Cost Management: All You Need To Know
11 / 08 / 2020
Construction projects are complex and multi-faceted undertakings that require much preparation and critical thinking in order to realise their full potential. One of the key aspects of a construction project is cost management – every good quantity surveyor contractor knows this, and that’s why in today’s blog, we’re going to be exploring every aspect of cost management including what it is and how it can help you.
Cost management in a nutshell
Cost management is the process of ensuring every financial avenue and aspect of the project is in order prior to and during the project’s execution. Essentially, it’s ensuring the budget is sound and is stuck too throughout the project – guaranteeing that the project will run as financially smooth as possible. This includes accurate and closely regulated cost estimations based on all the available information and then monitoring the allocations.
How to estimate for a plan
There are two estimation stages carried out by our experienced quantity surveyor contractors – the initial rough one and the refined one that comes after the research phase. The first stage is done based off of past projects that may be similar in style or capacity and (as the name suggests) concentrates on establishing rough cost estimates for materials and labour.
The second, refined estimate takes into account all the research that has taken place to paint a more concise and clearer picture. This is done using determinative techniques which can only be effectively carried out once the project’s scope is clearer itself – hence why it comes after the research phase. At the end of the day, it’s up to a quantity surveyor contractor to deliver the most accurate cost estimations possible.
Researching and forming a cost management plan
Before any construction project is undertaken, in-depth research is required to gain the best possible outlook of the project. Things like viability, what competitors are doing, the best avenues that can be taken to achieve a certain task and timeline are all established during this research phase. Another important aspect is what issues may crop up down the track as well as a list of all the resources you’ll require – both materials and labour (otherwise known as a bill of quantities). It’s important to root such problems out in the beginning to avoid later disruptions.
These are all crucial parts that work to form the basis of a cost management plan as it’s from information such as this where refined cost estimates are made. For example, if your research reveals a material you were planning on using is no longer viable for a later phase of the project – you’ll have to find a replacement which may mean a different amount of funds. Alternatively, if certain delays are expected to potentially occur during construction then a contingency surplus should be established so you won’t be financially taken aback should the potential issue come to fruition.
Establishing and monitoring a budget
After the most accurate cost estimations have been delivered by the quantity surveyor – a budget based on said estimates can be established. Once a budget is set, then it must be closely regulated throughout. These are compared to any similar previous projects to gauge performance efficiency. The monitoring itself is helped along by the release of funds in increments based on the different stages of the project.
Cost management also involves identifying any variations from the budget and deeming whether or not they’re necessary or, if not, taking the necessary corrective steps. Another factor of cost management is keeping an eye on any budget revisions that may be required during construction and ensuring they’re viable within the grand scheme of the project.
Beyond the project
All the data from the cost management plan can be used as a baseline for future projects of a similar calibre to ensure more accurate estimations and projections can be made. This can essentially increase the accuracy of future estimations.
Are you looking for a quantity surveyor contractor for your next construction project?
Section 94 employs premium and trained quantity surveyors with years of experience under their belts to ensure you receive the most accurate and high-end estimation solutions for your construction project. We offer a variety of services on top of cost management such as organising progress claims and bills of quantities.
If you’d like to get in touch with one of our quantity surveyor contractors, then please do not hesitate to call 0413 953 869 to see how we can help you no matter where you are in Australia.