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COST CONTROL STUDY Project: Construction of Surgical and OPD jpmc Complex at PREPARED BY ROLL
COST CONTROL STUDY
Project: Construction of Surgical and OPD
jpmc
Complex at
PREPARED BY
ROLL NO
:
ALI AHSAN RIZVI
:
CE-89
COURSE TITLE
:
COST ENGINEERING AND CONTROL

1.0

COMPANY PROFILE

Company Name

:

TOTAL CONSTRUCTION

Type of Contractor

:

GENERAL CONTRACTOR

Volume of Work

:

90 CRORE

Type of Construction

:

BUILDING STRUCTURAL WORKS, FINISHING WORKS

Operation Area

:

KARACHI, LAHORE, ATTOCK, ISLAMABAD, SUKHAR

2.0 ASSESSMENT OF COST CONTROL SYSTEM

2.1 ECONOMIC YARDSTICKS

The cost incurred in the ongoing activities is monitored using the cost shown up to date by Microsoft Project. This is done by entering the total amount in Microsoft Project which in turn gives you the cost of each activity or phases.

It was also told that the company often use other types of yardsticks like dividing the substructure, superstructure, block masonry etc. into percentages of the total work.

2.2 FORECASTING MECHANISMS

a) Productivity:

The productivity is calculated by analyzing the schedule prepared followed by allotting certain manpower to each activity based on past project experiences. For example; it has been observed that a team of eight steel fixers bind two tons of reinforcement in one normal working day of eight hours. Resultantly, a resource pool is generated for each activity in the same manner.

b) Workhours required for remaining work:

In the schedule developing stage, the baseline schedule is setup by inputting the forecasted labor for each activity. If the activity is being delayed due to any unforeseen reason, Microsoft Project gives the additional man hours required to complete the designated task.

c) Material Requirement:

The drawings issued for construction are used to calculate the material that would be required for the task. Moreover wastage factors are also applied on the calculated material quantities.

d) Financial Requirement:

The baseline schedule is used for this purpose.

2.3

COST DEVIATION ANALYSIS

The cost incurred during the construction phase is compared with the baseline estimate to calculate the cost deviation throughout the project life cycle. For example; the baseline estimate showed that the excavation in the first month would amount to one lac rupees but on site, it actually peaked to one lac fifty thousand rupees. This would serve as an alerting agent for the engineers and other site staff to take necessary steps to control the deviating cost.

2.4 OVERRUNS

The probable reasons for overruns are many among which the most recurring is delays. Delays cause the project activities to linger on which in turn increase the labor and overhead costs.

Hence, the finest way to avoid overruns is to control the delays. This can be achieved by proper monitoring of site activities as per schedule and appropriate resource allocation. Additionally, the site staff need to continuously coordinate with the client about any probable changes or problems that might hinder the progress.

It is to be noted that the company has faced problems during excavating hard soils which were previously unknown. This could be avoided with client support by formerly conducting geotechnical studies.

2.5 WRITTEN PROCEDURES FOR COST CONTROL

No such written procedures are used for cost control. The company instead employs the schedule to tackle cost variances.

2.6 COST CONTROL ACTIVITES

a) Conceptual Stage:

Since the company comes into role after the tendering procedure, it does not have any such cost control activities for the conceptual stage.

b) Design/Engineering Stage:

The company is involved in construction process hence no cost control activities have been derived for this stage.

Generally, the designer should try to put up least alternatives to the client in order to avoid changes in the design and construction stages of the project.

c)

Construction Stage:

To any construction company, this stage requires the staff to work effectively while coordinating with each other in a way that proves to be beneficial for the project.

During this phase, cost control is primarily achieved by activity monitoring and keeping a proper check and balance on progress by comparing it with the schedule. Alongside, adequate resource allocation is also practiced to minimize cost deviation.

d)

Closeout Stage:

The activities taking place in the closeout period are usually related to delicate finishing items which need proper full time supervision otherwise it would consequently result in the generation of punch list that will cause unnecessary delays.

The company tries to avoid as much rework as possible by carrying out strict supervision during the closeout period of the project.

2.7

REPORTING PROCEDURES

Although the company does not have a committee to monitor cost control, however cost minimization and control is the goal every staff member strives for in one way or the other.

Rather than having a separately organized cost control team, the company site staff (shown in the hierarchy) is constantly reporting to their respective higher authorities to avoid cost deviation. The site engineer and supervisors highlight any problems or shortcomings to the project engineer. The latter discusses it with the planning engineer who incorporates it in the schedule and analyses the extra man hours required. The project engineer reports the results obtained to the project manager who prepares an impact report to forward to the CEO. The CEO personally recommends a way or asks the project manager to do so whatever is necessary depending on the type of query. The project manager then orders his team to work accordingly.

2.8

WRITTEN PROCEDURES FOR VARIATION ORDERS

In case of variations, an impact study is carried out initially to assess the cost for the respective change. The variation order is then officially submitted to the client to account

for the additional cost. The document contains detailed claim of the variation. The client approves the change order and the construction proceeds with the variation.

