SBEC2312

COSTSTUDIES
Fara DivaMustapa
DepartmentofQuantitySurveying
FacultyofBuiltEnvironment,UTM
y

LECTURE3:VALUEEFORMONEY
Theconceptofcost,price,proffit,value,feasibilityandprofitability
Valueformoneyinconstructio
onprojectsandcostimplicationsof
clientsrequirements

SUPPLYCHAININCO
ONSTRUCTION
INDUSTRY

CONSTRUCTIONP
PROCESS

THECONCEPTOFCOST,PRICE,PROFIT,
,
,
,
VALUE,FEASIBILITTYANDPROFITABILITY
Whatiscost?
Inagroupoftwo,discusswhat
defineascostandits
constitutions

ANSWER
1.Anamountpaidorrequiredinpaym
1
An amount paid or required in paymentforapurchase;a
ent for a purchase; a
price.
2.Theexpenditureofsomething,suchastimeorlabor,
necessary for the attainment of a goal: "Freedom
necessaryfortheattainmentofagoal:
Freedomto
to
advocateunpopularcausesdoesnotreequirethatsuch
advocacybewithoutcost"(MiltonFriedman).
3.costs Law Thechargesfixedforlitigation,oftenpayableby
thelosingparty.
However,differentpartiesinconstructionprojecthave
differenttypesofcost.Whatdoyouth
hinkthedifferences
are?

COST
1) C
Costtoaclientconsistsofallcons
li
i
f ll
structionrelatedcosts
i
l d
inclusiveofprofitfromthecontractors.
2) Costtoacontractorconsistsofbu
uildingmaterialsinclusiveof
the profit charged from the materrialsuppliers,construction
theprofitchargedfromthemater
rial suppliers construction
labour andprofitchargedfromtheprofitfromtheplantand
machineriessuppliers.

PRICE
Whatisprice?
noun
noun: price; plural noun: prices
1.1.
the amount of money expected, required, orr given in payment for
something.
"land could be sold for a high price"
the odds in betting.
archaic
archaic
value; worth.
"a pearl of great price"
2.2.
an unwelcome experience, event, or action iinvolved as a condition
of achieving a desired end.
"the price of their success was an entire dayy spent in discussion"

PROFIT
Whatisprofit?
noun
noun: profit; plural noun: profits
1.1.
a financial gain
gain, esp
esp. the difference betw
ween the amount
earned and the amount spent in buying, operating, or
producing something.
"pretax profits"

WHATISVALUE?
Howdoyoudefinevalue?

HOWDOYOUVALUE?

VALUE
Whatisprofit?
noun
noun: value; plural noun: values
1.1.
the regard that something is held to deserve;; the importance, worth, or
usefulness of something.
g
"your support is of great value"
the material or monetary worth of some
ething.
"prints seldom rise in value"
the worth of something
g compared
p
to the p
price p
paid or asked for it.
"at $12.50 the book is a good value"
2.2.
a person's principles or standards of behavio
or; one's judgment of what is
important
p
in life.
"they internalize their parents' rules and values"
3.3.
the numerical amount denoted by an algebra
aic term; a magnitude, quantity, or
number.
"the mean value of x"

FEASIBILITY
noun
noun:feasibility
1.
the state or degree of being easily or conveniently
thestateordegreeofbeingeasilyorconv
eniently
done.
"thefeasibilityofamannedflighttoMars""

PROFITABILITY
Profitableness:thequalityofaffordinggain
norbenefitorprofit

VALUEFORMONEEYINCONSTRUCTION
PROJECTS
Acomparativetermexpressingtheworthofanitemorcommodity,usuallyin
thecontextofothersimilarorcomparableeitem.

DEFINITIONOFVALUEM
MANAGEMENT
VMisrigorous,systematicefforttoimproveethevalueand
optimizethecostofprojects,facilitiesandsystems.VM
generatesthesecostimprovementswithou
utsacrificingthe
needed performance levels
neededperformancelevels.
RelationshipbetweenValue,Function(wo
orth),
QualityandCostaccordingtoCarlosFallon
n,
Value

Worth
Cost

VALUEMANAGEM
MENTINCI
Changesinclientsrequirementswillalso
changethecostandvalueoftheconstrucction
project.Forinstance,changesinhighend
d
b ld
buildingqualitywillalsochangetheovera
l
ll l
h
h
all
ll
constructioncosts.

THE END
THEEND
Thankyouforyourattention.