A Cost Based Approach to Project Management: Planning and Controlling Construction Project Costs

Cover
Half Title
Title
Copyright
Dedication
Contents
Abbreviations
Preface
1 Defining a Project
	Introduction
	Project Definers
		Triple Constraints
			Scope
			Cost
			Duration
			Time and Money Complications
			Do the Triple Constraints Sufficiently Define a Project?
		Uniqueness
		One-Time Event
		Comprised of and Breakable to Tasks
		Task Interdependence
	Other Requirements and/or Expectations
	Can Value Be a Project Definer?
	What Happens If It Is Not a “Project”?
	Construction Projects
		Types of Construction Projects
			Public and Private Construction Projects
			Buildings: Residential and Nonresidential Building Projects
			Heavy and Civil Engineering Construction Projects
		Stakeholders and Key Participants
			Stakeholders’ Differing Project Perspectives
			Basic Functions of the Stakeholders
			The Operator as the Fourth Stakeholder
		Project Delivery Systems
			Most Common Project Delivery Systems
		Construction Contract Pricing Options
			Unit Price Contracts
			Lump Sum Contracts
			Variations of Cost Plus Fee Contracts
	In Summary
2 Management, Project Management, and Construction Projects
	Introduction
	Modern Management
		Why Study Management?
		Who Are Managers?
		Everybody Manages Something
		What Do Managers Do?
		Where Do Managers Work?
		Management Levels and Titles
		Accountability and Dependency
	Roots of Modern Management
	Managerial Roles
		Interpersonal Roles
		Informational Roles
		Decisional Roles
	Managerial Skills
		Conceptual Skills
		Interpersonal (Human) Skills
		Technical Skills
	Management Practices
	Managers Have to Make Decisions
		Common Decision-Making Mistakes
	Management Process
		Planning
		Organizing
		Leading
		Controlling
	Most Common Managerial Mistakes
	Project Management
	Construction Project Management
		Cost and Time Considerations at Initial Stages of a Construction Project
	In Summary
3 Understanding Cost and Its Elements
	Introduction
	Cost Is More Than a Dollar Amount
	Elements of a Cost
	Price
		Unit Cost, Unit Price
		Assembly Unit Costs
	Cost Line Items
	Example for Unit Cost Conversions, Assembly Unit Cost, and Performance Assumptions
		Unit Cost Conversion for Materials
		Labor and M/E Unit Costs
		Labor and M/E Quantities
		Output Rate
		Resource (Labor or M/E)- Hours
		Output Rates, Resource-Hours and Activity Durations
	Managing a Cost Requires Knowing Both of Its Elements
	Tax, Price, and Cost
		Can the Price Be Less Than Its Cost?
	Defining Value
		Value, Quality, and Cost
		Types of Values
		Value Priorities of Stakeholders and Key Participants
		Value as a Measure of Project Success
		Considerations for Setting Value Goals for Projects
	In Summary
4 Cost Types and Components
	Introduction
	Types of Costs
		Direct and Indirect Costs
		Fixed and Variable Costs
		Examples
			Fixed Direct Costs
			Fixed Indirect Costs
			Variable Direct Costs
			Variable Indirect Costs
		Identifying Cost Types Example
	Components of a Cost
		Material Component
		Labor Component
		Machinery, Equipment, and Other Direct Costs (M/E) Component
		Overhead (O/H) Component
	Depreciation Is Not a Cost
	What Do Cost Types and Components Indicate?
