Group 3 Full Thesiss Project

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EFFECTIVE COST CONTROAL SYSTEM IN BILDING

CONSTRUCTION IN DEBRE BERHAN TOWN
DEBRE BEREHAN UNIVERSITY

COLLEGE OF ENGINEERING
CONSTRUCTION TECHNOLOGY AND
MANAGEMENT DEPARTMENT
EFFECTIVE COST CONTROAL SYSTEM IN BUILDING

A thesis submitted to the School of under graduate Studies of Debre berehan University in
Partial fulfillment of the requirements for the Degree of Bachelor of Science in
Construction Technology and Management
By ID NO
1 NIOMAN ABDUSELAM(i.d)………………….ENGR/648/05
2 HENOK ADMASU(i.d)………………………..ENGR/293/05
3 YARED BEYENE………………………….ENGR/751/05
4 GETACHEW MOGES……………………ENGR/1376/05
Write your name in alphabetical order.
MAY 2017 (final date)

DEBRE BEREHAN, ETHIOPIA
DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 1

2017
DEBRE BEREHAN UNIVERSITY

COLLEGE OF ENGINEERING
CONSTRUCTION TECHNOLOGY AND
MANAGEMENT DEPARTMENT
EFFECTIVE COST CONTROAL SYSTEM IN BUILDING

A thesis submitted to the School of under graduate Studies of Debre berehan University in
Partial fulfillment of the requirements for the Degree of Bachelor of Science in
Construction Technology and Management
By ID NO
1 NIOMAN ABDUSELAM…………….ENGR/648/05
2 HENOK ADMASU……………………ENGR/293/05
3 YARED BEYENE…………………….ENGR/751/05
4 GETACHEW MOGES……………….EMGR/1376/05
APPROVED BY BOARD OF EXAMINERS
ADVISOR: ______________ SIGN. ________ DATE _________
EXAMINERS: ______________ SIGN DATE _________.

SIGN DATE .
SIGN DATE .
MAY 2017
DEBRE BEREHAN, ETHIOPIA

2017
Steps:
1. Acknowledgement
2. Abstract
3. Table of content
-use uniform font color, type and size
-Titles should be placed in a new page especially chapters
-Don’t waste pages by stating points (eg page 20)
Contents
CHAPTER ONE..........................................................................................................................................7
INTRODUCTION.......................................................................................................................................7
1.1 Background of the thesis....................................................................................................................7
1.2, Statement of problems......................................................................................................................8
1.3 Research objective and question........................................................................................................8
1.4 Research questions............................................................................................................................9
1.6 Significant of the research...............................................................................................................10
1.7 Scope of the research.......................................................................................................................11
CHAPTER TWO.......................................................................................................................................12
LITERATURE REVIEW..........................................................................................................................12
2.1Construction project Cost control management................................................................................12
2.2 cost management process in planning stage.....................................................................................14
2.3 cost management process in executing stage...................................................................................16
2.4 cost management process in controlling stage.................................................................................18
2.5 Definition of effective cost control system......................................................................................21
CHAPTER THREE...................................................................................................................................22
RESEARCH DESIGN AND METHODOLOGY......................................................................................22
3.1Study area.........................................................................................................................................22
3.2Research Design...............................................................................................................................22

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3.2.1 Questionnaire Survey.............................................................................................................22

3.2.2Interviews..................................................................................................................................24
3.2.3 Data Processing and Analysis...................................................................................................25
CHAPTER 4..............................................................................................................................................26
RESULT AND DISCUSSION..................................................................................................................26
4.1 Extent of factors for effective cost control system...........................................................................26
4.2. Analysis and Ranking of causes of cost increasing differ from estimate........................................27
4.3. Questionnaires Response Rate and Respondent’s demographics....................................................27
4.4. Ranking of factors for cost control based on Severity.....................................................................29
4.5. Ranking of Causes of effective Cost control system based on frequency of occurrence.................34
4.6. Ranking of Causes of effective cost control based on Importance..................................................38
4.7. Best practices:.................................................................................................................................43
4.8. For Effective cost control will require the following actions to be taken........................................44
4.9. The cost control problem in overall viewpoint in the analysis........................................................46
4.10. The purpose of cost control from the analysis...............................................................................48
4.11. Project cost control includes from the analysis:............................................................................49
Chapter five...............................................................................................................................................50
Conclusion and recommendation...............................................................................................................50
5.1 Conclusions.....................................................................................................................................50
5.2 Recommendations...........................................................................................................................52
Reference...................................................................................................................................................54
Appendix A...............................................................................................................................................55
Questionnaire.............................................................................................................................................55
Appendix B...............................................................................................................................................60
List of respondents replied valid questionnaires........................................................................................60
Declaration................................................................................................................................................61

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LIST OF TABLES
Table 2.1 overall respondent for the questioners………………………………………..23
Table 4.1 result analysis for severity index……………………………………………………..30
Table 4.3 percentage serves for questionnaires…………………………………………………31
Table 4.4 results for recommended question……………………………………………32
Table 4.5 results for frequency of occurrences…………………………………………………35
Table 4.6 percentage for frequency of serve……………………………………………………36
Table 4.7 results for important index…………………………………………………………...39

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LIST OF FIGURE
Figure 4.1 Respondents’ organizational type replied valid questionnaires ……………………27
Figure 4.2 Respondents’ organizational type percentage value………………………………..29

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ACKNOWLEDGEMENTS
First we would like to thanks GOD because all things are happening by God. Next to God
We would like to acknowledge to the support given by Debre Berhan University the department
of Construction technology and management especially our co advisor Admasu and main advisor
Muhammad for all rounded support from the inception to the completion of our thesis.
We would like to thank all the study participants who gave their time, shared their experiences
and knowledge. All our instructors, particularly, Tec. Muhammed, has contribution in the
reshaping process and Tec Admasu for his effort to equip us with all possible means in the
courses of the study as well as during this thesis preparation.
Furthermore we would like to thank construction stakeholders who worked hard and responsibly,
in order to accomplish the data collection and maintain the quality of the data.
Finally we express our deepest gratitude to all who made this thesis a reality, including our
family for facilitating financial support.

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ABSTRACT
Cost control of engineering construction project is a complex system engineering, which needs to
implement a scientific and comprehensive dynamic management. This paper expounds the
connotation and significance of the cost control of engineering construction project, the
systematically discourses the project cost management subject program and work content, and
considering the engineering practice, emphatically analyzes cost management and cost control
measures in the construction phase, to help construction enterprise do the job of engineering
construction project cost control, and to improve the service efficiency of funds of infrastructure
construction.
Almost all the projects need to be guided right throughout in order to receive the required and
expected output at the end of the project. It is the team that is responsible for the project and
most importantly the project manager that needs to be able to carry out effective controlling of
the costs. There are, however, several techniques that can be used for this purpose.
In addition to the project goals that the project manager has to oversee, the control of various
costs is also a very important task for any project. Project management would not be effective at
all if a project manager fails in this respect, as it would essentially determine whether or not
your organization would make a profit or loss.
The overall experience of the respondents in building construction projects As shown from Figure 4.1, the
majority (34.69%) of the respondents had 5-10 years of professional experience; about 26.53 % had over
10 years of professional experience, 24.49% had between 1 and 3 years of professional experience and
the remaining 10% of the respondents had between 3 and 5 years of experience in building construction
in Debre Berhan
Key words: cost overrun, cost controlling systems, impact to project budget

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CHAPTER ONE
INTRODUCTION
1.1 Background of the thesis

Almost all project need to be guided right throughout in order to receive the required and expected output
at the end of the project. It is the team that is responsible for the project and most importantly the project
manager that needs to be able to carry out effective controlling of the cost. There are, however, several
techniques that can be used for this purpose.
In addition to the project goal that the project manager that has to oversee the control of varies cost is also
a very important task for any project. Project management would not be effective at all if a project
manager fails in this respect, as it would essentially determine whether or not your organization would
make a profit or loss.
Project planning cannot be completed satisfactorily by only planning and scheduling. Project controlling
which consists of project monitoring and updating, is the other important stage to be carried out to
accommodate the dynamic nature of construction work In general most (if not all) construction projects
experience time delays and cost factors during their implementation phase.
Project control includes both progress control and cost control. This research mainly concentrates on cost
control. There are various techniques available as cost control techniques that can be applied to
construction projects. It is good to have knowledge of effectiveness of those cost control techniques to the
contractors and how to use those techniques to minimize cost.
Probably no business needs an effective cost control system more than the construction industry. Because
construction companies operate on such a small profit margin due to winning contracts has undoubtedly
become fiercer, cost control cannot be overemphasized. Due to these low profit margins, construction
companies must capture works on large projects in order to create adequate returns on their investment.
This results in a substantial financial risk and, without adequate cost control, that risk will be increased.
The estimated cost of a project can be altered without major difficulties early during the project life cycle,
due to no major undertakings being committed at this stage.

