The Four Major Steps of Cost Management
Following The Project Management Body of Knowledge (PMBOK), which is the guide considered to be the bible of project management theory, reffers to cost management as a four processes operation. As a construction project starts from scratch to develop, the sequence that follows brings the project from the planning board to reality.
Resource Planning is the part of the initiation stage of a construction project. Resource planning in moste cases is using the work breakdown structure (or WBS) – which is an hierarchical representation of all project deliverables and all the works required to complete them – in order to calculate the full cost of resources needed to bring a construction project at completion. Project managers typically determine required resources for each work breakdown structure component and then add them to create a total resource cost estimate for all of the construction project deliverables.
Cost Estimating is a repeating process that uses various estimating techniques to determine the total cost of completing a project. There are various cost estimating processes that use different approaches for computing construction project costs. There is a range from conceptual processes that draw mainly from historical experience and expert judgment to determinative procesess that estimate costs on a component-by-component basis.
Determinative processes are the most accurate but because the estimator’s job is always to create the most accurate estimate possible, determinative estimating processes are only an option if you’ve reasonably finalized a construction project’s scope and deliverables.
Cost Budgeting when satisfactory estimates are created, they can be finalized and approved as the construction project’s budget. Cost managers follow a process of typically release budgeted amounts in steps according to the level of a project’s progress. In most cases, as a construction project develops, these allocations include contingencies and reserves.
Cost Control is the key practice of measuring a construction project’s cost performance according to cost and schedule baselines that provide points of comparison throughout the project life cycle. The specific requirements for effective cost control are set out in the construction project management plan. In most cases it is necessary for a construction project to have a cost control department. The individual in charge of cost management is trying to determine the reasons for cost variations. If they deem cost variations unacceptable, corrective action must be taken from project management in association and help from cost control management. Other tasks for cost control are related responsibilities like ensuring that all the updated construction project budgets reflect to confirmed and aproved changes to the project’s scope.
Construction Cost Control with Rabio
Rabio combines some of the best industry practices and company-specific procedures into a single database powered platform that is perfect for cost management. Create estimates, calculate forecasts and develop project controls plans easily through an easy interface.
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