6 Effective Tips for Construction Cost Control

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During the implementation of a construction project, there are important factors that need to be considered firsthand. A list of procedures for record-keeping has become an indispensable tool for project managers as well as other individuals who are involved in the construction process. Aside from listing of records, step-by-step methods of project control are also considered as a tool. The two tools functioned as a dual purpose. One, the recording of updated financial transactions which is expected to occur during the execution of a project. Second, it provides certain indications both for development and issues associated with the project. Additionally, all tasks for the project management system particularly the controlling of costs are a way also of getting reasonable indications of the existence of any issues if there’s any. The extent of any occurring problems within the project is easy to identify and assessed. 

A vital thing to consistently reconsider is the cost control of a construction project. The process of collecting the actual project costs is called cost control. The collected costs will be then collated in a particular comprehensive format. Formatting the costs displays a comparison of all project budgets. On the other hand, controlling the costs keeps an accurate list of all monetary expenses and expenditures. The budget and costs for the project is definitely a crucial part. Project managers do have every reason to keep an eye on this part.

Below are the 6 effective tips that project managers should need to consider in order to manageably control the construction project costs.

  1. Preliminary Cost Estimation

Identifying the funding intent of a construction project is the first thing to do before developing the concrete plans. Cost estimates are the major source of the funding factors. Costs estimations are sometimes not as accurate as it is expected to be and it can lead to severe consequences particularly on the final outcome of the project. Profit margins can entirely disappear as well. The best solution for this problem is to hire a project manager because these professionals are competent experts and have the skills in tracking the record and accurate estimation of costs. Today, analyzing everything for cost estimation is way easier because of the deployed project management system in the construction industry.

  1. Consistent Submission of Cost Reports

The progress of the project should be continuous. Apart from the contractors and project managers, clients also need to know and be updated about the progress. Hence, it is obligatory to provide cost reports to them. You have to keep them informed so that they will be satisfied with the outcomes. By continuously providing the updates, it enables you to fully view and check the cost reports and to compare it to the cost control plan. In this way, determining the project’s financial health is easier.

Cost Reporting is a type of reporting the overall costs and revenue of a construction project. It is labeled as the ultimate outline of a company’s current financial situation. This kind of reporting will be done on a weekly and monthly basis. It is also suggested that it can be done on a daily basis. 

Under In this area, it is important also to identify the financial elements and consistently keep track of them. Make sure to track the following financial elements:

  • Purchase orders
  • Payroll Costs
  • The ledger’s cost and revenue side
  • Standard condition elements
  • Subcontracts
  1. Installing of Construction Management Software

In the construction industry, people involved are now essentially using the software. The tool such as a construction management software has vast functionalities and one of which is data management capability. This particular feature helps to manage the entire project and updates everybody involves the possible changes in the project scope which happen most of the time. This tool is absolutely helpful even in terms of active communication between the team members.

Working on a construction project isn’t easy but with the use of this software tool, every single thing which associates to the project is manageable. The advantages of using the software are listed below:

  • Real-time labor productivity
  • Simplified Document Management
  • Accurate Cost Estimations
  • Lesser Risk and Increase of Profit

You can also read the article “Acknowledging the Importance of Construction Management Tool” for further informative details about the software.

  1. Preparation of Contingency Plans

There is an easy and convenient way for project managers upon planning for budget overruns and delays. Even setting a plan of action on how to fix the issues will be easily outlined. Setting risk management procedures is the answer. This is under the contingency plans which prevents the possibility of paying expensive premiums when something went wrong during the last phase. Note that contingency plans are normally based upon an assessment of risks. And the changes which are made at the scope of a project will not be covered by it.

Contingencies are basically expressed in terms of percentages. This will be applied at the early stage of a project especially when there are a great number of risks. An example is set out below on how a contingency be reduced during the development of a project.

  • During the preliminary plan stage, there will be an inclusion of 15 % contingency for the total cost estimates
  • 10 % of construction costs and other fees will be reduced in the elemental cost plan
  • Lastly, 5 % of the contract value will be considered as a contingency in the cost plan. This will only happen during the awarding of the contract.

Moreover, clients will most likely hold retention. Retention refers to the percentage of the certified amount which comes from the interim certificate. The basic purpose of retention is to ensure that all contractors will appropriately complete the listed activities which are required of them.

  1. Regular Update of Cost Plan

Cost plans in the first place should need to have a consistent reevaluation and analysis. By doing this, identifying any possible alterations is easy. In every process of developing the project, the cost is present. If the costs are higher than what you expected, balancing it out is definitely a must. One way to acquire the balance is to reduce the costs.

Furthermore, outside factors such as inflation can affect the alteration of costs. On the other side, the shortage of resources can severely cause the prices to change and to rise. But updating the cost plan will helpfully outline all monetary expenses. Consistent updates for the cost plan will eventually provide more continuous advantages such as the following:

  • Identifying and assessing value-engineering opportunities is much more convenient 
  • Approximate quantities can easily be taken whether for better cost appraisals or presentation design projects
  • Easy bench-marking and informing of tenderer’s returns when cost plans are used as a contract sum analysis 
  1. Encouraged the Project Team in Designing the Cost Plan in Every Stage

Make sure that you and your project team are specifically following the control procedures for the design development. It is a vital thing to let all the team members know and be aware of the fact that no one from any of them has the authority to change or increase the costs. Project Managers are held to be accountable for this if anything can change. Lastly, they also need to ensure that each worker has a thorough understanding with regards to the construction plan and the main purpose of creating it. A project management system should be imposed on any ongoing projects. This is without any doubts, beneficial, and helpful to the project members, contractors, architects, and every involved individual.

Putting a Cost Plan Together 

Remember that when you are beginning to put things together to create the cost plan, appreciating and determining the differences between the designs at the conceptual stage is necessary. This is not considered in the technical design and development of design but only at the concept stage. It is also important to remember that you are capable of taking approximate quantities in terms of details designs and can able to reduce the uncertainties. Everything will be taken care of by none other than the cost planners for they have the expertise for this cost planning.

Conclusion:

A comprehensive plan for cost control is an important factor in any construction project. By default, the plan itself can be designated as a determining factor for the contractors if whether they can able to get a profit straight from the project. That is why they have to make sure in setting up the cost control plans and make it as accurate as possible. The success of the project lies ahead in this particular plan. Using the procedures associated with it is also essential in terms of the delivery of the project, the budget, and the overall scope.

Understanding of cost control is just one of many important things that a project manager has to prioritize. The changes in the overall budget can affect the outcome of every process of the project. The cost plan and all of the factors associated with it can be easily determined and monitored these days especially that project management software specifically for construction projects has existed. It provides real-time and efficient software solutions for better construction management controls. Try the Pro Crew Schedule, a software tool for construction project management, and one of the best in the market. Request for a live demo today!

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