How can you effectively monitor and control construction costs throughout the project lifecycle?

In my experience, the cornerstone of steering a construction project to success lies in crafting a realistic, detailed budget from the get-go. It’s about diving deep into every cost aspect, anticipating the unforeseen, and setting a financial roadmap that’s both firm and flexible. I’ve seen how a meticulously planned budget acts as a north star during tumultuous times, keeping the project aligned with its goals even when unexpected costs emerge. This robust foundation, paired with clear communication with stakeholders, has consistently been the lifeline that navigates projects to safe harbors.

An accurate time-phased budget establishes the performance measurement baseline for the project. The project’s cost and schedule progresses are compared against the performance measurement baseline to determine the health of the project execution. Inaccuracies in time-phased budgets result in misdiagnosis of project health. During the development of a time-phased budget, assumptions are inevitable. These assumptions should be logged in the project’s risk register and monitored very closely throughout the project. When an assumption used in time-phased budget development turns out to be invalid during the project execution, the corresponding risk mitigation strategy should be deployed and the need for re-baselining should be explored.

If we talk about cost monitoring and control, we need to use reliable cost management software. Where contracts/orders, all direct and indirect cost will be entered according to proper project WBS, where costs (invoices) can be tracked on a regular basis. Download monthly cost reports, check the variances between actuals (AC) and planned (PC). Calculate EV and determine (EAC) the final cost of the entire project.

What is a budget other than an educated guess? Yes, people use historic costs as a guide but projects are rarely comparative. 1. To fully understand the complexities of a budget, you need to understand the myriad of options and how they interface. Then, a budget will be a far better "guess", but still just that. 2. Contingency is again best left to those who understand item 1 and therefore the potential risk associated and the impact. Happy for people to sneer and disagree, however, I have watched many many projects go massively over budget, a couple of football stadiums in particular.... I bet when they looked at their budgets, someone thought, It's a big piece of grass and some seating... Budget blown by circa 300%......

Know what you are doing at the outset*......I have been requested to provide more characters to get this posted, but I find it to be unnecessary jargon.* eg HS2.

Project success hinges on cost management, as cost is the primary determining factor for the success or failure of the venture overall. Having a cost management plan is important: 1. Having a framework on how to monitor and control costs, escalation process (very important for governmental agencies), changes review and approval process is focal as the majority of the major projects are design-build and thus, the design evolution will certainly result in some changes to your budget. 2. Less stress and frustration when costs come knocking. 3. Increase efficiency to determine how to use your resources, and monitor funds. 4. Standard procedures, policies, and documents makes planning, managing, and controlling project costs more efficient.

A robust cost management plan is the project's financial blueprint, outlining roles, tools, and procedures to oversee, control, and report costs. It assigns clear responsibilities, ensuring accountability among team members and stakeholders. Performance indicators and thresholds are pivotal, allowing proactive cost tracking and intervention if deviations occur. Change management processes are crucial to assess cost implications, preventing unauthorized expenses. Escalation and communication protocols ensure swift resolution of cost-related issues, maintaining alignment with project goals. Ultimately, this plan cultivates a culture of transparency and accountability, vital for successful cost control throughout the project lifecycle.

Once a realistic budget has been properly done, and done by tasks in the work breakdown structures and/or work package, the costs can be well monitored, comparing current cost v/s budget. And in case of exceed in budget, we can check if this is due to unforeseens (change in conditions, systems or scope creep) and then adapt by informing same to our client (for possible variation orders). And in the event it is not due to unforeseens, we may need to check for possibilities to catchup the loss in a particular work package from another one. The EVM method is practical here.

Let's do a test. The question to be asked: how realistic is the cost plan? And rate it out of 10. Then, assess the project maturity level. The last check is the cost plan review frequency My observation was higher the maturity, the higher the frequency = higher rating Lower the maturity, lower the frequency = lower the rating higher the maturity, the lower the frequency = rating trending downward Lower the maturity, higher the frequency = rating trending upwards

Develop a clear plan with will defined targets and a comprehensive sequence. Developing a risk register with the contingency that goes with it Using lesson learned from previous projects

Cost management software will usually help with the hard work, SAP has lots of products that can do this job. The company has to choose the one that will give more time for its workers to think and analyze if the information they producing aren't some utopia.

It is essential to use a cost management software to estimate, track, and monitor project costs. In major projects, it is impossible to not have a solid cost management software to track contracts, invoices, POs in real-time and issue monthly reports that define the cost performance against your budgets. This allows project managers to take prompt actions to avoid cost overruns for the project. The advancement in digital technology now allows the project team to have 5D models that show the 3D BIM model of the infrastructure, schedule, and cost (baseline and actuals). This allows project managers to visualize the CPI and SPI of the project as well as run simulations to forecast the cost at completion.

Having a well-established WBS and cost centers is very pivotal to tracking and recording costs throughout the project. SAP could be an effective tool to manage those WBS and cost centers. Montly accruals based on the value of work done (VOWDs) could be shown as SESs in Sap. After establishing a solid link between your WBSs (cost centres) and SAP, you could have a better understanding of project expenditure.

Para proyectos de construcción, considero que el programa @presto es una herramienta imprescindible de control, seguimiento y elaboración de informes. Con las nuevas versiones, te da un abanico de posibilidades que no he encontrado en otro software.

