TOTAL COST CONTROL ON CONSTRUCTION PROJECTS A presentation at 2019 ENGINEERING CONFERENCE A presentation by QS Fred Chiweza (MRICS, MSIM, MSc, BSc QS) September, 2019

OVERVIEW Construction projects incur cost overruns which impact on project success. This presentation is a discussion on how these overruns can be prevented. Initially we are looking at why we need cost control and later we look at cost control techniques. In conclusion we advocate for a great commitment to cost control issues as a way to project success.

WHY COST CONTROL Project objectives Project failure or success Time requirements Early /late completion, short construction period, firm completion date set by client etc Cost requirements Low total cost, cash flow timing, best combination of capital and maintenance costs, tight budgeting control etc Quality requirements Workmanship, materials, servicing and so on Specific Client Business Objectives

CAUSES OF COST OVERRUNS Project management and contract administration related factors 1 Poor project management 2 Change in scope of work 3 Delays in decision making 4 Inaccurate quantity take off

Design and documentation related factors B Design and documentation related factors 5 Frequent design changes 6 Mistakes and error in design 7 Incomplete design at the time tender 8 Poor design and delays in design 9 Delay in preparation and approval of drawings

Contractor site management related factors 10 Poor site management and supervision 11 Incompetent subcontractors 12 Schedule delay 13 Lack of experience 14 Inaccurate time and cost estimate 15 Mistakes during construction 16 Inadequate monitoring and control 17

Finance management related factor 18 Cash flow 19 Poor financial control on site 20 Financial difficulties of the owner 21 Delay in progress payment by the owner 22 Delay in payment to suppliers/subcontractors

E Information and communication related factors 24 Lack of coordination between parties 25 Slow information flow between parties 26 Lack of communication between parties

Human resources( workforce) related factor 27 Labour productivity 28 shortage of site workers 29 Shortage of technical personnel 30 High cost of labour 31 Labour absenteeism

Human resource control factors G Human resource control factors 32 Fluctuations of materials 33 Shortage of materials 34 Equipment availability and failure 35 Late delivery of materials and equipments

Environmental related factors H Environmental related factors 36 Level and number of competitors 37 Economic instability 38 Effects of weather 39 Government policies 40 Inadequate production of raw materials by the country 41 Monopoly by suppliers 42 Number of projects going on at same time 43 Political situation 44 Project location 45 social and cultural impacts

EFFECTS OF COST OVERRUNS To the Client To the end user To project consultants To contractors To the construction industry To the country

TOOLS AND TECHNIQUES FOR COST CONTROL Developer’s budget Cost planning Cash flow Cost reporting Cost Control

DEVELOPER’S BUDGET Cost of land Fittings and furnishings Legal costs Land preparation Building costs Consultants fees Fittings and furnishings Disposal costs Value added tax Financing costs Operational costs

COST PLANNING  “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, This person began to build and wasn’t able to finish.” Luke 14:28-30

PROJECT STAGE COST PLAN METHODOLOGY 1 Feasibility study Initial cost appraisal Based on past records and assumption 2 Project brief to sketch design Elemental cost plan Cost per square meter of space/ functional element 3 Sketch to detailed design Approximate quantities plan Available design details 4 Tender documentation stage Pre tender estimate Based on complete tender documents 5 On signing the contract or beginning of the project Contract sum Based on contractors price 6 Project implementation period Cost report projected sum Incorporating variation and all authorized changes to the contract 7 Project closure Find account Agreed during/ after defects liability period

CASH FLOW Cash flow is the movement of income into and expenditure out of a business over time. Cash flow is important in order to ensure that an appropriate level of funding is in the place and that suitable draw-down facilities are available.

COST REPORTING Cost reporting is a process used to inform a client about the magnitude of a construction project predicted or actual cost. Cost reporting must include ; Established project cost to date Anticipated final cost Future cash flow Ongoing risks to costs Potential savings

TOTAL COST CONTROL Total cost control will require the following actions to be taken; Design decisions Project Team Updating cost plan Updating cash flow plan Reviewing contingency Change management process Updating cost reports Information management Actual expenditure versus projected expenditure

CONCLUSIONS AND RECOMMENDATION To eliminate cost overruns the following should be adhered to all time; The consultants should apply project management tools in their project delivery. The client, the consultants and the contractors should strictly work within the scope originally planned for the project

Projects should be planned properly before execution starts Only contractors with adequate experience and financial ability to handle construction projects should be awarded contracts. Communication gaps should not exist between the stake holders of the building construction projects A commitment should be made to cost control followed by clear actions.

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