Wednesday 9 February 2022

Management of project cost risks

With the domestic construction market in line with international standards, the increasingly fierce competition in the international contracting market and the decreasing profits of engineering projects, as well as the adjustment of the capital construction investment structure by the state, the competition in the construction contracting market is becoming more and more fierce, and the pressure of elimination is increasing, and the whole industry has entered the era of low profits. in this case, how to compete and profit in the ever-changing international contracting market and how to form a project cost management system with its own characteristics has become a practical issue in front of us. therefore, summarizing the advanced experience of project cost management and studying new methods of project cost management are of great significance for comprehensively improving the economic benefits of construction enterprises.

first, the concept of project cost and the importance of cost control

1. the concept of project cost

the traditional construction project cost refers to the sum of various production costs that the construction enterprise or the construction project department must pay to complete a construction project. this is the current academic definition of the cost of a construction project. however, the cost of the construction project should also include related costs such as duration claims, quality claims, etc. the specific analysis is as follows:

the increase in these risks is bound to increase the cost of the project.

2. the importance of cost risk control

from the perspective of the negative impact of china's accession to the wto, first, because china's construction enterprises rarely participate in international competition, most construction managers (including project managers) do not understand international practices, and have little understanding of fidic (international federation of consulting engineers) clauses, so they cannot risk management of engineering projects and resolve disputes in project contracting in accordance with international practice; second, after the world's famous contractors will use their advantages in capital, technology, and management to draw salaries from the bottom of the pot, extensively tap outstanding talents in domestic engineering project management, and reduce the competitiveness of the domestic construction industry. third, although china's construction project management has been strengthened in recent years, it has not yet been able to compete with developed countries in the world, especially the lack of advanced project management software, and will face severe challenges after "joining the wto." in terms of project cost management, it can be said that china is particularly lacking. "wto accession" will have a considerable impact on china's enterprises in this regard. therefore, it is of great significance to control the cost of engineering projects.

second, the problems of project cost risk management

in the past ten years, although some construction companies have realized that the project is the cost center of the enterprise, only by doing a good job in the cost management of each project can we bring economic benefits to the enterprise, so the project method has been implemented and has achieved certain results. however, affected by the long-term planned economic management system, there are still many problems in the depth and breadth of project cost management and the method of cost management, mainly in the following:

1. cost accounting is a matter of fact, and the guiding significance is not great. first of all, the work of various departments such as finance, materials, contracts, and planning statistics is disconnected, project management is relatively blind, and there is a lack of awareness of doing and calculating, so that there is no budget accounting, no project economic analysis and comparison, and no suggestions and measures for saving and exceeding. even if it can reflect the profit and loss of the project from the settlement, it is not clear which link is overrun, which sub-project is overrun, which leads to the abnormal phenomenon of some projects making profits in the early stage, guaranteeing the capital in the medium term, and losing money in the later stage.

2. the economic concept of project management personnel is not strong. although each project is staffed with a budgeted, most budgets are unclear about their functions and do not combine cost budgeting and cost accounting. since the project has no phase cost analysis, no sub-project cost analysis, no comparison of actual cost with budget cost and planned cost, and no cost decomposition of the work class, it is of little significance to the project construction guidance; coupled with the imperfect reward mechanism, the reward and punishment methods are not implemented, and the cost savings are not linked to personal income, the project management personnel are not very concerned about the cost situation, and many people do not know the planned cost, budget cost and actual cost of the project part they are responsible for in addition to whether the progress is up. since there is no phase cost control, there is no sub-project cost control, so there is no cost control after the completion of the final project, and sometimes even the serious loss of the project is not known where the problem is.

3. do not pay attention to the management and control of "unforeseen costs". at present, the domestic construction project department attaches great importance to production costs, and is weak on quality costs and construction period costs, and the occurrence of unforeseen costs in construction and production is only natural, allowing them to occur, and not controlled. the construction period is stipulated in the contract between the construction unit and the construction unit. the construction enterprise can complete the contract period is an important condition for achieving a good reputation, which must be realized as planned and strictly performed. if there is no special reason (such as a higher early schedule award), there is no need to pay an additional financial price to shorten the construction period. surveys have shown that resources are often not evenly distributed in the construction of many projects. in fact, unforeseen costs are also controllable. for example, safety accident losses, as long as the construction is carried out in accordance with safety operating procedures, no accidents will occur, and the corresponding accident losses will be avoided. others, such as fines from government departments, can also be avoided.

4, the material management is not strict, the waste phenomenon is serious. the cost of engineering materials accounts for more than 70% of the construction output value, which is the main way for construction enterprises to reduce the cost of projects. strengthen material management, first of all, the procurement of materials, so that the goods are compared, under the premise of ensuring quality, choose lower-priced materials. general project losses, there are problems of lax material management and serious waste. 


