¶ … management has to do with the knowledge of the resources a company uses in running their daily affairs. It also involves effective projection of additional resources that could be needed along the way, and the maximization of the available resources. Maximizing the efficiency of the available resources and the ability to put some of them in reserve are part of Cost Management. Some scholars define cost management as the of cost setting up systems of accounting and models for the provision of guidance in relation to current and future operations in order to achieve specified objectives. They also believe that analyzing and interpreting cost information is vital and aids the processes of decision making. Basically, between a client and a contractor, cost management refers to the final cost of a construction project (Dubois, 2003).
The major reason for the analysis of cost management is to find a more effective final cost in a construction project. Experts have explained that the analysis of cost management is greatly needed for there to be a reliable budget. Usually, the most critically analyzed set of values attracts the clients more. Apart from the overall cost, the team of designers need to present measures of controlling cost even as the overall aim is maintained, in terms of providing quality building when due. The major focus of cost management should centre on the evaluation of several techniques to deliver quality services and products at lower costs. Researchers believe that a construction project manager owes the client the duty of managing cost, and this broadens the scope of cost management. Cost management in a project encompasses the prediction and reporting of cost variables to the client, and helping him to analyze and control expenditure while maintaining quality in the project (Dubois, 2003).
Specialists in the field have outlined the essence and importance of cost management as follows:
To minimize cases of rework in construction projects
Minimizing customer complaints
Reduction in the use of resources
Increase in profit for the contractor (Dubois, 2003).
Principles of Cost Management
Cost Management involves the planning, making estimates, budgeting, and taking measures to control the cost of completing a project within a specified budget. This aspect of management has three main principles:
Estimation of Cost: this has to do with the projection of the approximate cost of the resources that would be needed to successfully complete a project.
Budgeting of the Cost: gathering the cost estimations of the individual deliverables within the project in order to have the total cost.
Cost Control: this involves exertion of expert influence on the factors which affect cost differences, and also controlling the changes that could appear in the budget of a project (Dubois, 2003).
These principles are intertwined and they interact also with all the other area of project management. Each project management process may involve the efforts of one or more members or a group of persons in the project depending on what the needs of the projects are. If the project has different phases, each process of project management occurs not less than once in every phases. Though the processes appear here as distinct elements having defined boundaries, they are, in reality, intertwined, overlapping in ways that details may not be able to capture (Cokins, 2001).
Types of Estimates and Methods for Their Preparation
The estimation of the cost of managing a project has to do with the development of the approximate costs of the resources that will go into the completion of every scheduled activity within the project. The estimator needs to consider the factors responsible for cost variations, without ignoring risks (Cokins, 2001).
The process of estimating cost looks at the budget in relation to offsetting additional costs that may arise. Cost estimations are always expressed in currency units (euro, dollars, pounds, and so on) so as to be able to draw comparisons within and across multiple projects. However, other measurement units, like staff hours and work days, can be used in the analysis of cost in order to ensure effective managerial control (Cokins, 2001).
The accuracy of an estimate in a project increases with the progression of activities. The costs for deliverables are estimated also to account for all the resources that will go into the project. And this includes, among other things, materials, facilities, services, labor, and equipment, without sidelining important categories like inflation allowance and contingency cost. The cost estimate of a deliverable quantitatively assesses the presumable cost of the resources needed to successfully complete that scheduled activity (Cokins, 2001).
Techniques and Tools
Top-Down Model of Estimation (Analogous Estimating)
Analogous...
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