Strategies for Construction Cost Control

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...!!!

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"

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

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.

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).

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

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 .

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 .

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.

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.

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.

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.

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.

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.