The Use of Financial Models for Cost Control in Construction Projects (2013)

Cost Control in Construction Projects Dissertation – There have been significant changes in the construction industry within the past three decades. It is the rapidly changing environment that requires the construction sector keep up a fast pace so as to meet the challenges of the new decades. The construction sector is of paramount importance in the international financial markets, as it provides investment, goods and because governments are the major clients. Hence, the global financial crisis has seriously affected this sector.

International journals and press are noting every day bankruptcies of construction firms. Therefore, efforts have been made to reverse this situation and improve the cost – effectiveness in the construction sector. The main parameter of the monetary losses in the construction sector is attributed to project failures.

The UK Office of Government Commerce Best Practice maintains as the principal reasons of projects failure;

• Lack of clear links between the project and the organisation’s key strategic priorities, including agreed measures of success
• Lack of clear senior management and Ministerial ownership and leadership
• Lack of effective engagement with stakeholders
• Lack of skills and proven approach to project management and risk management
• Too little attention to breaking development and implementation into manageable steps
• Evaluation of proposals driven by initial price rather than long-term value for money (especially securing delivery of business benefits)
• Lack of understanding of, and contact with the supply industry at senior levels in the organisation
• Lack of effective project team integration between clients, the supplier team and the supply chain

For this purpose, many construction firms have devoted large amounts money and time to improving their cost management policies. Cost management is the process, which is necessary to ensure that the planned development of a design and procurement of a project is such that the price for its construction provides value for money and is within the limits anticipated by the client.

The cost planning of a project is of major importance for its success, control techniques have been established in order to perform cost planning efficiently. The Activity Performance Based method relies on the Value parameter to produce cost control statements. To conduct this method three techniques have been identified, by the author, as appropriate and these are; the Leading Parameter, Activity Based Ratios and the Variance Analysis.

Each one of them approaches the project costs from the projects performance perspective. They base their operation on simple calculations on the actual and planned values spent for the projects performance. The Unit Costing method is a control technique that measure the units used for the project performance and attributes them to the Capital Cost parameter.

• 13,000 words – 74 pages in length
• Excellent use of literature
• Good case study analyses
• Well written throughout
• Ideal for quantity surveying students

1 – Introduction

2 – Literature Review
Financial Models
Activity’s Performance Based
Leading Parameter
Activity Based Ratios
Variance and Earned Value Analysis
Unit Costing
Time Based
S-Curve
Critical Path Method Cost System (CPMCO) Method

3 – Research Analysis
Case Studies
Case Study 1: Corporate Office Building
Description of the case study
Financial Models
Activity’s Performance Based Model
Case Study 2: Conversion of a Storehouse into a Computing Center Room in a Primary School
Description of the case study
Financial Models
Case Study 3: Boiler House Refurbishment and Extension HM Military Workshops
Description of the case study
Financial Models
Discussion

4 – Conclusions
General Discussion
Activity Performance Based
Leading Parameter
Activity Ratios
Variance Analysis
Unit Costing
Time Based
S-Curve
CPMCO

References