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1.2, Statement of problems

In every industry cost control is a must in order to make sure that a project or production can make
maximum profit or to make sure that the budget of a project dose not burst. Locally the actual costs of
development of a project will normally being higher than necessary. In order to have an effective cost
control in construction project in context of debre berhan it is necessary for us to determine the difficulty
of cost control and to identify the factors contribute to the cost control difficulties in a project.
In order to overcome the difficulty or to avoid those factors may cause difficulties to cost controls of a
construction project during construction stage, thus to have an effective cost control for the construction
project and complete the project within the budget or under budget. The budgeted cost specified is a
limitation challenging construction in delivery of quality project at stipulated time; this, then, underscores
the need to establish effective cost control system on building project delivery in Debre Berhan.
Completion of a construction project within budgeted cost becomes difficult; cost, then, has been
affecting overall project performance. Likewise, the main objective of a construction firm is to upgrade
project performance through cost reduction, completion of project within budgeted limit and at specified
time.
1.3 Research objective and question

General objective:
 To gain the maximum profit within the designated period within the budget to
monitor and control actual expenditure against the estimated project budget
 To identify the factors that affect cost during building production processes;
 To investigate the effect of changes in building design during production process
on budgeted cost;
 To assess the impact of budgeted cost on management of construction resources;
 To ascertain how cost can be efficiently utilized without negatively affecting
delivery time and quality expected during production process; and
 To ascertain the important of applying cost control in construction industry

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 Specific objective:
 To assess the extent of effective cost control system in building
construction in Debre Berhan town.
 To identify the causes of Effective cost control in building projects
 To analyze the severity and frequency occurrence of the causes to rank
their overall importance
 Understand the purpose and importance of cost control required under take
effective study of building costs in Debre Berhan town
 To high light the cost control systems in a construction in Debre Berhan during
construction stage
 To investigate the factor contributing to cost control factors in Debre Berhan
constriction sectors and their systems
1.4 Research questions

In order to guide the stud and achieve the above stated research objectives; the following research
questions were formulated.
 What cost control systems are frequently used by contractors in Debre Berhan construction
projects?
 What are the problems faced by contractors in controlling cost in the construction project
process?
 What impact dose effective cost controlling techniques have on the duration of the construction
projects?
 What are the factors that affect cost during the building production process in Debre Berhan?
 How can cost be efficiently utilized without affecting delivery time and quality expected during
production processes?

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1.6 Significant of the research

This research is to get the best way of cost control system in Debre Birhan and to maintain and advise the
important of these cost control systems in order to minimize cost and gate profit to the companies.
Contractors agree that MS project and Earn value analysis are the most important techniques of cost
controlling. Contractors who adopt these techniques have already said easy to monitor and user
friendliness are the mostly influenced motives to use it. Also lack of practices and lack of expertise are
the main barriers that contractors are prevented by using it.
The primary need of any contractor or indeed in any business is to be profitable. Whilst profit alone does
not guarantee survival- cash flow is critical too –the amount of profit a contractor makes is to great extent
within his gift. Having won a project, the contractor possesses a contractual obligation and an amount of
money for discharging this obligation.
 Project cost control is ideally commenced from the tendering stage. A contractor will typically
have cost system that contains a resource code structure used by finance or account department
 Effective cost control coupled with realistic forecasting, subjected to regular review is imperative
in order for the contractor to maximize his profitability.
Cost control is about controlling expenditure to prevent over expenditure which reduces profit. In the
context of the present literature, there are no definitive studies in Debre Birhan which establishes this;
hence this study will Endeavour to establish the cost control practices to control cost overruns. The
research question driving this research is “what are the current construction cost control practices in
Debre Berhan.
In spite of the important role cost control plays in the construction industry, no published study explored
the methods being utilized by contractors in Debre Berhan. The limited number of projects available
means that competitive bidding has started to play an important role in projects awarding, and a sound
cost control system to ensure maximum profitability once projects are successfully awarded. The outcome
of the present study will benefit corporate managers, business practitioners, engineers and academicians
by enhancing their awareness of the materiality of cost control in an organization, and providing some
insights into the prerequisites of a successful cost control procedure and the dynamics of such cost control
practices and processes.

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1.7 Scope of the research

The research scope was defined to get information only for G1 grade to G7 grade. Then the sample size
was selected considering statistical approaches and it was decided as 20 contractors or other similar fields
like site engineers or project managers etc… in Ethiopia Debre Berhan town.
Also this thesis is covered in Debre Birhan town and also covers all construction in this city and there
contractors, site engineers, project managers etc…
This study is focused to contractor’s cost control during the construction stage, and the types of cost
control utilized will be dependent on the size of the projects, the size of the construction company and
also the types of contracts. This study is intended to exclude the cost control methods practiced by clients
and consultants in the pre construction, construction and post construction stage. It will also exclude cost
control procedures related to the accounting and financial management of the company.
The research will be limited to data gathered from the construction industry only in Debre Berhan city.
The gathered information will be from stakeholders in construction and consultancy firms, project
managers, site managers, architects, quantity surveyors, contractors, contract managers and construction
clients.
Only contractors of category “G1to G7” under the classification of contractor’s only larger companies are
financially capable of utilizing any effective cost control system therefore we did not see other lower
class companies cost control systems in Debre Berhan.

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CHAPTER TWO
LITERATURE REVIEW
2.1Construction project Cost control management

Cost control is the practice of identifying and reducing business expenses to increase profits, and it starts
with the budgeting process. A business owner compares actual results to the budget expectations, and if
actual costs are higher than planned, management takes action.
Cost control is an important factor for maintaining and growing profitability. Outsourcing is used
frequently to control costs because many businesses find it cheaper to pay a third party to perform a task
than to take on the work within the company. Corporate payroll, for example, is often outsourced because
payroll tax laws change constantly, and employee turnover requires frequent changes to payroll records.
A payroll company can calculate the net pay and tax withholdings for each worker, which saves the
employer time and expense
There are three elements or processes of Cost Management; cost estimating, cost budgeting and cost
controlling (Owens et al, 2007) and those are shown in three parts
 Cost Estimating :Developing estimates and measurement for the costs needed for a
resource to complete the project tasks and activities.
 Cost Budgeting: Collecting the cost estimates, combining them to develop an overall cost and
baseline.
 Cost Controlling: Managing and controlling factors that change or affect the budget.
Having accurate project estimates and a project budget accordingly is essential to deliver the project
within the project budget. That estimation and planning called the planning part. Without keeping an eye
on the actual costs meanwhile the project is being preceded, the project can never be delivered on-budget
(Sharma & Rupen, 2013). There are some techniques as mention in the PMBOK (A Guide to the Project
Management Body of Knowledge) used to control and monitor the cost of projects. Some of the advanced
techniques are Earned Value Management, To-Complete Index, Forecasting, Variance Analysis, and
Performance Reviews. Among above techniques, earn value management is one of the main technique.

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Earn value system is firstly used by Department of Defense. There are some basic steps which should
follow before apply this theory (Owens et al, 2007).
• Divide the project into manageable parts of authorized work for that there should be WBS.
• Ensure that the parts are defined in a manner so that each and every activity can be allocated duration of
time to be complete and a cost to complete.
• Allocate cost and effort to all parts across the entire project essentially establishing a baseline.
Simply the cost overrun is defined as exceed the budgeted margin of the project. According to the
researchers Nida & Azhar, (2008) there are 42 main factors effecting to the cost overrun in Pakistan
construction industry. Some of them are, Prices fluctuation of raw materials, Mode of financing and
payment for completed work, Frequent design changes, High cost of machineries, Improper planning,
High interest rates charged by bankers on loans received by contractors, Unstable cost of manufacturing
materials, and Long period between design & time of bidding/tendering. Weekly statement of material
cost • Weekly statement of labor subcontractor’s payments • Monthly statement of overhead cost •
Monthly cost summery • Weekly statement of output of works (Value of work) • Contractor’s
monthly cost control table • Contractor’s monthly cost control chart By referring those documents
we have to identify what are the documents should be improved and what are the new techniques
should be added to these documents.
Cost control, also known as cost management or cost containment, is a broad set of cost accounting
methods and management techniques with the common goal of improving business cost-efficiency by
reducing costs, or at least restricting their rate of growth. Businesses use cost control methods to monitor,
evaluate, and ultimately enhance the efficiency of specific areas, such as departments, divisions, or
product lines, within their operations.
During the 1990s cost control initiatives received paramount attention from corporate America. Often
taking the form of corporate restructuring, divestment of peripheral activities, mass layoffs, or
outsourcing, cost control strategies were seen as necessary to preserve—or boost—corporate profits and
to maintain—or gain—a competitive advantage. The objective was often to be the low-cost producer in a
given industry, which would typically allow the company to take a greater profit per unit of sales than its
competitors at a given price level.

