11/23/2019

Cost Control
▪ “Cost control is the total process which ensures that the
Cost Control Contract Sum is within the Clients budget or cost limit”
▪ This ensures that resources are used to the best advantages
▪ For any construction projects cost control commences at
inception and continues until the issues of the final
certificate

Evolution of Cost Control

Purpose of Cost Control
• Formed in early 19th century • The objectives of CP and CC
• Factors concerned • To determine the probable cost of the building
• Increase pace of society
• To control the design development throughout the project, thereby give good value of
money
• Complex requirements of clients
• Increased number of organisations involved in a project • To give a good value for money to the client
• Increase use of new techniques, materials and components • Not the lowest initial capital
• Contractors low profit margin • Be balance between quality, fitness for purpose, initial capital cost and LCC over the life of
the element
• Wastage reduction

Cont’d Principles of Cost Control System

• To achieve the required balance of expenditure between various parts of the
building
• Ensure that the cost is distributed across the elements to meet the clients’ and
designers’ requirements
• Eg : Neither an extra amount spent on the finishes nor the minimum cost for roofing
• All control system adhere to 3 principles. There must be
• Frame of reference or Set of conditions to be followed
• Method of checking or a feed back system
• Means of remedial action

• To keep the expenditure within the amount allowed by client

• Final account should not exceed the first estimate

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Frame of Reference Remedial Action

• Establishing a realistic first estimate/Cost limit • If cost checks reveals any requirements for changes, remedial action should
be taken before the design process moves on too far
• Planning how the estimate should be spent among various parts of the
building • Re-designing the element, changing the specification, or seeking on
alternative solution
• Substructure
• Remedial action ensures that expenditure is contained within the amount
• Superstructure agreed between client and design team
• Services
• No remedial action (impossible) – Needs additional finance to complete the
project

Cost Control during design process Cont’d

• Inception • Establishing realistic first estimate
• Design team is not yet appointed so no cost control procedures • Design team produces on estimate-cost limit
• Client organization is set up for briefing • Design team confirms the cost limit set by the client
• Client considers his requirements for the building and appoints a designer • Deciding how to allocate this estimate among elements
• Outline proposals :
• Feasibility • Insufficient information for elemental cost targets
• Design team provides approvals and recommendations regarding the form in which the • Cost allocations are made among major element groups using
project is to proceed • Cost allocations are adjusted for changes in design and market conditions – outline cost plan
• An effective cost control system must be set up by considering principles of cost control • Alternative design solutions are considered and cost studies are done

Cont’d Cont’d
• Scheme Design : • Detail Design:
• Brief is completed and the design developed • Final decision on every matter related to design, specification, construction and cost
• Approvals are obtained • Every part and component of the building fully designed and all designs are cost
checked
• Sketch plans are produced and the detailed cost plan is prepared
• Cost targets plus the price and design risk allowance should equal the cost limit • Remedial actions must be taken
• Appropriate quantities of each element is measured and priced as detail designs and
specifications are available.

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Cont’d… Cost control at Tender & Final A/C stage

• The estimated cost of fully designed elements are cost checked with cost target in cost • Rigorous cost control during design stages helps to keep the tender amount
plan with to within the cost limit
• If the cost checking reveals that remedial action is necessary
• Needs remedial action if tender amount exceeds cost limit
• Cost of the element design is greater than the realistic cost target – change the element
design
• Cost target is unrealistic – cost targets are adjusted throughout the cost plan, thereby
releasing surplus funds from other elements

Possible causes Cont’d

• CP is not realistic and too low Procedure:
• CP is realistic but the contactor’s rates are too high • Tender is cost analyzed and each lement cost compared with cost target
• Bad choice of list of tenderers • Nature of the discrepancy is identified and confined to one or two elements
or spread over many
• Unexpected increase in costs of labour or materials at or about the time of
tendering Action:
• One or more items in the bill may have been rated too highly due to a • Reducing quantity, quality of the work, or negotiation with contractor or
genuine error or misunderstanding on the contractor’s part combination of all three

Final Account Cont’d

• Final account exceeds the tender sum • Variations:
• Provisional work in the bill • All Architect’s instructions which involve cost must be cost at the earliest possible,
preferably before the instruction is officially issued
• Variations
• Cost variations – fluctuations of prices • Cost variations:
Provisional sums: • If the contract is not in a fixed price basis final account might be higher than the tender
figure
• Provisional sums and prime cost sums
• Provisional quantities

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Cont’d
• Client should be informed about the trend of the extra expenditure to enable
him to make the appropriate budgeting arrangement
• Increases in cost should not be allowed to build up and come as a surprise to
THANK YOU…
client
• At all stages, the design team should have a clear picture of what the final
account will be