Wednesday 9 February 2022

Rules to follow for project cost management



Engineering projects are the window of the construction enterprise image and the source of benefits, enterprises to create benefits, it is necessary to refine the internal basic management work, improve the cost management responsibility system, tap the potential to reduce costs, and do a good job in project cost management.

Principles that should be followed in project cost management

Leadership promotes the principle of full participation. enterprise leaders should formulate the policies and objectives of project construction cost management, establish a project construction cost management system, improve the incentive and constraint mechanism, and make all levels and departments and positions clear their respective cost responsibilities. every job of project cost management requires the appropriate personnel to complete it. comprehensively improving people's enthusiasm and creativity, full participation is the premise of doing a good job in project cost management.

Decomposition goals clarify the principle of responsibility. the enterprise determines the project responsibility cost index to decompose the project cost once. the project management department also needs to decompose the secondary target of the project responsibility cost indicator. according to the different positions and management contents, determine the cost objectives and responsibilities of each position. decompose the overall goal layer by layer, implement it into each management position, and ensure the realization of the overall goal through the completion of individual indicators.

dynamic control process tracking principles. the construction project is one-time, and the cost control should emphasize the whole process control of the project. because the cost forecast of the construction preparation stage is the expected cost target determined according to the specific content of the construction organization design, as the construction progresses, the situation continues to change, and it is necessary to adjust in time to ensure the realization of the cost target. at the completion stage, due to the basic determination of cost profit and loss, even if deviations occur, it is too late to correct.

responsibilities and rights are clearly defined in the principle of performance appraisal. in the process of project construction, in order to effectively achieve cost control and create more profits, it is necessary to carry out cost control in accordance with the requirements of the economic responsibility system and the principle of combining "responsibility, rights and benefits". enterprise leaders should conduct regular inspection and evaluation of the performance of project managers and project managers in cost control of various departments and operation teams, and implement the system of "rewards and penalties" to achieve clear rewards and penalties.

A way to control the cost of engineering projects

The key to cost management is to achieve process control of costs. project cost management must closely focus on all aspects affecting cost changes, from a single labor cost, material cost, machinery use cost control mode to cost forecasting, process control adjustment, and change to post-event summary and improvement. 


In addition to production costs, the cost management object should be gradually extended to forecast costs, construction program costs and quality costs, safety costs, etc., to extend the tentacles of cost management to each field and process of the project, the production and operation determine the cost, and gradually develop to the direction of cost intervention production and operation, so as to truly meet the requirements of the market economy. in order to do a good job in cost control of engineering projects, we must strengthen the following aspects of work:

It is fundamental for leaders to attach importance to vigorously grasping implementation. cost management is a "first-hand" project, and the competent leaders of enterprises and project departments should raise awareness, correctly lead, actively promote, and provide all necessary basic resources. it is necessary to enable all employees to establish the concept of capital, cost, construction period, safety, quality and environmental protection integration, correctly handle the relationship between various factors such as capital, cost and quality, safety, etc., and go all out to grasp every link and process of various tasks in the cost control process. establish and improve various cost management systems. ensure that there is a plan in advance, control in the matter, and assessment after the event, to ensure that the execution runs through the whole process, and everything is in a controlled state.

Benefit determination decomposition costs are the goal. After the project is bid and signed, the company's economic accounting department should be based on the winning contract price, based on the industry quota and the internal quota of the enterprise, in accordance with the method of "market and site, volume difference and price difference, positive calculation and reverse calculation", comprehensively consider the difficulty of the project, scientific and technological content, quality objectives, change claims, market risks, management efficiency and other exception factors, and formulate project cost targets. 


First, based on bidding quotations and construction drawings, budget quotas and site survey data and other information, according to the direct cost (labor costs, material costs, machinery use fees), indirect management fees (manufacturing costs), superior management fees (funds, payments, etc.), taxes for sub-evaluation, according to the unit project, division project, sub-project and construction process consumed in the physical quantity, the most reasonable unit price is calculated; second, on the basis of the responsibility clause, according to the principles of income and exit, saving expenses, ensuring targets and construction and production, scientifically and rationally prepare a capital revenue and expenditure plan. 


According to the measurement indicators, the project department shall decompose the project duration, quality, safety, profit, handed over funds, site and team management according to the construction progress, and establish a target responsibility system and an indicator contract responsibility system with clear goals, quantitative indicators, responsibility to people, and evaluation and implementation. 


The indicators are decomposed vertically into professional teams and work layers (individuals), horizontally decomposed into functional departments, and transformed into post responsibilities to ensure that everyone has indicators on their shoulders and goals in mind.

The internal price assessment system is the foundation. 


