Topic 2:

Project Cost Planning Part 1

Dr. Nadirah binti Darus
Block M46, Level 3, Room 355
nadirahdarus@utm.my
+60139708427
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QUICK CHECK
• TOPICS
Topic 1 : Project Resource Planning
Topic 2 : Project Cost Planning
Topic 3 : Project Time Cost Trade-Off
Topic 4 : Project Monitoring and Controlling
Topic 5 : Project Delay Analysis

• ASSESSMENTS (15%)
Test 2 : 10%
Case Study : 5%

• FINAL EXAMINATION (50%)

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TOPIC OUTLINES
1 2
Quick Basic
Recall: Principle of
Topic 1 Project Cost
6 7 3
Factors Example Requirement
Affecting of Cashflow of Project
Cashflow Forecasting Cost

5 4
Preparation Forecasting
of Cashflow of Project
Data Cashflow

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Quick Recall: Topic 1
Project Resource Planning

ü Types of Project Resources

ü Resource Management
ü Related Resource Problem
ü Types of Resource Planning
- Resource Smoothing
- Resource Levelling

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TOPIC OUTLINES
1 2
Quick Basic
Recall: Principle of
Topic 1 Project Cost
6 7 3
Factors Example Requirement
Affecting of Cashflow of Project
Cashflow Forecasting Cost

5 4
Preparation Forecasting
of Cashflow of Project
Data Cashflow

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Basic Principle of Project Cost
Types of Cost
1 2 3
Direct Cost Indirect Cost Total Cost

~90% ~10% 100%

4
Profit
(Contractor’s Mark Up)

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Basic Principle of Project Cost Cont.
Types of Cost
1 • Cost or expenditure that directly
Direct Cost related to project or site
requirements:
1. Construction material
~90% 2. Hiring and purchasing of
machinery
3. Manpower/
labour cost

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Basic Principle of Project Cost Cont.
Types of Cost
• Indirectly 2 Examples:
related to Indirect Cost 1. Staff Salary
project or site 2. Office Rental
requirements 3. Office
• Also known as ~10% Equipment &
Overhead or Facility
Fixed Cost 4. Other related
• Daily, weekly, management
monthly or costs
annually

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Basic Principle of Project Cost Cont.
Types of Cost
3
Direct Cost Indirect Cost Total Cost

~90% + ~10% = 100%

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Basic Principle of Project Cost Cont.
Types of Cost
Contract Value Client’s Liability

3
Total Cost Contractor’s
Liability
+
4
Profit
(Contractor’s Mark Up)

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Basic Principle of Project Cost
Monthly Cost vs. Time
Cost
Direct Cost

Indirect Cost

Time

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Basic Principle of Project Cost Cont.
Cumulative Cost vs. Time
Cost
Direct Cost

Indirect Cost

Time

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Basic Principle of Project Cost Cont.
Total Cumulative Cost vs. Time
Cost
Total Cost
S-Curve

Time

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TOPIC OUTLINES
1 2
Quick Basic
Recall: Principle of
Topic 1 Project Cost
6 7 3
Factors Example Requirement
Affecting of Cashflow of Project
Cashflow Forecasting Cost

5 4
Preparation Forecasting
of Cashflow of Project
Data Cashflow

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Requirement of Project Cost

Estimating Process – Taking-off

- Determine required types of work
01 and related factors
Estimating Cost of Work
- Calculate build of rate for each element
02 or work activity
Preparing Project Schedule (Gantt Chart)
- Incorporate cost of each work activity into the
03 planned schedule
Determining Cost Requirement
- Across the project duration either weekly, monthly
04 etc.

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Requirement of Project Cost Cont.
Cost Scheduling (Gantt Chart)

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Requirement of Project Cost Cont.
Cost Scheduling (Gantt Chart)
Duration (Month)
No. Activity Cost (RM)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
1 Site Preparation 1500 1500
2 Excavation 1200 1200
3 Formwork 4000 2000 2000
4 Basement Excavation 1200 1200
5 Basement Formwork 4600 2300 2300
6 Drainage 4000 2000 2000
7 Plumbing 5000 1000 1000 1500 1500
8 Superstructure 12000 4000 4000 4000
9 Roofing 4000 2000 2000
10 Brickworks 10000 2000 2000 2000 2000 2000
11 Utilities 2000 500 500 500 500
12 Flooring 5000 2000 1000 1000 1000
Total Monthly Cost 54500 1500 1200 3200 6300 4300 5000 5000 5500 3500 2000 4000 3000 3000 3500 2500 500 500
Cumulative Cost 1500 2700 5900 12200 16500 21500 26500 32000 35500 37500 41500 44500 47500 51000 53500 54000 54500
Monthly Duration 1 1 2 3 2 2 2 2 2 1 2 2 2 3 2 1 1
Cumulative Duration 1 2 4 7 9 11 13 15 17 18 20 22 24 27 29 30 31

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Requirement of Project Cost Cont.
S-Curve Cumulative Cost

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Requirement of Project Cost Cont.
Definition of S-Curve
• A tool or indicator to show project progress
• Both in terms of project duration and cost
• Use at project planning stage
• Delay tracking tool
• To be submitted to client to obtain the project
• Client may ask for both Gantt Chart and S-
Curve
• Client may reject poor S-Curve

