The cost control Process is an iterative series of actions. It means, after we create the budget plan, collect the updates (Actuals) analyses and report the cost control performance, then we might need to take some corrective actions and update the budget plan accordingly.
Fore example, if we calculated our budget cost plan based on certain productivity rates for Raft foundation. During the updates we found big deviation between budget productivity and actual Productivity in site.
upon investigation , we found that due to site special conditions, the raft foundation is taking more hours than budget. Accordingly, Cost control Engineer should inform the management about his/her findings
and take a permit in to change the budget cost plan. This action will give the management of the company an early alarm and estimation of this issue impact to the project cash flow.
1- Budget cost plan components:
During the course we will see step by step how to create the budget plan using smart techniques. However, in this point I want to let you know the basics of budget cost plan.
First step in cost control is to prepare the project budget costs. Accordingly, we have two types of costs:
- Direct costs: it is the cost of materials, taboos, Equipment, subcontractors or any other Costs that can be loaded to a certain activity.
- Indirect costs: i it is the cost of supervision salaries, site offices, money paid to issue l. C, Guarantees..etc to the client. this involves also any cost cannot be loaded to a certain activity.
Example of cash flow:
The chart above showing the net cash flow of the project where it will start with advanced payment and monthly wise work in progress will require spending money and accordingly we get paid from the client. The most useful information in this chart that by month of March 2020, the company should have around 20 millions to finance the project. this is the capital required which is very important to be known.
2- Collect the updates:
This is where most of engineers stuck and could not provide fast and accurate updates. Remember, we agreed at the beginning of the course that we want to work smart not hard. Accordingly in this course I have developed a smart way to update the progress of actual costs with minimal efforts. To be honest, the challenge here is in the progress updates since Actual costs can be collected from invoices. However, it is important to know the Actual cost of each activity as well. This will help us to define problems and cost overrun later on.
3- Analysis and report:
This is the most exciting part where all your efforts will show its values. puts pits and pies of information together so will result an amazing summary report with limitless possibilities of other detailed reports. By implementing the cost control technique in this course, you will be able to find where are the activities that causing delays to the project and take the relevant correction actions.
B- Project Detailed report:
4- Corrective Actions:
NOW You know as per the example above that Zone 2 and Zone 3 Concrete for foundations are causing cost overrun of 5,152 and 5,438 respectively. You can go now to the concern person and talk with him or her to see how to fix this issue. This called corrective action. You might then need to update your budget plan as we said before that cost control is an iterative process.