Cost Control Techniques in the Construction Industry

hail Control Techniques in the body structure Industry1.1 Objectives fox comprise influence weaken the common problem. intone greet control, change the efficiency of enterprises is fundamental the survival and development projects in a market economy. Many companies shake recognize the importance exist control, n primaeval companies development of relevant exist control system, some enterprises in implementing toll control responsibility, and made valuable experience of cost control. However, from the overall perspective, Project cost control related to the success or failure of business cost control. From the perspective of cost control mode, the majority of companies still use traditional cost control methods, develop construction budget, cost control ground on this budget, as long as it does not exceed the cost of the budget is the effectual control of cost, rough, simple control cost, no so that the project cost to achieve optimum control. Therefore, the need to furt her improve the method of cost control, improve the economic efficiency companies.Definition of the project costProject costs ar occurring the project of resources around the money reflects the cost, including the resource-consuming stage of the project spirit cycle. Project costs are usually measured in monetary units. Project costs are divided into direct costs, indirect costs in dickens ways. Direct costs from labor costs, materials, mechanical royalties and other direct costs component1.2 Different types of project in Hong KongThe project type was deemed appropriate for categorizing .The categories consisting of bridge, course construction, resurfacing, upkeep, traffic and traffic maintenance are characterized by notable differences in management practices due to the nature of the categories. Managing costs on a wide word take form of new building projects and structures, such as residential developments, sports stadiums, roads and bridges, schools, hospitals, offices and factories.To repeat For the Major Infrastructure Projects the progress in the past year. In time, many of these have entered the construction phase they includingHong Kong-Zhuhai-Macao BridgeHong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link,South Island Line (East)Sha Tin to Central Linkadvance works of the Tuen Mun-Chek Lap Kok LinkXiqu Centre of the westernmost Kowloon Cultural District, etc.Apart from the major infrastructure projects, the DEVB go out continue planning other public works to improve peoples quality of life. The projects including slope safety, pert water supply, prevention flood, green and heritage conservation work.Development Bureau, Press Releases/Wednesday, April 2, 2014 http//www.devb.gov.hk/en/sdev/press/index_id_8215.htmlChapter 2 Common Project Sources of Founds2.1 Government, Developer, ContractorTo citation Sources and forms of pay a business plan is fundamental to satisfactory fiscal planning and ultimately the plan imp art need to be formulated in financial terms. When approved and adopted, the business plan forms a basis for control and comparison. When it is set up, after approval and adoption, consideration of its financing must take place. This may be short term, such as a bank overdraft or long term as debt finance. A business plan must be knowing so that it provides the answers to all the question likely to be raised by prospective lenders.The main sources of finance for a business are the pursuala) Banksb) grant issuesc) Internal company financed) Hire purchase and leasinge) FactoringThe most common forms of systemThe role trader from of business which one person owns and operates for his /she bushel benefitThe partnership must consist of at least two and not more than twenty partnersLimited liability companies can be both private or publicPublic sector ownership organization by the government and accountableUnincorporated association usually social organization who may or may not hav e objective of making a profit.1Roy Plicher (1985, 1994) Project Cost control in Construction P.15, 17, 18, Blackwell scientific issuingThe Hong Kong Government basic on the construction self-financing sources, including the financial and extra budgetary places mobility special fund such as fiscal taxes the Fund.To quote (Baumal 3), for example ,argues that managers of firms direct in markets with very few rivals will seek to maximize revenue rather than profit. Nevertheless they are constrained by the need to maintain a minimum level of profit as demanded by shareholders. Other writers such as (Marris 4) and (Williamson 5) take diverse approach to growth. Nevertheless, what they have in common is that mangers are seen to pursue their own self-interest at the expense of the shareholder. This is in complete contrast with the neoclassical theory.3. BAUMAL W.J (1967) BUSINESS BEHAVIOUR, VALUE AND GROWTH. Harcourt Brace Jovanovich.4. MARRIS R.L.(1964) The economic theory of manageri al capitalism. Macmillan.5. WILLLIAMSON J .