The company's economic accounting department shall formulate a scientific internal price of the enterprise according to the construction quota, the construction organization plan and the material, labor and machinery prices determined by the bidding, as the basis for the calculation and assessment and evaluation of the responsibility cost. it is necessary to quantify the indicators of the optimization of the construction organization plan, the bidding of materials and equipment labor services, the cost savings of shortening the construction period, and the increase of net income by changing the claims, and reward and punish according to the assessment results, so as to effectively improve the enthusiasm of all employees to participate in cost control.

Optimizing the resource allocation of the program is key. construction scheme optimization is the main way to effectively control project costs. the project department should take the principle of "the program guides the cost, the cost constraint plan", takes the guarantee of the project quality, safety, construction period, improves the labor productivity and the requirements of the utilization rate of machinery as the premise, does a good job of on-site available resource investigation, fully understands and thoroughly understands the terms of the project contract, prepares a technically advanced, reasonable process, and organizationally capable construction plan, balances the progress of each sub-project, and reasonably determines the construction network in accordance with the operation principle of plane flow and main body crossing, so as to ensure that the work surface is not idle and the process operation is uninterrupted. 


Step by step to optimize the organizational design, give play to the leading role of program pre-control in cost management, to ensure that the process is efficient, feasible, the scheme is optimal, and the cost is the lowest. 


In the allocation of project resources, it is necessary to follow the principle of timely and appropriate amount, adapt to local conditions, and combination optimization, which can meet the needs of construction and production, and do not cause waste due to excess. it is necessary to select the project leadership team and capable and efficient management personnel and technical personnel with high standards and strict requirements; it is necessary to adopt the method of open bidding to select those external labor teams with construction capacity and construction experience; the financial department should analyze the use of project management fees month by month, find problems, reflect them in a timely manner, analyze the causes, and formulate corrective measures.

The total responsibility of the number of projects is the way. before the start of the project, the chief engineer of the project must go to the site to organize the drawing review and verification, and review the number of projects. in the process of review, if there is a difference in the number of projects, it should communicate with the owner and the design supervisor in time to strive to include it in the budget estimate. the number of subcontracted projects is determined according to the construction drawings and on-site investigations, and after being signed and confirmed by the chief engineer of the project, it is used as the basis for preparing the decomposition responsibility budget. 


The chief engineer of the project shall check the confirmation of the project quantity, the settlement of the project quantity, etc., strictly examine the list of project quantities, and strictly prohibit the occurrence of phenomena such as over-pricing and over-procurement. the project department shall establish a project quantity management ledger, register in a timely manner after each period of valuation, and strictly control the number of projects for the construction team to be strictly controlled within the approved number of projects. 


The external labor force used in the project is to sign the contract first and then go on the field, and it is necessary to calculate according to the actual amount of work completed, settle according to the unit price stipulated in the contract, strictly implement the first valuation and then pay, and put an end to the occurrence of the problem of over-denominated and over-payment.

Centralized control of major materials is the focus. in the construction of engineering projects, the cost of materials accounts for 65%-75% of the total project cost, and there is a great potential for savings, often relying on material savings to make up for other cost losses. 


Due to the large number of main materials in the construction industry and the large fluctuation of prices affected by the market, the project department needs to carefully arrange the feeding plan for each stage of construction according to the construction procedures and the progress of the project image, which not only ensures the continuity of the construction period and operation, but also can use the working capital well to reduce storage costs. this is especially important when capital flows are difficult. 


Material procurement needs to adopt the method of public bidding, under the premise of ensuring quality, according to the lowest price, the best purchase time, the best mode of transportation and service to determine the supplier unit, reduce the intermediate links and secondary handling costs. 


Auxiliary materials should be purchased by the project department itself, and their prices should be strictly controlled within the budget price. the material department must establish a material consumption console account according to the consumption of materials in the responsible cost budget, according to the material category and model, strictly implement the material consumption quota, and wrap up the base number of turnover materials and bulk materials, such as steel, wood, cement, etc., to limit the material picking. for various materials, adhere to the recycling of residual materials, waste utilization.


Paying attention to safety and strengthening quality is the guarantee. in the construction of the project, it is necessary to strengthen on-site safety management and effectively prevent the economic benefits of the project from being affected by the lack of safety management work. 


While complying with national standards or contract requirements and improving the quality of the project, it is necessary to control the quality cost at a certain level, and appropriately improve the quality requirements for some basic projects and sub-items involving the main body and the completion and acceptance of the project. after comprehensive consideration of all aspects of quality cost, the quality of the project not only meets the requirements of engineering standards, but also has economy and operability.

The new economic environment faced by construction enterprises has given new meaning to project cost management, and enterprises must do a good job in project cost management, so that construction enterprises can enhance their competitive strength, become bigger and stronger, and grow healthily.

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