A cost control system development: A collaborative approach

for small and medium-sized contractors

Vacharapoom Benjaoran
*
School of Civil Engineering, Institute of Engineering, Suranaree University of Technology, 111 University Avenue,
Muang, Nakhon Ratchasima 30000, Thailand
Received 6 November 2007; received in revised form 11 February 2008; accepted 19 February 2008
Abstract
Construction business comprises a number of small and medium-sized contractors which form the major part of the industry. The
existing research on the new ICT development is creating very sophisticated and complex systems which are not yet applicable to this
part of the construction industry. With regard to general limitations as design criteria, this research uses a collaborative approach to
develop a cost control system for ve selected small and-medium-sized contractors. The new ecient cost control system is adopted
on the earned value concept and is developed using available ICT tools which are familiar and easy-to-learn. A collaborative approach
can ensure the diusion of technology to these companies.
2008 Elsevier Ltd and IPMA. All rights reserved.
Keywords: Construction SME; Small and medium-sized contractor; Cost control; System development; ICT application
1. Introduction
Construction is a very competitive business mainly by
prices. To maintain success, contractors have to continu-
ously improve the eciency of their business processes.
Modern information and communication technology
(ICT) holds promising advantages to improve the business
processes of the construction industry particularly in the
eld of management. Many new system developments are
being created in relation to research ndings and they are
getting more sophisticated with the current trend of inte-
grating everything. Small and medium-sized companies
with their limited resources and some other constraints
are not ready to implement and obtain benets from the
technology.
This paper reports the research project which aims to
analyze the existing business processes of small and med-
ium-sized construction companies (or construction SMEs)
and identify priority area of improvement. It also aims to
determine the methodology and to develop a new ICT sys-
tem that can be successfully implemented on construction
SMEs business. A collaborative approach is employed to
overcome limitations on physical and psychological fac-
tors. The approach is emphasized on the company involve-
ment throughout the development process. Finally, the cost
control system is particularly developed for the collabora-
tive construction SMEs. The system is adopted on the
earned value concept and their existing documentation-
based control.
2. Recent system developments for construction SMEs
2.1. Importance of construction SMEs
The National Statistical Oce has conducted a nation-
wide survey of IT applications in the construction industry
in 2004. The report [13] shows that the construction indus-
try in Thailand is very fragmented. It consists of a number
of small and medium-sized companies that represent about
92% of the whole industry. Ninety-ve percent of all
0263-7863/$36.00 2008 Elsevier Ltd and IPMA. All rights reserved.
doi:10.1016/j.ijproman.2008.02.004
*
Tel.: +66 4422 4172; fax: +66 4422 4607.
E-mail address: [email protected]
Available online at www.sciencedirect.com
International Journal of Project Management 27 (2009) 270277
www.elsevier.com/locate/ijproman
construction companies have registered capitals of less than
1.5 million US dollars. The reports also show that con-
struction SMEs have developed very few of their own in-
house software which is only 1.7%. This insuciency is
partly a cause of many problems in this industry, such as
lack of ecient control systems, project delays, poor qual-
ity of work, and high costs. Kaplan [15] has argued that
American Society of Civil Engineers (ASCE) through their
publications is neglecting the big picture that the major
components of the civil engineering community and their
employers are indeed small-business entities. He requested
more attention to foster small-business groups and local
sections. These construction SMEs are currently using
primitive business processes which rely largely on manual,
paper-based data, intuition, and experience, but not ICT.
The government is concerned about this issue and urges
SMEs of many industries to implement new ICT applica-
tions as their competitive advantages. Many government
initiatives are now encouraging them to improve their busi-
ness processes and to increase their capabilities through
ICT.
This situation is similar to that of many other developing
countries. Jaafar et al. [14] have done a survey study to con-
rm that construction companies regardless of their sizes
have been seeing IT as their opportunity for improvement.