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2.2 cost management process in planning stage
The project planning process leads to the development and maintenance of a workable scheme to
accomplish the business needs for the project. It includes defining overall scope, identifying
planning strategy, developing the work breakdown structure for cost and schedule, refining
estimates and analyzing commitments optimizing the project plan, developing risk management
plans; and organizing the project team to establish a project – driven organization environment.
According to Young Hoonk wak (2002), the project cost management includes scope planning,
scope definition, resource planning, cost estimating and cost budgeting
Scope planning is the process of developing a written scope statement as the basis for
construction project decisions including cost management.
Scope definition involves subdividing the major project deliverables into smaller, more
manageable components in order to,
(i) Improve the accuracy of cost, time and resource estimates.
(ii) Define a baseline for performance measurement and control.
(iii) To facilitate clear responsibility assignments.
(iv) To do project success critically
Resource planning involves determining what physical resources like (I) Men (ii) Materials (iii)
Machinery (IV) Methods and what quantities of each should be used to perform project
activities.
Cost estimating involves preparation of estimate for the Costs of the resources needed to
complete project activities. Cost estimating differs from pricing. Cost estimating is an assessment
of the likely quantitative result, how much it will cost the performing organization to provide the
product or service involved. Pricing is a business decision as to how much the performing
organization will charge for the product or service that uses the cost estimate.
Cost budgeting involves allocating the overall cost estimates to individual work items in order to
establish a cost baseline for measuring project performance and for cost controlling.

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As defined under Project Management Institute Standard Committee (PMI) (2000) and Royal
Institution of Chartered Surveyors,
(RICS) (1998), the Cost Information System will be useful for the CMP in project planning
process.
The main cost information system in planning process is identified as,
(i) Cost Management Processes of Pre-Design stage:
Various preliminary studies are performed including a preliminary site investigation, a market
analysis of similar projects, a study of probable financial risks etc.
(ii) Cost Management Processes of Detailed Design Stage:
It is essential that intermediate estimates be prepared.
Design and specifications of items is moderated whenever cost variance (CV) is identified finally
details design drawings are documented.
(iii) Cost Management Processes of Bid and Award stage : Quotations from short listed
vendors are invited keeping the BOQ from detailed design phase as a baseline.
The above processes are given by Preetha G. Raman and VirendraK. R. Paul (2006).
According to Liang Liu, Scott A. Burns, Chung – Wei Feng, (1995), ‘in Cost Management
planning process, construction planners must select appropriate resources, including crew size,
equipment, methods and technologies, to perform the tasks of a construction project’. Chan et al
(2001) has adopted a research methodology for identifying critical success items for Design and
Build Construction Project in
Hongkong. Steven Trost Garold oberlendor (2003), observed that the accurate estimates during
the early stages of capital projects such as
(i) Process design
(ii) Team experience
(iii) Cost information
(iv) Time allowed to prepare the estimate
(v) Site requirements
(vi) Bidding and
(vii) Labor climate are important.

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Early project estimate represents a key ingredient in business unit decisions and often become
the basis for a project’s ultimate funding. Zohar Herbsman, Wei Tong Chen, William Epstein,
(1995) found that “the innovative contracting methods in construction projects have been very
successful in reducing construction time, while only increasing overall construction costs
minimally, if at all. ‘If corporate resources, such as labor, material and equipment, are required to
perform the individual activities, then an Activity – Based Costing (ABC) technique must be
developed that can accommodate the inherent variability in a process if actual costs are to be
accurately predicted. If process cycle time and process cost per cycle can be accurately predicted
for complex, highly variable processes, companies are in a much better position to determine
how proposed corporate initiatives for process improvement might actually impact overall
process performance, say Edward Back, Donald A. Maxwell, Leroy J. Isidore (2000). “Cost and
schedule increases are common in engineering design projects.
2.3 cost management process in executing stage
The CMP in project executing stage coordinates an organization and other resources to carry out
the project effectively. As per PMI (2000)
The executing processes include
(i) Project Plan Execution
(ii) Quality Assurance
(iii) Team Development
(iv) Information Distribution
(v) Solicitation
(vi) Source Selection
(vii) Contract Administration
Cost management processes are integrated programs where several processes like accounts, cost
estimate, finance etc., are managed from a common database. kr. Paul (2006). Some of the cost
reduction factors suggested by various authors in their research study are given below

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According to the Director (Contract), Military Engineering Services, Ahmedabad (2006), “the
total cost management of construction projects is possible only when all the players in the field
i.e. the client, the contractor, the architect, the design engineer, the quantity surveyor and the site
engineer / project manager are conscious of cost management of project and perform their
functions effectively. A lapse on the part of any single component will result in delay of project
and increase in cost”.
The Director (CEO), Britannia Academy of IT and Planning Ltd. London Cosmo College,
Hanow, UK (2006), has revealed that normally the cost Fluctuations occur if the project manager
is unable to control the construction activity efficiently. Further he added that the savings in cost
management are possible if Project Management team implements the construction with
diligence and care by dropping the components of infrastructure that are otherwise valuable as
social amenities. D.S. Sachdev, (2006) has suggested that “the Fast Track completion is to be
followed by increasing use of management techniques such as CPM/PERT, value analysis,
standard costing, budgetary control etc., for improving the physical performance and reducing
cost”.

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2.4 cost management process in controlling stage
The cost controlling process ensures that project objectives are met by measuring the financial
progress and taking corrective actions when necessary. It includes collecting project progress
status, analyzing variance, and communicating financial status. The process of project control
has been described by Kimmons and Loweree as “Having the necessary control plans, the need
to establish baselines and standards to control against, the regular monitoring of work against
these baselines, the evaluation of planned versus actual results, the early identification of
problem areas, and the firm and positive action to resolve performance variances promptly are all
key steps that the Project Manager should employ in controlling the project to a successful
conclusion”.
2.4.1 Cost control
Cost control includes

(i) Monitoring cost performance to detect variances from plan
(ii) Ensuring that all appropriate changes are recorded accurately in the cost baseline.
(iii) Preventing incorrect, inappropriate, or unauthorized changes from being included in
the cost baseline.
(iv) Informing appropriate stakeholders of authorized changes the relevant research
done earlier on this controlling processes are given below Yong – Woo Kim and Glenn Ballard
(1998) revealed that “the earned value method (EVM) is a project control technique that provides
a quantitative measure of work performance. It is considered the most advanced technique for
integration of schedule and cost. Critique of earned value method includes:
(I) while each cost account or activity is assumed to be independent in the earned value method,
they should be considered dependent. (ii) Managers can manipulate work sequences when
releasing work to the field and it is possible to release work assignment that are not shielded
from uncertainty (iii) In order to make cost variances (CV) positive, managers try to decrease the
actual cost of work performed (ACWP) as much as possible”.

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According to Khaled EI–Rayes and Amr Kandil (2005), “the traditional two-dimensional time-
cost trade off analysis to an advanced three dimensional time-cost-quality trade off analysis as a
multi objective genetic algorithm provides the capability of quantifying and considering quality
in construction optimization”.
The study made by Robert I. Carr (1993) revealed that “a unified nomenclature and parallel
budgets, and variance structure allow integrating of cost and schedule control for projects that
share common work breakdown structures. Budget, actual and variance values of cost, progress
and time are combined in a single figure provide integration at the activity/Cost account level”
Tricia Varvel, Stephanie G. Adams, Shelby J. Pridie, and Bianey C Ruiz Ullaa (2004) observed
that “individuals training on the type of personality of team members helped them to improve
communication, trust and interdependence, essential characteristics of an effective team.
Therefore, understanding and tolerance of individual’s behaviors and actions are the largest
benefit”. According to William C. Ibbs, Clarence K. Wrong and young Hoon Kwak (2001),
“changes in projects are common, but it affects the cost, the scheduling and the duration of
projects, both directly and indirectly. A comprehensive project change management system that
is founded on five principle,
(i) Promote a balanced change management system that is founded, (ii) recognize change, (iii)
evaluate change, (iv) Implement change, (v) continuously improve from lessons learned. By
applying this project change management system, project participants can minimize deleterious
change and promote beneficial change”. Stefanie G. Brandenburg, Carl T.M. Hass F. and Robert
W. Glover (2003) have concluded that “the shortage of skilled construction workers is a long
term problem that at times may be alleviated slightly during a recession but will continue to
worsen as time progresses.

