IS15883part3_COST pepper presentation pptx

sonukumarsingh7481 1 views 28 slides Oct 16, 2025
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CONSTRUCTION PROJECT MANAGEMENT - GUIDELINES IS 15883 (PART 3) : 2015 COST MANAGEMNET JAYESH RAJWADE 225CE6003 PRESENTED BY :

outLINE 2 2

INTRODUCTION : • Indian Standard (IS 15883 : 2015) provides guidelines for Construction Project Management. • Part 3 specifically focuses on Cost Management. • A construction project is an endeavor to create a built facility. • Without efficient and effective project management, construction projects face challenges:     ◦ Time over-runs     ◦ Cost over-runs     ◦ Changes in project parameters     ◦ Loss of quality      ◦ Inability to meet functional objectives • Cost management integrates with technical processes for project success. • This part c overs stages subsequent to project approval (when decision to implement the project including its finance is taken) till commissioning and handing over. • C ost management aspects during the project formulation and appraisal stage of the project are not covered in this standard. 3

NEED FOR COST MANAGEMENT Cost management is essential for construction projects due to various reasons: Project Cost Determination: To determine project cost with reasonable accuracy and accomplish it within planned time and resources. Realistic Cost Estimates: To predict likely final cost, forming the basis for budgetary processes . Application of cost management across stages: Necessary at all stages of the project . Project Feasibility: Helps determine feasibility, obtain financial approvals, plan cash flow, and provides basis for bid evaluations and project durations . Stakeholder Objectives: Client's Need: To achieve maximum value at economical cost within the planned time frame. Contractor's Need: To organize and control resource utilization and produce deliverables within agreed cost and time, adhering to quality and safety standards. 4

5 Aim: To complete the project within the authorized budgeted cost. Key Processes: Cost Estimation Cost Planning and Budgeting Cost Monitoring and Control These processes are applied in the following stages of a construction project: Pre-construction stage: Project development, planning for construction, tender action. Construction stage. Commissioning and Handing Over stage. Integration: Bearing of other project management functions (scope, time, quality, risk, procurement, health, safety, environmental aspects) must be duly considered in the cost management processes. OVERVIEW OF COST MANAGEMENT PROCESSES 5

Scope of Cost Management General Aspects Pre-construction Stage Construction Stage Completion & Handover Stage 6

7 General: Covers effective implementation of cost processes using appropriate techniques for estimating, budgeting, and controlling costs. Objective: Project completion within approved budgets with variations. Costs are expended in all project phases to achieve deliverables. authorised Cost Management Plan: Shall be established based on project nature, objectives, and specific requirements. Details proposed methodology, outputs, techniques, and deliverables. Work Breakdown Structure (WBS): Cost management processes are detailed out of project scope through scope statements and WBS. WBS forms the basis for cost budgetary allocations and assignments of control accounts for cost tracking and control. Integration: Processes shall be integrated with other project management functions, such as time and cost alignment for cost-integrated schedules . Scope of Cost Management – General Aspects

8 Purpose : Identify various resource requirements (quantum and timing). Convert resource requirements into monetary terms of costs for activities. Estimate costs of obtaining deliverables. Contingencies are added for unanticipated minor variations. Cost-Influencing Aspects decided in pre-design stage : Selection of project delivery system and contract strategy. Selection of design professionals and management consultants. Initial Overall Cost Budget Components : Capital costs for land procurement and development. Site surveys and geotechnical investigations. Enabling infrastructure works. Fees for design professionals and management consultants. Fees for municipal/development and other statutory approvals. Other costs chargeable to the project. Scope of Cost Management – Pre-construction Stage

9 Budget Development: Initial budgets are modified and updated as more information becomes available, considering budgetary constraints. Component-wise target costs are assigned. Before work starts, cost budgets and time schedules are integrated to establish the cost baseline for monitoring and control. Optimization Potential: The pre-construction stage provides greater potential for optimizing project costs. During the construction stage, emphasis shifts to monitoring and control for adherence to budgeted costs. Construction Stage Scope : Monitor and track cost status. Update project budget with actual costs incurred. Manage changes to the cost baseline. Compare actual costs with budgeted costs and analyze reasons for variations. Scope of Cost Management Pre Construction Stage and Construction Stage

10 Completion and Handover Phase Scope: Documentation of as-built costs and risks encountered. Processes related to financial closure and approvals. Comparison of final cost with original approved estimates and analysis of reasons for cost variance. Value Management and Value Engineering: Important cost management process. An organized approach to provide necessary functions at the lowest cost without compromising quality, reliability, and performance parameters. Enables the selection of the cost-effective proposal by maximizing value at optimum cost. Maximum potential for cost savings is during the preliminary and detailed design and estimation stage. Scope of Cost Management- Completion & Handover Stage and Value Management

COST Management 11

A. Resource Management Pre-construction Phase Construction Phase

13 Resource Management PRE-CONSTRUCTION PHASE Involves planning, estimation, and procurement of resources during pre-construction, and control of utilization during execution . In the pre-construction stage of the project, decisions and procurement processes related to the engagement of planning and design professionals and management consultants are made by the client organization following the established procurement procedures and practices depending on the type and magnitude of the project. Selection of construction firm and contractors for project execution is an important component of resource management and carried out during pre-construction process depending upon the type of project delivery system and associated contract type envisaged for the project implementation .