Goh [12] concluded from his survey study focusing on peo-
ple, their IT needs, and ability to manage change. The new
system must be compatible with their normal work routines
and easy to use because SMEs have limited resources for
training and time. Yang et al. [21] found that most eld
managers prefer to use Excel for recording and processing
cost data, notwithstanding the introduction of specialized
computer applications for project management. Cumber-
some workloads associated with data update in the com-
mercial project management applications make managers
hesitant to use. Thus they try to handle not only the cost
but also scheduling data using Excel. Acar et al. [2] studied
the relationship between an organizational size and the use
of ICTs within the SMEs in the building construction sector
in Turkey. They concluded that the larger the rm sizes are
the more intensive use of ICTs contractors do. This is not a
surprising nding because the applications of ICTs come
with a large amount of investment and that is a limitation
of construction SMEs. With their limited capitals, most
construction SMEs are cost concerned.
2.2. Modern ICT for construction industry
ICT has already been adopted on the construction
industry for a while. Aouad et al. [5] showed that all pub-
lications from 1990 to 1994 revealed the applications of IT
in construction in 16 dierent elds. El-Ghandour and Al-
Hussein [9] also conducted a comparable study of publica-
tions during 19922001 and they categorized the applied IT
in nine main dierent elds. There are many ICT system
developments available in the literature and commercial
packages. Most of these systems are in the trend of data
integration which prefers to combine dierent functions
together. The building information model (BIM) is created
to cover all information associated a building such as
geometry, spatial relationships, geographic information,
quantities and properties of building components. It aims
to share information across dierent disciplines, platforms,
and formats throughout the life cycle of a construction pro-
ject (i.e. design, construction and operation) and this will
achieve the data interoperability. The systems that are
developed upon BIM can add to and reference back all
information acquired without losing. These developed sys-
tems tend to be complex and dicult to comprehend and
operate. Despite that, only a few of them were particularly
designed for construction SMEs or have considered their
limitations on implementation.
2.3. Limitations of construction SMEs
With regard to limited resources available for adopting
IT in their businesses, Chau [7] found in his study the fac-
tors used in the selection of software package in SMEs that
SMEs rated the vendor support as the most important fac-
tor when selecting package software. This shows that
SMEs have inadequate technical personnel. The ease of
use/user-friendliness of the software package was viewed
as an important factor. Their common software packages
are just accounting or word processing-related software.
Fink [10] provided an indication of factors important to
SMEs when adopting IT. Internal factors such as IT bene-
ts, organizational culture, in-house IT expertise and
resources, IT implementation and selection were judged
to be more signicant than external factors which were
external environment, outside support, external resources.
Nitithamyong and Skibniewski [17] have conducted a sur-
vey study to identify the success and failure factors of per-
formance of commercial Web-based project management
systems. They concluded that the two most inuential
groups of factors were the characteristics of the system,
such as ease of use, system reliability, output quality, and
the project team, such as team attitudes, support from
top management, and adequate training. Peansupap and
Walker [18] have provided an organizational level frame-
work of ICT innovation diusion at the implementation
stage of a construction project. They identied four groups
of factors that inuence ICT use and adoption such as
management, individuals, technology, and workplace envi-
ronment. Challenges are the acceptance of prospective
users and the diusion of new applications.
2.4. Applications for construction SMEs
Available system developments that were created for
construction SMEs were investigated and summarized as
follows. Love and Irani [16] conrmed the benets of
ICT to the management practices of construction SMEs.
Primary motivations for IT adoption of SMEs were identi-
ed as productivity and business processes improvement,
V. Benjaoran / International Journal of Project Management 27 (2009) 270277 271
cost eciency, competitive advantage enhancement, service
quality, and protability. Apart from good functions of the
system, Stewart [20] showed that companies which pro-
vided reliable IT systems that are well-supported and
user-friendly would achieve higher IT-induced perfor-
mance improvement in their operational, strategic compet-
itiveness and benet perspectives.
