COST CONTROL

CONSTRUCTION MANAGEMENT

Michelle G. Galarion
INTRODUCTION
A critical element of a successful cost control is timely and accurate payments to the contractor for
the completed contract work and completed change order work.

Monthly progress payments to the contractor throughout the construction period shall be
administered in accordance with the contract documents.
 PROBLEMS DURING
CONSTRUCTION
Construction is a dusty, dirty and multi-faceted operation. Material is delivered daily at the same time
that hundreds of works must come together to complete their assignments. As construction proceeds,
the site becomes congested.

Despite the fact that the estimate and plans were made with a large factor of safety in each and every
task, many activities consume more than their estimated time and cost. This is because trades tend to
delay their start to the last minute, thus wasting float time. (THIS IS ALSO CALLED THE
STUDENT SYNDROME.)

Frequent changes results to work disruption and cost overruns

 PROBLEMS DURING
CONSTRUCTION
Even if one crew or trade works in a more productive way and finishes its work early, the following
trades are not obliged to start earlier than initially planned. Thus, earlier work is not reflected on the
project. Rather, the more productive crew may be penalized by cutting its estimates on new projects
or even getting it downsized.

In the midst of the work, some trades proceed slower than desired whereas others proceed faster than
desired, and in both cases, delays occur.

Dealing with suppliers and subcontractors also may not be easy.

 OBJECTIVES OF COST CONTROL
• These tools serve the 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

• Primarily intended to identify deviations from the project plan

• Monitors actual site execution and keep track of resources

• Provides detailed progress reports, comparing actual versus planned progress

• Forecasts the cost at completion at any stage in the construction

MEASURING WORK PROGRESS
•UNITS
  COMPLETED

 Applied to activities that involve repeated production of easily measured units of work

 For example, total volume of concrete poured or total number of windows installed

 Completed means installed. There are a few instances that the owner or the construction manager
may consider to include delivered (not yet installed) items as a part of accomplishment.
MEASURING WORK PROGRESS
INCREMENTAL MILESTONE

 Applies to activities that include subtasks that must be handled in sequence

 For example, measuring work for an equipment installation

 Delivery of materials (7th day, 20% value)
 Assembly (14th day, 60% value)
 Installation (17th day, 15% value)
 Testing (20th day, 5%)
MEASURING WORK PROGRESS
SUPERVISOR’S OPINION

 Applies to minor activities and requires the subjective judgement of supervisors

 For example, dewatering. temporary construction or landscaping

 This estimated technique can be biased by optimism, pessimism or inaccurate observations

MEASURING WORK PROGRESS
•COST
  RATIO

 Applies to activities that are budgeted based on a bulk allocation of money and involve a long
time or are continuous during the life of a project

 Examples are project management, quality assurance or other project controls

MEASURING WORK PROGRESS
WEIGHED OR EQUIVALENT UNITS

 Applies to activities that are composed of two or more overlapping subtasks, each with a different
unit of work measurement

 These are used in computing for the overall accomplishment of a certain project

 All elements are converted into an equivalent amount of a unified measurement unit.
S-CURVES
COST CONTROL
S-CURVES
• Graphical tool which displays the cumulative progress of a project
• A tool which construction companies use to track a project’s accomplishment to make
sure that what is being done is according to what was planned
• It is called an “S-curve” because the shape generated typically resembles the letter S.
Because projects are usually ”slow to start”, ramps up with all types of activity during
the middle part of the whole duration and slows down towards the end.
• This is plotted on top of a bar chart to particularly show a project’s accomplishment
over time
This is an example of an S-curve
The first column contains the scopes of work of the project with their corresponding amounts.
The third column contains the weight of each scope of work with respect to the totality of the project. Its sum should be
equivalent to 100%.
How is this computed? Amount per line item (per scope of work) is divided by the total amount.

 𝑃h𝑝 600,000.00
𝑃h𝑝 24,800,000.00
How are the bar charts being done?

All stakeholders must be consulted first in order to properly schedule each of the scopes of work.

For the “General

Requirements”, it will start
from the first month until the
last month – from mobilization
to demobilization.
The process will continue until you are able to put bars (schedule) in each corresponding scope of work.

For the pump room, it will be a

total of 4.5 months that will start
on month 1.
How are these projected accomplishments computed?
Each cell with a corresponding scopes of work schedule (cells included in the colored bar) also has a corresponding
projected accomplishment in terms of percentage.
Let’s take a look at the “General Requirements” that will run from the first month to the last month.

It is important that the planner knows how to project the accomplishment per month.

General Requirements:
For discussion purposes only,
we can ASSUME that an equal
Month 1: 2.42% / 8 = 0.3025%
amount of accomplishment can
Month 2: 2.42% / 8 = 0.3025%
be targeted each month.
Month 3: 2.42% / 8 = 0.3025%
Month 4: 2.42% / 8 = 0.3025%
Month 5: 2.42% / 8 = 0.3025%
Month 6: 2.42% / 8 = 0.3025%
Month 7: 2.42% / 8 = 0.3025%
Month 8: 2.42% / 8 = 0.3025%
Let’s take a look at the “General Requirements” that will run from the first month to the last month.

It is important that the planner knows how to project the accomplishment per month.