(1996) Profit, growth anf sales maximisation. Econcmica, FebruartTo quote Harris and McCaffer 12, Fine and other agree with this view by placing accuracy in estimating as the key multivariate in determining the successful outcome of bids Construction ecomomics is there such a thinf? by D.K Rutter MBA MSc MCIOB MBIM CDipAFHARRIS F and McCAFFER( R.1997) Modern construction management. Granada PublishingTo quote A project cannot proceed without adequate financing, and the cost of providing adequate financing can be quite large.by Chris Hendrickson, Department of Civil and Environmental Engineering, Carnegie Mellon University, Pittsburgh, PA l52l3 Copyright C. Hendrickson 1998First Edition originally printed by Prentice Hall, ISBN 0-13-731266-0, 1989 with co-author Tung Au.Second Edition prepared for world wide web consequence in 2000.http//pmbook.ce.cmu.edu/07_Financing_of_Constructed_Facilities.htmlChapter 3 Construction Cost Control Princ iplesThe cost control is include the Time-Cost RelationshipTo quoteChitkara (2005) said the relationship mingled with time and cost is a very important aspect in the control of costs on site as any variation in time has self-locking implication on cost. It is important to report and record all the works involving materials, plant and labour on sites. This alters thecontractor be able to know the costs and expenses of the resources used on site and compare with the initial cost budget. Various report techniques used include daily or weekly and monthly recording, schedule control, site daily diary report and the project budget.Chitkara, K, K., 2005. Construction Project Management Planning, Scheduling, and Controlling. Tata McGraw Hill Publishing Company Ltd.Poor Project Management match to Users Guide, (2005), a poor project management structure will have an impact at all stages of the construction passage take toLack of planning and coordinationPoor communication between membe rs of the project team and the project sponsorFailure to identify problems and institute essential and timely founding and programming changesLack of control over time and cost inputsLack of end user involvementA good project management manages costs by estimating, scheduling, accumulating and analyzing cost data, and finally implementing measures to correct problems related to cost.BY FETENE NEGA (2008)CAUSES AND EFFECTS OF COST OVERRUN ON PUBLIC BUILDING CONSTRUCTION PROJECTS ,IN ETHIOPIAA S line curveFigure .1 To quote in http//www.cpmtutor.com/c02/earnedvalue.htmlConstruction Poject Cost Control Method Construction cost control method of many, this highlights deviation analytic thinking. departurerefers to the actual value of the construction costs with the planned value of thedifference. Deviation analysis may be used to a bar chart method, form method, curve methodCurve is a total construction cost curve (S line curve) for the partial construction costs differential analysi s methods. A figure which indicates the actual value of the construction cost curve, p. construction cost of the scheme said the value curve, the curve between two vertical distances between construction cost deviations. The method used is the same image analysis, and visual characteristics, but this is very difficult to direct for quantitative analysis of quantitative analysis can play a role.During the execution phase of your project, you will need to monitor the status of the activities. Any deviation to schedule, quality, or scope for an activity will most likely have a cost impact. For this reason, project cost control requires you to check the overall status of each activity3.1 Budget estimating establish on a clients, contractorsTo quote The Government cost estimates should be prepared like the Government more cautious and full-equipped contractor estimating the project. Therefore, all costs, which a prudent, experienced contractor would expect to bear, should be included in the cost estimate. This philosophy widespread without the entire project cycle from programming through completion of construction. Each estimate should be developed as accurately as possible, as detail as possible be assumed, and be based upon the best selective information available. This objective is to be maintained so that, at all stages of the project programming, design, and during construction, the cost estimate in each aspects representation the seemly and reasonable cost to the Government.UNIFIED FACILITIES CRITERIA (UFC) HANDBOOK CONSTRUCTION COST ESTIMATING http//www.wbdg.org/ccb/DOD/UFC/ufc_3_740_05.pdfTo quote Clients will usually identify their needs in terms of commercialized or social pressureSpace requirements the need to improve production levels, add to production capacity, accommodate new processes or provide domestic or social accommodationInvestment to exploit opportunities to invest in buildingsIdentity to enhance the individual s or organization s sta nding in its market or societyLocation could lead to a better use of resources, capture a new market or improve agreeablenessPolitics mainly in the public sector.Fourth edition (2008)Martin Brook BEng (Tech) FCIOB,ESTIMATING AND TENDERING FOR CONSTRUCTION WORK3.2 Analysis Special construct methodConstruction opening Project Cost Control AnalysisLabour Workers can be to the production and operation, but the monthly wages, allowances, and bonuses can spend less. Artificially expand the disbursement of funds.Material management Some kind of design materials and book a difference to thousands of dollars, tens of thousands or even hundredsConstruction machinery -efficiency is not high for example, Monthly leasing machinery and equipment.To quote The aim of such a control system for use by contractor or subcontractor on site are toProvide a resolve definition of the products to be producedDetermine the method and activity to productWork package activitiesAssign responsibilities for work Plan and schedule the workPrepare resource budgets to agree with the programmeMeasure the work completedCollect cost and resource expenditure date Analyses data and take remedial action if necessaryProvide an historical input to a date baseBy A T Baxendale (1992), Integrations of time and cost control,BSc (Hons), MPhil, MCIOBJudge the economic worth of nonparasitic projectsIf a budget holder has proposals for several independent projects, thenwhole-life cost analysis can help decide the order in which projectsshould be granted the go-ahead to guarantee the maximum level of savingsin operation, maintenance and repair costs.3.3 A life cycle costingTo quote A life cycle costing approach ,that is an approach that takes explicit account of the life cycle cost of assets, is essential to effective decision making in the following ways a whole or total .