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COST CONTROL STUDY

Project: Construction of Surgical and OPD


jpmc

Complex at

PREPARED BY : ALI AHSAN RIZVI


ROLL NO
: CE-89
COURSE TITLE : COST ENGINEERING AND CONTROL

1.0

COMPANY PROFILE

Company Name

: TOTAL CONSTRUCTION

Type of Contractor

: GENERAL CONTRACTOR

Volume of Work

: 90 CRORE

Type of Construction : BUILDING STRUCTURAL


WORKS, FINISHING WORKS

Operation Area

: KARACHI, LAHORE, ATTOCK,


ISLAMABAD, SUKHAR

2.0 ASSESSMENT OF COST CONTROL SYSTEM


2.1 ECONOMIC YARDSTICKS
The cost incurred in the ongoing activities is monitored using the cost shown up to date by
Microsoft Project. This is done by entering the total amount in Microsoft Project which in
turn gives you the cost of each activity or phases.
It was also told that the company often use other types of yardsticks like dividing the
substructure, superstructure, block masonry etc. into percentages of the total work.

2.2 FORECASTING MECHANISMS


a)

Productivity:
The productivity is calculated by analyzing the schedule prepared followed by allotting
certain manpower to each activity based on past project experiences. For example; it has
been observed that a team of eight steel fixers bind two tons of reinforcement in one normal
working day of eight hours. Resultantly, a resource pool is generated for each activity in the
same manner.

b) Workhours required for remaining work:


In the schedule developing stage, the baseline schedule is setup by inputting the forecasted
labor for each activity. If the activity is being delayed due to any unforeseen reason,
Microsoft Project gives the additional man hours required to complete the designated task.

c)

Material Requirement:
The drawings issued for construction are used to calculate the material that would be
required for the task. Moreover wastage factors are also applied on the calculated material
quantities.

d) Financial Requirement:
The baseline schedule is used for this purpose.

2.3 COST DEVIATION ANALYSIS


The cost incurred during the construction phase is compared with the baseline estimate to
calculate the cost deviation throughout the project life cycle. For example; the baseline
estimate showed that the excavation in the first month would amount to one lac rupees but
on site, it actually peaked to one lac fifty thousand rupees. This would serve as an alerting
agent for the engineers and other site staff to take necessary steps to control the deviating
cost.

2.4 OVERRUNS
The probable reasons for overruns are many among which the most recurring is delays.
Delays cause the project activities to linger on which in turn increase the labor and overhead
costs.
Hence, the finest way to avoid overruns is to control the delays. This can be achieved by
proper monitoring of site activities as per schedule and appropriate resource allocation.
Additionally, the site staff need to continuously coordinate with the client about any
probable changes or problems that might hinder the progress.
It is to be noted that the company has faced problems during excavating hard soils which
were previously unknown. This could be avoided with client support by formerly
conducting geotechnical studies.

2.5 WRITTEN PROCEDURES FOR COST CONTROL


No such written procedures are used for cost control. The company instead employs the
schedule to tackle cost variances.

2.6 COST CONTROL ACTIVITES


a) Conceptual Stage:
Since the company comes into role after the tendering procedure, it does not have any such
cost control activities for the conceptual stage.

b) Design/Engineering Stage:
The company is involved in construction process hence no cost control activities have been
derived for this stage.
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Generally, the designer should try to put up least alternatives to the client in order to avoid
changes in the design and construction stages of the project.

c) Construction Stage:
To any construction company, this stage requires the staff to work effectively while
coordinating with each other in a way that proves to be beneficial for the project.
During this phase, cost control is primarily achieved by activity monitoring and keeping a
proper check and balance on progress by comparing it with the schedule. Alongside,
adequate resource allocation is also practiced to minimize cost deviation.

d) Closeout Stage:
The activities taking place in the closeout period are usually related to delicate finishing
items which need proper full time supervision otherwise it would consequently result in the
generation of punch list that will cause unnecessary delays.
The company tries to avoid as much rework as possible by carrying out strict supervision
during the closeout period of the project.

