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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.
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'.
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:
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
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).
However, there are some disadvantages in the processes. First, it is very consume time in the pre contract process due to the strategy is sequential and construction cannot be started before the completion of design. Also, the contractor is not appointed in the design stage, so the contractor and supply chain are no input into the design or planning of the project. Mo...
In the cost each task requires special treatment. In addition, such special treatment is necessary for each process in the cost calculation
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.
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.
Cost Analysis is an aspect of estimation that applies both formally and informally to the aspect of costing. Cost analysis is a formal discipline used to help appraise, or assess, the case for a project or proposal, and is an informal approach to making decisions of any kind. It is ultimately an economic tool to aid in logical decision making. In the case of construction cost estimates, the next step would be the cost analysis process. The sole purpose is to determine if the completed estimates are reasonable. Usually comparisons are made with similar projects done in the past to see if the number are within the same vicinity of each other. Though the estimates may differ from case to case, if the cost estimate is significantly higher or lower than the normal ra...
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
Estimates form the basis of tender comparison, so it should be as accurate as possible, if deficient the award settlement becomes arduous (Odusami & Onukwube, 2008). Accurate cost estimate for projects are tremendously essential to both the clients and the contractor. It provides the basis for the contractor to submit the tender and allows the parties to highlight the final cost of the project at an early stage. Essentially it is used for planning the entire project and helps during the execution phase (Akintoye and Fitzgerald, 2000). It has been pointed out that the building cost of the project usually differs from the estimated final cost and this is due to the variations (Oberlender and Trost,
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?