PAMANTASAN NG LUNGSOD NG MAYNILA

(University of the City of Manila)

COLLEGE OF ENGINEERING AND TECHNOLOGY
CIVIL ENGINEERING DEPARTMENT

PROJECT COST
MANAGEMENT
Engr. Reschelle Anne G. Silang
 OVERVIEW
1. Project Cost Management in Construction
2. Project Cost Management in Planning
2.1 Estimating Costs and Techniques
2.2 Bill of Materials (Bill of Quantities)
2.3 Allowances, Contingency and Management Resources
2.4 Escalation, Inflation, and Currency Exchange
2.5 Metrics
2.6 Additional Considerations in Estimating
2.7 Determine Budget
3. Project Cost Management Monitoring and Control
3.1 Actual Cost 3.3 Progress and Performance Reviews
3.2 Earn Value Management 3.4 Forecasting or Estimate at Completion
 01
PROJECT COST
MANAGEMENT IN
CONSTRUCTION
 PROJECT COST MANAGEMENT IN
CONSTRUCTION
Project Cost Management in construction includes cost estimating, cost budgeting, and cost monitoring
and control, and further entails managing the day-to-day project costs. This is considerably different
from financial management, which deals with revenue sources for financing the construction project, its
return on investment, its cash flow, and its investment payback analysis.
1. Direct costs - those that are directly attributable to a specific scope of
work, and may include equipment costs (e.g., a backhoe that is used exclusively for excavation).
2. Indirect costs - those costs that cannot be directly associated to a specific scope of work and
are allocated equitably over multiple scopes of work on a single project (e.g., equipment and
small tools). It can either be variable or fixed.
• DC x Certain Percentage = OCM
DIRECT
0.3

0.11

INDIRECT 0.03

0.01

0.10

0.12
Bring out your calculators..
https://www.dpwh.gov.ph/dpwh/sites/default/files/issuances/DO_197_s2016.pdf
https://www.dpwh.gov.ph/dpwh/sites/default/files/issuances/DO_197_s2016.pdf
 02
PROJECT COST
MANAGEMENT IN
PLANNING
 PROJECT COST MANAGEMENT IN
PLANNING
Project Cost Management in Planning - The cost management plan should consider the life cycle cost of
a project and may include operating costs, depending on the project delivery method. The plan should
be customized for the needs of the owner/sponsor with due consideration to other stakeholders’
needs. Cost management planning is a function that should be managed throughout the design process
in an effort to enhance the ability to “design to cost” and determine how the bill of quantities
(sometimes referred to as BoQ) will be prepared.

2.1 Estimating Costs and Techniques

2.1 Estimating Costs and Techniques

1. Analogous (Conceptual) Estimating - Analogous estimates are also referred to as

preliminary, conceptual, top-down, order of magnitude (OOM), and rough order of
magnitude (ROM).
2. Parametric estimating - uses a statistical relationship between relevant historical data and
other project-specific variables (e.g., square footage in building construction) to calculate a
cost estimate.
3. Bottom-Up (Detailed) Estimating - A prerequisite to a bottom-up estimate is a clearly
defined and detailed scope including documents such as a WBS, issued for construction
(IFC) drawings, and specifications. The detailed estimating technique results in a transparent
and structured estimate for the project that is more accurate and reliable.
4. Three-Point Estimating - Cost estimates based on three points with an assumed
distribution provide an expected cost and help clarify the range of uncertainty around the
expected cost. A project simulation model may be used, which translates the specified
detailed uncertainties of the project cost into their potential impact on project objectives
2.1 Estimating Costs and Techniques

5. Monte Carlo Simulation - The typical statistical distributions used for modeling construction
costs are beta, triangular, and lognor
mal distributions. However, opinions differ on the practical advantages (accuracy of
estimates) of using mathematical models for project cost analysis and quantitative risk
analysis, which is associated with cost estimates.
2.2 Bill of Materials (Bill of Quantities)

Bill of quantities (BOQ) is also a commonly used term that refers

to a document that itemizes measured quantities of
material, equipment, and labor.
• Candy
• Cost X
• Planswift
• Procore
2.3 Allowances, Contingency and Management Resources

allowances refer to a specific discipline or component of work

contingency refers to the total project cost or an aggregated control account.
Management reserve is not included in the cost baseline but is part of the
overall project budget and funding requirements.

2.4 Escalation, Inflation, and Currency Exchange

Escalation should account for market conditions that affect pricing in addition to
monetary inflation.
Inflation is a general index for the average increase of prices in an economy
Currency exchange used for estimates and exchange rate fluctuations is an
important consideration in construction projects. This can be difficult when
estimating international projects, especially when allocating responsibility for
currency exchange risk and taking into consideration the impact due to tax
legislation in the countries involved.
2.5 Metrics

Metrics used are primarily a combination of labor hours, equipment, and

material costs. Parametric cost models used within construction rely on metrics
such as square footage, location, and quality of materials to develop an estimate.
2.6 Additional Considerations in Estimating

The following list provides some additional factors that should be considered in
construction cost estimating:
• Site conditions (a site visit is generally recommended to evaluate site conditions);
• Labor resource availability, type, and wage rates (unions or open shop);
• Site access restrictions;
• Restricted working hours;
• Proximity to facilities available;
• Equipment and material logistical requirements;
• Weather considerations;
• Local community and social group impacts;
• Health, safety, and environmental regulations; and
• Geotechnical data.
 2.7 Determine Budget

A project budget can be established once an estimate is

approved. This involves aggregating the estimated costs
of individual activities or construction work packages. The
key benefit is that it determines the cost baseline in which
project performance can later be monitored and
controlled.
.
• Construction Work Package (CWP)
• Cost Baseline
 03
PROJECT COST
MANAGEMENT IN
MONITORING AND
CONTROL
3.1 Actual Cost 3.3 Progress and Performance Reviews

Most organizations have a set schedule (cut-off date) for Progress can be measured in several ways, such
capturing the actual cost at the end of a work period as units completed, real and approved use of
(weekly, biweekly, or monthly) depending on the activity resources, incremental milestones, start or
or project. The project accounting system captures the finish of work activities, or based on an
actual labor, material, equipment, and subcontractor costs inspector or supervisor opinion. Progress
from that work period. The accounting report is reviewed and performance reports (PPR) showing the
and analyzed for completeness and accuracy by the EVM values are published for management
project team. review and, if needed, any responsive actions

3.2 Earn Value Management 3.4 Forecasting or Estimate at Completion

It can be based on quantities to measure physical Forecasts are generated, updated, and reissued based on
progress, which is done by measuring installed work performance data provided during project execution.
quantities and comparing them to planned quantities As work on the project progresses, cost control captures
on a period-by-period basis. more precise information and these contingency reserves
may be used, reduced, increased, or eliminated.