2.7 REPORTING PROCEDURES


Although the company does not have a committee to monitor cost control, however cost
minimization and control is the goal every staff member strives for in one way or the other.
Rather than having a separately organized cost control team, the company site staff (shown
in the hierarchy) is constantly reporting to their respective higher authorities to avoid cost
deviation. The site engineer and supervisors highlight any problems or shortcomings to the
project engineer. The latter discusses it with the planning engineer who incorporates it in the
schedule and analyses the extra man hours required. The project engineer reports the results
obtained to the project manager who prepares an impact report to forward to the CEO. The
CEO personally recommends a way or asks the project manager to do so whatever is
necessary depending on the type of query. The project manager then orders his team to work
accordingly.

2.8 WRITTEN PROCEDURES FOR VARIATION ORDERS


In case of variations, an impact study is carried out initially to assess the cost for the
respective change. The variation order is then officially submitted to the client to account
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for the additional cost. The document contains detailed claim of the variation. The client
approves the change order and the construction proceeds with the variation.

2.9 SUBCONTRACTED WORK


The company usually choses to offer subcontracts and hence it is necessary to keep a close
eye on the subcontracted work activities to keep the work going at its optimum pace. The
company employs the following cost control techniques in case of subcontracted works:

Subcontractor is asked to submit a daily progress report along with the total labor
count
Subcontractor is informed of being subjected to penalties in case of delay in the
respective tasks
Strict supervision is kept on the labor of the subcontracted party

2.10 COST CONTROL SOFTWARES

Microsoft Project
Microsoft Excel

2.11 COST ESTIMATION PROCEDURES


The cost control system focuses on monitoring the cost throughout the project life cycle,
hence the process of cost estimation plays a vital role when it comes to cost control. The
cost is being continuously estimated and if found deviating from the baseline estimate,
requires a corrective action to be taken immediately.

2.12 COST OF COST CONTROL


As mentioned earlier in the study, the company possesses no official cost control team.
However the project team strives hard in this regard. Therefore the cost of cost control can
be said to be amalgamated within the salaries of the site staff who tend to individually play
their role in controlling the cost of the project.

2.13 ESCALATION STRATEGIES AND TREATMENT


The company does not have any escalation strategy whatsoever. The contract itself includes
a clause which identifies the provisions for extra work and escalation costs.
Generally speaking, as a better approach, the company should adopt to usage of cost
indexes to forecast escalation costs.
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3.0
3.1

PROJECT COST PERFORMANCE


COST CONTROL HEIRARCHY AND INFORMATION FLOW
CHIEF EXECUTIVE OFFICER

PROJECT MANAGER

CONSTRUCTION MANAGER

PROJECT ENGINEER
SUPERVISOR

SITE ENGINEER
PLANNING ENGINEER

3.2

COST OUTLOOK CURVE


Commulative Amount in Millions (Rs.)

1,000.00
900.00

700.00
600.00
500.00
400.00
300.00
200.00
100.00
June 2017

May 2017

April 2017

March-2017

February-2017

January-2017

December-2016

October-2016

November-2016

August-2016

September-2016

Month

July-2016

June-2016

May-2016

April-2016

March-2016

February-2016

January-2016

December-2015

November-2015

October-2015

September-2015

August-2015

July-2015

May-2015

June-2015

April-2015

Amount (Rupees)

800.00

3.3

WORKHOURS FOR 1% PROJECT COMPLETION


Comparison b/w Actual VS Budgeted Manhours
100000
90000

Cumulative Hours

80000
70000
60000
50000

Budgeted

40000
Actual

30000
20000
10000

1
4
7
10
13
16
19
22
25
28
31
34
37
40
43
46
49
52
55
58
61
64
67
70
73
76
79
82
85
88
91
94
97
100

Percent Complete

Total Man hours for 36% completion = 84080 hrs


Hence for 1% completion = 84080/36 = 2336 hrs

ENGINEERING SALARIES AND EXPENSES CURVES


a) Average Expenses (Rs/Workhour)
Percent Complete VS Expenses
180
160
140

Rs/Workhour

3.4

120
100
80
60
40
20
0
4

8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100

Percent Complete

b) Average Salaries (Rs/Workhour)


Percent Complete VS Avg. Salary
370
360

Rs/Workhour

350
340
330
320
310
300
4

8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100

Percent Complete

3.5

TOTAL EXPENDITURES CURVE


a) Material Expenditures
Percent Complete VS Material Expenditures
200000000
180000000

Expenditures (Rupees)

