Cost control techniques NEW POWER POINT.pptx

This module describes the skills, knowledge and attitude required to plan, maintain and control cost of construction project using different cost control techniques

1. Cost control techniques DEPARTMENT: CIVIL ENGINEERING OPTION: QUANTITY SURVEYING ACADEMIC YEAR: 2022-2023 SEMESTER: II LEVEL AND YEAR: LEVEL6AND YEAR 2 MODULE NAME AND CODE: CONSTRUCTION COST CONTROL TECHNIQUES AND QUSCC601   Learning hours 150, MODULE LEADER: QS. BIGIRIMANA Jean Pierre

2. PURPOSE STATEMENT This module describes the skills, knowledge and attitude required to plan, maintain and control cost of construction project using different cost control techniques. This module is intended for students pursuing a TVET diploma in Quantity surveying. At the end of this module, the students will be able to forecast project cash flows, establish project cost report and prepare a project final account.

3. LEARNING ASSUMED TO BE IN PLACE - Engineering mathematics - Engineering drawing - Construction material sciences - Building construction technology - Building services technology - Strength of materials - Construction laws and regulation

4. LEARNING UNITS LEARNING UNIT 1 – FORECAST CASH FLOWS Learning Outcomes: 1.1. Analyze sequence of works 1.2. Identify cost of resources 1.3. Examine inflow against outflow

5. LEARNING UNITS CNTD…. LEARNING UNIT 2 – ESTABLISH COST REPORT Learning Outcomes: 2.1. Review value of executed work against planned work. 2.2. Review omissions and additions of works 2.3. Anticipate cost to completion of works 2.4. Check payment records in line with payment certificates 2.5. Assess profitability of the project

6. LEARNING UNITS CNTD…. LEARNING UNIT 3– PREPARE FINAL ACCOUNT Learning Outcomes: 3.1. Conduct measurement of works 3.2. Adjust provisional sums 3.3. Evaluation of subcontractor’s works 3.4. Assess snags 3.5 Prepare statement of Final Account 3.6 Arrange handover documentation

7. INTRODUCTION Any projects in the world have suffered from cost overruns due to poor performance during the design and execution stages. A key role in the successful completion of the work is the efficient utilization of materials, labors, plants & machinery and overheads. So most of the project managers and contractors find difficulty in controlling project costs due to problems which include delays by clients to release money, lack of materials and equipment.

8. INTRODUCTION CNTD……. Then Cost control is the process of controlling the expenditure during all the stages of a construction project right from planning, design, till the completion of execution and final payments are made. During the execution of a project, project control and documentation becomes an essential tool to managers and other participants who are in the construction process The aim of the cost control is to monitor actual cost performance and identify improvement opportunities. Almost all the projects need to be guided throughout, in order to receive the required and expected output at the end of the project

9. INTRODUCTION CNTD……. It is important to note that efficient cost control is not limited to the planning stages; we must maintain it throughout the life of the project or business. Cost-control procedures are used to create cost efficient projects. CHARACTERISTICS OF AN EFFECTIVE CONTROL SYSTEM Cost control at every level focuses on inputs, processes and outputs. It is very important to have effective controls at each of these three stages. Each effective cost control have the following characteristics:

10. INTRODUCTION CNTD……. CHARACTERISTICS OF AN EFFECTIVE CONTROL SYSTEM ACCURACY: Effective control generates accurate data and information. Accurate information is essential for effective managerial decisions. TIMELINESS: There are many problems that require immediate attention on time. If information about such problems does not reach management in a timely manner, then such information may become useless and damages may occur.

11. INTRODUCTION CNTD……. CHARACTERISTICS OF AN EFFECTIVE CONTROL SYSTEM FLEXIBILITY: The business and economic environment is highly dynamic in nature. Technological changes occur very fast. A rigid control system would not be suitable for changing an environment. An effective control system is one that can be updated quickly as the needs aroused ACCEPTABILITY Controls should be such that all people who are affected by it are able to understand them fully and accept them.

12. INTRODUCTION CNTD……. CHARACTERISTICS OF AN EFFECTIVE CONTROL SYSTEM ECONOMIC FEASIBILITY The cost of a control system must be balanced against its benefits. The system must be economically feasible and reasonable to operate. Accordingly the benefits received must outweigh the cost of implementing a control systems.

13. INTRODUCTION CNTD……. CHARACTERISTICS OF AN EFFECTIVE CONTROL SYSTEM CRITICAL AND STRATEGIC Effective controls should be placed and emphasized at such critical and strategic control points where failures cannot be tolerated and where time and money costs of failures are greatest. The objective is to apply controls to the essential aspect of a business where a deviation from the expected standards will do the greatest harm

14. INTRODUCTION CNTD……. KEY DEFINITIONS 1. Cash follow: Wikipedia [5] referred to cash flow as the balance of the amounts of cash being received and paid by a business during a defined period, sometimes tied to a specific project. Payments from the client to the contractor are split in order to pay workers, wholesalers and subcontractors for labor and material costs incurred during a particular construction period. The contractor adds a mark-up to these expenses. The final amount generates a new invoice that will create cash inflow later.

