(103642000) Chapter 17 Cost Control

8/12/2019 (103642000) Chapter 17 Cost Control

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CONTENTS

Leadership in Energy and Environmental Design

Certification 300

171 Cost Control as a !anagement Tool 301

17" #ro$ect Cost Control Systems 301

173 Cost %cco&nts 30"

17' Cost Coding Systems 30'

17( #ro$ect Cost Code Str&ct&re 30'

17) Cost %cco&nts for *ntegrated #ro$ect

!anagement 30+

177 Earned ,al&e !ethod 310

17+ La-or Cost Data Collection 313

17. Charges for *ndirect and Overhead

E/pense 31)1710 #ro$ect *ndirect Costs 317

1711 i/ed Overhead 3"0

171" Considerations in Esta-lishing

i/ed Overhead 3"1

evie2 &estions and E/ercises 3""

Leadership in Energy and Environmental Design Certification

The Leadership in Energy and Environmental Design 4LEED5 certification program

provides tangi-le recognition to pro$ect o2ners for their interest and investment in

s&staina-ility *t is hosted -y the 6reen &ilding Co&ncil 48S6C5 and e/amines five

aspects of s&staina-ility9 415 s&staina-le site development: 4"5 2ater &se efficiency: 435

energy and atmospheric impact: 4'5 choice of materials and reso&rces: and 4(5 indoor

environmental ;&ality The achievements in each of these aspects are eval&ated -y a panel

of e/perts chosen -y the 8S6C: and ;&antified in a point scale Depending on the total

points achieved: the pro$ect is either certified or denied certification

There are several possi-le levels of certification9 Certified: Silver: 6old: and

#latin&m Each category is more stringent than the preceding one 4eg: 6old needs to

f&lfill more re;&isites than Silver5 % LEED certified pro$ect receives a formal certificate

of recognition and a pla;&e: is registered in an online directory of registered and

certified pro$ects: and incl&ded in the 8S Department of Energy


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30" Chapter 17 Cost Control

Leed Data #rocesses Leed Data Collection

This side of LEED is important -eca&se it helps the o2ner and design

teams compare in financial terms the initial costs necessary to -&ild ahigh performance -&ilding 2ith a fre;&ently less e/pensive -&t less

s&staina-le traditional design


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ig&re 171 Steps in cost control

" #ro$ect Cost #lan9


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constr&ction $o- is the definition of pro$ect?level cost centers The

primary f&nction of the cost acco&nt section of a chart of acco&nts

is to divide the total pro$ect into significant control &nits: each

consisting of a given type of 2or= that can -e meas&red in the field4see ig&re 17"5 Once $o- cost acco&nts are esta-lished: each

acco&nt is then assigned an identifying code =no2n as a cost code

Once segregated -y associated cost centers: all the elements of

e/pense 4ie: direct la-or: indirect la-or: materials: s&pplies:

e;&ipment costs: etc5 constit&ting 2or= &nits can -e properly

recorded -y cost code


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173 Cost %cco&nts 7


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173 Cost %cco&nts .

of the ma$or classifications 2ithin the !asterormat acco&nt

system is sho2n in Ta-le 171 % portion of the second level of

detail for classifications 0 to 3 is sho2n in ig&re 173

17( #OAECT COST CODE ST8CT8E

The !asterormat code as &sed -y the S !eans &ilding

Constr&ction Cost Data identifies fo&r levels of detail: an

e/ample of 2hich is sho2n in ig&re 17' %t the highest level

the ma$or 2or= classification as given in Ta-le 171 is defined *n

ig&re 17': the first t2o digits 03 apply to all concrete itemsLevel " identifies a ma$or s&-division 2ithin the 2or= of level 1

*n this case: 03 11 is assigned to concrete forming There are

many types of concrete forms: and they are defined at the third

level *n the case of ig&re 17': the item is str&ct&ral cast?in?

place concrete forming This level adds t2o additional digits to

the identifier: res&lting in 03 11 13 The fo&rth level adds a t2o?

digit decimal to level 3 and gives even more specificity to theitem *n this case: 03 11 13"( refers to forms in place: col&mns

