A Cost Based Approach to Project Management: Planning and Controlling Construction Project Costs

Description

A Cost Based Approach to Project Management: Planning and Controlling Construction Project Costs introduces early-career architects, construction managers, civil engineers, and facility managers to the essentials of delivering projects on-time and at cost. Drawing on the author’s decades of experience managing marquee building and infrastructure projects around the world, this primer offers busy professionals a crash course in budgeting, cost estimating, scheduling, and cost control. Chapters break down the details of cost elements, structuring project costs, and integrating budget with schedule, providing novice project managers with the key skills to plan and execute construction projects with confidence and precision. Features: Illustrates the principles of project management and the essentials of cost planning and control with easy-to-understand examples from the construction industry Includes step-by-step details of project planning, cost estimating, and management processes Offers clear, cost-based methods for defining scope, preparing bids, and planning for contingencies, as well as monitoring progress and determining when to take remedial action Contains a user-friendly guide to project management acronyms and terminology Provides sample construction schedules, budgets, and progress report forms An ideal resource for self-study, on-the-job training, or courses in construction, architecture, or civil engineering project management, A Cost Based Approach to Project Management makes a worthy addition to the aspiring project manager’s reference shelf. Cover Half Title Title Copyright Dedication Contents Abbreviations Preface 1 Defining a Project Introduction Project Definers Triple Constraints Scope Cost Duration Time and Money Complications Do the Triple Constraints Sufficiently Define a Project? Uniqueness One-Time Event Comprised of and Breakable to Tasks Task Interdependence Other Requirements and/or Expectations Can Value Be a Project Definer? What Happens If It Is Not a “Project”? Construction Projects Types of Construction Projects Public and Private Construction Projects Buildings: Residential and Nonresidential Building Projects Heavy and Civil Engineering Construction Projects Stakeholders and Key Participants Stakeholders’ Differing Project Perspectives Basic Functions of the Stakeholders The Operator as the Fourth Stakeholder Project Delivery Systems Most Common Project Delivery Systems Construction Contract Pricing Options Unit Price Contracts Lump Sum Contracts Variations of Cost Plus Fee Contracts In Summary 2 Management, Project Management, and Construction Projects Introduction Modern Management Why Study Management? Who Are Managers? Everybody Manages Something What Do Managers Do? Where Do Managers Work? Management Levels and Titles Accountability and Dependency Roots of Modern Management Managerial Roles Interpersonal Roles Informational Roles Decisional Roles Managerial Skills Conceptual Skills Interpersonal (Human) Skills Technical Skills Management Practices Managers Have to Make Decisions Common Decision-Making Mistakes Management Process Planning Organizing Leading Controlling Most Common Managerial Mistakes Project Management Construction Project Management Cost and Time Considerations at Initial Stages of a Construction Project In Summary 3 Understanding Cost and Its Elements Introduction Cost Is More Than a Dollar Amount Elements of a Cost Price Unit Cost, Unit Price Assembly Unit Costs Cost Line Items Example for Unit Cost Conversions, Assembly Unit Cost, and Performance Assumptions Unit Cost Conversion for Materials Labor and M/E Unit Costs Labor and M/E Quantities Output Rate Resource (Labor or M/E)- Hours Output Rates, Resource-Hours and Activity Durations Managing a Cost Requires Knowing Both of Its Elements Tax, Price, and Cost Can the Price Be Less Than Its Cost? Defining Value Value, Quality, and Cost Types of Values Value Priorities of Stakeholders and Key Participants Value as a Measure of Project Success Considerations for Setting Value Goals for Projects In Summary 4 Cost Types and Components Introduction Types of Costs Direct and Indirect Costs Fixed and Variable Costs Examples Fixed Direct Costs Fixed Indirect Costs Variable Direct Costs Variable Indirect Costs Identifying Cost Types Example Components of a Cost Material Component Labor Component Machinery, Equipment, and Other Direct Costs (M/E) Component Overhead (O/H) Component Depreciation Is Not a Cost What Do Cost Types