COST CONTROL

Where we are?

Contractor/Owner

▪ Schedule Updating
▪ Progress Evaluation
▪ Time& Cost Control

CONCEPT DESIGN BIDDING CONSTRUCTION O&M

General Background

Planning

Plan i.e., a new

Updating
T Plan to
follow
Correction
action

M
$ Q
Const-
ruction

Variances
in time &
cost
Evaluation &
Control
Control measurements Construction
 Objectives of Project Control

◼ Accurately follow the project plan;

◼ Monitor actual site execution and keep track of resources;
◼ Provide detailed progress reports, comparing actual
versus planned progress;
◼ At any stage during construction, forecast the cost at
completion; and
◼ Take corrective actions at any stage to bring time and
cost closer to the plan.
Project Control
◼ Divided into four main aspects:
◼ Measuring Work Progress
◼ Activity and Project Levels
◼ Cost & Schedule Control
(Variance Analysis)
◼ Forecasting at completion
◼ Schedule Updating
1. Measuring Work Progress

◼ Step 1 Focus on activity level, then

◼ Step 2 The project level

The 5 Common Approaches

◼ Step 1: Activity level

1. Units completed
2. Incremental Milestone
3. Supervisor Opinion
4. Cost Ratio
5. Weighted of Equivalent Units
Units completed

◼ For activities that involve repeated

production of easily measured units of
work (e.g., pile driving)
◼ % Complete =
Units Completed / Total Units
Incremental Milestone
◼ For activities that include subtasks that must be
handled in sequence. Each milestone is assigned a
certain percentage as a rule of credit. E.g.,
Installation of Major Equipment:

◼ Received & Inspection 15%

◼ Setting Complete 35%
◼ Alignment Complete 50%
◼ Internals Installed 75%
◼ Testing Complete 90%
◼ Accepted by Owner 100%
Cost Ratio

◼ For activities that are budgeted based

on a bulk allocations of dollars and
involve long time (e.g., Project
management, quality assurance).
◼ % Complete = Actual Cost (or
hrs) of Work to Date/Forecast at
Completion
 Weighted of Equivalent Units
(1) Subtask Unit (2) (3) Quantity (4)
Weight Total Quantity to Date Earned Tons
Cost/total

0.02 Run Found. Bolts Each 200 200 10.4

0.02 Shim % 100 100 10.4
0.05 Shakeout % 100 100 26
0.06 Columns Each 84 74 27.5*
0.11 Beams Each 859 45 3
0.10 Cross Braces Each 837 0 0
0.20 Girts & Sag rods Bay 38 0 0
0.09 Plumb & Align % 100 5 2.3
0.30 Connections Each 2977 74 3.9
0.05 Punch List % 100 0 0
1.0 83.5

Example: Structural Steel Erection. Total Steel Tons =520

 Example

Earned Tons to date (4) =

(Quantity to Date (3) / Total Quantity (2)) * weight (1) *

Total Steel Tons
= (74/84) * 0.06 *520 = 27.5 tons

% Complete =
Summation (Earned Tons)/ Total Steel Tons
= 83.5 / 520 =16.1 %
 Example Step 2: Project level

Task Budget Weight Bar Charts: Actual versus Planned

A $30K 0.3
10% 40% 40% 10%

B $20K 0.2
70% 30%

C $10K 0.1
40% 60%

D $40K 0.4
40% 60%

$100K 1.0 1 2 3 4 5 week No.

Actual Plan
 Example

◼ It is required to calculate
◼ The project % complete at the end of each week
◼ The Earned Value (i.e., the budgeted cost of actual
cost) in the second period.
Solution: Main considerations

◼ Deal with planned separately from actual

progress;
◼ The planned % complete at the end of each
week is prorated with activity duration; and
◼ The weight of each activity is calculated as
the activity’s total budget in proportion to the
total project budget.
 Solution
Task Budget Weight Cumulative % complete at end of Week No.

1 2 3 4 5
A $30,000 30%* Plan 0.333 0.666 1.0 1.0 1.0
Actual 0.1 0.5 0.9 1.0 1.0
B $20,000 20% Plan 0.25 0.75 1.0 1.0 1.0

Task Budget Weight

Actual 0 0.7 1.0 1.0
Bar Charts: Actual versus Planned
1.0
C $10,000 10% Plan 0 0 0.25 0.75 1.0
33.3% 33.3% 33.3%

A $30K 0.3 Actual 0 0 0.4 1.0 1.0

D $40,000 40% Plan 0
10% 0
40% 0 10%
40% 0.5 1.0
Actual 0 0 0 0.4 0.6
Project % Complete
◼ The Actual Project % complete at
end of week 2 =

= 0.5*0.3(A) + 0.7*0.2(B) + 0*0.1(C)

+ 0*0.4(D) = 0.29 = 29%
 Project % Complete

Cumulative % complete at end of

Week No.

