Cost Control Monitoring Processes Project House Renovation

Question: Explain about Cost Control Monitoring Processes for a Project House Renovation Project. Answer: Introduction All projects need guidance so that they can deliver the expected results for the completion of the project. The responsibility of the attained results rests with the team for the project and the Project Manager (PM) is the most important link to carry out an effective control of the costs. However, the PM has to make a choice of the best and most appropriate costing techniques from the several techniques which are available for this purpose, (Baum Baum, 2015). Cost Control Techniques Discussed below are some of the widely used and essentially effective techniques which are universally used for efficient control of project costs. Planning the Project Budget As the PM, I need to prepare a budget during the planning session in case I used this method. This budget must be prepared after considerable research, critical thinking and due diligence process. It is the budget which will help me in deciding about the payments and the costs that I will be incurring during the project life cycle. As in any budget, I will have to leave margin for adjustments because the costs will not remain the stationary during the project life cycle. However, following the project budget during the project life cycle will be my key to generating the stipulated profit for the project, (Baum Baum, 2015). Keeping a Track of Costs This techniques which uses the method of keeping track of the actual costs related to the project has also been found to be equally effective. Using this techniques I will prepare a budget for a period of time. This helps me in keeping track of the overall budget of the project in each of the phases in which I divide the project. I will track the actual costs for every phase against the targets that I will set for that period in my budget. The basis of the phases can be monthly, fortnightly or weekly and even yearly in case the project is of long duration, (Hinkel, 2010). I find this technique to be the most effective as I feel it is easier to work with phased budgets rather one overall budget for the entire project life cycle. In case any additional work is included in the project, I will not be required to change my complete budget but will make adjustments in the estimates for the particular phase in which that work has to be completed and simply add the accommodated work in the final budget. Effective Time Management Another effective technique concerns with efficient time management and has been found to be very useful for project cost control. In my view, the reason for this can be seen in the fact that the cost of a project can keep rising in case the PM is unable to meet project deadlines. Hence, the PM has to constantly keep reminding the team about the importance of deadlines in order to ensure that the project is completed on time and within the budget, (Burn, Cartwright Maudsley, 2009). Project Change Control Project Change Control technique employs the principal that it is essential to consider any potential changes which occur during the project life cycle. This gains importance since any change that is made to the scope of the project is definitely going to create an impact on the deadlines of the project. Hence, the changes can increase project cost as they increase the level of effort required for completing the project, (Burn, Cartwright Maudsley, 2009). Use of Earned Value In a running project, it sometimes becomes very crucial to identify how much work by value has been completed. I find that in this context the best technique which can be employed quite efficiently and effectively is the accounting technique which is commonly known as 'Earned Value Technique'. In my opinion, this can be more effectively used for large projects as it helps the PM to make quick changes which become absolutely essential for the successful completion of the project, (Megarry et al, 2012). Most Suitable Technique for Project Cost Control To arrive at the correct and most effective technique, I find that a constant review of the budget as well as other financial information is essential. It is imperative that by providing project financial reports at regular intervals can be very helpful in keeping track of the projects progress. This not only controls overspending, it does so at the correct time. I have always maintained that the earliest a problem is identifies, the more effectively and quickly it can be remedied, (Megarry et al, 2012). Part 2: Cost Control Techniques and their Impact in Minimising Cost Overrun As has been discussed above by me some techniques prove to be very effective when used for controlling and monitoring project cost. Among these, the more advanced techniques are Earned Value Management, Variance Analysis and Performance Reviews, (McFarlane, Hopkins Nield, 2012). In my view, the Earned Value Management technique is the most effective technique. While applying this techniques, I would recommend the following basic steps which are essential to be followed. The PM should divide the project into manageable phases and for each phase there should be a separate WBS. The PM should ensure that all the phases are defined in such a manner that every activity of the project can be allocated an appropriate time for completion and a cost for completion. The Pm should allocate appropriate cost and effort values to all phases of the project. The PM should essentially establish a timeline for the project. The PM should define the cost overrun in case it exceeds the budget of the project. According to my studies there are nearly 42 main factors which can affect the cost overrun in the construction industry, (McFarlane, Hopkins Nield, 2012). Some important ones are Fluctuation in prices of the raw materials. Method of payment for the completed works. Frequency of design changes. High cost of machines used. Improper planning. Long periods of delay between designing and bidding / tendering. According to the industry experts the following documents should be used for maintaining records so as to control cost by comparing actual cost with the estimated cost. Unit cost sheet Weekly statement of direct labour cost Weekly statement of machinery hire cost Weekly statement of material cost Weekly statement of labour subcontractors payments Weekly statement of output of works (Value of work) Monthly statement of overhead cost Monthly cost summery Contractors monthly cost control table Contractors monthly cost control chart Results And Conclusion In my long career as a PM, I have found that most of the contractors are aware of the Cost Control Techniques which are commonly used in the construction industry, although their proper usage is minimum. Basically, the purpose of the Cost Control Techniques was to act as tools for controlling cost overrun. Figure-1 in the Annexure below provides a summary of currently practiced cost control technique. Contractors have also been found to agree that MS Project and Earned Value Analysis are the most effective techniques for cost controlling. Contractors using these techniques have found them to be easy to monitor and also user friendly. Although, in my studies I have found that lack of practice and expertise to be the main barriers which have prevented the contractors from using the Cost Control Techniques more frequently. On the basis of these findings, my suggestion to contractors associations is to conduct regular training for use of these techniques, (Ashworth Perera, 2015). To sum up my discussion on the subject, I would suggest that simply preparing a project budget is not adequate for project planning. My suggestion to the team would be to keep a vigilant eye on the fact that the costs remain close to the estimates given in the initial budget. For this, use of any of the above mentioned techniques will constantly monitor the project costs. List of References Ashworth, A. and Perera, S. (2015). Cost Studies of Buildings. (6th ed.). Oxon: Routledge. Baum, A. and Baum, Prof A. (2015). Real Estate Investment: A Strategic Approach. (3rd ed.). Oxon: Routledge. Burn, Edward Hector, Cartwright, John and Maudsley, Ronald Harling. (2009). Maudsley and Burn's Land Law. Oxford: Oxford University Press. Hinkel, Daniel F. (2010). Practical Real Estate Law. (6th ed.). Boca Raton, FL: Cengage Learning. McFarlane, Ben, Hopkins, Nicholas and Nield, Sarah. (2012). Land Law: Text, Cases, and Materials. Oxford: Oxford University Press. Megarry, Robert, Wade, William, Harpum, Charles, Bridge, Stuart and Dixon, Martin J. (2012). The Law of Real Property. (8th ed.). New York: Sweet Maxwell.