PROJECT COST CONTROL

ESTABLISH AUTHORITY LEVELS TO

•SANCTION THE USE OF FUNDS

•APPROVE AUTHORIZATION OF
EXPENDITURE

•AUTHORISE CONTRACT STRATEGY AND

CONDITIONS

•SPECIFY INDIVIDUAL LEVELS OF

AUTHORITY TO ISSUE PURCHASE ORDERS,
FINALISING CONTRACTS,
1 APPROVING EXPENSES ETC.
 PROJECT COST CONTROL

CONTRACT STRATEGY & RISK CONTROL

Basis for Type of Owner’s Product Contractor’s
paying the contract degree of definition risk Moti-
contractor project required vation
control
needed

Performance - Turnkey Least Highest Highes Highest

  - Lump sum     t  
  - Bill of qty.         
    & sch. rates        
   - Target Price        
           
Time - Fee +Rembrs.        
  day-work rates      
- Cost plus Highest Least Least Least
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 PROJECT COST CONTROL

PROJECT COST REPORTING

1. COMMITTED COSTS: Total value of all
works and expenses contained in
contracts and purchase orders awarded
to third parties. In case of reimbursable
or measured works contracts, committed
costs are in relation to defined scope of
work.
2. PROJECT EXPENDITURE: Total cost of
work done, goods received and of
services used, whether or not these have
been paid for. This includes accruals &
provisions.
3. OUTSTANDING COMMITMENTS: Total
3 costs committed minus project
 PROJECT COST CONTROL

PROJECT COST REPORTING

4. ESTIMATE TO COMPLETE: Is the best

estimate that can be made at any given
time of remaining costs not already
reported as expended or committed,
taking into account the current project
scope and performance trends to date.
5. ESTIMATED FINAL COST: It is committed
costs to date plus the estimate to
complete.
6. EARNED VALUE: Total of budgeted cost
for the work progress to date.

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 PROJECT COST CONTROL

HOW PROJECT MANAGER CAN INFLUENCE COSTS

PROJECT COST

• EVALUATE ALTERNATE DESIGN CONCEPTS

• AVOID EXCESSIVE SAFETY FACTORS
• AVOID & CONTROL EXTRA REFINEMENTS
• USE CONTINGENCY BUDGET ONLY FOR INTENDED
PURPOSE & NOT FOR SCOPE CHANGE.
• PROVIDE ADEQUATE TIME FOR ‘PRICE-SHOPPING’
IN PROJECT SCHEDULE.
• INCORPORATE SCOPE CHANGES ONLY ON
CLIENT / MANAGEMENT APPROVAL AND
ALLOCATION OF REQUISITE FUNDS / TIME
• PLAN FOR INFLATION – PROVIDE FOR “PRICE
PROTECTION” & “ESCALATION”

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 PROJECT COST CONTROL

HOW PROJECT MANAGER CAN INFLUENCE COSTS

FINANTIAL EXPENSES

•REDUCE INTEREST COST BY PLACING

ORDERS AS LATE AS POSSIBLE.

•MAINTAIN “ZERO” NET CASH POSITION

BY PROPER STRUCTURING OF PROGRESS
PAYMENTS & CASH RECEIPTS.

•ENSURE RAPID PROJECT ACCEPTANCE BY

EARLY COMPLETION & COMPLIANCE TO
RELEASE RETENTION MONEY OR START
EARLY PAYBACK.
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 PROJECT COST CONTROL

HOW PROJECT MANAGER CAN INFLUENCE COSTS

TAX EXPENSES

•ENSURE PROJECT COMPLETION WITHIN

SPECIFIED ACCOUNTING PERIOD TO TAKE
INVESTMENT RELATED TAX BENEFITS.
•AVOID PROJECT SCHEDULE DRIVEN BY
INFLUENCES EXTERNAL TO PROJECT’S
FUNDAMENTAL OBJECTIVES
•USE ‘PERCENTAGE OF COMPLETION’
PROCESS FOR ACCOUNTING OF REVENUES.
•SUPPORT THE MANAGEMENT IN
ACHIEVING FAVOURABLE P & L BY
ADJUSTING PROJECT SCHEDULES
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 PROJECT COST CONTROL
COST CONTROL CURVE

120

TIME DELAY
100
Cumulative % Budgeted Cost

80

ACWP
60 COST OVERRUN BCWS
BCWP (EV)

40

20

0
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