15. INTRODUCTION CNTD……. KEY DEFINITIONS Actual Value (AV). is the actual cost incurred in accomplishing work on the schedule activity or WBS component during a given time period. Planned Value (PV): is the budgeted cost for the work scheduled to be completed on an activity or WBS component up to a given point in time. Under profit project: when different between planned cost from actual cost is positive, it means project is under profit.

16. INTRODUCTION CNTD……. KEY DEFINITIONS Under loss project : when different between planned cost from actual cost is negative, it means project is under loss Predecessor activities: refers to activities to be done previous( before )of other activities. Successor activities: refers to activities to be done next( after) of other activities. Concurrent activities: refers to activities to be done at same time

17. LEARNING UNIT 1 – FORECAST CASH FLOWS Analyze sequence of works A complex project must be well planned, especially if a number of people are involved. It is the task of management to undertake the planning and to ensure that the various tasks required in the project are completed in time. Operational researchers developed a method of scheduling complex projects shortly after the Second World War. It is sometimes called network analysis, but is more usually known as critical path analysis (CPA).

18. LEARNING UNIT 1 CNTD…. 1.1 Analyze sequence of works The work sequence is the order in which tasks are completed. Work sequence in construction is used as management tools used for time planning where scope of construction project are identified and separated into flowchart, with logical order. Activity networks In order to be able to use CPA, you first need to be able to form what is called an activity network. This is essentially a way of illustrating the given project data concerning the tasks to be completed, how long each task takes and the constraints on the order in which the tasks are to be completed.

19. LEARNING UNIT 1 CNTD…. 1.1 Analyze sequence of works As an example, consider the activities shown below for the construction of a garage.

20. LEARNING UNIT 1 CNTD…. 1.1 Analyze sequence of works Clearly, some of these activities cannot be started until other activities have been completed. For example: activity G - erect roof cannot begin until activity E erect walls has been completed. The precedence relations D must follow E E must follow A and B F must follow D and G G must follow E H must follow G I must follow C and F J must follow I .

21. LEARNING UNIT 1 CNTD…. 1.1 Analyze sequence of works All this information can be represented by the network shown below. In this network each activity is represented by a vertex; joining vertex X to vertex Y shows that activity X must be completed before Y can be started.

22. LEARNING UNIT 1 CNTD…. CRITICAL PATH You have seen how to construct an activity network. In this section you will see how this can be used to find the critical path. This will first involve finding the earliest possible start for each activity, by going forwards through the network. Secondly, the latest possible start time for each activity is found by going backwards through the network. Activities which have equal earliest and latest start time are on the

23. LEARNING UNIT 1 CNTD…. EXAMPLE OF NETWORK TO CREATE CRITICAL PATH

24. LEARNING UNIT 1 CNTD…. CRITICAL PATH The numbers in the top half of each circle will indicate the earliest possible starting time. So, for activities A, B and C, the number zero is inserted. The numbers in the top half of each circle will indicate the earliest possible starting time. So, for activities A, B and C, the number zero is inserted. Moving forward through the network, the activity E is reached next.

25. LEARNING UNIT 1 CNTD…. CRITICAL PATH Since both A and B have to be completed before E can be started, the earliest start time for E is 7. This is put into the top half of the circle at E. The earliest times at D and G are then both 17, and for H, 22. Since F cannot be started until both D and G are completed, its earliest start time is 25, and consequently, 27 for I.

26. LEARNING UNIT 1 CNTD…. CRITICAL PATH The earliest start time for J is then 29, which gives an earliest completion time of 32.

27. LEARNING UNIT 1 CNTD…. LAST STEP OF CONSTRUCTING NET WORK IS PRESENTED IN FOLLOWING NETWORK

28. LEARNING UNIT 1 CNTD…. The vertices with equal earliest and latest starting times define the critical path. This is clearly seen to be: A E D F I J. Another way of identifying the critical path is to define the float time = latest start time − earliest start time. The information for the activities can now be summarized in the table below

29. LEARNING UNIT 1 CNTD….

30. LEARNING UNIT 1 CNTD…. So now you know that if there are enough workers the job can be completed in 32 days. The activities on the critical path (i.e. those with zero float time) must be started punctually; for example, A must start immediately, E after 7 days, F after 25 days, etc. For activities with a non-zero float time there is scope for varying their start times; for example activity G can be started any time after 17, 18 or 19 days' work

31. LEARNING UNIT 1 CNTD…. 1.2 IDENTIFY COST OF RESOURCES FORECAST Good project management in construction must vigorously pursue the efficient utilization of labor, material and equipment. Improvement of labor productivity should be a major and continual concern of those who are responsible for cost control of constructed facilities.

32. LEARNING UNIT 1 CNTD…. 1.2 IDENTIFY COST OF RESOURCES FORECAST Material handling, which includes procurement, inventory, shop fabrication and field servicing, requires special attention for cost reduction. The use of new equipment and innovative methods has made possible wholesale changes in construction technologies in recent decades. Organizations which do not recognize the impact of various innovations and have not adapted to changing environments have justifiably been forced out of the mainstream of construction activities.

33. LEARNING UNIT 1 CNTD…. IDENTIFICATION OF PRICE OF MATERIALS