cost management companies in india

Guide to manage project costs

Your projects are vital for the future of your organisation. Adequate cost management enables you to optimise your resources (time, staff, equipment and materials), make decisions based on data about projects and their risks, measure financial performance, and provide senior management with key metrics.

What is cost management for the project?

Cost Management is a challenge to effectively predict and manage project costs whether you are developing a new product, designing a facility, or changing a key process.

Cost management refers to the planning and project budget management activities. Efficient cost management ensures the completion of a project in accordance with and in line with its budget. Because you at least partially evaluate the success of a project by its cost performance, cost management is a key determinant of the project outcome.

Cost management activities are carried out during the entire project cycle, from planning and budget allocations to project management and cost evaluation upon completion of the project.

Whilst cost management encompasses a whole set of activities, it is sometimes referred to in more specific areas such as spending administration, cost accounting and cost transparency. These terms are sometimes used by cost managers as loose synonyms for the broad function of cost management.

Four major steps in cost management

The theory of project management, says costs management comprises four processes. The cost management process consists of four different processes.

Resource planning:

As part of the project initiation phase, resource planning uses a work-downstructure to calculate the full costs of the resources required to successfully complete a project. This is a hierarchic representation of all project deliverables and the work required for completing them. Managers usually identify the necessary resources for each component of the work breakdown structure and then create a total resource cost estimate for all project results.

Cost estimation:

Cost estimation is an iterative process using a number of estimation techniques to determine the total project cost. Cost estimation techniques vary widely from conceptual approaches that draw on historical experience and expert assessment to determinative technique which estimates costs on a component-by-component basis. These techniques will be discussed in detail later as their level of precision varies.

However, although the estimator’s task is always to create the most accurate possible estimation, determinative estimation techniques are only an option if the scope and the deliverables of a project have been reasonably finalised. In the earliest phases of project planning, you therefore use the less accurate estimation techniques, and then review and update estimates as the project is defined.

Cost Budgeting:

You can finalise and approve the project budget once you have produced satisfactory estimates. Cost managers typically release the amounts budgeted at the stage depending on the progress of a project. This includes contingencies and reserve appropriations.

Cost Control:

Cost management is the practise of measuring cost performance by cost and schedule, providing comparison points throughout the project life cycle. The project management plan specifies the requirements for efficient cost control. The person responsible for cost management examines the reasons for cost variations – remedial action is provided if they consider cost variations to be unacceptable. Other related responsibilities include controlling costs for example to ensure that project budgets reflect changes in the scope of a project.

Key components of Cost management plan

These four processes are governed by the cost management plan. Costs management plan, which was developed during the project planning phase, is a document defining how the project costs are managed, controlled and communicated to the end of the budget project.

A cost management plan identifies, among other things, the person or group responsible for cost management, details how to evaluate the cost performance of a project, and sets out rules for communication to shareholders of the project’s cost performance. It also sets out the methodologies through which project cost differences are controlled.

Although you can personalise a plan to meet your company’s needs, they usually follow a standard format. Sections often include the cost variance scheme, cost management approach, cost estimate information, cost baseline information, cost and reporting processes, the process of change monitoring, budget for the project, and approvals. You may also want to include the level of expenditure authorities of key project staff, to indicate which roles can cost up to certain thresholds.

Construction Project Management

What is Construction Project Management (CPM)?

Construction project management is primarily responsible for the planning, coordination and implementation of a construction project, whether for agricultural, residential, commercial, institutional, industrial, heavy civil or environmental purposes.

The management of building projects usually involves complex tasks that can vary wildly depending on the work in hand and requires strong communication skills, a thorough understanding of the construction process and the ability to solve a problem. Construction project management is a complex field that requires knowledge in a variety of areas such as finance, law and business.

The role of a project manager

Construction project managers are responsible for ensuring that the project moves according to plan. The objective is to manage the project in a timely and budget-driven way, but still to meet the codes, plans and specifications. A project manager could also be responsible for establishing parameters, finances, schedules, the vetting, and recruitment of subcontractors and local staff, the development of a possible conflict resolution strategy and much more.

Construction manager’s common responsibilities falls into these 7 categories:

• Project Planning

• Managing costs

• Management of time

• Managing quality

• Management of contracts

• Management of security

• Professional practises in construction management (manage the project team, define the role and responsibilities of each person…).

The role of a construction contractor

The design phase is first in every construction project, and the construction manager opens the bidding process to interested contractors when this is completed. Contractors must be able to demonstrate that they can manage public safety; decision-making, engineering, drafting, human resources, time, costs and management of the quality. The contractors that meet these guidelines are then selected by selecting low-bids, selecting best values and or selecting qualifications – all common actions.

How the project is won?

The owner will share project information with a large group of contractors, general contractors or subcontractors when a project owner is ready to begin. The process begins with a cost estimate, telling the owner how much the contractor should pay for the project.

Types of Bids

A contractor may expect two types of offers:

Open Offer: Offers are open and usually advertised for public projects. Any contractor may make an offer with an open offer.

Closed bid: A private project process begins with the closed bid, which invites the owner to submit a bid to a selected group of contractors.

Selection Criterion

The offer can be made and selection of a contractor can then begin based on a number of criteria whether the owner chooses an open or closed offer process for the project.

