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What Is Construction Cost Management and What Steps Are Involved?

Cost construction can be better organized if expenditures are planned ahead of time. A fundamental goal of all projects is to complete them on time and within budget. We’ve talked about construction cost management and the processes involved.

Construction Cost management refers to the activities involved in budget planning and control for a project. Effective project cost management ensures that a project is completed on time and within budget. Because the success of a project is measured in part by its cost performance, cost management is a key determinant of project success.

Understanding Construction Cost Control

In many cases, cost control in construction is the difference between making a profit and absorbing a loss. Construction projects are notorious for exceeding their budgets, but the actual figures are astounding.

According to a recent study, only 25% of projects came in under budget by 10% in the previous three years. That means that three out of every four projects will not only exceed their budget but will do so by double digits. That’s extremely discouraging for any construction manager hoping to keep costs under control.

Of course, eating your budget can be difficult if you own a construction company. It is, however, not impossible. By making a few changes to your cost-control processes, you can join the 25%. Cost control is a critical component of construction management; if done incorrectly, your projects will be perpetually in disarray.

The Pros of Being  a Cost Management to Cost Construction Consultant:

Cost management is the process of planning and controlling a project’s budget. Implementing a cost management structure for projects can help them stay within their overall budget. Effective cost management entails four steps, which are as follows:

·         Cost estimation,

·         cost budgeting, and

·         cost control is an aspect of resource planning.

Cost management will assist in:

·          Identify all project costs,

·         and ensure that all expenses are approved before purchasing.

·          Maintain a central record of all costs incurred,

·         and keep the overall cost of the project under control.

The goal of construction cost management is to provide a method for:

·         Creating the project baseline budget and tracking tool Defining the process for cost reporting.

·         Describing how cost variance will be managed in the project,

·         and providing information for decision-making.

Cost management activities are carried out throughout the project life cycle, beginning with planning and budget allocation and ending with controlling costs during project execution and assessing a project’s cost performance at completion.

Although cost management encompasses a wide range of activities, it is also used to refer to more specific functions such as spend management, cost accounting, and cost transparency. These terms are sometimes used by cost managers as loose synonyms for the overall cost management function.

What Is the Meaning Of Resource Planning?

Resource planning to cost construction consultants is the first step in the project cost management process; it employs a work breakdown structure, which is a hierarchical representation of all project deliverables and the work required to complete them, to calculate the total cost of resources required to complete a project.

 Construction managers typically estimate the total resource cost for all project deliverables by determining the required resources for each work breakdown structure component and then adding them together.

Cost Computation:

Cost estimation is a quantitative assessment of all the resources needed to complete the activity/project. It is a method for forecasting and predicting project costs and expenditures to create a budget.

Labor, subcontracts, materials (including consumables), plant and construction equipment, services and facilities, and so on are all included, as are inflation allowances and contingency costs. Cost estimation is a never-ending process.

Budgeting for Construction Costs:

Cost budgeting is the process of aggregating the estimated costs of individual activities or work packages to create a project budget or cost baseline for monitoring and measuring performance. Add up cost estimates to create a project budget and then time phase project budget with the help of a construction schedule and schedule of quantity, and develop a cost baseline.

Maintain a management reserve’ for unknown risks and a ‘cost reserve (cost contingency)’ for known risks.

Cost Management:

To cost construction consultants control is the process of keeping expenses within the approved budget by monitoring and evaluating cost performance. It is the process of tracking the progress of a project to update the project budget and manage changes to the cost baseline.

 We must ensure that cost expenditure does not exceed the budgetary ceiling, and cost performance must be monitored to identify any deviations from the approved cost baseline. The following deliverables will be updated throughout the project lifecycle as a result of cost control:

·         Corrective actions for budget updates

·         Cost estimate revision

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