Since the bar char is divided by weeks and

not months, each of the weeks will contain
Month 1 WEEK 1 WEEK 2 WEEK 3 WEEK 4
the following percentages:
Gen 0.075625% 0.075625% 0.075625% 0.075625%
For Month 1: Reqts.
Week 1 = 0.3025% / 4 = 0.075625%
Week 2 = 0.3025% / 4 = 0.075625%
Week 3 = 0.3025% / 4 = 0.075625%
Week 4 = 0.3025% / 4 = 0.075625%
Let’s look at the ”Pump Room” which will start on the first month and will last for 4.5 months.

Again, for discussion purposes only, we can ASSUME that an equal amount of accomplishment can be targeted for
each month.

What are the instances that an

unequal amount of
accomplishment happens?

If you look back at slide # 7,

“incremental milestone” was
discussed.

In these kinds of scopes of work, the corresponding projected

milestone accomplishments must be used.
Let’s look at the ”Pump Room” which will start on the first month and will last for 4.5 months.

Again, for discussion purposes only, we can ASSUME that an equal amount of accomplishment can be targeted for
each month.

Pump Room Month 1 WEEK 1 WEEK 2 WEEK 3 WEEK 4

Gen Require- 0.075625% 0.075625% 0.075625% 0.075625%
14.11% / 18 weeks = 0.783888% per week ments

Pump Room 0.783888% 0.783888% 0.783888% 0.783888%

 For the elevator shear wall:

Again, for discussion purposes only, we can ASSUME that an equal amount of accomplishment can be targeted for
each month.

Continue this process until all the cells with

corresponding scope of work has been filled up.

Month 1 WEEK 1 WEEK 2 WEEK 3 WEEK 4

Elevator Shear Wall Gen Require- 0.075625% 0.075625% 0.075625% 0.075625%
ments
12.11% / 22 weeks = 0.550454% per week
Pump Room 0.783888% 0.783888% 0.783888% 0.783888%

Elevator 0.550454% 0.550454% 0.550454% 0.550454%

Shear Wall
How are these monthly accomplishments computed?

These are the just the sum of all the accomplishments per month.

Month 1 WEEK 1 WEEK 2 WEEK 3 WEEK 4

We just have to add all the % we Gen 0.075625% 0.075625% 0.075625% 0.075625%
Require-
computed earlier. ments
Pump 0.783888% 0.783888% 0.783888% 0.783888%
Month 1 is composed of Weeks 1 Room
to 4 and up to scope of work 3 Elevator 0.550454% 0.550454% 0.550454% 0.550454%
only. Shear Wall

The sum of all these

accomplishments is equal to 5.64%.
Continue adding up all the sums of the accomplishments per month.
The cumulative accomplishment is the sum of the present and previous month accomplishments.
 How to draw an S-curve?
Starting from 0% accomplishment on Day 0, plot the curve with the duration in the X-axis and the %
accomplishment in the Y-axis.

In this example, an emphasis on the

monthly cumulative
accomplishment is shown.
EARNED VALUE
TECHNIQUE
COST CONTROL
BCWS (Budgeted Cost of Work Scheduled)

What is planned in terms of

budget cost of the work that should
take place
ACWP (Actual Cost of Work Performed)

What is paid in terms of the actual

cost of work that has been
accomplished to date
BCWP (Budgeted Cost of Work Performed)

What is done in terms of the

budget cost of work that has
actually been accomplished to date
SPI (Schedule Performance Index) = BCWP / BCWS
SPI > 1.0 indicates schedule advantage
CPI (Cost Performance Index) = BCWP / BCWS
CPI > 1.0 indicates cost savings

Cost Variance = BCWP – ACWP

CV > 0 indicates cost savings

Schedule Variance = BCWP – BCWS

SV > 0 indicates schedule advantage
PREPARING
ACCOMPLISHMENT
REPORTS
COST CONTROL
Accomplishment Reports are status reports that provide an overview of what was achieved during a given period.

Aside from its purpose as a cost and schedule control, it serves as a basis for the progress payments of the
contractor. It usually forms part of the billing submitted by the contractor to the owner to collect payment.

There are no standard formats for the accomplishment reports. It usually depends on the owner, construction
manager or the contractor.
Shown below is an example of an accomplishment report.

Assumptions:
1. This accomplishment report is generated for the contractor’s second quarter billing.
2. The contractor was paid already for the first quarter accomplishment.

The accomplishment to date is the sum of the previous and present accomplishment.
The first three columns were already discussed in slides 14 and 15.
The percentage per scope are based on on-site accomplishment or installed items. Unless stated in the contract,
delivered items cannot be considered as an accomplishment.

The percentage accomplishment per scope was already discussed in slides 6 to 10. In this example, only a summary
of the scopes of work were shown. The subtasks should be assessed per line item of work.
For example, in Item III (Elevator Shear Wall), it is composed of the following scopes of work:
1. Structural works
2. Waterproofing works
3. Painting works
These scopes of work are needed to be evaluated one by one to get their line item accomplishment and the total
project accomplishment

The weights are computed simply by multiplying the % scope and the % weight of the scope of work.

12.10% x 36.36% = 12.10% x 36.36% =

Continue computing the weighted accomplishments for all the scopes of work to get the overall accomplishment
The accomplishment to date is the sum of the previous and the present accomplishments.

Continue computing the weighted accomplishments for all the scopes of work to get the overall accomplishment

The overall accomplishment or accomplishment to date is 50.29%.

End of Lecture
COST CONTROL