri Realty Ltd.,  | 02 12 2009 10:45:39 +0000

ALL LOCAL AVAILABLE MATERIALS MAY NOT SUIT FOR THE CONSTRUCTIONS/ OR MAY OF INFERIOR QUALITY ETC.,

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Pre Plan the purchases

idea posted by Ajith Kumar.R Civil Engineer-Other, Government of Kerala
Pre- plan and combine the items that are available at a same place
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Procurement

idea posted by Mallikarjuna Gupta Bhogavalli Sr. Product Manager, Oracle India Pvt Ltd
But the matierials at the right time with gud bargin. do not compromise on quality of the material to cut down the cost. In short run you may acheive this but in long run you will be loosing a lot...
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by Anjali Sinha, Construction-Heavy, Sobha Developers  | 11 13 2008 14:22:50 +0000

yes Buying the materials at the right time is most important, and who knows how the costs will soar in future, but in the same time the materials bought must be used effectively and protected in a proper manner.

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Reduce rework

idea posted by Shailesh Vadalkar Business Analyst, Al Rostamani Pegel LLC

Cost gets added up due to more resources consumed which can be result of bad planning due to which rework is required.This rework can be in anything consumes additional resources hence increase in cost.

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Discounted cash flow method.

idea posted by Mohammad Bakhsh Consultant(Civil), Rail Vikas Nigam Limited

All the ideas as suggested are part of project management but not the part of the strategy.The strategy means how profitable the capital investment should be ensured.The stake holders are not only concern about the investment but how it is being utilized and what for.The best strategy is to have strict control over cash out flow in proportion to each schedule of completion.

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BOQ and tracking

idea posted by Shaju George Facilities/Construction Manager, IBS Software Services (P) Ltd

Ensure that the project is properly estimated and a reliable BOQ is in place. Track expenses regularly, analyse and prepare MIS reports. It will help in understanding where to control and thereby arriving at methods to control cost.

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Cost Control Policy

idea posted by Irfan Hi Projects Coordinator, Buhaleeba Contracting

Most of the companies have been found wanting in this matter but i feel there are various ideas which can be implemented. Also, many people get confused between QA/QC policy and Cost Control Policy, as there is always an overlap of the activities between them.

  1. Material A-B-C analysis- All materials shall be divided in these catergories to know which materials deserve higher attention and responsibility to get best price shall then be distributed in hierarchy of procurement department. I believer A item will be some 2 % of total listed materials but will cost 80% of total cost of materials.
  2. Technical Audit that to on weekly basis is a must to identify bad material management at project site.
  3. For workers and machineries it is always preferable to have production rates and check production rates on daily basis. But this may require more staff to cover this works and unless a clear study is not carried out, this may prove detrimental.
  4. Monitoring of delay is also a part of cost control as any delay will lead to increase overheads for the project, and this can be carried out by keeping planning engineers for monitoring.
  5. There is also a need to have a Budget Monitoring System in place for making comparison with the cost analysis of each activity against expenditure and this can be carried out by have a good ERP system in place. Even Primavera can be used for this.

This list will keep on increasing, but i think these forms  part of cost control policy for contracting organization. For clients, i will list in next post.

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