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Based on the idea of Pareto’s Law described in the literature above for this study the top 13
(20%) of the causes were selected for further discussion. Here, the top 13 causes obtained from
the analysis based on their importance were discussed. Each cost fluctuation cause was briefly
described as follows:
1. Inflation/material price fluctuation
2. Variations/Change orders
3. Delays in construction
4. Design change
5. Right of way problem
6. Contractual claims
7. Scope change Scope
8. Lack of experienced and specialized project managers and construction managers
9. Lowest bidding procurement method
10. Inaccurate cost estimation
11. Change in exchange rate
12. Poor supply and late delivery of raw materials and equipment by contractor
13. Inaccurate/change in.

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2.5 Definition of effective cost control system
Different researchers defined cost control in their study. Some of the definitions are presented as
shown below. Singh (2009) defined ‘effective cost control’ as the difference between the actual
cost and the initially projected (i.e., expected) cost of the projects. Singh also defined Percentage
cost control for a project as the ratio of the cost control and the initially projected cost of the
project (multiplied by one hundred).
Wakjira (2011) also defined cost overrun as the increase of the final actual cost of a construction
project (usually expressed as a percentage of original contract amount) at a completion over the
original contract amount− agreed by and between the client (the project owner) and the
contractor during the signing of the contract. Similarly Arcila (2012) also defined cost overrun
as it occurs when the final cost of the project exceeds the original contract value at the time of
completion.

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CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1Study area
The research was conducted on buildings and executed by different contractors at the town of Debre
Berhan town and from different level contractor from level 1 up to 7 contractors and from other likes
project managers.
3.2Research Design
This research adopts a combination of quantitative and qualitative methods. It was conducted in two
stages. The first stage was conducted using a quantitative method through a questionnaire survey in a bid
to generate information from a large sample population. The second stage of the study was conducted
using the qualitative method using semi-structured interviews. The reasons for using the interview in
addition to the questionnaire survey were: to triangulate data obtained from the questionnaire survey; to
enhance, expand and create depth to the results of the questionnaire survey by investigating and
elaborating on some of the issues highlighted; and to explore the experiences of the sample population in
relation to the topical issues revealed after analysis of the data obtained from the questionnaire survey .
3.2.1 Questionnaire Survey
The aim of the survey is to establish the current common practice of time and cost control in the DEBRE
BERHAN building construction industry, including control methods and software applications being used
by practitioners as well as inhibiting factors. It started with a thorough review of existing studies that
revealed a lot of issues on construction project time and cost Control, project control tools and techniques
and latest thinking and new developments in the field of construction project control. This led to the
development of a questionnaire made up of 25 select and fills the specified place choice questions.
The questionnaire was divided into two sections: Section one was background information which was
targeted at obtaining information on the general particulars of the respondents and their organization, such

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as the experience of the respondents, their position within the organization, the type of project embarked
on by the organization etc. While the second section contained similar questions but specific to cost
control practices A total of 20 questionnaires were administered; 15 to the top construction companies’
contractors and others in the Debre Berhan town by company turnover and the remaining 5 to the top
construction project consultancies in the town by the number of professional staff employed and company
fee earnings.
Telephone calls were subsequently made to these companies to confirm the addresses and to find out the
type of hierarchy and structure that exists within the organization. This enabled the questionnaires to be
sent to the appropriate department. To supplement this, the name of a construction director, manager or
the appropriate personnel with a huge responsible for the management of construction projects in the
organization was obtained to ensure that the questionnaires went to the correct addresses and addressed to
the appropriate personnel.
Mainly methodology was divided in two different stages. Those are preliminary survey using interviews
and questionnaire, final questionnaire survey, data collection and data analysis.
Preliminary questionnaire was prepared based on the knowledge gain through the literatures reviewed.
Preliminary survey was conducted as open-ended interview based on the preliminary questionnaire. It
was helpful to fine tune our final questionnaire and get the involvement of the professionals in the
construction site.
At present there are more contractor register in Debre Berhan town form C1 grade to C 9 grade.
Questionnaires were distributed through interviews. After gathering all required data, analyzing part was
done by using excel software. Graphs and bar charts have been drawn with respect to the data for each
and every question. Normally most of the results were manipulated according to the percentages.
Maximum percentage can be taken as the most accurate answers.
In some cases relative index methods were applied. Such as five no of responses were ranked 1 to 5 scale
by considering their importance for severity (very strong-100%, moderately strong-75%, fairly strong-
50%, less strong-25%, not at all strong -0%). Then relative index was calculated by considering the
importance of responses and the total number of responses.

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Frequency of accuracy (1- Not at all = 0% probability to happen, 2- Unlikely = 25%, 3- Likely = 50%,
4Almost certain = 75%, 5- Certain =100% probability to happen)
Role of respondent
Role Number Percentage

Contractor 7 31.82%
Consultants 5 22.73%
Site engineer 8 36.36%
Other 2 9.8%
Total 22 100%
Table 2.1 overall respondents for the questioners
3.2.2Interviews
The second stage was conducted using a qualitative method – semi-structured interviews. The aim is to
explore the topical issues revealed after analysis of the questionnaire survey and experiences of
practitioners in greater depth. The same population used for the quantitative stage of the research was
used. The offices of the companies that the questionnaires were sent to during the quantitative study were
contacted, explaining the objective of the research and requesting for a relevant contact (construction
managers, project managers, senior project managers etc) that could be interviewed.

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3.2.3 Data Processing and Analysis
The collected data were analyzed using both Microsoft excel and statistical software package
SPSS version 16 to determine the severity and frequency occurrence of the causes of cost in
building project. The ranking of causes based on severity, frequency of occurrence and
importance index were calculated using the formulas shown below.
Severity Index (SI) value was calculated with the following expression: SI = Ʃ𝑠 /𝑁𝑆
Where SI = Severity Index, s = Weighting given to each factor by respondents and it ranges from
1 to 5. S = Highest weight (i.e. 5 in this case), N = Total number of respondents. The Frequency
Index (FI) was calculated using the following expression: FI = Ʃ𝑓 /𝑁𝐹, Where FI = Frequency
Index f = Weighting given to each factor by respondents and it ranges from 1 to 5, F = Highest
weight (i.e. 5 in this case) N = Total number of respondents.
3.2.4 Ranking of Causes of effective Cost control based on Importance
This part of the study provides the analysis of the causes based on both frequency occurrences
and their severity, in order to rank their overall importance as causes of cost. The ranking of the
causes were done based on frequency occurrence and severity using importance index (II). This
was done by multiplying the values identified from both severity index and frequency index. It is
computed as per the following formula:
II = SI * FI Where II = Importance Index SI = Severity Index FI =

Frequency Index

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CHAPTER 4
RESULT AND DISCUSSION
4.1 Extent of factors for effective cost control system

This section of the research focuses to investigate the extent of factors in cost control in debre berhan
building project by analyzing different building projects. From these building projects Based on the data
gathered from the desk study, all of building projects investigated 100% of the investigated projects were
not completed with the original cost and shows a significant of increasing of cost.
This part of the study provides the analysis and the results which focused on with the identification of the
causes of cost fluctuation on those building projects. In order to identify these causes review of different
literatures related to causes of effective cost controls system desk studies for selected building projects
were done.
For this study, different building projects were analyzed for desk study. All of these projects experienced
for effective cost control system.
The characteristics of these building projects; i.e. brief descriptions of construction type, surfacing type
(proposed work), length, financer, contractor, consultant, project status, original contract amount, final
cost, extent of cost control problems in % and causes of cost fluctuations are described as follows.
From the results identified from desk studies and literature review a total of 21 different causes were
identified listed and used in the questionnaire

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4.2. Analysis and Ranking of causes of cost increasing differ

from estimate
Based on the research methodology described in chapter three, this part of the study targets to show the
discussions and results to meet the third objective of the study, which was the analysis of severity and
frequency occurrence of the identified causes to rank their importance. To accomplish this objective
questionnaires were used. This part includes:
 Questionnaires Response Rate and Respondent’s demographics

 ranking of the causes based on severity
 ranking of the causes based on frequency occurrence
 Ranking of Causes of Cost control based on Importance
4.3. Questionnaires Response Rate and Respondent’s

demographics
For this study, the sample population composed of professionals from consulting firms, and contractors,
site engineers and other professions connecting with building projects who participated in the
construction of building projects in the Debre Berhan town. These includes project engineers, office
engineers, contract administrators’, project managers, construction managers’ project team leaders and
resident engineers. Structured questionnaire survey was carried out by distributing a total of 20
questionnaire sets. It has been distributed to, 15 contractors firms, and 5 consultant firms. From these
distributed questionnaires, 16 responses were received back. However, some of the questionnaires were
not completed which were considered as invalid and not used for further analysis as shown below in table
Respondents Number of Number of % of Number of % of valid