Forcada et al. [11] devised a tool for automatically cre-
ating an organizational document structure in order to
improve both internal and external document organization
and to remedy the ineciency of document management in
SMEs. Perera and Imriyas [19] have developed an inte-
grated management information system for project cost
management using DBMS (MS Access) and time manage-
ment software (MS Project). Their system is particularly
designed for SMEs. Zhiliang et al. [22] have developed a
system for the multi-party in construction projects to col-
laborate on the Web using XML. The information
exchanged among the multi-party was identied such as
scheduling, cost control, quality assurance, and contract
management. Yang et al. [21] have developed a new
method to maximize the practicability of progress manage-
ment of multiple apartment buildings construction pro-
jects. They designed a work-packaging model based on
the Cost Breakdown Structure which has the lowest level
is the cost items shown on the bill of quantity.
Alshawi and Ingirige [3] have discussed the impacts of the
latest advances in technology on project management and
the emerging paradigm of performing project management
over the Web. Abudayyeh et al. [1] have proposed an
approach to implement a cost control system over the
Web. Cheung et al. [8] have developed a Web-based con-
struction Project Performance Monitoring System (PPMS)
that aimed to assist project managers in exercising construc-
tion project control. The project performance measure cate-
gories were identied for inclusion in the PPMS: people,
cost, time, quality, safety and health, environment, client
satisfaction, and communication. Chan and Leung [6] have
also developed a prototype of a metadata-based information
system for data exchange among Web-based documents for
construction project management using XML technology.
It could be summarized that those system developments
designed for construction SMEs were kept simple and
addressed on a certain problem area of the existing business
process. The developments were based on the existing prac-
tices and used low-investment tools such as spreadsheet,
compact database management software, XML, and web-
based technology. However, none has reported the use of
a collaborative approach during the development stage.
3. The collaborative approach
This research aims to nd a methodology for designing
and developing a new IT system for construction SMEs
and also successfully implementing it with regard to their
limitations identied in the next section. To overcome these
limitations a collaborative approach is created and
employed. Five dierent construction SMEs are recruited.
They are representing various specializations in the indus-
try such as local infrastructures, public buildings, commer-
cial buildings, ats, and residential houses. These ve
dierent companies can be used to generalize the picture
of the construction SMEs business and are a reasonable
number of cases for this study. The key policies for the
development are established as follows:
1. To enhance involvement of both the managements and
the prospective users in designing the system.
2. To identify and improve the business process in area of
their high priority.
3. To develop the system by referring to the existing rou-
tine and to be aware of any dramatic changes.
4. To develop the system with the existing software that
they are using and familiar with so that it will require
a minimum cost and learning time.
Fig. 1 summarizes the collaborative approach frame-
work. The process starts with involving construction SMEs
in this program. Public announcements and invitations are
made to recruit ve construction SMEs. The criteria for
recruitment were the company size and the positive attitude
toward the IT benets. They must have a certain level of
condence in IT benets and they should be ready to give
support to their commitment.
Then an investigation of business processes of the ve
construction SMEs was conducted through several meet-
ings with their managements. Their business processes
must be clearly understood before identifying their priority
problem areas. The problems of all ve companies are later
analyzed and generalized to determine suitable solutions.
Then both managements and prospective users participate
in designing the system and generating system require-
ments. This ensures that the developed system will suit
their abilities. The new system is designed with a consider-
ation of avoiding any radical changes. Instead, it must imi-
tate or follow the existing business processes. The system
interface is designed by the prospective users to ensure their
acceptance and understanding. Also, tentative procedures
and functions of the system must be demonstrated before
actual use to prepare the users. Finally, the new system is
developed with the existing software which is being used
and familiar to them.
At the implementation stage, the developed system is
delivered to the companies with demonstrations and expla-
nations. Then the companies are still assisted with facilita-
tions and encouragement to help them successfully
implement the new system. After launching the system
for four months, the system is evaluated with feedback
from the managements and the users.
4. Characteristics of the collaborative construction SMEs
The analysis found a traditional way of operating the
construction business in this region. The typical business
272 V. Benjaoran / International Journal of Project Management 27 (2009) 270277
process of the construction SMEs are summarized in Fig. 2
in a cross-functional diagram. The construction SMEs
works as main contractors who are responsible for manag-
ing projects such as administrating contracts with clients,
nancing projects, procuring materials and equipment to
construction sites, and monitoring and controlling the pro-
ject progress. They are outsourcing all workforces to local
subcontractors. That explains why their business sizes are
small (using the number of employees as criteria). This
can help reduce the risk of uctuating demands in the con-
struction industry and also their businesses can be set up
with a small amount of capital. When a new project arises,
they assign suitable subcontractors who are available at
that time to the new project. The construction SMEs pay
their local subcontractors wages for physical labor and
trade skills. They also supply all required materials and
tools through an on-site store. They cover all these direct
costs (wages, materials and tools) incurred in a project.