2.9 SUBCONTRACTED WORK

The company usually choses to offer subcontracts and hence it is necessary to keep a close eye on the subcontracted work activities to keep the work going at its optimum pace. The company employs the following cost control techniques in case of subcontracted works:

Subcontractor is asked to submit a daily progress report along with the total labor count

Subcontractor is informed of being subjected to penalties in case of delay in the respective tasks

Strict supervision is kept on the labor of the subcontracted party

2.10 COST CONTROL SOFTWARES

Microsoft Project

Microsoft Excel

2.11 COST ESTIMATION PROCEDURES

The cost control system focuses on monitoring the cost throughout the project life cycle, hence the process of cost estimation plays a vital role when it comes to cost control. The cost is being continuously estimated and if found deviating from the baseline estimate, requires a corrective action to be taken immediately.

2.12 COST OF COST CONTROL

As mentioned earlier in the study, the company possesses no official cost control team. However the project team strives hard in this regard. Therefore the cost of cost control can be said to be amalgamated within the salaries of the site staff who tend to individually play their role in controlling the cost of the project.

2.13 ESCALATION STRATEGIES AND TREATMENT

The company does not have any escalation strategy whatsoever. The contract itself includes a clause which identifies the provisions for extra work and escalation costs.

Generally speaking, as a better approach, the company should adopt to usage of cost indexes to forecast escalation costs.

3.0

PROJECT COST PERFORMANCE

3.1 COST CONTROL HEIRARCHY AND INFORMATION FLOW

CHIEF EXECUTIVE OFFICER

PROJECT MANAGER

CONSTRUCTION MANAGER PROJECT ENGINEER PLANNING ENGINEER
CONSTRUCTION MANAGER
PROJECT ENGINEER
PLANNING ENGINEER
CONSTRUCTION MANAGER PROJECT ENGINEER PLANNING ENGINEER SUPERVISOR SITE ENGINEER 3.2 COST OUTLOOK CURVE
CONSTRUCTION MANAGER PROJECT ENGINEER PLANNING ENGINEER SUPERVISOR SITE ENGINEER 3.2 COST OUTLOOK CURVE
CONSTRUCTION MANAGER PROJECT ENGINEER PLANNING ENGINEER SUPERVISOR SITE ENGINEER 3.2 COST OUTLOOK CURVE
CONSTRUCTION MANAGER PROJECT ENGINEER PLANNING ENGINEER SUPERVISOR SITE ENGINEER 3.2 COST OUTLOOK CURVE

SUPERVISOR

SUPERVISOR SITE ENGINEER

SITE ENGINEER

3.2 COST OUTLOOK CURVE

Commulative Amount in Millions (Rs.)

1,000.00 900.00 800.00 700.00 600.00 500.00 400.00 300.00 200.00 100.00 - Month Amount (Rupees) April-2015
1,000.00
900.00
800.00
700.00
600.00
500.00
400.00
300.00
200.00
100.00
-
Month
Amount (Rupees)
April-2015
May-2015
June-2015
July-2015
August-2015
September-2015
October-2015
November-2015
December-2015
January-2016
February-2016
March-2016
April-2016
May-2016
June-2016
July-2016
August-2016
September-2016
October-2016
November-2016
December-2016
January-2017
February-2017
March-2017
April 2017
May 2017
June 2017

3.3

WORKHOURS FOR 1% PROJECT COMPLETION

Comparison b/w Actual VS Budgeted Manhours

100000 90000 80000 70000 60000 50000 Budgeted 40000 Actual 30000 20000 10000 0 Cumulative Hours
100000
90000
80000
70000
60000
50000
Budgeted
40000
Actual
30000
20000
10000
0
Cumulative Hours
1
4
7
10
13
16
19
22
25
28
31
34
37
40
43
46
49
52
55
58
61
64
67
70
73
76
79
82
85
88
91
94
97
100

Percent Complete

Total Man hours for 36% completion = 84080 hrs Hence for 1% completion = 84080/36 = 2336 hrs

3.4 ENGINEERING SALARIES AND EXPENSES CURVES

a) Average Expenses (Rs/Workhour)

Percent Complete VS Expenses

180 160 140 120 100 80 60 40 20 0 4 8 12 16 20
180
160
140
120
100
80
60
40
20
0
4
8
12
16
20
24
28
32
36
40
44
48
52
56
60
64
68
72
76
80
84
88
92
96 100
Rs/Workhour

Percent Complete

b) Average Salaries (Rs/Workhour)

Percent Complete VS Avg. Salary

370 360 350 340 330 320 310 300 4 8 12 16 20 24 28
370
360
350
340
330
320
310
300
4 8
12
16
20
24
28
32
36
40
44
48
52
56
60
64
68
72
76
80
84
88
92
96 100
Rs/Workhour