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Requirement of Project Cost Cont.
Types of S-Curve

1 2
Physical Financial
Activity Duration/ Monthly Cost Distribution
Work Effort (Cumulative)

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TOPIC OUTLINES
1 2
Quick Basic
Recall: Principle of
Topic 1 Project Cost
6 7 3
Factors Example Requirement
Affecting of Cashflow of Project
Cashflow Forecasting Cost

5 4
Preparation Forecasting
of Cashflow of Project
Data Cashflow

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Forecasting of Project Cashflow
Definition of Forecasting
• The projection of income and expense during
the life of the project
• Income = Inflow
• Outcome = Outflow

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Forecasting of Project Cashflow Cont.
Importance of Forecasting

1 3
To ensure To be made
adequate cash available at
by the appropriate
contractor time

2
To convince the
lender or
financier

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TOPIC OUTLINES
1 2
Quick Basic
Recall: Principle of
Topic 1 Project Cost
6 7 3
Factors Example Requirement
Affecting of Cashflow of Project
Cashflow Forecasting Cost

5 4
Preparation Forecasting
of Cashflow of Project
Data Cashflow

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Preparation of Cashflow Data
Information Gathering Data Analysis
(Cost Distribution) Cash In and Cash Out
Normally obtained from Data includes occurrence
project schedule duration or time

Step 2 Step 4

Step 1 Step 3

Information Gathering Payment vs Income

(Payment Graph Plotting
and Guide to determine total
Expenditure Term) cashflow requirement

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Preparation of Cashflow Data Cont.
Typical Cashflow Graph
Maximum
cash
requirement

Cash out
Cost

(contractor
expenditure)
Cash in
(payment
received from
client)

Time

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Preparation of Cashflow Data Cont.
Typical Cashflow Graph
Maximum
cash
requirement

Cash out
Cost

(contractor
expenditure)
Cash in
(payment
received from
client)

Time

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TOPIC OUTLINES
1 2
Quick Basic
Recall: Principle of
Topic 1 Project Cost
6 7 3
Factors Example Requirement
Affecting of Cashflow of Project
Cashflow Forecasting Cost

5 4
Preparation Forecasting
of Cashflow of Project
Data Cashflow

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Factors Affecting Cashflow

Payment
Frequency
Payment
Term
Delay
Factor
Front End
Loading
Contract
Value
Over-
payment
Profit
Margin
Work
Subcontracting
Retention
Fund
Advanced
Payment

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TOPIC OUTLINES
1 2
Quick Basic
Recall: Principle of
Topic 1 Project Cost
6 7 3
Factors Example Requirement
Affecting of Cashflow of Project
Cashflow Forecasting Cost

5 4
Preparation Forecasting
of Cashflow of Project
Data Cashflow

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Example of Cashflow
Forecasting
Based on the given table for culvert construction
planning, tender value and cost for each activity
were stated. Plan the cashflow prior to project
start where according to contract term, the
payment will be made two months after each
submission of payment claim at the end of the
month. Calculate the maximum cash requirement
to construct the project.

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Example of Cashflow Cont.
Forecasting
Activity Contract Cost Start Date Finish Date
Value (RM) (RM)
Excavation 17,000 15,000 1 May 31 May
Piling work 80,000 70,000 15 May 15 Jul
Pile cap 60,000 55,000 1 Jul 15 Aug
Culvert wall 70,000 75,000 1 Aug 30 Sept
Culvert cover 65,000 68,000 1 Sept 30 Oct
Backfill 25,000 16,000 15 Oct 15 Nov
Clearance 15,000 8,000 1 Nov 30 Nov
Total 332,000 307,000

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Example of Cashflow Cont.
Forecasting
Activity Value Cost Start Start May June July Aug Sept Oct Nov
Date Date
Excavation 17 15 1/5 31/5

Piling work 80 70 15/5 15/7

Pile cap 60 55 1/7 15/8

Culvert wall 70 75 1/8 30/9

Culvert cover 65 68 1/9 30/10

Backfill 25 16 15/10 15/11

Clearance 15 8 1/11 30/11

Monthly Value 332 37 40 60 55 67.5 45 27.5

Monthly Cost 307 32.5 35 54.2 55.8 71.5 42 16

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Example of Cashflow Cont.
Forecasting
Item (RM x 1000)/ April May June July Aug Sept Oct Nov Dis Jan Feb
Month Start Finish
1. Monthly Cost - 32.5 35 54.2 55.8 71.5 42 16

2. Cum. Monthly - 32.5 67.5 121.7 177.5 249 291 307 307 307 307
Cost (Cash Out)
3. Monthly Value - 37 40 60 55 67.5 45 27.5

4. Cum. Monthly - 37 77 137 192 259.5 304.5 332

Value
5. Cum. Payment - 0 0 37 77 137 192 259.5 304.5 332
Received (Cash In)
6. Cash Required - 32.5 67.5 121.7 140.5 172 154 115 47.5 2.5 -25
(Cash Out Current Max. Profit
Month – Cash In Cash
Previous Month) Req.
Example : Cash Required for May = Cash Out for May – Cash In for April
= 32.5 – 0
= 32.5
: Cash Required for Sept = Cash Out for Sept – Cash In for Aug
= 249 – 77
= 172

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Example of Cashflow Cont.
Forecasting

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 Thank You!

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