Organization questionnaires questionnaires response valid responses
Distributed Received received questionnaires’’
Site engineers 8 8 100% 8 100%
Consultant 5 3 60% 3 60%
Contractor 7 5 86.67 5 86.67%
Total 20 16 73.335% 16 73.335

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In this research, 25 % (3) consultants, 35 % (7) contractors 40% (8)site engineers and 10% for others
replied a valid questionnaire as shown From the received questionnaires from consulting firms and
contractors 13 questionnaires’ were received from domestic firms and 3 questionnaires were received
from foreign consultant firms that are currently working building construction projects in debre berhan
town.
% for stakeholders
site engineers
contractors
conseltants
other respondents
contractors
Figure 4.1 Respondents’ organizational type replied valid questionnaires
The overall experience of the respondents in building construction projects As shown from Figure 4.1, the
majority (34.69%) of the respondents had 5-10 years of professional experience; about 26.53 % had over
10 years of professional experience, 24.49% had between 1 and 3 years of professional experience and
the remaining 10% of the respondents had between 3 and 5 years of experience in building construction in
Debre Berhan

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4.4. Ranking of factors for cost control based on Severity

In this part of the study, the ranking of the causes were done based on level of severity using severity
index (SI). In the questionnaire; the respondents were asked about the severity of each causes of cost
fluctuation based on the five point Likert’s-scale which ranges from 1 (very strong) to 5 (not at all
strong). From the responses gathered from the respondents SI value for each causes calculated with the
following formula: SI = Ʃ𝑠/𝑁𝑆
Where SI = Severity Index
s = Weighting given to each factor by respondents and it ranges from 1 to 5 where,
1= very strong
2 = moderately strong
3 = fairly strong
4 = slightly strong
5 = not at all strong
S = Highest weight (i.e. 5 in this case)
N = Total number of respondents
The table as indicated below shows the calculated relative severity index values and rank for each causes
of cost fluctuations based on their severity as cause of cost control factors from contractors, consultants,
and overall respondent’s viewpoints.

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2 GENERAL FACTORS FOR INCREASING OF COST IN

BILDING PROJECT
Overall Site engineer Contractor Consultants
Factors for effective cost SI SI SI

SI VALUE VALUE VALUE
control system in building VALUE
construction
1 Complexity of projects/technical complexity 0.534 0.542 0.543 0.554
2 Insufficient production of raw material in 0.657 0.676 0.772 0.692

the country
3 Lack of experienced and specialized project 0.757 0.754 0.765 0.776

managers and construction managers
4 In appropriate and Inaccurate cost 0.748 0.765 0.795 0.743

estimation
5 Delays in construction 0.796 0.843 0.856 0.798
7 Scope and design change 0.784 0.797 0.721 0.743
8 Inefficient labor in the site 0.676 0.684 0.687 0.631
9 Poor project management 0.754 0.758 0.772 0.784
10 Poor supervision and Lack of experience 0.867 0.821 0.871 0.827

technical consultants

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11 Different Contractual claims 0.756 0.776 0.786 0.708
12 Contractors lack of project experience 0.546 0.558 0.562 0.589
13 Lack of contractors proper evaluation 0.885 0.821 0.826 0.867

(review) of tender documents at tendering
phase
14 Poor relationship between management and 0.672 0.598 0.596 0.568
labor
15 Poor utilization of resources (material labor 0.843 0.865 0.887 0.889

and equipment)
Table 4.1 result analysis for severity index
From the analysis based on overall respondents results, showed that the severity of causes of effective
cost control system could be categorized into three classes.
Firstly, the causes with extreme to very severe cause of cost fluctuation with SI value lying between 0.800
and 1.000. Based on this the top 3 causes from the identified 3 causes are positioned in this group, which
account only 14.28% of the causes from the listed 3 causes. (No-15, 13, 5)
Secondly, the causes with very to moderate severe causes of cost, with SI value lying between 0.600 and
0.800. Based on this criterion 10 causes ranked in the table (2,3,4,5,7,8,9,10,11,,14) are placed under this
category. These 10 causes positioned in this group accounts 46.62% of the causes.
Finally, the causes with moderate to slightly severe causes of cost, with SI value lying between 0.600 and
0.400. Based on this criterion 2 causes ranked in the table from (1and12) were classified in this category.
These 2 causes account 9.52% of the overall listed 21 causes.
According to overall respondent’s Lack of contractors’ proper evaluation (review) of tender’

documents at tendering phase was the most severe cause as it has the first rank among all causes

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with SI value of 0.885. Poor supervision and Lack of experience technical consultants has been ranked
by all respondents in the second position with SI value equal to 0.868 and Delays in construction
the team was ranked as the third significant cause SI value of 0.835.
No Range of severe Rank
1 Extreme to Very Severe 14.28%
2 Very to Moderate Severe 46.62%
3 Moderate to Slightly Severe 9.52%
Table 4.3 percentage serves for questionnaires
 As shown below the top 7 most severe causes of cost CONTROAL SYSTEM were listed in
descending order of rank with their respective Severity Index (SI) values
 Lack of contractor’s proper evaluation (review) of tender documents at tendering phase( SI=
0.885)
 Poor utilization of resources (material labor and equipment)( SI = 0.865)
 Delays in construction( SI = 0.835)

 Scope and design change (SI = 0.786)
 Different Contractual claims(SI = 0.765)
 Lack of experienced and specialized project managers and construction managers (SI VALUE
0.754)
 Poor project management (SI = 0.742)

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For recommended question
1 RECOMMENDATION AND PRACTICE QUESTIONERIES
no RECOMMENDED PRACTICES Over all Site engineer Contractor Consultant

SI SI SI SI
Value Value Value Value
1 The construction team (including the owner, 0.874 0.874 0.897 0.874
engineering and procurement) was both integrated
and aligned
2 Drawings, site permits, and other required 0.657 0.876 0.574 0.856
documents were available before starting
construction
3 All necessary material, equipment, tools and work 0.868 0.658 0.865 0.684
permits were available before starting
construction.
4 An effective process was used to monitor and 0.784 0.745 0.765 0.745
control work
Permits
5 Required construction and management personnel 0.897 0.578 0.598 0.589
were available as needed before starting
construction
6 Small project checklists were used to standardize 0.472 0.659 0.474 0.478
and speed up construction
Table 4.4 results for recommended question
From the analysis based on overall respondents results, showed that the severity of causes of cost control
in building could be categorized into three classes.

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Firstly, the causes with extreme to very severe cause of cost fluctuation with SI value lying between 0.800
and 1.000. Based on this the top five causes from the identified 2 causes are positioned in this group,
which account only 33.34% of the causes from the listed 5 causes.
Secondly, the causes with very to moderate severe causes of cost control system, with SI value lying
between 0.600 and 0.800. Based on this criterion 3 causes ranked in the table from 2 to 5 are placed under
this category. These 3 causes positioned in this group accounts 50 % of the causes.
Finally, the causes with moderate to slightly severe causes of cost, with SI value lying between 0.600 and
0.400. Based on this criterion 1 causes ranked in the table from 6 were classified in this category. These 1
causes account 16.67% of the overall listed 6 causes.
4.5. Ranking of Causes of effective Cost control system based

on frequency of occurrence
This section of the study concerned on the analysis of the frequency occurrence of the causes. The
ranking of the causes were done based on frequency occurrence using frequency index (FI). In the
questionnaire the respondents were also asked about the frequency occurrence of each causes of cost
building project based on the five point Likert’s scale which ranges from 1 (not at all) to 5 (certain)
probability to happen. From the responses gathered from the respondents, the Frequency Index (FI) was
calculated using the following formula: FI = Ʃ𝑓/ 𝑁𝐹
Where FI = Frequency Index
f = Weighting given to each factor by respondents and it ranges from 1 to 5 where,
1= Not at all 2 = Unlikely
3 = Likely 4 = Almost Certain
5 = Certain F = Highest weight (i.e. 5 in this case)
N = Total number of respondents

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The table as indicated below shows the calculated Frequency Index (FI) values and rank for each causes
of effective cost control system based on their frequency occurrence from contractors, consultants, site
engineer and overall respondent’s viewpoints.

