Cost Management

ccs-image The set of circumstances that prevail when considering the Construction process necessitates the use of unique software solutions. Not only is the process different from any other industry, but is bound by the use of contractual documents that, in themselves, are variable.

Drawings, specifications, terms and conditions as well as Bills of Quantity are produced with the understanding that drawings can, and will, change; specifications may vary and quantities almost certainly will change.

Against this background, add in the complexities of the construction phase of the project and you have a set of very difficult management tasks to contend with. A constantly variable set of challenges that need to be evaluated – constantly and timeously, quantified and recorded.

This is particularly relevant when dealing with cost information.

Managing Estimating and Accounts in Real Time

peter cheneyArticle by Peter Cheney, Managing Director, Construction Computer Software (Pty) Ltd.

Cost Management – Estimating phase.

The first tenet that has proven to be the basis of successful control methods is the production of a first-principle resource based estimate. Normally quantities that are made available via the Bills of Quantity form the quantity basis of the allocation of resources to the items of work to be performed.

Lately however, with the introduction of 2D and 3D CAD models, the identification of the individual elements making up the structure can be selected from the model, and disassembled into quantifiable bill items. This seems counter intuitive but is the only method for the production of relevant measured quantities. The CCS Candy estimating tool has a new additional Quantity Take Off module that is used to mine the CAD data and extract, re-model and aggregate quantities directly into the bill.

By selecting an element in the model, the interface allows the user to identify the quantities calculated and sent to the relevant bill items. Conversely the quantities now visible in the take-off data can be traced back to the source element.

By accumulating quantitative information from each item of work and allocating resource items to those items, the project is now equipped to move into a post bid phase making sure that the initial information reflects the method the project team intends to use for the construction phase.

Cost Management – Construction phase.

It is now essential that the initial estimating data is made available in its entirety to the project team. The resource information must transparently, and in detail, be made available to the procurement process and monitored in terms of the goods and services procured taking into account all variations during the construction phase.

The initial resource estimate contains quantity, rate and amount information that forms the basis for comparison against the actual costs being incurred on site on a daily basis. These processes – capturing labour time sheets, plant hours, maintenance job cards, stock receipts and issues, sub-contractor valuations and all other cost elements undoubtedly occur on a continual basis and because of the variability of these costs need to be tracked in detail.

The real spin off is that using the right software tools, the daily capture of information leads to the daily aggregation of real time costing, as well as the use of the same information for the reconciliation of these costs with the books of account.

No serious cost management system can assume that costing information captured outside of the formal accounting process can produce accurate and auditable figures. The CCS Buildsmart system is designed to accrue cost data daily and uses this data as the source for the accounting process.

Earned Value Reporting

At a point in time, normally monthly, progress is measured on site by assigning work done quantities to the items of work in the Bill. This produces, not only revenue figures, but a snapshot of the budget allowable at that point in time.

It is therefore critical that cost information flowing from the allocation of cost values on site be made available at the same time for comparison with the budget calculated by the valuation of work done.

Any other process will result in one or other leg of the analysis being out of time and, frankly, almost impossible to reconcile.

Accounting Management – Construction phase

An imperative in the construction industry is that there is a tight and unbreakable link between the resourced items allocated in the estimating phase, the budget that is produced by the earned value measurement process, and the cost accumulated up to and including the day of measure – all reconciled back to the books of account.

Conclusion

This process is the only one likely to produce the correct results.

The use of software products that have not been deigned to accommodate the procedures described above cannot produce meaningful and timeous information.

 

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