Implementing software is a game-changer for automating and enhancing cost control. This sophisticated tool integrates estimating, budgeting, forecasting, and reporting, facilitating streamlined tracking and analysis of financial data. It aggregates information from diverse sources, including contracts, invoices, timesheets, and PO's, to generate real-time reports and dashboards. These insights not only display current cost status and project performance but also highlight issues, trends, and variances that need attention. By leveraging this technology, project managers can identify opportunities for cost-saving, make informed decisions, and drive project efficiency, ultimately improving the financial health and success of their projects.

Once a contract has been awarded, scope variation must be properly managed in such a way that it does not go beyond proportion. Key checks to do include: First, formal request must be made, and this must be done in the approved procedure, based on the form of contract in use. Informal and verbal instructions which are not properly documented are not to be regarded as valid request for change. Second, the change order must be issued by the appropriate authority, competent to do so. Cases for instance, of instructions on engineering works being issued by an Architect must be avoided. Third, effects of scope variation (direct and indirect costs) must be well assessed and established prior to approval and execution.

Time spent pre-contract getting parties aligned on scope and requirements is always time well spent. This usually reduces the number of change orders, especially ones that have a major impact.

The majority of standard forms of contract have a process for managing changes against the baseline scope. Project teams should establish a framework within the cost management plan that includes the following: Defining a project contingency to cover scope changes and uncertainties. Establishing a change evaluation process. Creating a CCB. Considering schedule and cost impacts of changes. It is also paramount to respect the contractual timeline for the change management process. Finally, documenting the changes is crucial to ensure that the budget/baseline is updated based on the approved changes and allow project managers to assess the cost performance while considering the changes (especially changes with major impacts on the budget).

A change control document is mandatory here, where the change is input and communicated, stating when and by whom it has been informed, and been approved. The potential additional cost has to be stated, if applicable.

In my experience, monitoring and controlling scope and change is pivotal in both cybersecurity and physical security landscapes. Defining clear project requirements and implementing a robust change management process is crucial. As I navigate these domains, I ensure that all scope changes are promptly captured, communicated, and meticulously documented. Leveraging methodologies like Agile or Waterfall, I can customize solutions tailored to unique project needs, allowing me to proactively address evolving security challenges. My mantra? Stay agile, stay informed, and lead security initiatives with precision and foresight!

Often the best way to control project cost and its scope is to make sure it finishes on time. Therefore, project plan defining its duration, should be based on project’s critical chain and NOT on its critical path. Critical Chain project management methodology allows you better aggregate safety, usually embedded in each task, in the overall project buffer protecting project’s entire duration. Monitoring project completion (as defined by the critical chain) against project buffer consumption allows you better manage project execution and therefore its cost.

Evaluating the cost performance is a crucial step in avoiding/minimizing cost overruns. The two indicators that most project managers use to monitor and control costs are the Cost Performance Index (CPI) and Cost Variance (CV). These indices provide a comprehensive picture of the project’s cost performance and help project managers analyze the root cause of the variance. In repetitive projects such as manufacturing of rolling stock/trains, pipeline/road construction, this information can be particularly helpful as it allows PMs to take actions and improve the cost for upcoming activities given their repetitive nature. It also enables PMs to reevaluate their estimates to bring the project back within budget.

If cost control of conventional buildings is challenging, it is much more difficult for innovative projects based on new technologies such as inductive Electric Road Systems (ERS). And yet is necessary to make best possible estimates to be able to fund pilot deployments. Charging infrastructure is indispensable to drive transport decarbonization and has the potential to be monetized. This opens the possibility to include return on investment in the business plan.

The final stage in cost control is critical to ensuring project success. Reviewing and enhancing cost performance involves comparing actual costs with planned budgets, identifying causes of deviations, and taking corrective actions. Additionally, implementing lessons learned, optimizing processes, and seeking feedback are essential practices for continuously improving project performance.

5. If the contract is given for a certain contract amount, the only cost performance is with the change orders to reduce the number of the changes.

In my experience, using an Integrated Design and Delivery Process (aka IDP) for construction leads to higher performance at a lower cost, because it puts all of the stakeholders (owner, consultants, and constructor) in a collaborative team structure with a shared risk pool. While IDP is proven, it is often difficult to get started as the old ways of doing things like Design-Bid-Bulid (DBB) are so entrenched.

In order to effectively monitor and control construction costs, the project must have a Certified Cost Engineer who shall then establish and administer the Cost Control and Monitoring throughout the construction. Create and schedule frequent cost reporting to exercise awareness of the project financial status which enables stakeholders to mitigate any commercial issues that may arise at project stages.

Thorough estimates. ... Strong communication. ... Daily reports and continuous updates. ... Backup plans. ... Trusted subcontractors. ... Limited change orders. ... Post-project evaluation. ... Construction management software.

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A thriving company and a successful project have a lot in common. Just like a thriving company hinges on its financial blueprint and operational prowess, a successful project rests on a well-defined budget, milestone achievement, and sub-contractors (yes, know your subcontractor in and out) Think vendors and subcontractors like core employees – their expertise, timely supply, and safety record determine the L3 and L4 schedule's success on which the L1 schedule rests. Because ultimately, success isn't just about meeting individual deadlines or checking off tasks. To protect the main contractor from monopolistic vendors, diversity in subcontractors is equally important. It diversifies the risk and keeps the costs in check.