Budgeting and Cost Management: Civil Engineering Management B

Budgeting and Cost
Management
Civil Engineering Management B
Session Objectives
Includes:
The estimating of costs and the setting of an agreed budget
The initial cost estimate is developed in line with the scope,
schedule and resources
The budget is phased over time to predict expenditure thus
allowing a cashflow forecast to be developed.
Cost management is the monitoring and control of actual
expenditure against the budget/cashflow forecast.
By comparing actual cost against the expenditure profile,
trends can be identified and corrective action taken to
minimise adverse variances.
Such reviews form the basis of Earned Value management
which is covered in a later lecture.
People aspects
Pay
hourly rate basic/overtime
Subsistence
People overhead
Pension
National Insurance contributions
Holiday
Sick pay
Equipment car/phone/office
Overheads typically 100-250%
Equipment aspects
Rate e.g. hourly/daily/weekly
Hired/own ~ equivalent hire
charge
Establishment charge
Equipment overhead
Typical plant overhead 5-10%
(E.g. fuel, oil, cleaning)
Material aspects
Unit cost m, m2, m3;
mass (kg/tonnes)
Delivery charge
Material overhead
Wastage/breakage/theft
Up to 5% typically 2%
Cost of doing the work
Contractors own resources
Using a Subcontractor
Equipment
+ O/H
Fixed cost
but..remeasurable
People
+ O/H
Materials
+ O/H
People
+ O/H
Equipment
+ O/H
Materials
+ O/H
Cumulative Cost (k)
Cumulative cost curve
Time
Cumulative Cost (k)

Based on
ES
Based on
LF
Cost
Envelope
Time
Non-critical tasks
Cumulative Cost (k)

Contractor
Cost
Payment to
Contractor
(Employer cost)
Time

Cumulative Cost (k)
B. Profit
Contractor
Cost
A. Break even
point
C. Borrowing
Payment to
Contractor
(Employer cost)
Time
The Cost project

Developing a cashflow from a Gantt chart
Task
Precedence
Duration
(Weeks)
Estimated
Cost
( x 1000)
Follows Start
50
Follows A
100
Follows B
Precedes Finish
200
Follows A
100
Follows B and D
50
Follows A
50
Follows F
50
Follows A
Precedes Finish
100
Follows E and G
Precedes Finish
10
300
The Cost project
Using the Cost project Gantt, determine

the cost for each four week period
Accumulate the costs and plot the
cumulative cost against the duration,
assuming all costs occur at the end of
each four week period
This could then be repeated for all late
finishes
Determine the cost for each four

week period
Task
50
100
50
50
33
100
100
50
17
25
Precedence
Estimated
Cost
( x 1000)
Follows Start
50
Follows A
100
Follows B
Precedes Finish
200
Follows A
100
Follows B and D
50
Follows A
50
Follows F
50
Follows A
Precedes Finish
100
Follows E and G
Precedes Finish
10
300
50x4/6 = 33.333
50
33
Duration
(Weeks)
Take as 33
17
50-33=17
25
60
120
120
Cost (k)
50
333
192
108
77
120
120
Cu Cost (k)
50
383
575
683
760
880
1000

Cumulative cost (k)
1000 -
X
X
800 -
X
X
600 -
400 -
200 X
I
4
I
8
I
12
I
16
Time (weeks)
I
20
I
24
I
28
Determine the cost for each four

week period
50
100
50
50
33
17
33
25
100
100
120
100
120
17
25
60
Cost (k)
50
50
183
75
102
220
320
Cost (k)
50
100
283
358
460
680
1000

Cumulative cost (k)
1000 -
X
X
800 -
X
X
600 -
X
X
400 -
X
X
200 X
I
4
X
I
8
I
12
I
16
Time (weeks)
I
20
I
24
I
28
Costs and incomes something to

work on

Cumulative Cost (k)
B. Profit
Contractor
Cost
A. Break even
point
C. Borrowing
Payment to
Contractor
(Employer cost)
Time
An Estimating sum
542m of 150mm diameter drain are to be laid at an
average depth to invert of 1.675m.
The construction details:
Backfill with excavated