Selection based on Low bid:

The main focus for the project owner is the bottom line – also the price. The winner is the one who submits the lowest project price.

Selection based on qualification:

The project owner asks contractors to make an application for qualifications (RFQ) in this process, which summarises the contractor’s experiences, management plans, organisational flow and success in maintaining budgets and timetables. The owner of the project chooses the best qualified contractor.

Selection of best-value

In this approach, the project owner considers both the offer price and the qualifications of the contractor to find the most effective combination of cost and expertise.

Cost Estimation Service

Cost Estimation in Construction Projects

Suvarna Consultancy is a top notch consultancy in the domain of Project Management of Construction projects. It renders different services to its clients and Cost Estimation is one among them. Here we will have a detailed look at the Cost Estimation Services and different aspects allied to it.

Cost Estimation in Construction Projects

Cost estimation is an integral part of the construction project, and to run a successful construction project, the benefits of cost estimation cannot be denied. The estimate forms the baseline for cost control. Hence it is essential to do the estimation carefully.

In this article, we will study more about cost estimating and will understand some related terminologies.

Let’s understand the basics first:

What is cost estimation?

What do we mean by estimation in simple terms? Estimation refers to educated guessing. Similarly, cost estimation in construction projects refers to approximating the expenses well in advance so that the cost planning can be done.

Let’s consider a simple scenario; you are planning to get your house painted, so you need to approximate the amount that is going to be spent. You need to know this amount even before planning for your expenses and arranging for the funds. Similarly, you need to estimate the amount spent on your construction project well in advance to do the cost planning properly. This amount is referred to as the estimation in the construction project.

Types of estimates in construction projects:

Preliminary estimates: establish a higher level of accuracy and helps in initial budgets; however, the reliabi9lity of the numbers are not always precise, and hence this estimation method is not so commonly employed. If you want to follow the preliminary expenses, your user does that under an expert’s supervision. Square foot method is a common estimation technique. The preliminary estimation procedure is time consuming, as well.

Detailed estimates: As implied by the name, the detailed estimate involves checking all the nitty-gritty and calculating based on that.

Design estimates: These are the estimates that run parallel with the planning and design. This can be further subdivided into screening estimates, engineer’s estimates, etc. The design estimates portray the progress of the design. This information is beneficial to the project managers.

Bid estimates: The bid estimate comprises the direct construction cost. It can include field supervision, overhead, profits, etc. The bid estimate is essential in getting a new client. In many clients, the .lowest bidder is given the responsibility if new projects.

Control estimates: Control estimate aids in budget estimate, cost calculation, etc.

Process of estimation in the construction projects:

Let’s have a look into the estimation process in the construction projects:

In simple terms, the estimation process in the construction projects aims in answering the below questions:

How many: This refers to the quantities

How much: This refers to the pricing that is going to be involved

How long: this refers to the amount of time that everything in the production process will be con summed. For instance, ‘how long’ can refer to the productivity of the employees involved in the construction projects.

Hence once you have all the answers to the above questions, you can consider that your estimation was correctly done.

You can do the below things which will help you I the cost estimation process:

Reviewing the plans and specs is essential to understand the big picture before talking about the nitty-gritty. Check for the particular condition clauses etc. that could affect the cost. Check for the future prospects of the project as well. For instance, if you notice that a mall will be constructed near your construction site, then it is likely that the selling price o0f the project will augment in the future, and hence the pricing plan needs to be determined accordingly.

Some red flag items or ether things that demand immediate attention must be highlighted to the estimator well in advance, much before the cost estimation. The budgeting process is being carried out.

Developing the list of questions and clarifications:

Developing a list of questions and the answers can also be helpful. You need to have all the details handy before the pre-bid meeting.

The pre-meeting:

The pre-bidding meeting is an important step, and the cost estimator must prepare for this meeting well. Generally, these meetings occur at the project site and if any red flag issues need to be highlighted in the pre-bid meeting. The estimator can take part in the meeting himself, or he can send any of his representation. Suppose any representative is attending the meeting on behalf of the estimator; in that case, it is the representative’s responsibility to communicate all the essential information so that there are no gaps.

Site visit:

Site visits is an essential step in cost estimation. The cost estimation process cannot be carried out effectively without visiting the site. When you walk around the site, you get relevant information like measuring the land, the water facilities, etc. Also, you come to know if there are any shortcomings. It is the estimator’s responsibility to find out the problematic zones and highlight that in advance. The estimator should note the below things which will help him in the estimation process:

Distance from the corporate offices:

This is an essential factor to consider and cannot be ignored. The estimator should notice the distance of the site from the co9rporate offices. If the project is located far away from the corporate offices, then it is more likely that the cost will be stagnated and it will have a lower population of the people who work in the corporate offices.

Site conditions: The site conditions cannot be necessary before the estimation of the cost.

Soil data: Soil data is also an important part and it must be taken into consideration before the cost estimation. If the soil is more fertile you can expect the cost of your project to increase in future.

Location merits: Is your project located near a movie theatre or a shopping mall? If yes the project price will likely increase in the near future. So while bidding you need to consider this.

Parking: Does your construction site have places for parking? If the answer is yes then the prices will likely increase.