Percent Complete

3.5 TOTAL EXPENDITURES CURVE

a) Material Expenditures

Percent Complete VS Material Expenditures

200000000 180000000 160000000 140000000 120000000 Budgeted 100000000 80000000 60000000 Actual 40000000 20000000
200000000
180000000
160000000
140000000
120000000
Budgeted
100000000
80000000
60000000
Actual
40000000
20000000
0
4 8
12
16
20
24
28
32
36
40
44
48
52
56
60
64
68
72
76
80
84
88
92
96 100
Expenditures (Rupees)

Percent Complete

b) Labor Expenditures

Percent Complete VS Labor Expenditures

25000000 20000000 Actual 15000000 10000000 Budgeted 5000000 0 4 8 12 16 20 24 28
25000000
20000000
Actual
15000000
10000000
Budgeted
5000000
0
4
8
12
16
20
24
28
32
36
40
44
48
52
56
60
64
68
72
76
80
84
88
92
96 100
Expenditures (Rupees)

c) Total Expenditures

Percent Complete

Percent Complete VS Total Expenditures

250000000 200000000 150000000 Actual 100000000 Budgeted 50000000 0 Expenditures (Rupees)
250000000
200000000
150000000
Actual
100000000
Budgeted
50000000
0
Expenditures (Rupees)

4

8

12

16

20

24

28

32

36

40

44

48

52

56

60

64

68

Percent Cpmplete

72

76

80

84

88

92

96 100

3.6

CONSTRUCTION PROGRESS CURVE

Cumulative Progress Curve

40 35 30 25 20 15 10 5 0 Progress in % Mar-15 Apr-15 May-15
40
35
30
25
20
15
10
5
0
Progress in %
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17

Month

3.7 PRODUCTIVITY PROFILE CURVES

The productivity profiles of three bulk quantity items has been developed using the data available which are as follows:

a) Excavation

Productivity Profile of Excavation

1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 4 8 12 16
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
4
8
12
16
20
24
28
32
36
Productivity

Percent Complete

10

b) Concreting

Productivity Profile of Concreting

1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 4 8 12 16
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
4 8
12
16
20
24
28
32
36
Productivity

c) Steel Fixing

Percent Complete

Productivity Profile of Steel Fixing

1.20 1.00 0.80 0.60 0.40 0.20 0.00 4 8 12 16 20 24 28 32
1.20
1.00
0.80
0.60
0.40
0.20
0.00
4 8
12
16
20
24
28
32
36
Productivity

Percent Complete

3.8

PRODUCTIVITY TREND CURVE

Productivity Trend Curve

100000 Man hours Overrun 90000 80000 70000 Budgeted 60000 50000 40000 Actual 30000 20000 10000
100000
Man hours
Overrun
90000
80000
70000
Budgeted
60000
50000
40000
Actual
30000
20000
10000
0
Percent Complete
Cumulative Hours
1
4
7
10
13
16
19
22
25
28
31
34
37
40
43
46
49
52
55
58
61
64
67
70
73
76
79
82
85
88
91
94
97
100

3.9 LABOR MANNING CURVE

Labor Manning Curve

18 16 14 12 10 8 6 4 2 0 No of Emplyees Mar-15 Apr-15
18
16
14
12
10
8
6
4
2
0
No of Emplyees
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16

Month

3.10

EARNED VALUE ANALYSIS

The earned value analysis has been carried out at different progress stages of the project:

a) At 30% Progress

According to this study, the actual man hours consumed were man hours overrun at this percent progress were 66828 hours while the budgeted were 59716 hours. Therefore there was an overrun of 7112 hours at this stage of the project.

b) At 65% Progress

As per the overrun calculated at the 30% progress, the total man hours overrun at this stage would be approximately around 15409 hours.

c) At 100% Progress

As per the overrun calculated at 30% progress, the total man hours overrun at project completion would be approximately around 23700 hours.

4.0 ANALYSIS OF COST CONTROL SYSTEM

4.1

PROS AND CONS OF THE COST CONTROL SYSTEM

a)

Advantages

Despite the fact that the company lacks an appropriately organized cost control team, it manages to control the cost through the efforts of the site staff. They keep an eye on all the ongoing activities and highlight any problems that occur or might possibly occur in near future. The planning engineer constantly monitors the site activities as per the schedule and report the project manager of any conceivable delays. Hence, the cost of the project is tried to be kept under control at all times through the team endeavors coordinating with each other and the client.

b)

Disadvantages

As mentioned previously the absence of cost control team in the company might lead to some detrimental impacts. The current project overruns can be controlled and minimized with the presence of a cost control team. The team would maintain all sort of cost databases

which would prove beneficial for the company to estimate the cost of the upcoming projects.

Moreover the company’s planning engineer should rather employ Primavera P6 instead of Microsoft Project, the former being a much more detailed analysis software for developing project schedules.

4.2 COST CONTROL PERFORMANCE

The graphical analysis in the previous sections of the report clearly shows that the project is lagging in terms of the overall progress. This is mainly due to the delays in the first three months of the project due to whatever reasons. Consequently the cost time overrun has triggered a parallel increase in cost. The company failed to put up IPCs as per the cash flow they initially submitted.