14 Resource Management CONSTRUCTION PHASE Physical resources required for project execution include manpower, construction materials, equipment, and site-specific infrastructure facilities in terms of water, power, roads, communication, security and other required facilities. Manpower Resources: Manpower resources under the categories of construction workers and technicians planned for theirs quantities, skills, and timing based on project details, WBS, schedule, and estimates. Construction Materials : Constitute a major proportion of project cost, requiring sound material management. Material resource management involves identification, market survey (source, cost, leads), quantity estimation and timing of requirements as per project schedule , procurement process from suppliers and delivery at site. Site-related processes: storage and handling, usage, minimization of wastages, and prevention of environmental degradation. Construction Equipment : Modern construction practices adopt mechanized construction for improving quality and speed Some of the major construction equipment usage are the equipment for earthwork operations; concrete production, transportation, placement and compaction etc. In the procurement process of equipment, economic considerations of owning and operating cost or hiring on rental/lease costs needs to be considered.

B. COST ESTIMATION APPROXIMATE COST ESTIMATION ( During concept design stage ) Preliminary cost estimation ( During scheme design ) DETAILED COST ESTIMATION ( Based on detailed designs ) 15 Cost contingency

16 Approximate Cost Estimation (Concept Design Stage ) In this w orkable design solutions with alternatives of materials available evaluated. Final design scheme selected based on cost, time, and objective s of the project specified . This is an Analogous estimation technique based on past project cost data, adjusted for escalation factor for time, location factor, and other cost influencing factors.

17 Preliminary Cost Estimation (Scheme Design ) It covers all the cost components, scope of project ( current and future firmed up) and exclusions. This shall be done as follows : It should form basis for according of approvals by client and for monitoring of project cost. Based on schematic designs, further considered through value engineering exercises. Considers site-specific information, local practices, manpower, material, machinery costs, and provision for escalation. Cost including cost drivers, professional fees, project management services, and approval charges. Incorporates realistic project duration, procurement strategy, contract type, and time lines with milestones. Utilizes life cycle costing, value engineering, and constructability analysis for optimization of time and cost and improve quality aspects. Provision for contingencies for unidentifiable cost variations

18 Preliminary Cost Estimation Methods (Specific Projects) Building Projects: Floor Area/Total Built-up Area Method: Unit area costs multiplied by total built-up area, adjusted for parameters like construction technology, foundation systems, number of storeys , mechanized construction, sustainability. Construction Cost Index (CCI): Tool to measure cost increase over a base year, location-specific, accounts for materials, labour, equipment. Used for updating estimates. Elemental Cost Method: Provides opportunities for considering alternative design solutions for building elements. Infrastructure Projects (roads, bridges, water supply, etc.): Roads: Parametric cost data (cost per unit length/surface area) from past projects, approximate quantities from preliminary layouts. Bridges: Based on preliminary designs, approximate quantities, elemental costing for individual bridge elements (foundations, substructure, deck, etc.). Cost per unit plan area of the bridge deck from past projects can be useful. Infrastructure Services: Database on cost per unit area of site from past project is adopted, dependent on development type, density, and site characteristics.

19 Detailed Cost Estimation Detailed cost estimates are prepared based on detailed designs. These detailed estimates are prepared for p repared for trade-wise sub-heads of work. Bill of Quantities (BOQ) is prepared following Indian Standard methods of measurement. Nomenclature of items must be fully described without ambiguity, as this forms the basis for payments. Schedule of rates and analysis of rate documents published by construction organizations with item nomenclature are used for standard items rates. Detailed analysis of rates for specialized /non-schedule items based on past works, current market rates, or rational basis. Bill of quantity of item of work preparation can be done manually or more efficiently through computer-aided methods. The reasonability of detailed estimates can be broadly a ssessed through elemental cost analysis by comparing quantities and costs of building elements per unit floor area with similar constructed buildings. The main purpose of the detailed cost estimate shall be to predict the cost as nearly as possible to the expected cost of construction based on market condition and hence the detailed estimates worked out shall consider the prevailing rates of material and labour and other market condition. The construction cost index may be used to arrive at the percentage enhancement to be added to update the detailed estimate costs of the projects prepared based on the schedule of rates documents of the earlier years.