!asterormat does not provide f&rther detail in its system: and it

is left to each &ser to add more digits to the identifier S

!eans adds fo&r digits in a fifth level *n ig&re 17': the

complete description of the item is 03 11 13"( (000: for

str&ct&ral cast?in place concrete forms made of ply2ood and

&sed once for $o-?-&ilt + + col&mns This


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17( #ro$ect Cost Code Str&ct&re 1010 Chapter 17 Cost Control


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17( #ro$ect Cost Code Str&ct&re 1"

( E/penda-les

) Constr&ction e;&ipment

7 S&pply+ S&-contract

. *ndirect

% high concentration of information can -e achieved -y proper

design of the cost code S&ch codes are also ideally s&ited for data

retrieval: sorting: and assem-ly of reports on the


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17( #ro$ect Cost Code Str&ct&re 13

Ta-le 171 !a$or Divisions in CS*@s !asterormat 8niform Constr&ction*nde/ "00'

#roc&rement ands Contracting s&-gro&p

00 F #roc&rement and Contracting e;&irements

6eneral e;&irementss&-gro&p

01 F 6eneral e;&irements

acilities Constr&ctions&-gro&p

0" F E/isting Conditions03 F Concrete

0' F !asonry

0( F !etals

0) F ood: #lastics: and Composites

07 F Thermal and !oist&re #rotection

0+ F Openings

0. F inishes10 F Specialties

11 F E;&ipment

1" F &rnishings

13 F Special Constr&ction

1' F Conveying E;&ipment

1( F eserved for f&t&re &se in !echanical

1) F eserved for f&t&re &se in Electricalacilities Services s&-gro&p

"1 F ire S&ppression

"" F #l&m-ing


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17( #ro$ect Cost Code Str&ct&re 1'

E;&ipment

'' F #oll&tion Control E;&ipment

'( F *nd&stry?Specific !an&fact&ring E;&ipment

'+ F Electrical #o2er 6eneration

ig&re 17( Classification of acco&nts9 typical data str&ct&re for acomp&teri>ed cost code


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17( #ro$ect Cost Code Str&ct&re 1(

-asis of selected parameters 4eg: all constr&ction e;&ipment

costs for concrete forming on pro$ect 10 started in a given year5

The desire to cram too m&ch information into cost codes:ho2ever: can ma=e them so large and &n2ieldy that they are

conf&sing to &pper?level management

17) COST %CCO8NTS O *NTE6%TED #OAECT !%N%6E!ENT

*n large and comple/ pro$ects: it is advantageo&s to -rea= the

pro$ect into common -&ilding -loc=s for control -oth of cost andtime The concept of a common &nit 2ithin the pro$ect that

integrates -oth sched&ling and cost control has led to the

development of the 2or= -rea=do2n approach The -asic

common denominator in this scheme is the 2or= pac=age: 2hich

is a s&-element of the pro$ect on 2hich -oth the cost and time

data are collected for pro$ect stat&s reporting The collection of

time and cost data -ased on 2or= pac=ages has led to the termintegrated pro$ect management That is: the stat&s reporting

f&nction has -een integrated at the level of the 2or= pac=age

The set of 2or= pac=ages in a pro$ect constit&tes its 2or=

-rea=do2n str&ct&re 4S5

The S and 2or= pac=ages for control of a pro$ect can -e

defined -y developing a matri/ similar to the one sho2n in

ig&re 17) The col&mns of this matri/ are defined -y -rea=ingthe do2n pro$ect into physical s&-components Th&s: 2e have a

hierarchy of levels that -egins 2ith the pro$ect as a 2hole and: at

the lo2est level: s&-divides the pro$ect into physical end items


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17( #ro$ect Cost Code Str&ct&re 1)

ig&re 17) #ro$ect control matri/


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17) Cost %cco&nts for *ntegrated #ro$ect !anagement 17


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17) Cost %cco&nts for *ntegrated #ro$ect !anagement 1+1+ Chapter 17 Cost Control

