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Cost Control In Construction

Elements and Systems

Sunday, February 26, 2017

Elements of Cost Control

Cost Control is an obvious objective in Construction Management and Construction Scheduling. It should be recognized that no amount of paperwork achieves this construction cost control. The actual control is achieved through the ultimate decision of the manager that something should be done differently and the translation of that decision into practice. The paperwork provides guidance on what control actions should be taken and therefore it is rather a cost information system.
The elements of a cost control system are:

A construction cost control system should enable a manager to observe current cost levels, compare them with a standard plan or norm, and institute corrective action to to keep cost within acceptable bounds.
The system should help to identify where correction action is necessary and to provide pointers as to what actions should be.
Most construction cost control systems have an inordinately long response time. Even the best cost control system would provide information on what was happening last week or last month. Since, in construction projects some activities might finish in a week or a month, then nothing could be done if the performance of such activities was reported to overrun estimates of respective costs.

Cost Control Systems

The following systems and variants of them are in use in the Construction Industry:

Overall Profit or loss

The Contractors waits until the Contract is finished then compares expenditure and revenue.
The system is only suitable for very small contracts of short durations. The information provided by this system can induce corrective action in future contracts, and surely not the finished one from which data was extracted.

Profit or Loss at valuation dates

In this system, the total costs to date are compared with valuations gross of retentions. It is not suitable for contracts which involve significant set up costs which are distributed over the unit rates.

Unit Costing

In this system, costs of various types of work, such as concrete casting, are recorded separately. The costs, both cumulatively and periodically are divided by the quantity of work of each type. This provided unit costs that can be compared with those estimated in the tender. A recommended platform for this system is e- S T M 8 software, which provides an estimating platform as well as an invoicing platform. It has a 15 day free trial, you can find more information in our software section.

screen shot of e- S T M 8 costing platform

Unit Costing platform in e-S T M 8 Software

Developments in Cost Control Systems

There are three developments in construction management which show promise of improving cost control system in the construction industry

Short term scheduling and control

This system was developed at Loughborough University in association with a contractor. It aims to merger the planning and supervision and hence to obtain a more or less zero response time.

Project Cost model.

This a system developed by Dr Martin Barnes for simulating future actions and thus guiding the manager in his choice between them

Quantitative Scheduling

One of the unique Construction Software that provides a futuristic construction cost control tool for construction management is the Instant Cash flow forecasting. It has taken into consideration the possible deviations from estimates of cost as well as cash in patterns and provided a means to return back to the original estimate by damping out these deviations through the remaining period of construction. Updated estimates are provided each time an actual figure is added such that the end cost remain same as was originally estimated. It provides an excellent guide for managers through the construction project to capture the best possible actions in each period activities. Labor rate and efficiency constitute the core of Quantitative Scheduling which is highly recommended if cost minimization in respect of productivity rates is sought.
Also Construction Cost is directly related to Material price, Material usage and waste, Fixed and varied overhead expenditure. These are the areas where managers should seek action for future adjustments in order to get back to original estimate or practically as near as possible.

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