BILDING PROJECT
Factors for effective cost SI SI SI

SI VALUE VALUE VALUE
control system in building VALUE
construction

the country


estimation

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phase
labor

and equipment)
Table 4.5 results for frequency of occurrences
Based on the analysis, the results from all the respondents showed that the frequency occurrence of causes
could be categorized into three classes. Firstly, the causes with certain to almost certain probability to
happen with FI value lying between 0.800 and 1.000. In this group, only (15, 5, 11) ranked cause, which
accounts 20% of the identified 15 causes placed in this group.
Secondly the causes with almost certain to likely probability to happen with FI value lying between 0.600
and 0.800 Based on this criterion 10 causes ranked in the table (1,2,3,4,6,7,9,10,13.14,15) were placed
under this category. These 10 causes grouped in this group accounts 66.67% of the identified 15 causes.
Thirdly, the causes with likely to unlikely probability to happen with FI value lying between 0.600 and
0.400. Based on this criterion 2 causes ranked in the table (8and12) were classified in this category. These
2 causes account 13.33% of the overall listed 15 causes.

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No Certainty Rank 
1 Certain to Almost 20% Table 4.6
Certain percentage for
frequency of
2 Almost Certain to likely 66.67% serve
 As shown
3 Unlikely to Likely 13.33% below the top 7
most severe
causes of cost
CONTROAL SYSTEM were listed in descending order of rank with their respective Severity
Index (SI) values
 Delays in construction (SI=0.865)

 Different Contractual claims(SI=0.832)
 Poor utilization of resources (material labor and equipment(SI=0.825)
 Lack of contractors’ proper evaluation (review) of tender documents at tendering
phase(SI=0.786)
 Poor project management (SI=0.721)

 Scope and design change (SI=0.687)
 In appropriate and Inaccurate cost estimation(SI=0.654)
4.6. Ranking of Causes of effective cost control based on

Importance

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This part of the study provides the analysis of the causes based on both frequency occurrences
and their severity, in order to rank their overall importance as causes of cost in building
construction. The ranking of the causes were done based on frequency occurrence and severity
using importance index (II). This was done by multiplying the values identified from both
severity index and frequency index. It is computed as per the following formula:
II = SI * FI Where
II = Importance Index
SI = Severity Index
FI = Frequency Index
The table as indicated below shows the calculated importance index values and rank for each
causes of cost factors for building construction from contractors, consultants, site engineer, and
overall respondents viewpoints.
GENERAL FACTORS FOR INCREASING OF COST IN

BILDING PROJECT

2017
Factors for effective cost SI SI SI SI

VALUE VALUE VALUE VALUE
control system in building
construction

the country


estimation


2017

phase
labor

and equipment)
Table 4.7 results for important index
Based on the idea of Pareto’s Law described in the literature above for this study the top 13 of the causes
were selected for further discussion. Here, the top 13 causes obtained from the analysis based on their
importance were discussed. But we discuss the seven most important things with describe in the
questioner each cost factors in building construction in Debre Berhan town cause was briefly described as
follows:
1. Insufficient production of raw material in the country

Insufficient production of raw material in the country was ranked as one of the factor and most
important causes of cost fluctuation as agreed by all the respondents (II=.0.368) Inflation is a rise
in the general level of prices for goods and services, and consequently, purchasing power of
money is falling Therefore, any price rise due to inflation in these basic construction materials as
cement, fuel, steel, and other materials needed to complete the project will directly raises the
total cost of the project. Since inflation is, mainly time dependent factor avoiding unnecessary
construction delays will minimizes this problem.
2. Delays in construction Delays
In construction was ranked most important causes of effective control system as agreed by all the
respondents (II=0.756). Delays in construction may be caused by right of way problems (access to site
and quarry, late removal of obstructions like, electric poles, and water supply lines), design changes,

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variations, scope changes, late supply of required materials and equipment needed for the project etc...
Therefore, these delays cause the rise in cost of the project for client and contractors.
3. Design change
Design change was ranked as the other most important cause of increasing of cost according to all
respondents point of view (II=0.576). Design changes were considered as main causes for increasing the
final cost of project and completion time. These changes may occur in drainage structures, in dimensions
of building structure length and width, realignment and regarding of road section or on any other parts of
the construction. These changes were caused by unforeseen ground conditions, requests from towns to
increase the length and width of road, inaccurate designs etc..., which directly affects the budgeted cost of
the project. Proper, careful, and detail analysis and investigations at feasibility, planning, and design
stages will minimizes this problem.
4. Contractual claims
According to all respondents contractual claims were ranked as the other most important causes of cost
control factor (II=0.658). Most of time construction projects faced different problems, which hinders
completion of the projects in accordance with the original contract; from these problems, claims are
considered as causes of cost fluctuation, which affects completion of the project within the budgeted cost.
Claims are caused due to delays in construction, variations or change orders, scope changes, right of way
problems, and delayed payment for completed works. Since these claims increases the cost of the project
all the contracting parties must fulfill their responsibilities and minimizing the problems related with
variations, scope, design change and right of way problems also minimizes these problems.
5. Scope change
Scope change was ranked the most important cause of cost effective control from all respondents’
viewpoints (II=576). Scope change occurs when the client introduces new works, such as change of
surfacing material change of masonry work to RCC, etc. that are not originally incorporated in the contact
document. These causes may be due to changed or unexpected site conditions, design errors, or due to the
client request. Like design change, variation and ROW problems this problem can be minimized or avoid
through proper and careful analysis at the feasibility, planning and design stages.
6. Lack of experienced and specialized project managers and construction managers

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According to all respondents lack of experienced and specialized project managers and construction
managers was ranked most important causes of cost control (II=0.568)l. Since, project managers and
construction managers are the key personals of the construction project that manages, supervises, and
controls the overall performance of the project to complete the project within the expected time, quality,
and cost. However, if they lack experience and skills faces challenges in managing, controlling and
supervisions, which leads the projects to construction delays and cost increases. Hiring of skillful and
experienced construction and project managers will minimizes this problem.
7. Inaccurate cost estimation
Inaccurate cost estimation was ranked as the other most important cause of cost with from all
respondents’ viewpoints (0.578). Cost estimation is made to forecast the required amount of money for
completion of the construction project. Inaccurate cost estimation directly affects cost of the project; it
may be caused by wrong selection of estimation method, incorrect material prices, inaccurate
measurement of quantity etc. due to these problems the final cost of the project exceeds the original
estimated cost of the project. In order to tackle this problem using accurate cost estimation methods,
gathering relevant information about the price of construction materials, clearly understand and analyze
the drawings and other contract documents and accurate measure of quantity etc. minimizes this problem.
From this point of view we analyze that for to gat cost control effectively we can consider those describe
below
4.7. Best practices:

The objective of cost control is to manage the delivery of the project within the approved budget.
Regular cost reporting will facilitate, at all times, the best possible estimate of:

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 Established project cost to date.

 Anticipated final cost of the project.
 Future cash flow.
In addition cost reporting may include assessments of:
 Ongoing risks to costs.

 Costs in the use of the completed facility.
 Potential savings.
Monitoring expenditure to any particular date does not exert any control over future expenditure
and, therefore, the final cost of the project. Effective cost control is achieved when the whole of
the project team adopts the correct attitude to cost.
To do the best practice in construction building this main thing to do best practice to finish within the best
quality in the specified cost and time
 Strategic Planning
 Engineering Procurement
 Design Management
 Contract Management
 Quality and Performance Management
When we see what modernization and transformation initiative deals about cost overrun the initiative
considered cost overrun as a problem and conducted a research focused on the following main objectives:
 Identification of root causes of cost overrun

 identifying the potential gaps that needs to be addressed by the employer
 Recommend and implement necessary interventions to mitigate the problems
The other best practice observed during conducting this research was the design and supervision
accountability system. This system assesses the quality of design and supervision works against their
impact in terms of cost and time overruns during construction projects.
The system checks whether the following major tasks are properly done or not by designers and
consulting firms.

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 Quality of advisory role to the employer

 Quality of design and design review related services
 Quality of the works supervision
 Sufficiency of the supervision team’s capacity penalized those designers and consultants and
their appointed professionals that fails to meet the aforementioned tasks and causes cost and time
overruns on the projects. The research identified this accountability system as best practice
because it minimizes negligence and mistakes of designers and consultants on the projects.
4.8. For Effective cost control will require the following actions to be
taken
 Establishing that all decisions taken during design and construction are based on a
forecast of the cost implications of the alternatives being considered, and that no
decisions are taken whose cost implications would cause the total budget to be exceeded.
 Encouraging the project team to design within the cost plan at all stages and follow the
variation/change and design development control procedures for the project. It is
generally acknowledged that 80% of cost is determined by design and 20% by
construction. It is important that the project team is aware that no member of the team has
the authority to increase costs on its section or element of the work. Increased costs on
one item must always be balanced by savings on another.
 Regularly updating and reissuing the cost plan and variation orders causing any
alterations to the brief.
 Adjusting the cash flow plan to reflect alterations in the target cost, the master schedule
or the forecast of inflation.
 Developing the cost plan in liaison with the project team as design and construction
progress. At all times it should comprise the best possible estimate of the final cost of the
project and of the future cash flow. Adherence to design freezes will aid cost control.
Developing the cost pan also involves adding detail as more information about the work
is assembled, replacing cost forecasts with more accurate forecasts or actual costs
whenever better information can be obtained.