1 2 3 4 5

Plan 0.15 0.35 0.525 0.775 1.0

Actual 0.03 0.29 0.51 0.76 1.0

 Comparison
100% $100,000

80% $80,000
% Complete

Budget ($)
60% $60,000

40% Plan $40,000

20% Actual $20,000

0% $0
0 1 2 3 4 5 6
Week No.
2. Cost & Schedule Control

1. S-Curve Method

2. Double S-Curve Method

3. The Earned Value Technique

 S-Curve Method
Direct+
Indirect 100%
cost

Plot the S-Curve

Early Start Average
as an envelope
bounded by the
early-start S-
Late Start
Actual Curve and the
late-start S-Curve.

Time

Project Time-Cost Envelope

 S-Curve Method

◼ The shape and width of the project’s time-cost

envelope depend on the relative amount of float each
activity in the network has. The wide envelope
indicates more flexibility than a narrow envelope.
◼ At any reporting period, if the actual cost point is
above the average S-Curve, then we can assume that
we have additional project expenses.
◼ One of the drawbacks is that it does not tell if these
extra expenses are due to a fast execution of more
work than planned.
 Double S-Curve Method
E
100%
Direct+
e Planned
Indirect Early-Start
cost Actual Costs CV
Costs

Work Hours
D
C
100%

Cumulative Cost
a
and Working
B
A
Hours (the
Planned
Hours amount of work
Actual
Hours done)
Time
SV Now
Double S-Curve Method
◼ Although the plot covering the drawback of the
previous technique, it can be misleading and requires
extra care. One can conclude that the project exhibits
a cost overrun equal to the distance between points
“E and e”, and slow work progress (delay) by the
distance between points “A and a”, which is wrong;
but
◼ Point A shows the level of work done till time “NOW”
 Double S-Curve Method
◼ Using the horizontal line, point B shows the time at which
the current level of work was supposed to be completed;
◼ Using a vertical line from point B, point C is the level of
planned cost that correspond to the amount;
◼ Using the horizontal line from point C, point D is the
planned cost for the work done at time ”NOW”; and
◼ Recalculating the cost overrun of the project based on the
amount of work done at time “NOW” (the distance
between points E and D), which is much larger than the
cost overrun assumed earlier.
 The Earned Value Technique
$

BCWS

Earned
Value
Measures

Cost Variance
ACWP
Schedule
Variance

Time
BCWP (EV) Now

Time Variance
 The Earned Value Technique
◼ Budgeted Cost of Work Scheduled (BCWS):
measures What is Planned in terms of budget cost of
the work that should take place (i.e., according to the
baseline schedule of the work).
◼ Budgeted Cost of Work Performed (BCWP) –
Earned Value: measures What is Done in terms of
budget cost of the work that has actually been
accomplished to date.
◼ Actual Cost of Work Performed (ACWP): measures
What is Paid in terms of actual cost of the work that
has actually been accomplished to date.
 The Earned Value Technique

BC WP
Schedule Performance Index (SPI) =
BC WS

BC WP
Cost Performance Index (CPI) =
AC WP
Project Performance Indices
SPI

Schedule Schedule
Advantage >1 Advantage
Cost Overrun Cost Saving

CPI
<1 1 >1

Schedule Delay Schedule Delay

Cost Overrun <1 Cost Saving
 Solved Example
◼ Find the early & late times for the following
project.
Act no. Act. Duration Predecessor Res.
1 A 0 ---- 0
2 B 2 1 0
3 C 5 1 2
4 D 3 1 2
5 E 2 2 1
6 F 6 2 2
7 G 6 3 3
8 H 6 4 1
9 I 4 4 0
 Solved Example
Act no. Act. Duration Predecessor Res.
10 J 2 5, 6 4
11 K 7 6, 7 2
12 L 3 2, 8 2
13 M 2 2, 8, 9 4
14 N 2 10, 11, 12, 13 0

◼ Draw the project BCWS, BCWP and ACWP

curves to the end of week 5, give the
following .
 Solved Example
◼ Progress report at end of week 5.

Activity ES Projected completion

B 0 3
C 0 5
D 0 4
E 2 5
H 3 9
I 3 8
 Solved Example
◼ Budget values for the project
Act. Total Cost
B 24,000
C 145,000
D 84,000
E 126,000
F 168,000
G 126,000
H 78,000
Solved Example
Act. Total Cost
I 80,000
J 216,000
K 84,000
E 70,000
L 228,000
M 120,000
N 36,000
Actual cost to end of week 5
Week 1 2 3 4 5

Cost (000) L.E 72 72 125 130 65

529
Cumulative cost (LE) *100 1600
1400
1200
1000 BCWS
800 BCWP
600 SV = 92
ACWP
400
CV= 27
200
0
1 4 7 10 13 16 19
Weeks
 Example