	In Summary
5 Structuring Project Cost
	Introduction
	Project Planning Process
		Initiator of the Project Planning Process: Scope
		Detailing Scope by Breaking It Down to Tasks: Work Breakdown Structure (WBS)
		WBS Should Cover the Entire Scope
		Example: Dinner Party Project
	Compiling Detailed Task Information: Work Package Dictionary (WPD)
	Structured Project Cost:Project Cost Breakdown (PCB)
	PCB and Project Price Breakdown
	Different Perspectives for PCB
	WBS Examples for Different Stakeholders
	In Summary
6 Cost Estimating
	Introduction
	Cost Estimating in the Construction Industry
	Types of Estimates and Estimate Accuracies
	Cost Estimating Process for Line Items
		Quantity Take-Offs (QTO)
			QTO for Materials
			Labor and M/E QTOs and Durations
	Estimate Preparation Duration and Accuracy
	Expert Opinion in Estimating Costs
	Step-by-Step Cost Estimating Process
	Project Delivery Systems, Contract Pricing, and Cost Estimating
	Technology and Reference Data for Estimating
	Updating WPD With Estimated Cost Data
	WPD and Project Resource Schedule (RBOQ)
	Example: Hotel Building Superstructure
		Quantity Take-Offs, BOQ, WPD Update, and Project Resource BOQ
		STEP 1. Prepare (or Check if Available) Quantity Take-Offs
		STEP 2. Update the WPD for This Activity
		STEP 3. Assign Resources and Determine Durations
		STEP 4. Calculate the Cost by Applying Unit Costs to the Quantities
		STEP 5. Check Cost and Schedule Acceptability
			Option 1. Increasing Crew Size
			Option 2. Keeping the Initial Crew Size and Paying Overtime as Needed
			Decision
		STEP 6. Finalize by Updating WPD
		Remarks on Cost and Duration Correlation for the Example
	Estimating Overhead(s)
		Task O/H
		Project O/H
		Head Office O/H
		Estimating the O/H
	In Summary
7 Contingency as a Part of Cost
	Introduction
	Certainty, Uncertainty, Risk, and Contingency
		The Known and Unknown Risks
			The Known-Unknowns
			The Unknown-Unknowns
	Contingency at Several WBS Levels
	Both Cost Elements May Include Contingencies
	Typical Uses of Contingencies
		To Cover for Errors
			Systematic Errors
			Random Errors
		To Cover for Omissions
	Escalation
	Using a Provisional Sum to Avoid a Contingency
	Dealing With Unknown-Unknown Scope Changes
	Contingency and Profit
	Contingency and Change Orders
	Hidden Contingencies
	How Much Is Enough?
	Management Reserve and Project Manager
	In Summary
8 Project Cost Budget
	Introduction
	Project and Operational Budgets
		One-Time Occurring and Not Repetitive
		Covers the Entire Project Duration
		Requires Unique and Project-Specific Resources
	Project Cost Budget Includes and Reveals All Required Resources
	Project Cost Budgets and Schedules Are Interrelated
	Project Budgets Include All Known-Unknowns
	Preparing and Reporting Cost Budgets
		Budgeting Activity Costs
		Budgeting Project Cost
		Budgeting for Project Resources
		Budget Formats
	Monitoring Cost Budgets
		Budget Format for Performance Monitoring
		Budget Format for Futuristic Projections
		Monitoring Project Resources and Output Rates
	Revising Budgets
	Budget–Schedule Integration: Expense Flows and Resource Schedules
	Preparing the Bid Price
	In Summary
9 Controlling Cost
	Introduction
	Cost Accounting Versus Cost Control
		Major Differences
		Accrued Expense Versus Committed Cost
	Step-by-Step Cost Controlling Process
		Cost Control Is Not a Process of Reducing Cost
	Monitoring Progress
		What to Monitor
		Monitoring Frequency
		How to Monitor
			Reporting
				Daily Reports
				Project Progress Reports
			Processing Progress, Invoices, and Payroll
				Sorting and Distributing Accounting Cost Data
				Calculating/Verifying Actual Quantities
	Interpreting Monitored Performance
	Root Causes of Variances
		Common Reasons for Quantity Variance
			Take-Off Errors
			Scope Creep
			Excessive Waste
			Damages
			Adverse Conditions
			Changes
				Scope Changes
				Design Changes
				Changes in Regulations
				Differing/Unforeseen Site Conditions
				Failure of a Stakeholder
			Force Majeure
		Unit Cost Variance
		Errors, Inflation, Changes, Market, and Adverse Conditions
			Unit Cost Variance and Quantity Implications
		Labor and M/E Performance Variances
	Remedial Action Considerations
		Variance Accountability and Remedial Action
		Categorical Remedial Action Options
	Remedial Action and Delivery Method/Contract Pricing Complications
	What Is the Right Remedial Action?
	Implementing Remedial Actions
		Keeping Records
	Disputes Related to Variances
	Cost Control Process Schematics
	In Summary
Appendixes
	Appendix A: Cost Budget Forms for Hotel Project Stakeholders
		A.1: For Owners
		A.2: For Contractors
		A.3: For Hotel Operators
		A.4: Design WBS
	Appendix B: Sample Work Package Dictionary Form
	Appendix C: Typical Progress Report Forms
		C.1: Sample Daily Report
		C.2: Monthly Reports
About the Author
Index