Professional Cost Management in Construction Projects

Professional Cost Management
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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................4
Conclusion................................................................................................................................17
References................................................................................................................................19
Appendix..................................................................................................................................21
3D Design or Layout for the Section Plot 14 of the Warehouse Building...........................21
Drawing of Section Plot 14 of the Warehouse Building......................................................21
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Introduction
Construction Cost Management has become a separate sector in the Construction Industry. It
is considered the essential part of the industry, which is required before, during and even after
the completion of the project. It requires appointing Cost Managers or Quantity Surveyors to
look after the cost throughout the whole construction process (Ashworth and Perera, 2015).
It also requires estimating cost before and managing cost after the project, to complete it
within the estimated amount of money. It also requires all the parties involved in the
construction project, including the constructors, client, lawyers, managers, and workers, to
work ethically and get full value for the money spent throughout the project.
Projects are termed as successful when they are delivered safely to the client with the
required standard of quality, time and on specified budget. An effective cost management is a
very important element to achieve all the required objectives. The clients expect that the total
cost of the projects doesn’t go beyond the agreed budget, and cost certainty is given higher
priority by the majority of the clients (Cooke and Williams, 2009). It is found that cost
management pass through various distinct stages of development both in pre- and post-
contract stages of projects as per aligned by RIBA Plan of Work (2013) stages. In addition to
that, there is the involvement of various stakeholders for giving decisions on each stage as per
the complexity and difficulty level. The stakeholder’s contributions on effective management
of cost design include giving real advice upon cost, allocation of budget regarding elements
of projects, providing advice to the clients as well as proposing a solution when cost exceeds
the approved budgets.
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This essay will also demonstrate the concept related to cost management in construction
projects and its impacts on the role of professional cost manager. The role of cost manager
and issues associated with construction procurement will also be discussed. However, the
main focus of this essay will be on developing of larger public sector building of 10,000m2 in
the developed country and of a new distribution warehouse of 2,000 m2 which is developed
for sale in the open market in a developing country. So, it will analyze the pre- and post-
contract stages and risk associated with it and the usage of various models to overcome the
problems. This will also discuss about the value and financial management including the BIM
of both the projects. It will also take in account the soft landing and ethical consideration of
the projects.
Discussion
In a construction project, for a single person to manage the whole thing is not possible,
especially when the work is large. That is why in most of the construction project, the
contract manager appoints a cost manager. The cost manager must look after the cost of
products bought, along with the planning of cost which will be needed in the future
(Burtonshaw-Gunn, 2017). Not just that, the cost manager also has to think about effective
pricing of the products and the work, and so needs to bargain in all the steps while involves
money. Along with the lowest possible price, the cost manager has to keep the quality of the
products and services at their best. At no cost is the cost manager allowed to hamper the
quality of work.
The cost manager is also called the Quantity Surveyor or the QS. The main role of QS is to
manage the contract throughout the project, as well as managing the finance. However, the
role of QS may vary from project to project but will always be based on the finance sector.
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QS can be a consultant in services such as cost and advisory sector. The role the QS has to
play there is of setting the budget before starting a project, as well as managing the cost in the
phases of design and construction (Clough and et al., 2015). In some cases, QS also
administrates the contract, and sometimes becomes the project manager of the client side and
look after the whole process of building. The following table will highlight the expected cost
for preparing a new (c. 2,000 m2) distribution warehouse in a developing country for open
sale:
Table: 1. Expected Cost/ Investment for (c. 2,000 m2) Distribution Warehouse
(Source: Matyi, 2015)
While the QS is estimating before starting a project in the pre-contract stage, there are some
factors which should be taken into consideration (Halpin, Lucko and Senior, 2017).
• Before starting a construction project, the main work which should be done is land
acquisition, which requires quite a large number of legal fees to buy the site legally,
so that the project faces no problems related to law midway during the work.
• Before starting the project, a lot of money and time get used up in site investigation,
which is not included in the project cost planning, therefore gets wasted.
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• After that, some amount of money is used to enable work as well as
decontaminating the construction site.
• It also includes the fee of the consultants, which varies according to the amount of
transportation cost.
• During the project, financing is done by a bank, which includes interest rates which
depends on the financing method chosen.
• The most important of all of them is the main construction cost, which takes about
70% to 80% of the total cost estimated.
• If there occur some unknown risks, which can be seen mainly in large projects
which goes on for years, then a portion of the budget is used. Also, there can occur
many accidents related to fire, etc, which uses up some time and money for the
project.
• While the construction is going on, at that time too, some legal issues can occur, and
property lawyers are appointed to solve it. These lawyers are more expensive than
most other lawyers. This too is included in the budget of the project.
Value management (VM) or finance management is a term which not only includes
managing the finance but a team-based approach of the construction project in an overall
structured manner. Value management is the value process in which is done during some
phases of the construction project such as the concept, the definition, implementation and
operation phase. It includes a set of procedures which are very systematic and logical (Dada
and Jagboro, 2015). It also includes such techniques, which can enhance the value of the
project throughout the time the project and everything related to it exists. Value management
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