If there is no material system, or the system is not implemented, resulting in countless materials entering the site, leaving countless warehouses, no recycling of surplus materials, and serious theft and waste. especially after the piecework contract, the worker team is busy with output, and the excessive consumption of materials and materials; excessive wear and tear on machinery and equipment; small hand tools are more unloved, sometimes there are procedures for lending, and there is no acceptance; or the calculation of the unloading is inaccurate, and the scrap rate exceeds the standard; steel discs are stacked unattended, and loss occurs from time to time; the scaffolding procurement model is inaccurate, resulting in idle waste; incomplete records of material supply receipts, and the supply quantity does not match the actual situation; there is no supply plan or there is a feeding plan that is not executed, and the responsible person is often not traced when something goes wrong.

5. Insufficient understanding of project risk management and improper response. the management of project risks should be a complete system.

third, the countermeasures for project cost risk management

in the face of the management of cost risks and the impact of china's accession to the wto, we must take measures to face them positively. only in this way can we avoid harm and seek profit and develop ourselves.

1. Select and use a good labor subcontractor, and motivate and use. 


The self-operation layer of the enterprise. with the reform of the internal mechanism of state-owned enterprises, enterprises have gradually streamlined their teams and optimized their structure. the selected labor service team should select some reputable and strong labor service teams for comprehensive evaluation, and establish a relatively stable and regular assessment of the dynamic management of qualified labor subcontractors. labor subcontracting implements a bidding system. 


The company set up a bidding leading group, the deputy manager in charge of the company as the group leader under the judge pool, the judges by the project manager, labor, construction, quality and safety and other personnel, the formulation of bidding documents, clear bidding scope, content, standards, qualifications, etc., invite more than two subcontractors to bid, according to the bidder's bid and credit to determine the winning unit, and then sign a subcontract according to the bidding documents, bidding documents and the commitment of the winning unit. labor subcontracting runs from the issuance of bids to the signing of contracts in a fair, just and open manner, eliminating black-box operations. in the process of operation, the cost should always be taken into account,

2. Take the network as the link. 


To achieve the rational allocation of resources between projects. enterprises must speed up the pace of network construction, the surplus labor of each project, inventory materials, idle settings through the enterprise website in a timely manner, by the enterprise legal person level of the functional departments according to the needs of the project unified deployment, mutual exchange of existence and non-existence, to avoid the occurrence of repeated procurement and other phenomena. the good construction experience and methods in each project should also be exchanged online in a timely manner to achieve resource sharing between projects.

3. Take science and technology as the guide, and strengthen. 


The confidence of enterprises to take the road of management and technology-intensive. enterprises should formulate scientific and technological development plans in light of the actual conditions of their units and the needs of the market, strengthen the construction of scientific and technological teams, carry out technological innovation and technological transformation in a focused and targeted manner, actively study advanced technologies, introduce advanced equipment, master advanced technologies, enhance the scientific and technological level of hydro power construction enterprises, and regard the improvement of scientific and technological content as an important measure to improve the quality of projects, increase economic benefits, and expand market space.

4. Establish a scientific and accurate assessment and incentive mechanism.


Adopt scientific management of personnel, and maximize the potential of the project. the importance of funds to enterprises is like blood to the human body, and the monetary funds recovered by enterprises from projects mainly come from project profits and depreciation. the size of the depreciation amount is determined by the amount of equipment occupied by each project, and the determination of the target profit requires careful analysis of the relevant content of the bidding quotation, combined with the actual construction management experience, adopting the policy of "cautious determination and gradual improvement", and trying to achieve the interests of all parties and take into account fairness. the project manager appraisal implements the method of combining tenure appraisal and annual appraisal, and further increases the intensity of rewards and punishments. 


In the cost management of foreign engineering projects, great importance is attached to the management of personnel, especially the American engineering contracting companies. as long as the quality of engineering and technical personnel and management personnel is improved, and the cost awareness is enhanced, the cost control is much easier, and it is necessary to give full play to the subjective initiative of people, encourage personnel at all levels to improve construction methods and management methods, and regularly hold experience summary meetings, so that the correct opinions can be determined as soon as possible as a system and applied to the project implementation process.

5. make full use of modern management tools such as computers. 


With the rapid development of computers and application software, people are increasingly recognizing its importance and applying it to production practices. in recent years, many foreign countries have developed software for project management, and even specially used for cost control and management software. practice has proved that the use of computers not only greatly improves people's work efficiency, but also plays a very important role in assisting staff in design and decision management. although many companies in our country have also used computers and developed some software, they have not realized their huge potential.


No comments:

Post a Comment