If the cost estimate is produced properly, the conversion from estimate to budget should be accomplished with little difficulty. The various work items that are the basis of the cost estimate will also form the basic structure of the budget, which is a plan for the financial aspects of the project against which actual financial performance can be measured and compared. Once the budget is established, the process of cost monitoring can be carried out. This process will be described in the following chapter, as we consider several issues related to operating the project. In the mobilisation stage, the budget and the framework for cost control will be established.
The three purposes of construction cost control systems are (1) to provide a means for comparing actual with budgeted expenses and thus draw attention, in a timely manner, to operations that are deviating from the project budget, (2) to develop a database of productivity and cost performance data for use in estimating the costs of subsequent projects and (3) to generate data for valuing variations and changes to the contract and potential claims for additional payments. We have discussed the second of these purposes in our consideration of cost estimating in Chapter 4 and have emphasised the importance of cost databases, while admitting the need for judgment for every unique project estimate. The first purpose, cost control and the change, variation and claims processes will be considered in Chapter 6.
In the previous chapter, we illustrated the use of an estimating software package called WinEst®, by including two tables (Tables 4.5 and 4.6), produced by that program. Many cost accounting programs provide the contractor with a means to track project costs, using the estimate as a basis. For illustration, we use Peachtree Complete Accounting 2002®, available from Peachtree Software Inc. (2002). The first step in using this package for project cost accounting is to export the WinEst® estimate to Peachtree and to structure the project budget in a form that will be used for cost control. Table 5.3 contains the project direct-cost budget for
Bennett Construction Direct Cost Budget
As of Apr 5, 2004
Filter Criteria includes: 1) IDs from 2004-611 to 2004-611. Report order is by ID.
Job ID Job description For customer
Phase ID Phase description Cost code description Est· exp· units Est· expenses
2004-611 1.505 Mobilisation Equipment 1.00 120.00 Concrete wall Labour 1.00 550.00 Meridian shippers 1.710 Clean up and move out Equipment 1.00 120.00 Labour 1.00 320.00 2.110 Clearing and grubbing Equipment 400.00 84.00 Labour 400.00 132.00 2.220 Silt excavation Subcontractor 12.10 508.20 2.221 Rock excavation Subcontractor 5.30 707.55 2.224 Backfill Subcontractor 13.80 327.06 3.115 Continuous edge forms Labour 12.20 382.10 Material 12.20 200.69 3.135 Wall formwork Labour 151.00 7429.20 Material 151.00 2672.70 3.211 Footing reinforcement Labour 0.14 69.98 Material 0.14 85.19 3.213 Wall reinforcement Labour 1.34 676.98 Material 1.34 824.10 3.310 Footing concrete Equipment 2.40 47.40 Labour 2.40 150.00 Material 2.40 265.92 3.318 Wall concrete Equipment 15.00 228.00 Labour 15.00 396.00 Material 15.00 1900.50 5.050 Anchor bolts Labour 40.00 176.00 Material 40.00 160.80
2004-611 Total 18 534.37
160 The Management of Construction
our concrete wall project. Note that the work items and their values correspond to the direct-cost portion of our estimate given in Tables 4.1, 4.5 and 4.6. This table is confined to direct-cost items because that is the work whose costs must be controlled by management staff on the project worksite. We could include site overhead costs on this cost control scheme as well.
The cost accounting code system must be simple enough to be understood and used in the field and also sufficiently comprehensive to acquire the data necessary to fulfil the three purposes listed above. Too much detail is costly, may be misunderstood and misused and can result in information that is unneeded. On the other hand, a code simply representing ‘concrete’ will hardly identify problems with the placement of footing concrete for machinery foundations. Judgment is required to establish a code system that balances these considerations.
It is generally believed that a single cost-coding system should be used for all projects throughout the contractor’s organisation. Most such companies tailor systems for their own use and there are many methods of classification ‘represented by combinations of numbers and letters, both upper and lower case, full stops, colons, hyphens, etc., all of which have taken their place in the system’ (Pilcher, 1992). A simple system might be based on alphabetical notation broken down by trade. Two or three letters or letter/number combinations might be sufficient. For example, Pilcher (1992) shows the use of BEM to represent laying engineered bricks in a manhole and DC3 for drainlaying 300 mm diameter concrete pipes; in each case, the first letter designates the trade (B for bricklaying and D for drainlaying), with subsequent letters or numbers indicating details within the trade.
Many contractors use a numerical coding system and often the coding is linked directly to the work breakdown structure, such as that in Figure 5.7. If the cost estimate is structured on the basis of the technical specifications, a cost-coding system may use the master specification format as its foundation. The following represents one of many possible coding layouts:
076 2004 08 06136.15 2, in which
076 = the 76th project begun this year 2004 = year of project start
08 = location in project; this might be the floor of a building or a kilometre location on a highway project
06136.15 = work type code, where 06 = wood and plastics from the 16 divisions of the CSI master format, 136 = heavy timber trusses as a subdivision of that work and 15 provides further details, such as elements of a certain size
2 = distribution code, representing materials, with other numbers for labour, equipment and the like.