Safety of the area: Safety of the area must also be considered before doing the cost estimation and before the bidding happens.

What all is required for a correct cost estimation: An accurate cost estimation required the below things:

Historical cost data: The cost estimate can be prepared based on the historical data on the construction costs. The project manager must examine the part records of the project and do a attend analysis. Hence when you are involved in the cost estimation and cost control process of the construction projects, you must maintain the records properly to be analysed in the future. By checking the historical data, you know the features and specifications of vendors’ data in the past. You can also get hold of the commercial cost reference manuals for doing estimation. The historical data must be used carefully. The cost associated may increase over a period of time. Hence the cost estimator must consider the cost increase of the associated items before determining the cost estimation based on past reports.

Detailed step for building an estimate:

The estimation process is not straightforward and may require you to pour your blood, sweat, and tears.

1. Visit your site: Site visiting forms the primary step of building an estimate. It would help if you watched all the things minutely before commencing the estimation process.

2. Determine the WBS: The Work building structure is an essential aspect of cost estimation. It is imperative to be familiar with the construction materials and methods for determining the WBS. The contractor needs to quantify and do the pricing of each work step. It would help if you did not overlook anything while calculating the estimation. The WBS will portray the project as a series of interrelated elements. This facilitates the cost control process to a significant extent. The performance and schedule can also be tracked with the help of WBS.WBS helps in the assignment of responsibilities for all the work elements of the project. The breakdown forms the skeleton of cost control and cost estimation in the construction projects.

3. Quantifying: You need to quantify the materials, labour, and general conditions before pricing any work. How many is vital to be calculated before how much. It is imperative to read and interpret the plans involved in construction projects and know the basic estimation calculation before quantifying. You will need to utilize algebra for measuring the ratio and proportion and geometry for cubic measurements. Quantifying of material is more comfortable as compared to the other estimating activities.

4. Consider the taxes: The tax consideration forms an essential part of cost estimation. Mainly two types of taxes are considered which sales tax is, and the other one is payroll tax. Payroll tax is also referred to as the labor burden and must be added in the labor column. The payroll tax may consist of an employer’s portion of the social security tax, worker compensation, unemployment tax, employee benefits like health insurance, life insurance, vacation, teethe sales tax needs rot to be added in the material column.

5. Obtain bids from subcontractor and vendor: The subcontractor and vendor bids form an essential part of the cost estimation process. When your estimation team estimates the self-performed work prices, they must also gather the prices from the vendors and subcontractors. A failure to obtain the bids from subcontractors and vendors can result in a significant cost estimation gap. Ideally, you should so0licit the bids, receive the bids, analyse the bids, and then choose the bids.

6. Reporting is an integral part of cost estimation, and the reports can be prepared daily, weekly, or monthly. It will help have job logs, diaries, daily field reports, time cards, and the subcontractor billing estimates in the cost estimation process.

Basic approaches to cost estimation:

The cost estimator uses one or the combination of the below approaches to do the estimation process:

Production Function: Production function is the relationship between construction volume and production factor.

Empirical cost reference: Empirical estimation refers to statistical techniques that include the construction cost or facility operation. The empirical cost estimate aims to determine the best parameter values or constants in the estimated cost function. Usually, regression analysis techniques are employed to find the empirical cost reference.

Unit Cost: A cost associated with each of the facility components is referred to as the unit cost. Unit cost determination is a straight forward process. For this, the process needs to be segregated into several tasks. Each of the referred tasks is important for the construction of the facility. The hourly rate needs to be accurately calculated for specialty labor. Once you have determined the overall rate, you need to determine the rate for individual crew members.For bidding estimation, the unit cost is utilized even though the contractor decomposes the project into different levels of the below-mentioned hierarchies:

Subcontractor quotation: Subcontractor quotation is an integral part of cost estimation; however, the accuracy of the estimation also depends on the genuineness of the quotations.

Construction Procedures: If this is practiced, then the project can be split into labor, material, and equipment to perform various tasks in the project.

Various formulas are utilized for cost estimation. Simple Unit cost formula factored estimate formula, and formula based on labor material and equipment are essential for cost estimation.

Allocation cost or joint cost: The essential cost involved in the allocation process is the joint cost. In construction projects, the necessary costs may imply the labor cost, the material costs, the construction equipment cost, construction supervision, and general office overhead.

Other factors to keep in mind for cost estimation:

1. Allowance for contingencies: In most of the construction projects, you can find an allowance for contingencies. This implies unexpected costs during construction. The contingency amount is determined by the historical experience and the difficulties of the task associated with a construction project. If the contingent amount is unutilized throughout the project, it is released at the end of the construction project. This amount can be saved and can be utilized in your next project. A good project manager will make fair use of the contingency allowance and try to save the next project.

2. Computer-aided cost estimation: You can find much software for cost estimation. These tools are sometimes better than manual estimation as it gives more accurate reports and saves time. These tools help you get faster bids so that you can set a good impression on your clients. Another significant benefit of using the cost estimation tools is that you can be up-to-date with all the changes. The cost of the estimating tools may vary depending on several factors. For instance, if you own a big company and many employees need to use the cost estimation tool, you need to pay more for the same. Most of the cost estimation software are cloud-based, and some of them are on-premises software. For apparent reason s the cloud-based software are more popular. The popular tools for cost estimation in construction projects include pro contractor estimation and Plan swift. These tools facilitate the cost estimation process and help you to create bids and track your expenditures.