They manually record all these costs in an accounting jour-
nal in a chronological order and on an accrual basis.
The ve construction SMEs identied their most con-
cerning problem area on the cost control. They are cur-
rently using a simple paper-based cost control system
which is not eective. Subcontractors ll in a requisition
Involve construction
SMEs
Investigate business
processes
Identify problem area
and generalize the
problem
Participate for
system requirements
Complete a new
system development
Arrange facilitation
and helps
Evaluate the system
after implementing
Design and Develop a new IT system Implement the system
Introduce the new
system
Demonstrate the
prospective system
Fig. 1. The research framework.
Small and medium-sized contractors typical business processes
S
u
p
p
l
i
e
r
s
S
u
b
c
o
n
t
r
a
c
t
o
r
s
C
o
n
t
r
a
c
t
o
r
Assign
subcontractors to
projects
Supply construction
materials
Submit invoices
Payments and
record expenses
Perform
construction work
Request materials to
their sites
Provide materials as
requested
Progress
construction work
Evaluate
performance at the
end of projects
Fig. 2. Construction SMEs typical business processes.
V. Benjaoran / International Journal of Project Management 27 (2009) 270277 273
form to receive any materials they want. The paper-form is
checked and approved by the storekeeper. The construc-
tion SMEs normally work on a few projects at once. These
requisition forms are then collected from each construction
site and sent to the head oce weekly. A clerk at the head
oce spends a plenty of time to manually rearrange this
cost information and put it into proper cost account items.
These cost account items are established related to work
items in a bill of quantities (BOQ) of a project. It is a very
tedious task and cost summary reports are done so late that
they cannot use it for controlling purposes. They added
that a cost overrun would become recognized long after a
project had nished. Some construction SMEs do not cat-
egorize these costs into dierent account items. They sim-
ply sum them up so that they cannot evaluate the work
performance on site. Despite all these construction SMEs
have personal computers and oce software package avail-
able, they cannot use them to assist with their work.
Also, the analysis found limitations of the collaborative
construction SMEs on implementing the IT developments.
These limitations are generalized and categorized into two
groups related to physical and psychological factors. Fig. 3
shows the category of generalized limitations of construc-
tion SMEs. The rst group, which is physical factors, can
be considered as companys resources comprising money
and personnel. They are apparent limitations since they
are the criteria for classifying the size of a company. Con-
struction companies are generally undernanced. At any
point in time there is only limited capital available for
investment and IT investment must compete with other
demands on capital [4]. Although the managements are
convinced of the benets of the IT developments, they
may not be able to aord a highly priced fully functioning
commercial package. Also they have limited personnel in
terms of both availabilities and abilities. With their small
number of employees, all personnel are fully occupied with
a variety of responsibilities rather than focusing on a spe-
cialized work area. They are not able to aord a high-sal-
ary job to attract procient personnel so it is more likely
that their employees possess limited abilities, particularly
sophisticated IT skills.
The other group of limitations are related to psycholog-
ical factors which are obstacles created by ones mindset.
They are further separated into two groups of people in
the companies, namely management and users. The man-
agement is policy and decision makers who are directly
responsible for encouraging the implementation of the IT
systems and allocating necessary resources for operating
them. The management can have its own levels of commit-
ment of support and levels of values and beliefs in the ben-
ets from the IT systems. In addition, the IT systems aect
some parts of employees work routine. Prospective users
who are at the operating level can have a resistance to this
change. Some users fear technology and they think that it is
too dicult to learn.
5. System requirements and development
The main requirements of the new cost control system
are to monitor the progress of project costs and to make
a real-time comparison with the bill of quantities (BOQ).