1775 8sing this three?dimensional-rea=do2n: 2e can develop definition

in terms of physical s&-element: tas=: and responsi-ility: as 2ell as

reso&rce commitment % cost code str&ct&re to reflect this matri/ str&ct&reis given in ig&re 17+ This 1(?digit code defines &nits for collecting

information in terms of 2or= pac=age and reso&rce type eso&rce &sage

in terms of monetary &nits: ;&antities: man ho&rs: and e;&ipment ho&rs for

a fo&ndation in the -oiler -&ilding 2o&ld -e collected &nder 2or= pac=age

code 1"100" *f this 2or= relates to placement and vi-ration of concrete

-y &sing a direct ch&te: the code is e/panded to incl&de the alphan&meric

code

ig&re 17+ asic cost code str&ct&re


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177 Earned ,al&e !ethod "1

Cost/Prod.

Units Baseline

BCAC

BCWS

Schedule

Variance

AC

WP

BC

WP

Co

st

Varia

nce

Study Date Timeig&re 1710 Control

,al&es for Earned

,al&e %nalysis

esta-lishes an e/pected level of 2or= completion as of the st&dy date The

level of e/pected prod&ction is often sho2n as an S?C&rve plotting the cost

or &nits of prod&ction 4eg: &nits prod&ced: 2or= ho&rs e/pended: and so

on5 against time This costGprod&ction c&rve is referred to as the -aseline

%t any given time 4st&dy date5: the &nits of costGprod&ction indicated -y

the -aseline are called the -&dgeted cost of 2or= sched&led 4CS5

The trac=ing system re;&ires that field reports provide information

- t th t l t f = f d 4%C#5 d th t l tit


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177 Earned ,al&e !ethod """" Chapter 17 Cost Control

1711 The pro$ect consists of t2o control acco&ntsMM%@@ and MM@@ %

consists of t2o s&-acco&nts: %1 and %" The information for these 2or=

pac=ages depends on its c&toff date 4the

PROJ

CT

A B

A. !A. "

ig&re 1711 % Simple #ro$ect


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Ta-le 17" St&dy Date Data for Simple #ro$ect

C% %C 3% %3 #C 4J5 C EC

%

%1 1 1 3 333 1"%" 7 3.0 '

1 1 + ("0 )"

TOT%L " 1 L L ( 1"'3 ""7

#ro$ect #C 4##C5 H Total C# Total C%C H 1"'3 "1(

H (7+J EC%CiH Estimated Cost at

Completion for or= #ac=age i H %C#i

#Ci

MMno2@@ date F o-vio&sly: each date may have different val&es5:

and for the e/ample it is given in Ta-le 17" *n this e/ample: the

-&dget is e/pressed in 2or=er ho&rs so the -aseline for control is

in 2or=er ho&rs The estimated total n&m-er of 2or=er ho&rs for

this scope of 2or= is "1( 4the s&m of the estimated 2or=er ho&rsfor %1: %": and 5 The C# or earned val&e for a given

2or= pac=age is given as9

C#iH #C

iC%C

i

2here i is the 2or= pac=age or acco&nt la-el: and #C is the

percentage complete as of the st&dy dateThe percent complete 4#C5 for each pac=age is -ased on theratio of the act&al

;&antities 4ie: its %#5 divided -y its &dgeted &antity at

Completion 4ie: %C5 -ased on the latest ;&antity

t *f = th i i l tit ti t i 100


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Q 3.Q (" H 1"'93

Therefore: the pro$ect percentage complete 4##C5 for

the small pro$ect is9 ##C

f1"'93P"1(g 100 H (79+

percent

This simple e/ample ill&strates several points9

1 The #C for a given pac=age is -ased on the ratios of the%#G%C

" The ##C is calc&lated -y relating the total C# 4ie:earned val&e5 to the total

C%C for the pro$ect scope of 2or=

3 The total 2or= earned is compared to the 2or= re;&ired

The val&es of &nits to -e earned are -ased on the

originally -&dgeted &nits in an acco&ntG2or= pac=age and

the percentage earned is -ased on the latest pro$ected

;&antity of &nits at completion

or=er ho&rs are &sed here to demonstrate the development

of the ##C ed -y cost and sched&le variances as 2ell as cost


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17+ La-or Cost Data Collection "(