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 Reviewing contingency and risk allowances at intervals and reporting the assessments is
an essential part of risk management procedures. Developing the cost plan should not
involve increasing the total cost.
 Checking that the agreed change management process is strictly followed at all stages of
the project. The procedure should only be carried out retrospectively, and then only
during the construction phase of the project, when it can be demonstrated that otherwise
significant delay, cost or danger would have been incurred by awaiting responses.
 Arranging for the contractor to be given the correct information at the correct time in
order to minimize claims. Any anticipated or expected claims should be reported to the
client and included in the regular cost reports.
 Contingency provisions are based on a thorough evaluation of the risks and are available
to pay for events which are unforeseen and unforeseeable. It should not be used to cover;
changes in the specification, changes in the client’s requirements or variations resulting
from errors or omissions. Should the consultants consider that there is no alternative but
to exceed the budget, a written request must be submitted to the client and the correct
authorization received This must include the following:
1. Details of variations leading to the request.

2. Confirmation that the variations are essential.
3. Confirmation that compensating savings are not possible without having an unacceptable
effect on the quality or function of the completed project.
 Submitting regular, up-to-date and accurate cost reports to keep the client well informed
of the current budgetary and cost situation.
 Ensuring that all parties are clear about the meaning of each entry in the cost report. No
data should be incorrectly entered into the budget report or any incorrect deductions
made from it.
 Ensuring that the project costs are always reported back against the original approved
budget. Any subsequent variations to the budget must be clearly indicated in the cost
reports.

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 Plotting actual expenditure against predicted to give an indication of the project’s

progress.
From interview part we gate some problems for cost fluctuation or overrun mostly for contractors and site
engineers based on their experience and positions
4.9. The cost control problem in overall viewpoint in the

analysis
During the execution of a project, procedures for project control and record keeping become
indispensable tools to managers and other participants in the construction process. These tools
serve the dual purpose of recording the financial transactions that occur as well as giving
managers an indication of the progress and problems associated with a project. The problems of
project control are aptly summed up in an old definition of a project as any collection of vaguely
related activities that are ninety percent complete, over budget and late The task of project
control systems is to give a fair indication of the existence and the extent of such problems.
Also we consider the problems associated with resource utilization, accounting, monitoring and
control during a project. In this discussion, we emphasize the project management uses of
accounting information. Interpretation of project accounts is generally not straightforward until a
project is completed, and then it is too late to influence project management. Even after
completion of a project, the accounting results may be confusing. Hence, managers need to know
how to interpret accounting information for the purpose of project management. In the process of
considering management problems, however, we shall discuss some of the common accounting
systems and conventions, although our purpose is not to provide a comprehensive survey of
accounting procedures.
The limited objective of project control deserves emphasis. Project control procedures are
primarily intended to identify deviations from the project plan rather than to suggest possible
areas for cost savings. This characteristic reflects the advanced stage at which project control
becomes important. The time at which major cost savings can be achieved is during planning and

2017
design for the project. During the actual construction, changes are likely to delay the project and
lead to inordinate cost increases. As a result, the focus of project control is on fulfilling the
original design plans or indicating deviations from these plans, rather than on searching for
significant improvements and cost savings. It is only when a rescue operation is required that
major changes will normally occurring in the construction plan.
Finally, the issues associated with integration of information will require some discussion.
Project management activities and functional concerns are intimately linked, yet the techniques
used in many instances do not facilitate comprehensive or integrated consideration of project
activities. For example, schedule information and cost accounts are usually kept separately. As a
result, project managers themselves must synthesize a comprehensive view from the different
reports on the project plus their own field observations. In particular, managers are often forced
to infer the cost impacts of schedule changes, rather than being provided with aids for this
process. Communication or integration of various types of information can serve a number of
useful purposes, although it does require special attention in the establishment of project control
procedures.
4.10. The purpose of cost control from the analysis

From the result of the analysis the main purpose of cost control is useful in the construction
industry field because of the high level of uncertainty associated with the cost of building
complex structures special building like low cost housing project. Although there is a potential
for projects to be completed under budget the complexity involved in construction requires
specific attention to cost control in order for the successful completion of the project. To be the

2017
most effective over the lifecycle of a project a cost control system must be applicable for all the
three phases of the project that we have mentioned above. The system needs to be simple
enough that it is applicable and enough to apply to a wide of projects. The most important use of
cost control is:-
 Giving day to day attention for each activity that are on the contract to make it on the safe
side and also over all financial assessment, monthly valuation for completed work at a
regular interval.
 To provide feedback to the cost estimator for tendering purpose. But it is less important due
to the unique nature of the construction industry and higher variation of price of material,
labor, and equipment from day to day, month to month, year to year and also variations of
contracts for different projects.
 Provide data for the valuation of variation that may occur during the course of contract.
This use of cost control also needs proper recording of previous data.
Cost control also includes controlling the cost of material, labor, and equipment (direct costs)
and other indirect costs (site overhead and general overhead costs).
Material cost control is simple and direct forward to perform but if the amount of material on site
is large it need accurate and frequent interval assessment.
Cost control of labor and equipment are very important rather than material this is due to these
two reasons
 Their combination /combination between labor and equipment/ are very important to the
successful execution of the work on the site.
 Their interaction is most likely to be inefficient
As explained earlier, cost estimating, budgeting, and controlling are highly interacting each
other. Ones output is used as an input for the other as cost-estimating output is the input for cost

2017
budgeting and cost control. So the input for cost control /the output for cost estimating and
budgeting/ shall be as accurate as possible for best cost control.
4.11. Project cost control includes from the analysis:

 Influencing the factors that create changes to the cost baseline.
 Ensuring requested changes are agreed upon.
 Managing the actual changes when and as they occur.
 Recording all appropriate changes accurately against cost baseline.
 Preventing all incorrect, inappropriate, or unapproved changes from being included in the
reported cost or resource usage.
 Informing appropriate stakeholders of approved changes.
Chapter five
Conclusion and recommendation
5.1 Conclusions
This study has investigated the effective cost control system and their factors in Debre Berhan
town building projects using desk study data from Debre Berhan town building projects and

2017
questionnaires collected from contractors, consultants and site engineers, P.M and others
respondents participating in building construction industry.
From the findings of the analysis of desk study and questionnaire responses the following
conclusions are drawn.
 Based on the data gathered from the desk study, most of the project does not have finish
the project within the estimated amount of cost 100% of projects are not completed with
the original cost and shows a significant cost fluctuations
 In this study, 21 causes were identified and ranked based on their severity, frequency
occurrence, and overall importance value based on the questioner all respondent fill their
own answer based on their experience.
 Based on their severity as causes of effective cost control system inflation/material price
fluctuation, variations/change orders, delays in construction, design change, contractual
claims, scope change, inaccurate cost estimation, lack of experienced and specialized
project managers and construction managers were the top ten most severe causes of
effective cost control system in central and northern regions road projects.
 Based on their frequency of occurrence inflation/material price fluctuation,
variations/change orders, delays in construction, design change, contractual claims, poor
supply and late delivery of raw materials and equipment by contractor, scope change, and
lack of experienced and specialized project managers and construction managers were the
seven most frequent causes of effective cost control system appears in Debre Berhan
town building projects.
 Based on their overall importance as causes of effective cost control system
inflation/material price fluctuation, variations/change orders, delays in construction,
design change, contractual claims, and scope change, lack of experienced and specialized
project managers and construction managers, and inaccurate cost estimation were the top
seven most important causes of cost in Debre Berhan building construction projects.

