Establishing a Project Cost Control Baseline

The project cost control baseline is developed from the project cost estimate.2 Initially, during the conceptual phase, the cost estimate exists only as a preliminary or order of magnitude estimate;3 as the engineering design progresses, more precise estimates of cost can be developed. A detailed cost estimate, based upon work quantities determined from completed project drawings and specifications, provides the most precise estimate of cost. It is this detailed cost estimate that forms the basis of the project cost control baseline.

However, the detailed cost estimate often cannot be directly used as a control budget. Usually some transformation is required. For example, for bidding or negotiating purposes, the estimate may originally have been organized in a form convenient for the project owner. The project contractor may find it advantageous to reorganize the estimate into a form that matches his or her cost control preferences. Also, the level of detail provided by the estimate may not be appropriate for the control budget.

Several factors should be considered when deciding upon the appropriate level of detail for the cost control budget:

►How many individual cost elements can the office and field personnel be expected to break actual project costs into for reporting purposes?

►How many individual cost elements can the project management team effectively review and monitor?

►How can Pareto's Law be taken into account—that 80 percent of the total project cost is probably represented by only 20 percent of the cost items?

The answers to these questions and the selection of an appropriate level of detail depends upon the characteristics of the project and upon the management resources allocated to manage the project. If, for instance, a cost engineer is assigned to assist the project manager in supervising the collection and reporting of cost control information,

Detailed Cost Estimate

Cost Control Budge

Cost Code Number

Item

Material

Labor

Total

Cost Code Number

Item

Material

Labor

Total

03

Concrete

03100

Concrete Formwork

71920

125602

197522

03100

Concrete Formwork

71920

125602

197522

03200

Concrete Reinforcement

208105

83100

291205

03200

Concrete Reinforcement

208105

83100

291205

03310

Cast in Place Concrete

391400

42700

434100

03310

Cast in Place Concrete

391400

42700

434100

03350

Concrete Finish

0

18900

18900

03350

Concrete Finish

0

18900

18900

04

Masonry

04210

Brick Masonry

4200

3510

7710

04220

Concrete Unit Masonry

2810

3640

6450

04000

Masonry

7410

7870

15280

04420

Cut Stone

400

720

1120

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

Get My Free Ebook


Post a comment