performance and sched&le performance indices These val&es in CGSCSC

are defined as follo2s9

C,R Cost ,ariance H C# %C#S,R Sched&le ,ariance H C# CS

C#*R Cost #erformance *nde/ H C#P%C#

S#*R Sched&le #erformance *nde/ HC#PCS

ig&res 171" a: -: and c plot the val&es of C#: %C#: and CS

for the small pro$ect data given in Ta-le 17" %t any given st&dy date:

management 2ill 2ant to =no2 2hat are the cost and sched&le variance

for each 2or= pac=ages The variances can -e calc&lated as follo2s9

C, N%91OH C# N%91O %C# N%91OH 3393'0 H )97

C, N%9"OH C# N%9"O %C# N%9"OH 3. 3( HQ'

C, N7O H C# NO %C# N7O H ("

(0 HQ"

Since the C, val&es for %" and are positive: those acco&nts are

2ithin -&dget 4ie: the -&dgeted cost earned is greater than the act&al

cost5 *n other 2ords: less is -eing paid in the field than 2as originally

-&dgeted The negative variance for %1 indicates it is overr&nning -&dget

That is: act&al cost is greater than the cost -&dgeted

This is confirmed -y the val&es of the C#* for each pac=age

C#* %91 H 33P'0 S 190 % val&e less that 190 indicates cost overr&n of-&dget

C#* % " H 3. 3( 1 0


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17+ La-or Cost Data Collection ")") Chapter 17 Cost Control

esta-lished -y Singh 41..15 The vario&s com-inations are sho2n in ig&re1713 and

Ta-le 173 The reader is enco&raged to verify the information in this ta-leThe earned val&e approach re;&ires a comprehensive =no2ledge of

2or= pac=aging: -&dgeting: and sched&ling *t is a data intensive

proced&re and re;&ires the ac;&isition of c&rrent data on the %C# and

%# for each 2or= pac=age or acco&nt *t is a po2erf&l tool: ho2ever:

2hen management is confronted 2ith comple/ pro$ects consisting of

h&ndreds of control acco&nts *n large pro$ects consisting of tho&sands of

activities and control acco&nts: it is a necessity itho&t it: pro$ects can;&ic=ly spiral o&t of control % more detailed presentation of this topic is

-eyond the scope of this chapter The interested reader sho&ld refer to

c&rrent government p&-lications that descri-e the earned val&e

management system 4E,!S5 and the inherent proced&res associated

2ith its implementation

17+ L%O COST D%T% COLLECT*ONThe p&rpose of the payroll system is to 4a5 determine the amo&nt of and

dis-&rse 2ages to the la-or force: 4-5 provide for payroll ded&ctions: 4c5

maintain records for ta/ and other


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17+ La-or Cost Data Collection "+

CP) %

BCWP

%

"5!.$

ACWP $

BCWP % "ACWP % $

, %BCWS

'

W#

WithinBude

t

SV % BCWP&BCWS % 3(.$

SP) %

BCWP

%

" 5!.$

BCWS ,

Study DateTime

Ahead o2 Schedule

0c1Baseli

ne 2orB

ig&re 171" States of Control%cco&nt for Single #ro$ect

p&rposes: and 4d5 to provide information regarding la-or e/penses

The so&rce doc&ment &sed to collect data for payroll is a daily or2ee=ly time card for each ho&rly employee similar to that sho2n in

ig&re 171' This card is &s&ally prepared -y foremen: chec=ed -y

the s&perintendent or field office engineer and transmitted via the


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CAS )

7

ScheduleACWP Cost DelayBCWP

O-errun

T&8OW

CAS ))

7

ScheduleDelayBCWP Cost

ACWP Underrun

T&8OW

CAS )))

7 BCWPScheduleAd-antae Cost

Underrun

ACWP

&

CAS )V

7 ACWP

CostSchedule

O-errunDelay

BCWP

T&8OW

CAS V

ACWP

CostO-errun7

BCWP ScheduleAd-antae

T 8OW

CAS V)

BCWP

7Cost

ACWP

Underrun ScheduleAd-antae

T&8OW


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30 Chapter 17 Cost Control

Ta-le 173 ,al&es of C#*: C,: and S#*: S, for the Si/ Scenarios 4Singh: 1..15

CP) + !o-errunninCV + $

cost

SP) + !

