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Brief review of project cost management
Brief review of project cost management
Brief review of project cost management
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The concept of cost planning and cost control particularly in the tendering process of building project is not a new technique and have been successfully use for many years to achieve value for money on project. Involving a process of applying prices to the various elements of work that comprise the project, such as items of labour and materials so as to estimate the overall cost of the construction project. Added to the function of providing a means of determining the probable cost of the project, this technique is also used to assess achievement of best value for money of the project. The UK government describes achieving best value for money as having taken into account when making procurement decisions the optimum combination of whole life cost and quality necessary to meet customer's requirements (CPS.GOV.UK). It dictates the critical elements of the project such as design, schedule and quality all constitutes a stages where cost must be effectively planned and controlled.
2.0 Cost Planning Best Practice for Clients during the Bidding Process
The bidding process of a project is the phase where cost planning and assessment of value for money should be made. This process is critical for a Client, as it is against this output that project performance would be measured. To effectively plan cost during this stage, the recommended best practice is for clients is to applied cost planning at the earliest stages of project planning. This could be during the project definition phases of the project. For instance, consideration can be given to the start and finish dates of the project, particularly if the cost a executing a project during winter months are grossly higher that doing the same scope of work in the warmer months. Cost plann...
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...the main aim being performance. Regardless of the method used, the contractor will be required to employ an effect cost planning strategy throughout the duration of the project. Recommendation of best practices for cost planning strategies as intimated by Boussabaine (2007) and Brook (2008),
• Prepare cost schedule for all element of work: This will give all the consideration taken for developing the costs
• Establish a systemic cost assessment through the duration of the project
• Effective communicate with client on price changes
• Be fully aware of project changes through the duration of the project.
While the contract remains committed to meeting the needs the client, taking into the requirements for time, cost, quality and risks, the contract will also be required to undertake a value management process which will involve effective collaboration with the teams
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.
Planning phase involves completion of the project scope plan, WBS, schedule of the project plan, cost and procurement of the project plan. According to the research study, the organizations need to spend a certain amount of time on planning and initiating phase. These plans address the knowledge areas. In this phase, we need to estimate the cost and obtain resources for the project. The team members need to reassess the plan at each and every phase of the project.
The 'Standard' of the 'Standard'. Combination of project cost forecasts with earned value management. Journal of Construction Engineering & Management, 958-966. Sitnikov, C. (2012). The 'Standard'.
Not everyone agreed with what Begin did; criticism was extremely rampant in his own Likud party regarding his contradictory behavior towards Begin’s history of being a prompt promoter of Greater Israel agenda (Quandt 1983, 14). Nonetheless, Begin’s image turned overnight from an extremist terrorist to a Nobel Peace Prize winner with his past enemy Anwar
The design-bid-build method is performed in the three distinct phases of design, construction and commissioning, with little overlap between the first two in particular. This process begins when an owner retains an architect to develop a design which meets their performance and budget specifications. An important note is that there is typically no constructor involvement during the design process and that the cost estimates provided by the architect are often very rough. The inherent lack of constructor input during the design process is a key weakness of the design-bid-build delivery method. In fact, constructor involvement begins following the completion of the design documents in a process of competitive bidding. The complete construction documents are made available to a number of competing contractors and the one who returns the lowest cost for responsible completion is awarded the project. The main benefit of this delivery system is that it removes any appearance of impropriety in the awarding of contracts. It has also been traditionally believed that the design-bid-build method yields the lowest possible cost. Recent successes of alternative delivery methods however, have challenged this assumption. The design-bid-build approach provides a transparent and simple to understand delivery system best suited for inexperienced owners or agencies legally bound to its use.
Project managers must take cost estimates seriously if they want to complete software projects within budget constraints. After developing a good resource requirements list, project managers and their software development teams must develop several estimates of the costs for these resources. There are several different tools and techniques available for accomplishing good cost estimation.
There are four processes involved in project cost management (a) planning cost management; (b) estimating costs; (c) determining the budget; and (d) controlling costs. The first three of these processes need to be addressed during the planning phase of the project. The fourth process, controlling costs, is an ongoing process from the beginning to the completion of the project (Schwalbe, 2014, pp. 274-275).
To test the financial feasibility and plan acceptability, there must be information on the magnitude, and share of estimated project cost that are reimbursable. This information can be derived from cost allocation. Also where cost sharing is required in the multipurpose planning process cost allocation can be applied. Cost allocation also provides information necessary for allocating the real expenditures ensuring that the cost account are maintained in line with plan formulation and allocation principles during the subsequent c...
However, in some cases we need to develop strategies for them to improve their efficiency, improve their machinery, install backup generation, etc. In these scenarios, a team is developed with the consultant being the project manager or point man. Therefore, these projects require the four functions to be followed so we can develop the best possible solution. The first function used is “Planning”, which allows us to outline a strategy catering to the specific needs of our client. The “Planning” function also gives us a time table on how long the project will take to complete, who needs to be involved, and how we expect to accomplish each goal.
Many companies, particularly those in the manufacturing industry mostly produce products following a forecasting on demand. Though from time to time it can make them on receiving orders from its clients. The items that are made and the work which is completed in accordance with the order of a customers is called job. Hence, the costing process intended to establish the cost of a job is extremely important. Job order costing therefore is the costing system which establishes the cost of the jobs obtained from a client (Walther, n.d.). In this way, job order costing approximations the costs of producing products in line with clients' instructions.
Time-phased project work is the basis for project cost control. Work package duration is used to develop the project network. Further, the time-phased budgets for work packages are timetabled to establish fiscal measures for each phase throughout the project. The time-phased budgets are to emulate the real cash needs of the budget, which will be used for project cost control. This information is useful to estimate cash outflows. The project manager's attention is on when the costs are to occur, when the budgeted cost is earned, and when the actual cost materializes. This information is made up to measure project schedule and cost variances (Gray & Larson, 2005). The following are typical types of costs found in a project:
Improper evaluation of risk and planning are common themes that lead to project delays. Since project cost is directly linked to the time a project is completed, project managers should be more attentive
In general, there are different types of procurement type for various situations due to no one method can be suitable under the all different construction project. In this case, there are four procurement paths, which are traditional, design and build, management and design and manage, will be advised to use. However, each method has different aspects of advantages and disadvantages.
With communication between buyers and budgeters and he may be able to reduce the budget and actual costs. Price trend of products and goods should be assessed and predicted well so there is no wastage in business. For a construction project, it requires high costs as it requires considerable equipment and machinery. Cost of maintenance and other expenses should be considered at the same time. Budgeting process is very helpful in focusing the budget and the exact quantity and More efficient (Sui & Wang, 2013)
-Project Planning and Control: How long will a project take, how should resources be used?