The project BOQ is a part of contract documents that cat-
egorizes all groups of works in the project. It species all
material types, measuring units and quantities required in
Limitations of
Construction SMEs
Physical Factors Psychological Factors
Money Personnel
Abilities
Availability
Management System Users
Commitment of
Support
Fear of Change
Belief in Benefits
Fear of
Technology
Fig. 3. Generalized limitations of construction SMEs in implementing IT system developments.
274 V. Benjaoran / International Journal of Project Management 27 (2009) 270277
each group of work. It sets contracted unit-prices and
prices of these material items. It also species labor prices
in proportional to the materials prices. Therefore, the total
price of each material item can be expressed as a function
of its own quantity. The total price of the whole project
is expressed through these material items.
The developed system is adopted on the earned value
concept, thus it uses the quantities of materials in the
BOQ as the budgeted costs or allowable quantities. The
materials that are gradually requisitioned by the subcon-
tractors must conform to the BOQ of that project. The
cumulative numbers of requisitioned materials must not
exceed the numbers stated in the BOQ and these numbers
are used as the actual costs given that the unit-prices of
the materials are kept constant. Measuring units of materi-
als are dierent and depends on material types. The third
term is the earned value which can be obtained from the
contractor supervisors on site. These three terms namely
the budgeted costs, the actual costs and the earned value
are used to calculate the schedule variance and the cost var-
iance. These two indicators are then used for tracking the
project progress.
This cost control through the material quantities check-
ing is proved to be practical to the construction SMEs. It
requires a few resources to consistently collect the data.
The inputs of the system are a project BOQ and material
requisition data of that project. The system must daily
gather material requisition data from construction sites to
the contractors oce through the Internet. All these inputs
are nally stored in the database at the contractors oce.
The outputs of the system are various reports regarding
materials usage and progressing costs. These reports can
assist the managements to discover the source of any cost
overrun and then take corrective actions in time.
The system requires database utilities at both construc-
tion sites and the contractors oce. These databases are
timely synchronized through the exchange of data between
the two sides. Fig. 4 shows the entity-relationship diagram
(ERD) of the structure of the designed database of the sys-
tem. The structure is organized into groups of data attri-
butes. Two main groups are bill of quantity and material
request. The group of bill of quantity has attributes for
storing data associated with project BOQs. The group of
material request has attributes for storing data associated
with material requisition transactions. The cumulative
number of requisitioned materials can be queried and com-
pared with the allowable quantities in the project BOQ.
The other groups are auxiliary groups which contain other
supplementary data such as project, material, subcontrac-
tor, and supplier.
Microsoft Access is selected as a developing tool because
it can provide many advantages to the construction SMEs.
It is a reasonable relational database management system
that is packed within the Oce Solutions of Microsoft. It
is very available software and all ve companies have
owned one. Therefore, the developed system can be
installed and run without any additional cost. The prospec-
tive users are also familiar with the user-interfaces and
common functionalities of this MS Oce package. The
developed system is anticipated to be comprehended fairly
rapidly. MS Access is supporting Visual Basic for Applica-
tion (VBA) codes that will allow any customized develop-
ments as required. It also provides a separate group of
interfaces such as tables, queries, forms, reports and mod-
ules that are necessary for this development. As a database
management system, MS Access can maintain the data
integrity and security. With all these capabilities, MS
Access can overcome the generalized limitations of con-
struction SMEs identied earlier.
For the data transferring between construction sites and
the contractors oce, the Internet and an XML formatted
le are utilized. Data can be compacted in an XML format
with a small le size so that it is convenient to be transmit-
ted via a low-speed Internet connection. In addition, MS
Access is supporting XML formatted les on both data
write (export) and read-back (import).
After the system requirements are well established, the
cost control system is developed. Fig. 5 shows the data ow
of the system through its dierent functions. The system
functions are detailed as follows.
Add and edit BOQ the system assists the contractors
since the beginning of a new project. It provides a form
to ll in a BOQ of the new project. It also allows for editing
some items of the BOQ in case of any change-orders. This
form should be lled in by the users at the contractors
oce.