3. Factor estimating It is also used by many project managers for cost estimation. When No MTO or schedule is present, then this methodology is utilized.

4. Check cost centres: It is also imperative to view the project by cost centres. You need to check every aspect to prevent overruns in case of a mishap.

Conclusion

Thus the above article will guide you in cost estimation. Cost estimation can act as a two-way sword. Once you give very high bidding, you may lose the bid, and your project may go to some other contractor. On the other hand, if your bidding is low, you will fail to achieve the desired ROI. If the cost estimation is done carefully, then it can result in long term profits.

You can take help of some esteemed project management company like Suvarna Consultancy to get support in the Cost estimation process. They also have an ERP named CCIS or Construction Cost Information System that can help you in doing cost estimation efficiently and effectively.

Cost Estimating Services pune

Bringing Down Costs in Residential Projects through Cost Management

Cost management is an essential part of project management and needs to be done in the right manner. If you are in a construction project, then cost management becomes a mandate. This article will focus on some concepts related to cost control and check if it is possible to trim costs in residential projects through cost management.

Let’s take a sneak peek into the essential concepts first:

What is Cost Management?

If you are a project manager then this terminology must be very familiar to you. Cost management refers to the methods employed for trimming costs. It involves forecasting, planning, estimation budgeting, and control. The techniques and methods utilized for monitoring and improving companies’ activities and processes are important for the project’s survival, and this is indeed a tedious process and can act as a two-way sword. If the cost management is done correctly, then it can maximize your profits. Still, if it is not executed correctly, you can incur significant losses in your project—the cost estimation, forecast, and monitoring aid the decision-making process.

Why is Cost Management required for construction projects? And what are the problems faced by the construction sector in the absence of cost management.

Cost overruns can have severe implications in construction projects and can lead to cash flow issues. Let’s see what problems you can face in the construction sector due to improper cost management.

Wrong cost management can lead to quality defects and rework:

This is a typical result of improper cost management. When you run short of budget, you generally try to finish the project with bad quality things. In some cases, if you notice that your project is going out of budget, you may consider revising your plan of action so that you can follow the budget. This may lead to rework

Missing deadline and increased customer dissatisfaction

Wrong cost management can result in delays in project completion. At the end moment, you may realize that you are facing overruns, and you make sincere efforts to compensate the same. As a result, it may result in relays and delays result in customer dissatisfaction. Time is money, and hence if you fail to complete the project, it may have serious business implications.

Demotivation of the labors:

The absence of good management can demotivate the workers if they fail to see that y their efforts are bringing in any results. It is the job of the project manager to align everyone with the plan. The project manager must keep the labourers updated about any plan changes.

Price increase of residential projects:

If the net cost plan increases, then the price for buyers may also be increased as deemed appropriate by the authorities. Price increases in the residential project can impact sales to a considerable extent. Hence, it is crucial to properly manage the cost in construction sectors so that the budget does not exceed the plan.

Cost transparency:

Depending on the forecast, you might have promised a particular cost; however, if it exceeds then there may not be any cost transparency, and this can lead to dissatisfaction of the end-users.

Impact the other things associated:

If you cost an increase in a particular segment, you may try to lower the cost in another segment, and thus it may impact the other things whose cost was reduced. You may cut off some other things to trim expenses.

Effective cost management is indeed rewarding to the sponsor of the project as the ROI can be maximized. Therefore, to provide accurate guidance to the decision-maker in initiating and making their decision, consideration of value, the achievement of maximal accuracy and reduction in cost are significant to be achieved in every cost estimation exercise.

Without cost management, your project can go haywire: Without cost management, you will not have any control over your project, and you can notice that your project is going haywire. Hence it is essential to manage cost. Thinking out of the box is required to improve. You may go for some structural changes in the plan if needed, but it needs to be approved by the owner.

Where the Cost Management is required the most?

Cost management is required in all the sectors and requires the skills of the project managers. In a construction project, this is more important as if the cost exceeds, then the buildings’ total cost may increase for the end customers.

Who will require cost management most?

Cost management is essential for everyone involved in the project as well as the customers. Let’s see how cost management in the construction sector affects everyone:

• End Clients: improper cost management may increase the invoice of the end clients also; in some cases, due to improper cost management, the project may fail to complete in time. In both cases, the clients may be dissatisfied.

• Stakeholders: The stake holders and the developer may suffer if the cost management is not done correctly. It may cause them business losses and can also spoil their reputation.

• Project manager: If the cost management is not done correctly, it may spoil the project manager’s reputation. If a project

• Workers: Wrong cost management can lead to overruns. During overrun, the higher authorities may find it appropriate to cut down the cost in some other segments to compensate. This may impact the daily wages of the workers as it may be decreased. Also, during overruns, rework is also suggested in some cases. Such scenarios can get complicated for the workers as they may need to repeat a few tasks unnecessarily.

Hence the cost management must be done correctly so that everyone is happy.

When will be the cost management required the most?