and Components Indicate? In Summary 5 Structuring Project Cost Introduction Project Planning Process Initiator of the Project Planning Process: Scope Detailing Scope by Breaking It Down to Tasks: Work Breakdown Structure (WBS) WBS Should Cover the Entire Scope Example: Dinner Party Project Compiling Detailed Task Information: Work Package Dictionary (WPD) Structured Project Cost:Project Cost Breakdown (PCB) PCB and Project Price Breakdown Different Perspectives for PCB WBS Examples for Different Stakeholders In Summary 6 Cost Estimating Introduction Cost Estimating in the Construction Industry Types of Estimates and Estimate Accuracies Cost Estimating Process for Line Items Quantity Take-Offs (QTO) QTO for Materials Labor and M/E QTOs and Durations Estimate Preparation Duration and Accuracy Expert Opinion in Estimating Costs Step-by-Step Cost Estimating Process Project Delivery Systems, Contract Pricing, and Cost Estimating Technology and Reference Data for Estimating Updating WPD With Estimated Cost Data WPD and Project Resource Schedule (RBOQ) Example: Hotel Building Superstructure Quantity Take-Offs, BOQ, WPD Update, and Project Resource BOQ STEP 1. Prepare (or Check if Available) Quantity Take-Offs STEP 2. Update the WPD for This Activity STEP 3. Assign Resources and Determine Durations STEP 4. Calculate the Cost by Applying Unit Costs to the Quantities STEP 5. Check Cost and Schedule Acceptability Option 1. Increasing Crew Size Option 2. Keeping the Initial Crew Size and Paying Overtime as Needed Decision STEP 6. Finalize by Updating WPD Remarks on Cost and Duration Correlation for the Example Estimating Overhead(s) Task O/H Project O/H Head Office O/H Estimating the O/H In Summary 7 Contingency as a Part of Cost Introduction Certainty, Uncertainty, Risk, and Contingency The Known and Unknown Risks The Known-Unknowns The Unknown-Unknowns Contingency at Several WBS Levels Both Cost Elements May Include Contingencies Typical Uses of Contingencies To Cover for Errors Systematic Errors Random Errors To Cover for Omissions Escalation Using a Provisional Sum to Avoid a Contingency Dealing With Unknown-Unknown Scope Changes Contingency and Profit Contingency and Change Orders Hidden Contingencies How Much Is Enough? Management Reserve and Project Manager In Summary 8 Project Cost Budget Introduction Project and Operational Budgets One-Time Occurring and Not Repetitive Covers the Entire Project Duration Requires Unique and Project-Specific Resources Project Cost Budget Includes and Reveals All Required Resources Project Cost Budgets and Schedules Are Interrelated Project Budgets Include All Known-Unknowns Preparing and Reporting Cost Budgets Budgeting Activity Costs Budgeting Project Cost Budgeting for Project Resources Budget Formats Monitoring Cost Budgets Budget Format for Performance Monitoring Budget Format for Futuristic Projections Monitoring Project Resources and Output Rates Revising Budgets Budget–Schedule Integration: Expense Flows and Resource Schedules Preparing the Bid Price In Summary 9 Controlling Cost Introduction Cost Accounting Versus Cost Control Major Differences Accrued Expense Versus Committed Cost Step-by-Step Cost Controlling Process Cost Control Is Not a Process of Reducing Cost Monitoring Progress What to Monitor Monitoring Frequency How to Monitor Reporting Daily Reports Project Progress Reports Processing Progress, Invoices, and Payroll Sorting and Distributing Accounting Cost Data Calculating/Verifying Actual Quantities Interpreting Monitored Performance Root Causes of Variances Common Reasons for Quantity Variance Take-Off Errors Scope Creep Excessive Waste Damages Adverse Conditions Changes Scope Changes Design Changes Changes in Regulations Differing/Unforeseen Site Conditions Failure of a Stakeholder Force Majeure Unit Cost Variance Errors, Inflation, Changes, Market, and Adverse Conditions Unit Cost Variance and Quantity Implications Labor and M/E Performance Variances Remedial Action Considerations Variance Accountability and Remedial Action Categorical Remedial Action Options Remedial Action and Delivery Method/Contract Pricing Complications What Is the Right Remedial Action? Implementing Remedial Actions Keeping Records Disputes Related to Variances Cost Control Process Schematics In Summary Appendixes Appendix A: Cost Budget Forms for Hotel Project Stakeholders A.1: For Owners A.2: For Contractors A.3: For Hotel Operators A.4: Design WBS Appendix B: Sample Work Package Dictionary Form Appendix C: Typical Progress Report Forms C.1: Sample Daily Report C.2: Monthly Reports About the Author Index