Add and edit general data supplementary or general
data such as descriptions of materials, projects, subcon-
tractors and suppliers can be added or edited through this
form. These data are to give general descriptions of mate-
rials, projects, subcontractors and suppliers.
Material requisition form the existing paper-based
form is transformed into a computer-based formatted
form. The layout of this electronic form is imitated from
the paper-based one so that users can feel condent in
inputting all data. The forms are lled in by the storekeep-
ers at dierent construction sites.
Material-usage reports The system provides various
reports to monitor the material-usage on each progressing
project. They are such as material-usage daily report, mate-
rial-usage summary report and material-usage by subcon-
tractors. First, the material-usage daily report is used for
summarizing all materials requisition on any particular
day on any particular project. This report is daily prepared
and centrally sent to the contractors oce in an XML for-
mat via the Internet. Second, the material-usage summary
report accumulates all quantities of materials that have
been taken up to the present date. The calculated quantities
are real-time item-by-item compared with the numbers sta-
ted in the BOQ. The system also noties the users of the
items that exceed the numbers stated in the BOQ. This
function can help alert the managements to the cost over-
runs of a project which have been a problem for contrac-
tors for a long time. Third, the system provides the
V. Benjaoran / International Journal of Project Management 27 (2009) 270277 275
material-usage by subcontractors report. This report helps
indicate which subcontractor has taken those materials. It
can also keep records of how each subcontractor uses his
acquired materials.
Subcontractor Project
Material
Supplier
Bill of
Quantity
has
supplies
makes
indicates
1
1
1
M
Material
Request
details
1
M
1
Subcontractor ID
Subcontractor
Name
1
Request ID
Request Date
uses
1
1
Project ID
Project Name
Project Detail
Quantity Takeoff
Quantity Used
Item Bid Price
Request
Detail
identifies
Material ID
Material Name
Unit Name
Unit Price
Material ID
Project ID
Supplier ID
Supplier Name
1
1
Request ID
Material ID
Quantity
Note
1
1
Fig. 4. The structure of the database of the developed cost control system.
Add / Edit
Project BOQ
Material
Requisition Form
Material Usage
Daily Report
Material Usage
Summary Report
Database
Database
Exchanged E-mails
Material Usage by
Subcontractors
Report
Add / Edit
General Data
Subcontractors at
Construction Sites
Contractor at Office
Received XML Sent XML
Fig. 5. The developed cost control system for construction SMEs.
276 V. Benjaoran / International Journal of Project Management 27 (2009) 270277
6. Conclusions
The recent industry survey reports that small and med-
ium-sized companies are the majority of the construction
industry. This research has collaborated with ve selected
construction SMEs. It identied that general limitations
on the new ICT adoption are related to both physical
and psychological factors such as human resources, capital,
managements support and users acceptance. Therefore, a
suitable ICT system development must require low invest-
ment, be easy to use and maintain, convince the manage-
ment of its benets, target on their highest priority
problems, and be familiar to the prospective users. This
research used a collaborative approach in the system devel-
opment and implementation processes to increase the
acceptance of the users and the managements. These com-
panies were concerned about costs and needed a new eec-
tive cost control system. The earned value concept was
adopted using the three principle terms namely the bud-
geted cost, the actual cost and the earned value. These three
terms were simplied to suit the capabilities of the con-
struction SMEs. The quantities of materials in the BOQ
were used as the budgeted costs while the cumulative num-
bers of requisitioned materials were used as the actual
costs, given that the unit-prices of materials were constant.
The earned values were estimated by the contractor super-
visors on construction sites.
MS Access and XML were selected as suitable tools for
this development. The functions of the developed system
were adopted on their existing work routine and document
forms to ensure that the users were able to learn rapidly.
Although it is dicult to change paper-based work rou-
tines to electronic-based, the persistence of helps and
encouragements and the use of the forms familiarity can
ease the learning process of the users. The developed cost
control system can successfully be implemented on the ve
collaborative companies. The system helps the contractors
track the progresses of their dierent projects. It is antici-
pated that this cost control system with the collaborative
approach can also improve the eciency of the business
process of other construction SMEs.
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