(Flanagan et al.,1983)Life cycle costing is a whole or total cost approach undertaken in the acquisition of any capital -cost proj ect or asset, rather than merely concentrating on the initial capital costs alone.Life cycle costing allows for an effective choice to be made between competing proposals of a stated objective the method will take into account the capital, repair running and replacement cost and express these in consistent and comparable terms. It can allow for different solutions of the different variables involved and setup hypotheses to test the confidence of the results achieved.Life cycle costing is an asset management tool that will allow the operating cost of premises to evaluated at frequent intervals.Life cycle costing will enable those areas of building to be identified as a result of changes in working practices, such as hours of operation, introduction of new plant or machinery ,use of maintenance analysis etc.John W.Bull (1993) Life cycle costing for construction, BLACKIE ACADEMIC PROFESSIONALChapter 4 Relationship of Building Contract and CostingContract and information managementThe contract are clear rights the agreement of both parties obligations, the two sides is liquidation the fundamental basis on the project personnel cost control baseline. After the signing of the contract should be organized project management staff contract analysis, contract report, contract implementation. Especially clear claims and counter-claims conditions in a timely manner to change the file. The contract information management into cost control.The Construction projects egg Sum Contract has become widely used in the world of the pricing method, the Construction project are recommended or required in the form of Bill of quantities Characteristics of Lump Sum Contract with quantity Lump Sum Contract with quantity list valuation to truly realize the quantity, price principle of separation. For bidders to bid Bill of quantities provided as a platform, based on their technical, financial and management capability to carry out the tender offer so that bidders can fully take into a ccount many other factors, such as bidding construction scheme for its own schedule, risks, resource scheduling, and so on. So the bidder can be flexible adjustments for these quotes, so quotes can accurately assent with the project. This valuation method of engineering construction risk and reasonable distribution of tendering party quantity risk bidders bear the price of risk. While traditional better pricing method, which no bidders technical advantage and price advantage. Engineering change management is the key of construction contract management of engineering changes in process engineering is inevitable, but construction should try to reduce engineering change, because change is often in addition to the costs of the project itself, but also will bring a lot of machines or the duration of a claim.Cost in real settlement contract (Cost Reimbursement Contract)Cost plus honoraria contract (Prime Cost and Fee) cost plus honoraria contract is bid people by tender file provides ea rly estimated project of artificial, and material, and mechanical of cost price, and by requirements (consultations) take early estimated cost of percentage value or fixed costs as bid people of honoraria (contains costs and profit), constitute tentative contract price, stay engineering completed sh, by actual occurred of cost settlement, but honoraria proportions or total not variable.Such contracts apply to tight deadlines, emergency rescue and disaster relief work. No such contract in Hong Kong standard contract forms.Reasons of Projects over BudgetInexperience of Project LeaderPoor Communication/Management of Personnel tone ending Through Damage or MalfunctionHuman ErrorEmployee AbsenteeismVendor Relationship IssuesEnvironmental FactorsPoor WorkmanshipLack of ForesightConclusionConstruction project cost control is complicate system engineering. Actual operation an application and flexibility of needed to adapt applications under the local conditions, various sizes, different con struction company and different administrative systems are different, However in under any circumstances the construction of production and operations of amount of serviceman resources and materials resources and costs, guidance, supervision, monitoring and restrictions. Therefore, the to increase production and conservation, increase revenue and reduce expenditures, is a common building construction enterprise, which requires constant practice in reviewing and improving cost control, methods and means to ensure that the project costs. As a business that only deepen the financial management system, advanced cost management center, to further sanction cost management and stringent cost negative, complete implementation of, the whole process of cost control and constantly adapt to the overall market competition, to pommel of adversity to achieve target of cost control