Although most of the cost gets determined during the concept phase, it gets essential in the budgeting and estimation phase of the cost management. Locking the price and the design minimizes changes and alterations.

In construction projects, cost management is highly essential for the success of the project.

How to perform Cost Management in the Construction sector?

• Cost management is no cakewalk and may require you to pour your blood, sweat, and tear but once done successfully; it can be highly rewarding. The cost management in the construction sector is a straight forward process and involves four essential steps. All the stages of cost management are crucial, no matter which industry it is done. The four processes of cost management are

• Planning: In this step, you check how to determine the budget, estimate costs, etc. You need to be aware of everything associated with the project and know the different types of expenses involved. Once you have the mentioned details, you can do the right planning.

• Estimation: Here, you try to chalk out estimated costs for the products and services associated with the project. Cost estimation is used to determine the possible price of a future project or product, even before it is designed in detail. Accuracy of estimation is also essential. You must be careful so that the estimated expense and the real expense do not have much variance. The estimation step can be categorized in the below processes:

Parametric estimation: You carry out this estimation technique by analysing the historical data and by doing a trend analysis

Bottom-up approach: In this process, you analyse the nitty-gritty and break down all the project activities. The bottom-up approach gives you accurate results, but it may require a lot of budgets.

Three-point estimation: Three-point estimation is also called as the Program Evolution and Review Technique. Through a three-point analysis, you can check all the possibilities, assumptions, and uncertainties related to cost.

• Budgeting: You determine the budget by combining all the estimations. You must also prepare the contingency plan at this step to mitigate risks.

• Controlling: This is the fourth and final step. This step aims to complete the project in the determined budget.

For doing cost management in the construction sector, follow the below steps:

1. Value engineering is essential: You can try doing something in an ales costly way. You need to research the different solutions and implement the one who will save a lot of cost without compromising the quality. This will require intensive research and hard work.

2. Accuracy of estimation: accuracy of estimates is essential. You may consider using some tools to have an accuracy of the analysis.

3. Monitor and do the progress reporting: It is crucial to chalk out the plan, but you must also monitor if everything is going per plan.

4. You must have the data at your fingertips. If you do not have the correct data, it can lead to the wrong estimation and impact the budgeting.

The cost information is highly essential for decision making, and cost management in the construction sector determines its success. Hence it must be prudent to do the cost management effectively.

Help of some established project management consultancy like Suvarna Consultancy can prove to be effective. The Software like CCIS or construction cost Information system can be used to manage the activities in an efficient way. You can follow the tips mentioned above to do cost management like a pro. Efficient cost management can lower down the cost of residential projects to a considerable extent.

Project Cost Management

How do you manage project costs?

Managing the cost of the project effectively is a challenging task and may require a lot of skills. There is no silver bullet for effective cost management in the construction sector. In this article, we will have a look into some of the tips that will help you in efficient cost management in your construction projects.

What is project cost management?

Project cost management refers to the process followed by the project manager to plan and manage the project budget. This may involve the usage of technology to measure cost and productivity. The appropriate estimation, allocation and the control of costs determine the success of projects. Project cost management also involves the cost associated with procuring the projects related to project completion.

Let’s understand this through a simple concept: Your mother is getting older, and you decide that she must move into your house however you may not have ample space in your house, and hence you decide to build up a spare room for her. The first question that will cross your mind is, how much is this project going to cost? Well, this question can be answered through project cost management.

Now that you have a fair understanding of the definition, let’s look into why it is important.

Why is Project cost management important?

Project cost management is important to set a budget. Through project management, the project manager makes sure that the project cost remains within budget.

The project managers compare the original project cost status with the targeted project cost and use it as a baseline to determine the future course of the project plan. He may change or realign the project structures if needed so that he can meet up the cost target.

This comparison helps in determining the success of the project.

A project can be termed as successful if:

• The project follows the scope

• If the project completes within the deadline

• If the project is completed within the budget

• If the project completes within the stipulated time

Types of Project costs:

There are generally five types of the project cost

Fixed cost: The costs that generally remain fixed throughout the project lifecycle are termed as the fixed cost. Examples may include the salary of employees or licence cost.

Variable cost: Variable cost is the costs that vary. An example may include supply cost, labour cost etc.

Direct cost: The costs which are directly related to the project work are called as a direct cost.

Indirect cost: these costs are not associated with the work of your project but may be incurred during the business.

Sunk Cost: Sunk costs refer to the costs that have already been lost and they fail to produce any outcome

Total project cost: Total project cost is the summation of all the costs mentioned above.

Now that you know the basics let’s focus on the main aspect which is how to do cost management Project cost management consists of four important steps. Once you are familiar with the steps, you can do the cost management easily.

Let’s look into the four steps of cost management:

Project resource planning:

Through resource planning, you identify the resources that are required for the project execution. This can refer to people like employees and contractors and equipment like vehicles, tools tec.

Resource planning is done even before the project commences. To begin with, the project manager must know about the work break down structure (WBS). The WBS will have many subtasks. It is the job of the project manager to look into each subtask and check how many people, what skills or what equipment needed etc. to finish the project.

