Construction Project Cost Control Quiz

Project Cost Control

• Cost control is defined as managing expenditures within the authorized budget, ensuring desired quality, and timely completion.
• Essential for profitable construction projects.
• Construction managers need to be aware of and control project costs.
• Three main types of costs in construction projects: estimated, actual, and projected/target costs.

Estimated Cost

• Defines the initial budget for a project.
• Often presented as either a total direct cost for a job or a unit price based on material quantity.
• Sets the limit for spending on a project.

Actual Cost

• Costs incurred during project execution.
• Tracking actual costs is crucial for monitoring and controlling potential cost overruns.
• Regular cost tracking during construction is important.
• Discrepancies between actual and estimated costs should trigger corrective actions by project managers.

Projected and Target Cost

• Updated cost estimate based on actual project progress,
• Calculated by multiplying the actual unit cost by the number of completed units.
• Significant deviations between projected and estimated costs demand remedial actions for cost control.
• A target cost is sometimes set to bring projected costs in line.

Elements of Project Control

• Defining project objectives, scope, budget, and schedule are essential steps.
• Measuring progress (actual progress, time elapsed, money spent) and analyzing project performance with respect to the established baseline are core elements.
• Implementing corrective actions to keep projects on track is critical to managing costs and timelines

Objectives of Project Control

• Generating historical data for future estimations.
• Establishing benchmarks to compare actual progress against estimated timelines and budgets.
• Motivating project teams for higher performance and efficiency.
• Clearly defining responsibilities and credit allocation.
• Identifying methods for cost reduction.
• Alerting the relevant management to any potential corrective actions required during the project (not just after).

Cost and Schedule Analysis

• Performed at specific points during project execution to track progress relative to the initial estimations.
• Projects typically begin slowly, accelerate as resources and efficiency improve, and then slow again due to closing activities.
• Provides a quantitative assessment to ascertain project's progress compared to planned schedule and budget.

Cost Analysis

• Evaluating actual project cost relative to the initial estimated cost.
• Comparing completed units to the total anticipated units to ascertain percentage completion.
• Analyzing actual spent hours against the hours estimated to evaluate if the project is running over or under budget.

Schedule Analysis

• Assessing project progress with respect to the agreed-upon project schedule and timetable.
• Calculate completed percentage to establish the current completion time status.
• Calculate the difference between anticipated completion period versus the elapsed time from project start to assess delay patterns

Cost and Schedule Analysis Example

• Example case study illustrating how to calculate cost and schedule completion status.
• Includes calculations for completed area, man-hours spent, and efficiency rates.
• Clearly defines the approach to identifying whether budgets are being met, and whether schedules are being met.

Earned Value Analysis

• Essential for assessing project status comprehensively by merging cost and schedule criteria.

Earned Value Elements

• Actual Cost of Work Performed (ACWP) records project expenditures.
• Budgeted Cost of Work Performed (BCWP) or Earned Value (EV) predicts the budget for completed work.
• Budgeted Cost of Work Scheduled (BCWS) or Planned Value (PV) is the planned work expenditure.

Earned Value Calculations

• Cost Performance Index (CPI) evaluates budget efficiency (CPI > 1: under budget; CPI < 1: over budget).
• Schedule Performance Index (SPI) measures schedule adherence (SPI > 1: ahead of schedule; SPI < 1: behind schedule).
• Cost Variance (CV) measures budgetary performance (CV > 0: under budget; CV < 0: over budget).
• Schedule Variance (SV) measures the adherence to the project schedule(SV > 0: ahead of schedule; SV < 0: behind schedule).

EVMS Graphical Representation

• Graphical representation of earned value metrics over time (Cost vs Time).
• Visual method to observe progress of planned versus actual costs against the project plan schedule/time.

Project Performance Example

• A hypothetical project baseline and current status.
• Analyzing the project's performance and providing progress report.

Cost & Schedule Analysis (% Complete)

• Calculating the percentage of the project that has been completed.
• Assessing the project's financial performance (e.g.,. under/over budget).
• Evaluating the project's schedule performance (e.g., ahead/behind schedule)

Forecasting EV

• Estimating project's final cost(EAC).
• Formula for EAC: ACWP + (BAC − BCWP).
• BAC = Budget at Completion.

Original Budget & Schedule

• Project schedule with milestones and cost durations.
• Current progress status.
• Costs incurred.

How is the Project Doing?

• Guidelines for evaluating project performance.
• Key indicators to evaluate the project (ACWP, BCWS, BCWP, SPI, CV, CPI, EAC)

Formalize Judgment: $

• Calculating the cost of each unit.
• Calculating the total cost of completed units.
• Project's cost and schedule performance analysis.

Schedule?

• Calculating the expected project completion timeline based on the established baseline.
• Calculating schedule performance index (SPI).
• Calculating schedule variance (SV).

Project Performance Results

• Summary of project status—under budget and ahead of schedule.
• What is expected final cost?

Project Performance Results

Additional Notes

• The provided information includes examples of calculation methods for various metrics (e.g., costs, schedule, resources, etc.).
• Practical application to real-world scenarios of the discussed formulas and metrics.