20 Cost Contingency A certain amount added to base estimates to account for unidentifiable cost variations. Incorporation of cost contingency is a cost-related risk management approach to reduce cost over-runs to an acceptable level. Contingency Influencing Factors: Project size, complexity, associated risks, and level of information available during different stages of project . P roject cost contingency Components: Design Contingency: Accounts for design changes. Construction Contingency: Caters to changes during the implementation phase (e.g., site conditions). Determination of cost contingency : Traditional Approach: Fixed percentage of base cost estimate (usually 3-5%, higher for uncertainties) based on past experience. More Realistic: Probabilistic methods considering various cost-related uncertainties. Management Reserve: Amount of project budget withheld for management control purposes for unforeseen work within the project scope. Not included in the cost baseline but part of overall budget and funding requirements. When an amount of management reserve is used to fund unforeseen work, the amount of management reserve used is added to the cost baseline, thus requiring an approved change to the cost baseline.

21 C. COST BUDGETING Cost Budgeting – Costs and Schedule Integration. Carried out before the start of construction. Project cost at this stage is the firmed-up budgeted costs of work packages/items from the accepted tendered costs. For traditional item rate contracts, contract cost is in the form of trade-wise items. Item-wise project costs are converted into project activity costs based on work break down structure methodology. Output: Project Baseline Cost Curve (also known as 'planned value curve' or 'budgeted cost of work as scheduled' - BCWS) This term is used to indicate that each of the project activity is assigned with a budgeted cost that needs to be monitored and controlled.

22 D. COST MONITORING AND CONTROL Cost Monitoring : It involves tracking and comparison of actual costs incurred with reference to the baseline costs budgeted for each activity. Depending upon the type, nature, size and complexity of the project, the cost monitoring shall be done at various prefixed intervals of time and/or at specified milestones. Involves closer watch on cost-related processes across pre-construction, construction, and handover stages. Includes monitoring the development of realistic cost budgets, adherence to initial budgeted costs, and accuracy of bill of quantities. Techniques like value management, value engineering, constructability analysis, elemental cost analysis may be used for cost reviews with the considerations for alternative design. During construction stage the cost monitoring processes to bring out the deviations from the budgeted costs may be carried out t hrough methods like periodic cost reporting systems, variance analysis and cost performance measurement techniques.

23 Cost Control : The cost control processes involve actions that are required to control changes/deviations between the budgeted costs and the actual costs so that the completed costs are within the budgeted costs including authorised revisions. Direct Cost Control : Physical Progress: Schedule control is important to avoid time delays, which lead to cost escalation and loss of revenue. Manpower Control: Record actual utilization vs. planned, manage item-wise actual unit cost to keep within budgeted costs. Material Control: Effective utilization, minimization of wastage through proper storage, handling, measurement, and lean construction techniques. Equipment Control: Monitor cost per unit quantity of work executed, compare with budgeted costs; assess economics of owning vs. hiring. Sub-contractor Control: Ensure proper coordination and work-front availability. Cost of Changes: A major factor in increasing project costs; minimize with proper pre-construction planning; changes require justification, examination of cost/time implications, and approval by competent authority. Consultants: Professional fees are direct costs; quality and cost-based selection is crucial. Other Costs: Includes salaries, field/office expenses, temporary facilities, security, insurance, taxes, etc.

24 Cost Control : Earned Value Management (EVM) Earned value management (EVM) is a valuable tool for the cost and schedule monitoring and control of the construction projects. The technique is used as a tool for the measurement of current time and cost performance and forecast the future outcomes. EVM considers project schedule status and updated costs incurred at periodic intervals and provide an integrated approach for the measurement of cost and schedule performance during the course of project implementation. The performances are characterized by the variance between the planned performance and actual performance. Benefits: Identifies cost/time over/under-runs, resource utilization, forecasts cost nearby completion cost. Limitations: Progress based on expenditure may not align with value creation; requires extensive and accurate documentation of the periodic costs on various resource utilizations to capture the actual cost occurrences in relation to the project schedules.

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26 E. POST-CONSTRUCTION REVIEW & DOCUMENTATION All project cost documents relating to built cost, as-built unit area rates, elemental/component costs, and cost-related risks encountered shall be analyzed and preserved for later reference.

27 Its core objective is to ensure projects are completed within approved budgeted costs and authorized variations, preventing financial overruns. Successful project outcome depends on efficient cost management restricting cost overruns, alongside complying with time targets, specified quality standards, and safety provisions. Robust cost management mechanism in all project phases is critical to avoid any obstruction in timely project completion, planned utilization, and potential project halts due to financial problems. This framework guides project teams to achieve objectives within planned time, resources, quality, and safety standards. CONCLUSION:

28 THANK YOU
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