Cost estimation:

Cost estimation is the next important step. Here the project manager calculates the approximate cost, and he tries to quantify everything so that it can help him in the cost estimation process. This is an extremely difficult step and requires the project manager to know all nitty-gritty associated with the project. He must be aware of all costs, including the fixed cost variable cost sunken costs etc. The cost estimation process forms the baseline of the planning stage. In some scenarios, the project managers come up with multiple ways of executing a project, and the cost estimation acts as their guideline and help them to choose the right path.

Cost estimation methods are of the below types:

Parametric estimation: This estimation technique utilizes the historical data and is mostly accurate as trend analysis is also done in this process.

Bottom-up approach: This approach asks you to break down all the activities associated with the project. This is an accurate technique but is time consuming and may require a lot of budgets as well.

Three-point estimation: this is also known as the Program Evolution and Review Technique. Here you check all the possibilities, assumptions and uncertainties related to cost.

Cost budgeting:

Cost budgeting is more detailed as compared to the cost estimation. Here the project manager needs to fix a budget for each component involved in the project. This is an important step, and it determines the future cash flow of the project.

Cost control:

If there is any variance from the baseline, then cost control helps to correct the variance so that the cost can be aligned to the plans. This is a continuous process and must be done throughout the project lifecycle if the costs exceed the budget, then it is the job of the project manager to get the costs realigned to the budget.

Let’s look into some of the tips that will help you do cost management like a pro:

1. Consider utilizing project cost software: Project cost software aims in automating the calculation process, and hence manual errors can be prevented. Also, with the project cost software, you can have all the data at your fingertips and the dashboard will also help to portray the data and hence it acts as an efficient reporting tool. This software also helps in multicurrency cost management in case you are dealing with international clients. Hence these software’s facilitates benchmarking and standardization. To run a project smoothly, a cost manager must have the project cost management software.

2. Set up the project budget from the beginning: Once you have the budget ready from the beginning, then you know what to spend and where. After doing the cost budgeting, the project manager needs to get it approved as well.

3. Monitor the project budget now and then: It is important to set up the budget properly; however, it is also important to check from time to time and ensure if everything is happening per plan. If at any point you notice any variance of the cost during implementation, then you must make needful alterations so that you can stick to your budget. You may consider displaying the budget in the dashboards so that everyone is aligned and does not exceed the budget. You may also consider having regular meetups with your team to understand the challenges and constraints. It would help if you did not stop inspecting at any time. Timely inspections and supervision can prevent budget overruns.

4. Have the facts and figures in your fingertips: It is important to have the reports handy when you want to do successful cost estimation. The reports should be detailed and should have a visual representation of the facts and figures so that everyone can understand it easily. This will act as a motivation factor as your team members will know about their strengths and weaknesses as far as the project is concerned. Hence they will take the necessary steps to do better.

5. Look out for the problematic spots and find a quick fix: For doing successful cost management, you must be aware of the problematic zones that can lead to overruns. It would help if you made a sincere effort to control them from the beginning. For instance, one of the major problems on most construction sites is the large amount of materials wastage due to varying circumstances. Wastage of materials can usually happen during the procurement process, storage, and during utilisation. This can happen due to the buying materials of wrong specifications, buying more than what is required and in some cases, due to some unplanned and unrealistic circumstances. Wastage of materials also happens during transportation. So if you monitor this from the beginning, you can take the necessary steps to prevent wastage. You need to be proactive and neglect careless attitudes. Also, pay importance to the appropriate storage of materials. The relationship between time and cost is an important aspect in the control of costs on-site as any variation in time will have an automatic implication on cost.

Cost management is a continuous process and is important throughout the life cycle of the project. This may require you to pour your blood sweat and tears, but the result will be highly motivating. Successful cost management will improve the prospect of the project, and you can expect a better ROI through a proper cost management mechanism. Hence follow the steps mentioned above to do project cost management like a pro and expect rewarding results that will be valuable for a lifetime.

cost control in project management

Importance of cost control in project management

The success mantra of any business is to derive maximum profit with minimum costs. However, cost control in project management can be a daunting task and may require expertise. Especially in the construction sector, a correct forecast of the budget is challenging. However, cost control in project management is essential, and cost control ensures that your budget is in the tract. In this article, we will discuss the importance of cost control in project management.

Before checking the details, let’s familiarize yourself with the different costs associated with constructions. Once you are familiar with the costs, you can attempt to control them:

The cost associated with construction:

The various costs associated with construction is listed below:

• Land rent

• Operating staffs

• Labour cost

• Renovations

• Taxes and insurance

• Financing costs

• Utilities

• Other expenses by the owner

To develop a detailed understanding of cost control, let’s find responses to the below questions:

Cost control in construction projects

Cost control in construction projects refers to the activities related to the planning and controlling a project’s budget. You will have a significant cost control when you can get your project completed within the allocated budget and within the stipulated time and according to its planned scope. Also, there should be no compromise in quality during the execution process. Efficient cost control also refers to the optimized usage of your available resources to get the maximum ROI. The cost plan is designed to allocate the budget to the project and act as the basis of cost control. Though budget and cost plan Semmes to be the same, they both can imply different things. The budget means the limit of expenditure for the project.

On the other hand, cost plan defines how much money will be spent for which purpose and at what time. The cost plan helps to form the cash flow plan and allocates budget to the project. The cost plan should ideally include the estimate of the cash flow and should also set a target for future costs.

