Q1. Explain the role and responsibility of Quantity surveyor in Project management?

In project management, Quantity Surveyors (QS) play a crucial role in ensuring financial control and
managing costs throughout the project lifecycle. They combine a blend of construction knowledge,
financial expertise, and contractual awareness, performing various key tasks and bearing significant
responsibilities.

Main Roles and Responsibilities:

 Cost estimating and budgeting: This involves preparing detailed cost estimates for all project
phases, considering materials, labour, equipment, and other resources. QS contribute to
feasibility studies and inform decision-making during pre-construction.

 Procurement and contract administration: QS advise on procurement strategies, participate

in tender evaluations, and draft tender documents and contracts. They manage contractual
obligations, assess variations, and prepare claims if necessary.

 Financial monitoring and reporting: QS track project expenditure against the budget,
analysing costs and identifying any deviations. They prepare regular financial reports for
project stakeholders, providing insights into financial performance and potential risks.

 Value engineering and risk management: QS suggest cost-saving alternatives and identify
potential risks throughout the project. They participate in value engineering exercises to
optimize costs without compromising quality or functionality.

 Dispute resolution and claims management: In case of contract disputes or claims, QS

provide technical and financial expertise, preparing and negotiating claims on behalf of the
client.

Q.2 What is Shadow price with reference to Social Cost Benefit Analysis? How is Shadow price
measured for traded and non-traded goods?

A shadow price is an estimated value assigned to goods or services that are not traded in the regular
market. This allows them to be compared with other costs and benefits that do have market prices,
providing a more comprehensive picture of the project's impact on society as a whole.

Traditional cost-benefit analysis only considers market prices, which can often misrepresent the true
value of something. For example, the market price of clean air does not reflect its total economic
and environmental benefits. Hence shadow prices are used which address this by accounting for
externalities and Promoting efficient resource allocation.

Measuring Shadow Prices:

Determining the shadow price for both traded and non-traded goods requires different approaches:

1. Traded Goods:

 Willingness to Pay (WTP): This method estimates the maximum amount individuals are
willing to pay for a good or service, often through surveys or contingent valuation
techniques.

 Price adjustments: Sometimes, existing market prices can be adjusted to reflect social costs
or benefits not captured in the price, such as externalities.
2. Non-Traded Goods:

 Cost-based methods: These methods estimate the cost of replacing the non-traded good
with its closest market equivalent, such as the cost of building a public park to replace
recreational benefits lost due to development.

 Production cost approach: This method estimates the cost of producing the non-traded
good, using data on inputs like labor and materials.

 Preference Method: This method involves analyzing people's choices and behavior to reveal
their preferences directly or indirectly. For example, looking at the time and money people
spend on recreational activities to estimate the value of environmental amenities.

Q.3 What are the advantages of Cost Variance analysis and Schedule Variance analysis in Project
Management? Innumerate with example.

Advantages of Cost Variance Analysis:

Early Budget Issue Identification: Quickly detects if the project is overspending or underspending,
enabling early corrective actions like renegotiating contracts or optimizing material usage.

Improved Budget Control: Tracks changing costs over time, helping refine future budgets and make
informed spending decisions based on identified areas of over or underspending.

Enhanced Financial Communication: Provides a clear way to communicate project financial

performance to stakeholders, building trust and demonstrating control over project finances.

Advantages of Schedule Variance Analysis:

Early Detection of Delays: Reveals if the project is progressing as planned or facing delays, allowing
prompt action to minimize their impact, such as adjusting deadlines or reallocating resources.

Improved Risk Management: Identifies potential risk factors affecting the schedule, enabling
proactive measures to prevent future delays based on an understanding of the reasons behind
current delays.

Enhanced Resource Allocation: Optimizes resource allocation by highlighting tasks contributing to

delays, allowing effective prioritization and focusing on critical tasks to bring the project back on
schedule.

Imagine you're managing a website development project budgeted at $100,000 with a 6-month
deadline.

 At month 3:

o CV: The project has spent $60,000, $5,000 more than planned. CV analysis reveals
higher server costs due to unexpected traffic growth.

o SV: The project is two weeks behind schedule due to complex design changes
requested by the client.
By analyzing both CV and SV, you can understand the complete picture of project performance. You
can then implement corrective actions like negotiating additional budget with the client, prioritizing
development tasks, and optimizing server resources to ensure the project remains within budget
and completes on time.

Q.4 Definitions of various Costs-

Direct Costs and Indirect Costs:

 Direct Costs: These are costs directly attributable to a specific project or activity. They
include expenses such as labor, materials, and equipment directly associated with the
production or execution of a particular task. For example, the wages of construction workers
on a building project are a direct cost.

 Indirect Costs: These are costs that are not directly tied to a specific project but contribute
to the overall functioning of a business. Indirect costs are often overhead expenses, such as
rent, utilities, and administrative salaries. While they support various projects, they are not
easily traceable to a specific task or product.

Fixed Costs and Variable Costs:

 Fixed Costs: These are costs that remain constant regardless of the level of production or
output. Fixed costs do not change with the quantity of goods or services produced. Examples
include rent, insurance, and salaries of permanent staff.

 Variable Costs: Variable costs fluctuate in direct proportion to the quantity of goods or
services produced. As production increases, variable costs rise, and they decrease when
production decreases. Examples include raw materials, direct labor, and utilities tied to
production volume.

Sunk Cost:

 Sunk Cost: This is a cost that has already been incurred and cannot be recovered. Sunk costs
should not influence future decision-making, as they are unrecoverable regardless of the
chosen course of action. For instance, if a company invests $100,000 in a project that later
proves unprofitable, that $100,000 is considered a sunk cost.

Opportunity Cost:

 Opportunity Cost: This represents the value of the next best alternative forgone when a
decision is made. It reflects the benefits or profits that could have been gained from
choosing a different option. For example, if a person decides to attend a workshop instead
of working, the opportunity cost is the potential income they could have earned during that
time.

Project Cost and Major Types:

Project cost refers to the total expenditure required to complete a project from start to finish. It
encompasses all the financial resources used to achieve the project's objectives, including both
direct and indirect expenses.
Two major types of project cost:

Direct Costs: These costs are directly and specifically attributable to the project and can be easily
traced to individual project activities. Examples include:

Materials: Raw materials, equipment, supplies, software licenses.

Labor: Salaries, wages, benefits for project personnel.

Contractors: Payments to external service providers for specific tasks.

Permits and fees: Government permits, licenses, and inspection fees.

Indirect Costs: These costs support the project but are not directly tied to specific activities. They are
often shared across multiple projects within an organization. Examples include:

Overhead: Rent, utilities, insurance, administrative costs.

Depreciation: Decrease in asset value due to wear and tear or obsolescence.

Contingency: Reserve funds for unexpected expenses or risks.

Management and supervision: Salaries and benefits for project managers and administrators.