material
Pipe Bedding
450mm
600 mm
An Estimating sum
The Estimator has estimated:
Output is expected to be 22m per 8 hour day using:
Hired JCB + Operator at 34.70p per hour
Three own operatives at 7.80p per hour
Compactor at 25 per day + Trench Supports at 73 per day
150 diameter pipes at 14.20p per m + 2% wastage
Pipe bedding at 28.00 per Tonne + 5% wastage
Disposal of surplus excavated material is included
The Company has determined:
Own labour overhead is 120%
Hired equipment overhead is 4%
Material overhead is zero but wastage is to be included.
Site overheads are 8% and Head Office overheads, risk and profit are 13%
Determine a rate per m for the installation of this 150mm diameter drain
An Estimating sum
Estimated rate for 150 drain
542
Duration =
= 25 days
22
People
3 operatives x 8hrs x 25 x 7.80 = 4680.00
O/H 3 ops. x 8hrs x 25 x 7.80 x 1.20 (120%) = 5616.00
total labour = 10296.00
An Estimating sum
Estimated rate for 150 drain (continued)
Equipment
JCB 1 x 8 x 25 x 34.70 = 6940.00
Compactor 1 x 25 x 25.00 = 625.00
Trench supports 1 x 25 x 73.00 = 1825.00
Subtotal equipment = 9390.00
Overhead at 4% = 375.60
total equipment = 9765.60
An Estimating sum
Materials
Pipes 542m x 14.20 x 1.02 (wastage) = 7850.33
Pipe bedding
Volume = 542 x 0.6 x 0.45 = 146 m 3
Pipe volume
DDT pipe = 10 m3
150
= 136 m3
x 542= 10m
4
At 1.8 T/m3= 136 x 1.8 = 245T
245T x 28.00 x 1.05 (wastage) = 7203.00
total materials = 15053.33
2
An Estimating sum
Sum up (People, Equipment and Materials) = 35114.93
8% site overhead = 2809.19
New total = 37924.12
13% head office overhead = 4930.14
Total = 42854.26
Divide Total by 542m for rate per m = 79.07
Note: Normally done using a spreadsheet
An Equipment rate sum

A Company is considering buying and owning an excavator rather than
hiring which they are doing at present at a rate of 39.00 per hour including
operator. Enquiries have indicated that:
The cost of purchase is 60,000 and the resale value after 3 years is
12,000.
Fuel is estimated to cost 4,700 per annum and miscellaneous disposals
are to be costed at 10% of fuel cost. A service cost of 900 per annum is to
be included and it is anticipated that there may be three breakdowns/repairs
per year estimated to cost 600 each. 3000 is to be included for one
major repair during the operating life.
Utilisation is expected to be 80% and a 5 day 8 hour 47 week working
period is expected.
A plant overhead of 7% is to be recovered.
The own operator is to be charged at 7.50per hour + 150% labour
overhead.
Determine an equivalent hire rate and comment on the proposal to
purchase this item of plant.

Consider three year life
Capital
Cost of purchase = 60, 000.00
Residual value = 12, 000.00
Capital is = 48, 000.00

Running costs
Annual fuel = 4, 700.00
Misc.
= 470.00
Service = 900.00
B.downs (3) = 1, 800.00
7, 870 x 3 = 23, 610.00
major repair 3, 000.00
Running costs = 26, 610.00
Total cost = 74, 610.00
7% O/H = 5, 222.70
Total costs to recover = 79, 832.70

Utilisation
Usage = 5d x 8hrs x 47wks x 3yrs = 5, 640 hrs
But only 80% = 4, 512 hrs
Therefore plant rate = 79, 832.70/4, 512 = 17.69 per hr
Labour for operator = 7.50 +150% = 18.75 per hr
Therefore equivalent hire rate = 36.44 per hr
This is less than 39.00 so proposal is cost effective.

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Budgeting and Cost

Cost of doing the work

Contractors own resources

Cumulative Cost (k)

Cumulative cost curve

Cumulative Cost (k)

Cumulative cost curve

Cumulative Cost (k)

Cumulative cost curve

Cumulative cost curve

The Cost project

The Cost project

Using the Cost project Gantt, determine

Determine the cost for each four

Cumulative cost curve

Determine the cost for each four

Cumulative cost curve

Costs and incomes something to

Cumulative cost curve

Backfill with excavated

An Equipment rate sum

An Equipment rate sum

An Equipment rate sum

An Equipment rate sum

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