Understanding your Project Budget

The project budget is dependent on your construction plan and the associated cash flows. The estimate of the cost determines your financial performance. Planning for a construction project is a serious business and even experienced program managers struggle to get this right. You can get the estimate from an experienced engineer to understand the overall project.

Before determining the project cost, you must schedule a meeting with all stakeholders like contractors, architects, utilities, etc. You must assess any potential issues from the beginning and determine the cost accordingly.

Reasons of why theCost Control isimportant in project management

• Cost control in project management is highly essential to maximize your revenues. Let’s look into some of the reasons for which cost control is so important.

• An effective cost-control improves your experience and maximizes your scope of earning new projects: When you can effectively control the cost of a project, it boosts your confidence. Also, your credibility increases to your clients who can trust you with new projects.

• Cost control gives the buildings good value for money:A building with an economical construction and layout can get good value for money and attract potential buyers. Hence, as an owner or developer, if you want to get a good value of your property in the future, you must have a good control plan.

• To do a logical distribution of the funds: Doing a logical distribution of the funds is essential, and cost control in project management helps you have a fair distribution of the costs. If some money is saved in one segment, you can invest the same in some other areas.

• Reduces delivery delays: An efficient cost control plan also helps you to control your project budget and will help you to finish the project within the stipulated time. Unnecessary delays can be frustrating for your clients, and hence an effective cost control plan will help leave a long-lasting impression on your clients.

• The absence of cost control can increase the building’s overall cost: If you do not have proper cost control in place, then the overall price of the property can get increased. This can eventually lead to fewer purchases, and hence you must be careful about the same.

Tips for effective cost control

Utilization of tools and software: To have a significant cost control, you can consider investing in construction management software. This software allows everyone to see details on the project plan, which will keep them motivated throughout the project. The construction management software is often integrated with the accounting program, which makes budgeting a cakewalk. The software also signals you when the project is about to get over or how many days are left for the completion to plan accordingly.

Review the cost plan from time to time and update the same:

If you review and analyze the cost plan from time to time, then you can check if any alterations are required. If you feel that the cost is higher, you can strive to cut down the cost in another area. External factors can change the cost, and hence if you had estimated some cost for something, it could increase later.

Keep your clients informed about the cost plan changes: You should regularly submit cost reports to the client. You must ensure regular communication flow happens between owners, general contractors, and subcontractors. Timely submission of reports avoids unplanned budget overruns.

Continuously encourage everyone to stick to the cost plan: you must always motivate people to stick to the budget. Unexpected budget overruns can happen. But, you must be careful to avoid it as much as possible. Your client may have specific requirements as far as expenditure is concerned. If you spend more than what was asked by the client. Your client may be displeased with your service. You need to monitor the cost strictly in all steps of the design. You must ensure that the estimated cost, tender fare, and the final amounts do not have many variances from each other.

Observe minutely: As a construction manager, you must look into the nitty-gritty of things. Because field elements can impact then construction projects, you need to be regularly updated on the details. You familiarize yourself with the construction site and everyone working under you. This way, you can plan the budget successfully.

Embrace automated reporting: The automated reporting tools will help you in doing a forecast and will eventually help you to control costs. The automated reporting tool will get you all the facts and figures in your fingertips so that you can successfully monitor every aspect. Also, automated reporting will reduce manual intervention and will save time. Since time is money, hence automated reporting will have a significant contribution in project cost control.

Few steps in successful budgeting and cost control:

Effective cost control in a construction project can be a daunting task and may require you to pour your blood, sweat, and tears. Let’s look into some of the steps which will help you do effective cost control.

• Understand your project well:

You must develop a dapper understanding of your project before starting the budgeting process. In the company, you must know who is in what position. This may need you to do some research before you can have all the information at your fingertips. You must gather all the details and understand the company’s overall cost structure for having successful budgeting. If you have any doubts, then don’t hesitate to ask.

• Assemble your team:

It would help if you assembled a team of professional individuals who will work with you to accomplish the goal. The team may depend on your company’s size and structure. You must choose your team members carefully and motivate them to leave no stones unturned to fulfil the desired objectives.

• Design:

In this step, you need to understand the scope of your project. After you finalize the design, consult about it with your team members to understand the feasibility. Also, check with the end clients if they are happy with your design. Unless you plan well, you cannot execute. The design should be within the budget and must never exceed it.

• Documentation:

This is an important step, and once the planning phase is completed, you can prepare for the documentation to get formal approval of the budget from your client. Please discuss with the team members from time to time to understand the issues and to keep them motivated so that you do not exceed the budget and can finish the project within the stipulated time.

Controlling:Controlling refers to constant supervision to check if everything is going per plan. If you notice any discrepancies, you can take preventive and corrective action.

The Final verdict:

Cost control is essential for ensuring profitability. Cost control leads to financial stability and maximizes profit. Follow the tips mentioned above to do an efficient cost control in project management for maximizing your revenues. Hence, start following the tips mentioned above and impress your clients.

cost management companies in india

A study of the relationship between Design (shape) and cost in the construction industry

In all the construction projects, the designs of the buildings to be constructed are planned in the pre-construction phase, and based on these designs further activities are carried on. There are direct linkages and relationships between the design (shape) and the cost incurred by the project in the construction sector. In this article, we will analyse this relationship and try to understand different aspects related to it.