6ehindSV + $

scheduleCAS )

CP) 5 !9ithinCV 5 $

6udet

SP) + !

6ehindSV + $

scheduleCAS

CP) 5 !

9ithinCV 5 $ 6udet

SP) 5 !

ahead o2SV 5 $

schedule

CAS )))

CP) + !

o-errunninCV + $ cost

SP) + !

6ehindSV + $

schedule

CAS

CP) + !

o-errunninCV + $

cost

SP) 5 !ahead o2SV 5 $

schedule

CAS V

CP) 5 !

9ithinCV 5 $

6udet

SP) 5 !ahead o2SV 5 $

schedule

CAS

rom the time card: the 2or=er@s *D 4-adge n&m-er5: pay rate: and ho&rs

in each cost acco&nt are fed to processing ro&tines that cross chec= them

against the 2or=er data 4permanent5 file and &se them to calc&late gross

earnings: ded&ctions: and net earnings S&mmations of gross earnings:

ded&ctions: and net earnings are carried to service the legal reporting


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1710 #ro$ect *ndirect Costs 31

generated The home office overhead: or general and administrative 46 W %5

e/pense: can -e treated as a period cost and charged


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1710 #ro$ect *ndirect Costs 3"

XX


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1710 #ro$ect *ndirect Costs 33

recommended that $o- indirect -e precisely defined d&ring estimate

development: many contractors prefer to

3'


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1710 #ro$ect *ndirect Costs 3'


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31.

ig&re 171) La-or cost report 4some typical line items5

37 Chapter 17 Cost Control


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line item?-y?item -asis This is essentially a variation of the flat rate application descri-ed

previo&sly

1711 *VED O,E


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171" Considerations in Esta-lishing i/ed Overhead 3"1


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171" CONS*DE%T*ONS *N EST%L*S


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'1 Chapter 17 Cost Control


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Ta-le 17' Comparison of i/ed Overhead ate Str&ct&res

"0J on

Total Direct

"(J on La-or and

E;&ipmentR 1(J on

!aterial and

S&-contracts

La-or and e;&ipment X X1)0:000 X"00:000Ao- 101 !aterials and X1:"00:00 "'0:000 1+0:000

X'00:000 X3+0:000

La-or and e;&ipment "00:00 X '0:000 X (0:000

Ao- 10" !aterials and ":000:00 '00:000 300:000

X''0:000 X3(0:000

La-or and e;&ipment 700:00 X1'0:000 X17(:000

Ao- 103 !aterials and 700:00 1'0:000 10(:000

X"+0:000 X"+0:000

three $o-s is compared to the &se of a "(J rate on la-or and e;&ipment and a 1(J rate on materials and s&-contracts*t can -e seen that the fi/ed overhead amo&nts &sing the "(G1(J approach are smaller on $o-s 101 and 10" than the

flat "0J rate This reflects the fact that the amo&nt of la-or and e;&ipment direct cost on these pro$ects is smaller than

the materials and s&-contract costs The ass&mption is that s&pport re;&irements on la-or and e;&ipment 2ill also -e

proportionately smaller On $o- 10": for instance: it appears that most of the $o- is s&-contracted 2ith only X"00:000 of

la-or and e;&ipment in ho&se Therefore: the s&pport costs for la-or and e;&ipment 2ill -e minimal: and the -&l= of the

s&pport cost 2ill relate to management of materials proc&rement and s&-contract administration This leads to a

significant difference in fi/ed overhead charge 2hen the "0J flat rate is &sed: as opposed to the "(G1(J modified rates4ie: X''0:000 vs X3(0:0005

On $o- 103: the fi/ed overhead charge is the same 2ith either of the rate str&ct&res -eca&se the amo&nt of la-or and

e;&ipment cost is the same as the amo&nt of the materials and s&-contract cost

*t sho&ld -e o-vio&s that in tight -idding sit&ations &se of the styli>ed rate system: 2hich attempts to -etter lin=

overhead costs to the types of s&pport re;&ired: might give the -idder an edge in red&cing his -id Of co&rse: in the

e/ample given 4ie: the "(G1(J rate vs

"0J5 the "0J flat rate 2o&ld yield a lo2er overall charge for fi/ed overhead on la-or? and e;&ipment?intensive $o-s