160000000
140000000
120000000

Budgeted

100000000
80000000
60000000

Actual

40000000
20000000
0
4

8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100

Percent Complete

b) Labor Expenditures
Percent Complete VS Labor Expenditures
25000000

Expenditures (Rupees)

20000000

Actual

15000000

10000000

Budgeted

5000000

0
4

8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100

Percent Complete

c) Total Expenditures
Percent Complete VS Total Expenditures
250000000

Expenditures (Rupees)

200000000

150000000

Actual
100000000

Budgeted
50000000

0
4

8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100

Percent Cpmplete

3.6

CONSTRUCTION PROGRESS CURVE


Cumulative Progress Curve
40
35

Progress in %

30
25
20
15
10
5

Jun-17

May-17

Apr-17

Mar-17

Feb-17

Jan-17

Dec-16

Oct-16

Nov-16

Sep-16

Aug-16

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Jan-16

Feb-16

Dec-15

Oct-15

Nov-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

Mar-15

Month

PRODUCTIVITY PROFILE CURVES


The productivity profiles of three bulk quantity items has been developed using the data
available which are as follows:

a) Excavation
Productivity Profile of Excavation
1.00
0.90
0.80
0.70

Productivity

3.7

0.60
0.50
0.40
0.30
0.20
0.10
0.00
4

12

16

20

Percent Complete

24

28

32

36

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b) Concreting
Productivity Profile of Concreting
1.00
0.90
0.80

Productivity

0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
4

12

16

20

24

28

32

36

28

32

36

Percent Complete

c) Steel Fixing
Productivity Profile of Steel Fixing
1.20

1.00

Productivity

0.80

0.60

0.40

0.20

0.00
4

12

16

20

24

Percent Complete

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3.8

PRODUCTIVITY TREND CURVE


Productivity Trend Curve
100000

Man hours
Overrun

90000

Cumulative Hours

80000
70000

Budgeted

60000
50000
40000

Actual

30000
20000
10000

1
4
7
10
13
16
19
22
25
28
31
34
37
40
43
46
49
52
55
58
61
64
67
70
73
76
79
82
85
88
91
94
97
100

Percent Complete

LABOR MANNING CURVE


Labor Manning Curve
18
16
14
12
10
8
6
4
2
May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

0
Mar-15

No of Emplyees

3.9

Month

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3.10 EARNED VALUE ANALYSIS


The earned value analysis has been carried out at different progress stages of the project:

a) At 30% Progress
According to this study, the actual man hours consumed were man hours overrun at this
percent progress were 66828 hours while the budgeted were 59716 hours. Therefore there
was an overrun of 7112 hours at this stage of the project.

b) At 65% Progress
As per the overrun calculated at the 30% progress, the total man hours overrun at this stage
would be approximately around 15409 hours.

c) At 100% Progress
As per the overrun calculated at 30% progress, the total man hours overrun at project
completion would be approximately around 23700 hours.

4.0 ANALYSIS OF COST CONTROL SYSTEM


4.1 PROS AND CONS OF THE COST CONTROL SYSTEM
a) Advantages
Despite the fact that the company lacks an appropriately organized cost control team, it
manages to control the cost through the efforts of the site staff. They keep an eye on all the
ongoing activities and highlight any problems that occur or might possibly occur in near
future. The planning engineer constantly monitors the site activities as per the schedule and
report the project manager of any conceivable delays. Hence, the cost of the project is tried
to be kept under control at all times through the team endeavors coordinating with each
other and the client.

b)

Disadvantages
As mentioned previously the absence of cost control team in the company might lead to
some detrimental impacts. The current project overruns can be controlled and minimized
with the presence of a cost control team. The team would maintain all sort of cost databases
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which would prove beneficial for the company to estimate the cost of the upcoming
projects.
Moreover the companys planning engineer should rather employ Primavera P6 instead of
Microsoft Project, the former being a much more detailed analysis software for developing
project schedules.

4.2 COST CONTROL PERFORMANCE


The graphical analysis in the previous sections of the report clearly shows that the project is
lagging in terms of the overall progress. This is mainly due to the delays in the first three
months of the project due to whatever reasons. Consequently the cost time overrun has
triggered a parallel increase in cost. The company failed to put up IPCs as per the cash flow
they initially submitted.

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