Cost Control Essay Example | Topics and Well Written Essays - 750 words

Cost Control - Essay Example The new methods are based on activity based costing which helps in cost control up to the managerial level. Cost Control and Project Management Cost control has become a very important management tool for construction industry as it does not only helps to make a certain project successful but also gives idea to the construction firm about the most profitable project. The cost control systems can generate data which can be used for progress payment requests and future bidding predictions. Cost Control Systems and Cost Accounts An efficient cost control system is necessary for proper execution of a project. Following are the steps which are mandatory for a successful design and maintenance of a Cost Control System: 1. Determination and allocation of cost accounts is the first step for a cost control system. Proper breakdown of a project into various heads based on type of activity and work is essential. These heads into which the project is divided are known as cost accounts. Establish ing cost accounts helps in maintaining a relationship between the project expenditure and the general accounts of the firm. 2. The formulation of a proper project cost plan is the next step because it helps in setting up a mechanism according to which the actual cost of the project could be compared with the estimated/budgeted cost. Moreover project cost plan also helps in relating costs of the project to the project schedule. 3. Cost Data Collection is the next step in which the actual cost data is collected by various means which include historical data, vendor quotations, supplier catalogs and market surveys. 4. Project Cost Reporting should be done according to the requirement of managerial staff and the Cost Control Engineer should be able to identify the data which is beneficial to the managerial staff. 5. After collecting the data and analyzing it, the final step is selection of Cost Engineering techniques best suited to the project scenario. Cost Coding System and Structure Since the construction projects are of very large magnitude and there is a huge amount of data which has to be organized. Cost coding systems are used for organizing the cost control data so that the required information can be accessed easily. Various organizations like American Road Builders Association, Associated General Contractors and the Construction Specifications Institute have developed cost coding systems and a project manager and cost control engineer can select the appropriate system according to the project under consideration. The cost coding system helps in giving a proper structure to the cost control breakdown of a project. Various cost accounts are given cost codes according to the detail incorporated in them. Cost control codes have various detail levels, the longer is the cost code the higher is the detail present in it. The various details which are present in a cost code are project initiation year, project type, project number, construction type classificatio n, work classification, functional classification etc. This makes project codes as long as 13-digit, but these details can easily be processed in computers and is also understandable as the people working in the cost control department have a very clear idea of these codes. Cost control matrix is another way of controlling cost which traces the overlapping areas between material and work cost accounts. Earned Value Method Earned Value Meth