Cost estimating is vital part of project management where to achieve the goal targeted by client. A cost estimate representing the original line of the project cost at different stages of development. A cost estimate at a given stage of project development represents a prediction provided by cost estimators or engineers on the data available.
Unit costs for bill of quantities: A unit cost is assigned to each one of the facility components or tasks as represented by the bill of quantities. You can find consists of few task in determined bill of quantities. Once those tasks are defined and quantities representing these task are assessed, a unit cost is assigned to each and then your total cost is determined by summing the expenses incurred in each task.
Allocation of joint costs: Allocations from cost from existing account may be used to develop cost function of an operation. The essential step of the method is that each expenditure item can be assigned to particular characteristic of the operation. This approach also related to the group of basic costs in allocation process. The account of basic costs may be classified according to labor, material, construction equipment and tools, construction supervision and general office overhead in construction project.
In preparation of costing information, there are two basic approaches. Among the approaches is bottom-up costing where the estimates of every level in the task breakdown structure are compiled and added together by each level of supervision in the project hierarchy as would be the case for reimbursable contracts. Another approaches is top-down costing where someone allocated a degree of money to complete the project activities and this has to be split between your subproject. The allocation is based on either senior management estimates or use of target costing.
The advantage of bottom-up costing is the estimates are ready by the people who will undertake the activities or their supervisor. This give some notion of commitment to achieving these figures if the expenses are accepted unmodified by the project manager. Thus, this method is not particularly proficient at producing accurate estimates. For top-down costing involves the allocation of the costs to the sub-activities. This create a amount of competition between the supervisors of the actions for resources which many view as being beneficial. The techniques for putting numbers to these elements are discussed, leading to how it accumulated into your final cost estimate.
Preliminary estimate of future construction expenditures is made through the project planning and design stage are essential approximate. It is because they are simply complied before the project is completely defined. Causeing this to be conceptual estimates is an art quite not the same as determining the final detailed estimate of whole construction costs. In a nutshell, this estimation is dependant on the conceptual design of the facility at the state when the essential technology for the design are known.
Detailed estimate is made when the scope of works are clearly defined and the detailed design is happening so the essential top features of facility are identifiable. Lastly is the engineer's estimate is dependant on the completed plans and specification when there are ready for the client to solicit bids from the construction contractors.
The cost associated with a facility may be decomposed onto hierarchy of levels that work of cost estimation. The amount of detail and information in decomposing the facility into tasks depends on the types of cost estimate to be prepared.
The contractor bid estimate often reflect the desire of the contractor to secure the job as well as estimating tools at its disposal. Since only the cheapest bidder would be the winner of the contract generally in most bidding contests, any effort devoted to cot estimating is a loss to the contractor who is not really a successful bidder. Thus, the contractor may put in minimal amount of possible effort for making an expense estimate.
For cost control on the project, the construction and the associated cash flow estimates can provide the base line reference for subsequent project monitoring and control. Progress on individual activities and the achievement of milestones completion can compare with the project schedule to monitor the progress of activities. For contract and job specifications provide the criteria by which to assess and assure the required quality of construction. The ultimate cost estimate provide base line for the assessment of financial performance during the project. Towards the extent that costs are within the final cost estimate, then the project is regarded as under financial control.
For control and monitoring purpose, the original detailed cost estimate is normally changed into a project budget and the it is subsequently used as a guide for management. Those specific item stated in the detailed cost estimate become job cost element. Expenses incurred during a project are recorded in specific job cost account to be weighed against the initial cost estimates in each category. Therefore, the average person job cost generally represent the essential unit for cost control.
In addition, the price amount, home elevators material quantities and labor input within each job account also typically retained in the project budget. Those information that contain where actual material utilization and labor employed can be set alongside the expected requirements. Thus, cost overruns or savings on particular item can be determined as due to changes in prices, labor productivity or in the amount of materials consumed.
During construction, cost accounting methods are put on have the actual production rates and costs as they occur. This management by exception cost system immediately identify for the project manager where production costs are unsatisfactory and management action is needed. When the project manager takes timely and suitable corrective measures, cost overruns often can be minimized and future expenditures are brought into line with budget estimates.
For both cost control and estimating method, a construction project must be divided into standardized and categorized building blocks, usually called as cost codes, work types, or Work Breakdown Structure element. Thus, cost information gathered through the construction phase must be tracked using same cost codes that will be found in producing future estimates.
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