◼ A 32-day project
◼ Indirect cost = $500/day (total = ?)
◼ Indirect cost is distributed in a balanced way
◼ Reporting Period = 8 days
Example
$2,000 / $125,000

1.6 x $16,000

$500/day x 32 days
Example
1 2 3 4

100% cost
100% cost
100% cost
4/8=50%

2/10
Example
1 Budget Cost for period 1 =
1x$2,256
+ 1x$11,280
+ 1x$4,512
+ 0.5x$20,304
+ 0x$22,560
+ 0.2x$16,920
+ 0.125x$13,536
+ 0x$18,048
+ 0x$11,280
+ 1x$11,280
+ 0x$9,024 =$44,556
 Example BCWS

BCWS

1 2 3 4
BCWS 44,556 53,016 24,929 18,499

Cumulative 44,556 97,572 122,501 141,000

 Example BCWS

$150,000

$141,000
$122,501
$100,000
$97,572
Cost

$50,000
$44,556

$- $-
0 8 16 24 32
Time
Example Now
 Example ACWP

ACWP

1 2 3 4
ACWP 38,659.72 46,777.78

Cumulative 38,659.72 85,437.5

 Example ACWP

$150,000

BCWS $141,000
$122,501
$100,000
$97,572
Cost

$85,438
$50,000
$44,556
ACWP
$38,660

$- $-
0 8 16 24 32
Time
 Example BCWP

BCWP

1 2 3 4
BCWP 38,634 53,016

Cumulative 38,634 91,650

 Example BCWP

$150,000

BCWS $141,000
$122,501
$100,000
$97,572
$91,650
Cost

$85,438
$50,000
$44,556
ACWP
$38,660
$38,634
BCWP
$- $-
0 8 16 24 32
Time
3. Forecasting at Completion
◼ The Estimate at completion (EAC) =
BCWS at completion + (ACWP – BCWP)
at present
◼ EAC = 141,000 + (85,438 – 91,650)
= $134,788
Cash Flow
profit
Max. amount of cash
needed, at period 5
Expense
S-Curve

Income profile

1 2 3 4 5 6 7
 Cash Flow Example

◼ The 32-day network

◼ Indirect cost = $500/day (total = ?)
◼ Contractor’s optimum Markup = 5%
◼ For bid prices, Indirect cost will be distributed in a balanced way
◼ Retainage amount = 10%; all withheld money will be paid back with
the last payment
◼ Owner’s payment delay of any invoice is one period (e.g., 1st period
invoice will be paid at the END of the 2nd period
◼ Time Period =8 days and the interest per period is 1%
 Cash Flow Example

◼ Step 1: Project Network and Bar Chart

◼ Step 2: Assessment of Costs, Expenses, and Bid Prices

◼ Step 3: Cash Flow Calculations

◼ Step 4: Plotting the Overdraft Profile

◼ Step 5: Interpreting the Results

Cash Flow step1
$2,000 / $125,000

1.6 x $16,000

$500/day x 32 days
Cash Flow Example
1 2 3 4

100% cost
100% cost
100% cost
4/8=50%

2/10
Cash Flow Example
1 Direct Cost for period 1 =
1x$2,000
+ 1x$10,000
+ 1x$4,000
+ 0.5x$18,000
+ 0x$20,000
+ 0.2x$15,000
+ 0.125x$12,000
+ 0x$16,000
+ 0x$10,000
+ 1x$10,000
+ 0x$8,000 =$39,500
 Cash Flow step3

X $1000 1st 2nd 3rd 4th 5th Ret.

(1)
39.5 47 22.1 16.4 0
Direct Expense
(2)
4 4 4 4 0
Indirect Expense
(3)
43.5 51 26.1 20.4 0
Total Expense
(4)
43.5 94.5 120.6 141 141
Cumul. Expense
 Cash Flow step3
X $1000 1st 2nd 3rd 4th 5th Ret.
(5)
46.78 55.67 26.18 19.42 0
Budget Value
(6) = (5)x10% Sum
4.678 5.567 2.618 1.942 0
Retainage 14.81
(7) =(5)-(6)
42.11 50.1 23.56 17.48 0 14.81
Amount Payable
(8) Payment 14.81
Received
(9) Cumul.
0 42.11 92.21 115.8 133.2 148.1
Owner payment
 Cash Flow step3
X $1000 1st 2nd
(3) Total Expense 43.5 51
(7) Payment Received 42.1

(10) Overdraft before -51

interest -43.5 -43.935
=-94.935
(11) = (10)x 1%
-0.435 -0.949
Interest on overdraft
(12) Total Overdraft -43.935 -95.884
 Cash Flow step3

X $1000 1st 2nd 3rd 4th 5th

(10) -28.21
-43.5 -94.94 -79.88 -50.98 -27.93 +17.48
+14.81
(11)
-.435 -.949 -.799 -.510 -.279

(12)= (10)+(11) -43.9 -95.9 -80.7 -51.5 -28.2 4.078