2017
 There is a strong agreement between the respondents site engineer vs. consultant, project
manager vs. contractor and consultant vs. contractor) in ranking the causes of effective
cost control in Debre Berhan building construction project.
5.2 Recommendations
5.2.1 Recommendations for Contractors

2017
Contractors are recommended to supply and deliver the required construction materials and
equipment’s on time and with adequate quantity. Any delay in delivery and poor supply will lead
the project to late completion and additional costs, which in turn causes disputes and claims.
Therefore, the contractor should nominate suppliers, which have the capacity to deliver the
materials, and equipments on the required time. In addition, the contractor should have time
schedule for material supply to the construction site and create storage mechanisms on site to
minimize the effect of shortage of materials.
Contractors should have experienced and specialized project managers and construction
managers in order to implement the projects with good technical and managerial ability.
Contractors also should give training for these professionals about administration of the contract
and project properly and effectively. .
Contractors are also recommended to have efficient and effective cost management systems.
Since any error in cost estimation will lead the project to cost fluctuation, they should give
sufficient time and special considerations to cost controlling, tendering, budgeting, and cost
estimations.
5.2.2 Recommendations for Consultants
Consultants are recommended to avoid delay in information, which needs their decision to
proceed the work, here any delay will lead the project for late completion and cost increase so
they must follow every steps of the project clearly and give decisions on time to avoid
unnecessary delays in construction. Furthermore, the staffs should have enough experience and
ability to overcome any managerial and technical issues happen during construction stages.
The designer carefully asses feasibility studies and planning at design stages properly and
effectively in order to minimize and avoid cost increments at construction stages due to design
changes and variations.
Consultants and designers are recommended to revise the tender, design and contract documents
before tendering stage to check all the drawings, specifications, and bill of quantities are

2017
included in a complete and good way, since cost estimations are made based on these documents
any incompleteness of these documents and missed items will lead the project to additional cost
and delays in constructions.
5.2.3. Recommendation for site engineer
The site engineer must making the effective work for specific time schedule and supervise the
site daily and report their progress and difficulties
Any delay in delivery and poor supply will lead the project to late completion and additional
costs, which in turn causes disputes and claims. Therefore, the contractor should nominate
suppliers, which have the capacity to deliver the materials, and equipments on the required time
Therefore the site engineer can must record and report the problem to the contractor accurately
and in a proper document also the site engineer carefully asses feasibility studies and planning at
execution stages properly and effectively in order to minimize and avoid cost increments at
construction stages due to design changes and variations
Reference
 Nida & Azhar, (2008) there are 42 main factors effecting to the cost overrun in construction
industry
 Owens et al, (2007) elements and process of effective cost control system

2017
 However Bender (2002) the concept of risk into the cost control system
 Phillips, J., 2009. Introducing Project Cost Management. In:
 PMP® Project Management Professional Study Guide. s.l.:McGraw-Hill. Rahman, I. A.,
Memon, A. H. & Abd. Karim, A. T., 2013a.
 Relationship between Factors of Construction Resources Affecting Project Cost. Modern Applied
Science, 7(1). Rahman, I. A., Memon, A. H. & Abd.karim, A. T., 2013b.
 Significant Factors Causing Cost Overruns in Large Construction Projects in Malaysia. Journal of
Applied Sciences, Volume 13, pp. 286-293.
*Author, Name of the book, Publisher, Year, Page (use this format)

2017
Appendix A
Questionnaire
Dear Respondent
This Questionnaire survey is part of academic research that aims to identify the effective cost
control system in Debre Berhan town building construction and their effects. The research is
conducted for fulfilling the requirement of BSc. Degree in Construction technology and
management department at Debre Berhan University.
For the purpose of this thesis cost control system is defined as the final cost of the project
exceeds the initial estimated cost of the project.
All the information you provide will kept in strict confidentiality and it will be only used for
academic research.
We value your participation and thank you for the commitment of time, energy, and effort and
thank you for your commitment and in fulfilling the questionnaires below.

2017
Part I. General Information
1.1 Name of the organization …………………………………………………..
1.2 Type of your organization (mark “X” in the appropriate box)
Client Domestic Consultant Foreign Consultant .
Domestic Contractor Foreign Contractor others profession
1. How many years have you worked in building construction?
1-3 years 3-5 years 5-10 years > 10 years .
1.4 In your organization at which position currently you are working.
Project manager Site engineer Office engineer .
Other (please specify)………………………..
1.5 Your work experience in building construction projects
1-3 years 3-5 years 5-10 years > 10 years .

2017
Part II. Effective cost control system in building construction in Debre Berhan
town
Please based on your overall experience in building construction projects in Debre Berhan
indicate the severity and rate of occurrence of each cause by ticking the appropriate boxes.
Please add and evaluate any additional cause that you have experienced and not listed in the
given list of causes.
1 RECOMMENDATION AND PRACTICE QUESTIONERIES
no RECOMMENDED PRACTICES Strongly Disagree Neutral Agree Strongly NA /

Disagree Agree UNK
1 The construction team (including the owner,

engineering and procurement) was both integrated
and aligned
2 Drawings, site permits, and other required
documents were available before starting
construction
3 All necessary material, equipment, tools and work
permits were available before starting
construction.
4 An effective process was used to monitor and
control work
Permits
5 Required construction and management personnel
were available as needed before starting
construction
6 Small project checklists were used to standardize
and speed up construction

2017
A. For strong effect B. for frequency of occurrence

1- Very strong -100& 1-not at all=0%
2- Moderately strong -75% 2-unlikely=25%
3- Fairly strongt-50% 3-likely=50%
4- Less strong -25% 4-almost certain=75%
5- Not at all strong- 0% 5-certain=100%

BILDING PROJECT
strongly affect the Frequency of

Factors for effective cost control cost control system occurrence
system in building construction
1 2 3 4 5 1 2 3 4 5
1 Complexity of projects/technical complexity
2 Insufficient production of raw material in the

country
3 Lack of experienced and specialized project

4 In appropriate and Inaccurate cost estimation
5 Happening of Delays in construction
6 Complexity of projects/technical complexity
7 Scope and design change

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8 Inefficient labor in the site/lake of experienced

labor
9 Poor project management and control system
10 Poor supervision and Lack of experience

11 Different Contractual claims and disputes
12 Contractors lack of project experience and in

appropriate site investigation
13 Lack of contractors proper evaluation (review)

of tender documents at tendering phase
15 Poor relationship between management and
labor
15 Poor utilization of resources (material labor and

equipment)

2017
Appendix B
List of respondents replied valid questionnaires

List of contractor
I. Adamu general contractor
II. Debre berhan housing construction agency
III. Biset asmamaw G.C
IV. Etete constraction
V. Debre berhan town construction building office
VI. Afro tsion construction plc.
VII. Adamou construction plc.
VIII. Damenu construction plc.
IX. Abaya construction enterprise
X. Abebayh building construction plc.
XI. Associated Engineering Consultants Plc.
XII. Mlugeta Ibrahim BC AND RE
XIII. Kasahun abeje building constriction
List of consultants
I. Sirak hailu consulting architect and engineers
II. Damenu general building consulting service

2017
Declaration-not needed
This is to certify that we have carried out this senior project program in Debre Berhan construction
technology and management department students. This report is original in nature and its acceptable for
submission for the requirement of senior project report all written note in this Document is contain
things are done by 1. Nioman Abduselam, 2. Henok admasu , 3. yared beyene, 4. getachew moges
DATE 26/05/2017
Approved by
Name signature
Main advisor: …………….
Co advisor: ………..……

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EFFECTIVE COST CONTROAL SYSTEM IN BILDING

DEBRE BEREHAN UNIVERSITY

EFFECTIVE COST CONTROAL SYSTEM IN BUILDING

MAY 2017 (final date)

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 1

DEBRE BEREHAN UNIVERSITY

EFFECTIVE COST CONTROAL SYSTEM IN BUILDING

ADVISOR: ______________ SIGN. ________ DATE _________

EXAMINERS: ______________ SIGN DATE _________.

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 2

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 1

3.2.1 Questionnaire Survey.............................................................................................................22

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 2

Table 2.1 overall respondent for the questioners………………………………………..23

Table 4.1 result analysis for severity index……………………………………………………..30

Table 4.3 percentage serves for questionnaires…………………………………………………31

Table 4.4 results for recommended question……………………………………………32

Table 4.5 results for frequency of occurrences…………………………………………………35

Table 4.6 percentage for frequency of serve……………………………………………………36

Table 4.7 results for important index…………………………………………………………...39

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 3

Figure 4.1 Respondents’ organizational type replied valid questionnaires ……………………27

Figure 4.2 Respondents’ organizational type percentage value………………………………..29

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 4

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 5

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 6

1.1 Background of the thesis

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 7

1.2, Statement of problems

1.3 Research objective and question

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 8

1.4 Research questions

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 9

1.6 Significant of the research

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 10

1.7 Scope of the research

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 11

2.1Construction project Cost control management

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 12

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 13

2.2 cost management process in planning stage

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 14

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 15

2.3 cost management process in executing stage

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 16

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 17

2.4 cost management process in controlling stage

2.4.1 Cost control

Cost control includes

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 18

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 19

1. Inflation/material price fluctuation

5. Right of way problem

7. Scope change Scope

8. Lack of experienced and specialized project managers and construction managers

9. Lowest bidding procurement method

10. Inaccurate cost estimation

11. Change in exchange rate

13. Inaccurate/change in.

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 20

2.5 Definition of effective cost control system

DEBRE BERHAN UNIVERSITY COTM DEPARTMENT Page 21

ADVISOR: ______ SIGN. DATE _

EXAMINERS: ______ SIGN DATE _.