Design Variables

Any design of a construction project, which is finalized, can be expressed in terms of many variables. These variables are known as design variables and they have direct cost implications. The relationship between these variables and cost can be understood and a direct forecast of the tentative costs can be done based on these variables.

Some of the common design variables that have direct cost implications are as follows:

1. Plane Shape

2. Complexity of Shape

3. Building’s Size

4. The average height of Storey

5. Number of storeys

6. Building envelope

7. Circulation space

8. Building’s grouping

9. Glazed wall percentage

10. Span of floor

11. Electrical and Mechanical Services

12. Constructability

Now we will have a look at all these factors one by one.

Plane Shape

By plane shape, we mean the shape of the plan view. In simple cases, the plan shapes can be square or rectangular. The cost of shapes with a lower perimeter to area ratio will be lower. For example, the shape of a square plan will have a low cost than the shape of the rectangular plan.

The shape of the building

The shape or the design of the building is directly linked with the cost incurred in constructing this building. The simpler the shape of the building the low will be the project cost. On the other hand, the complex is the shape or design, the higher will be the project cost.

For example, we can consider two projects with different plans A and B. Both the plans A and B have the same area but there are many irregularities and complex shapes that exist in plan B rather than Plan A. Hence it can be concluded here that the total cost will be higher for plan B as compared to plan A. This is due to the simplicity of Plan A, which is lacking in Plan B.

There are two common types of shapes, on which the buildings can be made:

1. Regular shapes

2. Irregular shapes

The regular shapes are simple shapes like square or rectangle and the irregular shapes are comprised of other complex shapes. The cost implication of constructing the building on these shapes is simple. For regular shapes, we will find that the cost incurred is less as compared to the irregular shapes. This is due to the fact that the irregular shapes have higher perimeters than the regular shapes and it is difficult to carve irregular shapes as compared to the regular shapes. Hence, it can be concluded that the cost of construction is low for regular shapes and is higher for irregular shapes.

Size of the building

The size of the building is another important parameter that has a direct relationship with the cost of construction. Buildings of the same shapes and different sizes can be taken into consideration for this. The overall cost per unit area is smaller for larger buildings than the smaller ones. This is due to the fact that the cost and other parameters don’t increase proportionally with the size. We are bound to incur smaller costs in case of the buildings of larger sizes when we calculate the cost per unit area.

For example, we have two rectangular buildings, A and B. Building B is having a 4 times plan area as compared to building A. In this case, when we calculate the per-unit cost of the two buildings, we will find that building B has a lower cost per unit area than building A. Hence, we have found that size has a direct relationship with the cost of the building.

The average height of Storey

The cost implication of the building to be constructed is also related to the height of the Storey of the buildings. The higher is the height the higher will be the cost to construct it. If we compare two buildings with different storey heights, we will find that the cost to construct the building with higher storey height is more as compared to the lower height one.

Number of storeys

The number of storeys is also directly linked with the cost. The more is the number of storeys the more will be the cost. This is due to the fact that more efforts and labour cost is required to make more storeys, especially on height. IF we have two buildings one 4 storey and the other with 8 storey, we will find that the cost of an 8 storey building is much higher than the cost of 4 storey building.

The envelope of the building

The envelope of the building is for example an important design variable. The simple will be the envelope of the building, the low will be the cost. For example, the cost of the square envelope will be the minimum, when we compare it to the other shapes.

Other Factors

There are many other design variables having an impact on the cost of the building. For example, the circulation cost is linked to the overall cost. The lower is the circulation space of the building, the lower will be the overall cost. The mechanical and electrical services are also related to the cost of building getting construction. The extent of usage of these services determines the actual cost of the building. The percentage of the glazed wall is another design variable that is important and determines the overall cost of the building. The lower will be the percentage of the glazed wall, the lower will be the cost.

Apart from all the factors discussed above, the constructability of the building is also a big determinant in the overall cost of construction. The higher the constructability of the building, the easier it is to construct it and the lower will be the cost.

Indices to represent complex shapes of buildings

In scientific studies, there are many indexes that are used to describe the shape complexities of various buildings. Some of these are as follows:

• W/F index: Wall/Floor index.

• LBI index: Length/Breadth index.

• PSI index: Plan/Shape index.

• Building planning “m” index.

• VOLM (volume/block compactness) index.

• Cook’s JC (shape-effectiveness) index.

• POP (plan compactness ratio) index.

• Optimum envelope area

All the above indexes are used to describe the shape or design of the building as well as its design features. These indexes are represented as numerical values and their exact measure will define the Complex features of the design of the building to be constructed.

Conclusion

Thus, we have seen in detail the different design variables which are direct determinants in the construction cost of the buildings. These factors or design of the building is directly related to the estimated cost of the building. We have also seen different aspects related to the design of the buildings and indices to represent the complexity of the building design.

All these aspects should be kept in mind at the time of planning in the preconstruction phase. They should be taken care of in the project management part. The design software like CCIS or Construction Cost Information System can be used to take care of these design variables in real-time.