The main point is that the charge for fi/ed overhead sho&ld -e reflective of the s&pport re;&ired eca&se the m&ltiplerate str&ct&re tends to reflect this -etter: some firms no2 arrive at fi/ed overhead charges -y &sing this approach rather

than the flat rate applied to total direct cost


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evie2 &estions and E/ercises 3"3

d f hi $ - h diff i d - h


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cost code for this $o- e s&re the differences in p&rpose and content -et2een these

t2o types of cost codes are clear in yo&r e/planation Specify any additional

information that may -e needed to dra2 &p the pro$ect cost code

17( Develop a cost code system that gives information regarding9

a hen pro$ect started

- #ro$ect n&m-er

c #hysical area on pro$ect 2here cost accr&edd Division in 8C*

e S&-division

f eso&rce classification 4la-or: e;&ipment5

17) The follo2ing planned fig&res for a trenching $o- are availa-le9

3&antity eso&rces 4ho&rs5 Cost

177 Categori>e the follo2ing costs as 4a5 direct: 4-5 pro$ect indirect: or 4c5 fi/ed

overhead9

La-or

!aterials

!ain office rental

Tools and minor e;&ipment

ield office #erformance -ond Sales ta/

!ain office &tilities

Salaries of managers: clerical personnel: and estimators

17+ The follo2ing data are availa-le on Del a--ro *nter? national: *nc The fi/ed

4home office5 overhead for the past year 2as X3)(:"00 Total vol&me 2as

X(:'00:000 *t is ass&med that 6 W % costs 2ill acco&nt for X1:0+0:000 of this

vol&me Del a--ro &ses a profit mar=&p of 10J The

E/cavationsecond

ha&ling

!achines 1000 X100:000

La-or (000 X100:000

estimating department has indicated that the direct and field indirects for a

renovation $o- 2ill -e X+00:000 hat -id price sho&ld -e s&-mitted to ens&re

proper coverage of fi/ed over?100:000 c&-ic yard Tr&c=s "000 X )":(00

%t a partic&lar time d&ring the constr&ction: the site manager reali>es that the

act&al e/cavation 2ill -e in the range of 110:000 c&-ic yards ased on the ne2

;&antity: he fig&res that he 2ill have 30:000 c&-ic yards left

% 1(0 +.'0 1((0eso&rce Cost "0 1"') 1.)

!achines +.( ho&rs +(000 C ( 3() (1

La-or )011 2or= 7.000

Tr&c=s 1)+' ho&rs (01'0

rom the main office: the follo2ing $o- information is availa-le9

head %ss&me a (J inflation factor and a 1"J gro2th factor in the calc&lation17. Calc&late the cost and sched&ling variances for each of the 2or= pac=ages

sho2n hat is the percentage complete for the entire pac=age

OZ


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CODE DESC*#T*ON ES %C OEC% ES %C OEC%

%00 EG D&ct ''

%10 #artitions "3 1( ""( "( 1' "

%"0


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1711 6iven the follo2ing diagrams of progress on individ&al 2or= pac=ages of a pro$ect

ans2er the follo2ing ;&estions9

Cost

BCW

S

Cost

BC

WP

Cost

BCW

S

Cost

AC

WP

') Chapter 17 Cost Control

a or Case 1 is the pro$ect ahead or -ehind sched&le 17 1" % pro$ect 2ith an S#* S 1 is according to the disc&s sions in this


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a or Case 1: is the pro$ect ahead or -ehind sched&le

- or Case ": is the pro$ect over or &nder -&dget

c or Case 3: is the C#* greater than 1

d or Case 1: is the S#* greater than 1 E/plain -y calc&lation

e or Case ': is the pro$ect on sched&le and -&dget

E/plain

171" % pro$ect 2ith an S#* S 1 is: according to the disc&s? sions in this

chapter: -ehind sched&le

Documents

(103642000) Chapter 17 Cost Control