Wednesday 9 February 2022

The impact of rates fluctuations of materials on the cost of the project

First, the significance of cost control of construction projects of construction enterprises

the project cost occupies the vast majority of the enterprise's capital, affects the normal operation of the enterprise's funds, and has a very profound impact on the development of the enterprise. if construction enterprises want to be further developed, they must strengthen the management and control of costs.

The importance of project cost control. construction companies must pay attention to cost control at different stages of development. first of all, from the project registration stage, the target should be accurately locked and blind bidding should be avoided. indiscriminate investment without targeting will only lead to a decline in the winning rate and an increase in costs. 


In addition, in the preliminary preparation of the construction project, it is necessary to improve the construction organization design and formulate effective cost control measures. the construction process from the project start to the completion of the cleanup, each process is closely linked, if the schedule can not be reasonably arranged, not only will cause the utilization rate of resources to decline, and may even lead to an increase in costs due to the extension of the construction period.

The project costing strategy. cost management is an essential part of the entire construction project. in the face of different stages of development, corresponding cost control measures should be taken for their particularities. there are many problems in America's construction enterprises, such as the concept of cost control is relatively weak, there is no clear division of labor responsibility, the system is not sound enough, etc., which will lead to an increase in costs. therefore, construction enterprises should proceed from the overall situation, proceed from the fundamentals, and continuously reduce expenses and improve the company's profitability.

Second, the current construction project cost control status of construction enterprises

the awareness of cost control is weak, and cost accounting is only a formality. china's construction enterprises in the cost control and management process generally have a backward understanding of the situation, which directly leads to the weak awareness of enterprises to implement cost control. many companies believe that the purpose of cost control is simply to reduce the cost of enterprises. in fact, cost control is more about cost utility. 


Although some enterprises have implemented a cost management system, the most important indicator of enterprise benefit is still operating income, not including cost rate. this approach of pursuing efficiency without regard to sources and methods can lead to disorganized cost management, which ultimately leads to inefficiency and increased losses. 


Therefore, the most fundamental means to increase the efficiency of enterprises is to strengthen the awareness of cost control and no longer let cost accounting become a formality.

The cost control and cost management system are not sound enough. the cost control of construction projects of construction enterprises is not limited to the financial department, but also involves other institutions of the enterprise, especially the project department. but in practice, all cost control decisions depend on the finance department and are only the responsibility of the finance staff. if the construction enterprise can take into account the responsibility of the project construction personnel for cost control and continuously improve the cost control and management system, then the economic benefits of the enterprise will be greatly improved.

lack of a sound reward mechanism for rights and responsibilities. according to the requirements of the economic responsibility system, in order to effectively control the target cost, it is necessary to have a perfect right and responsibility reward mechanism. 


Due to the lack of a unified mechanism of rights and responsibilities in the cost management of the project, the corresponding rights and interests of the cost control personnel are not given, and the specific responsibilities and obligations are not stipulated, it is difficult to fully mobilize the enthusiasm of various departments, resulting in the construction personnel only paying attention to their own interests, only solving the technical problems encountered in reality, and ignoring the control of costs. only by clearly defining responsibilities and rights and formulating a detailed reward and punishment system can we ensure that cost control is implemented and effective.

Blindness in project decision-making. many construction companies only blindly expand the scale of enterprises, and make bidding decisions without full consideration. due to the lack of detailed understanding of construction technical specifications and methods, the failure to seriously study the measurement and payment rules, the lack of thorough understanding of the current laws and regulations and related provisions, and the failure to fully consider the various risks that may occur, the blindness of bidding quotations has led to an increase in the cost of enterprises in the actual project settlement.

Low utilization of resources during construction. construction materials account for about 70% of the construction cost, so construction materials have a significant impact on the overall cost control of construction enterprises. starting from the procurement of materials, many enterprises will have the phenomenon of material error procurement, repeated procurement, etc., and even many construction units report prices beyond their actual range, which will lead to an increase in the cost of material procurement. 


in addition, in the construction process, the construction enterprises did not completely plan the system engineering, there was a problem of poor communication between the various project departments, and the uncoordinated work of various departments would directly produce the problem of waste of resources and low utilization, and there would be a serious phenomenon of rework, not only waste of materials, but also prolong the construction period.

Third, the principle of cost control of construction projects of construction enterprises

the principle of cost minimization. according to the actual situation of the specific project, on the basis of the feasibility of reducing costs and reasonable cost minimization theory, enterprises can comprehensively analyze the internal and external factors affecting the cost of enterprises, continuously optimize the structure of construction project costs, and ultimately achieve the goal of minimizing costs. of course, cost minimization is not the same as blindly reducing costs, but on the basis of ensuring that the quality of the project is qualified, the minimum cost is achieved.

the principle of total cost control. comprehensive cost control should be from the perspective of sustainable development of enterprises to weigh the advantages and disadvantages, cost control as a comprehensive indicator to measure the business results of enterprises, must mobilize the enthusiasm of all employees. the whole process controls all stages of construction, and the cost rate of each link should be reduced as much as possible. the specific construction links are inextricably linked to the cost of the project, so adhering to the principle of comprehensiveness is necessary to effectively control the cost of the project.

the principle of the trinity of rights, responsibilities and benefits. in order to truly implement cost control and mobilize the enthusiasm of all employees to participate in it, it is necessary to implement the principle of combining responsibility, authority and interests. in the process of project construction, it is not only necessary to implement the project manager responsibility system, but also to make each department and construction team have a certain cost control responsibility, so as to form a network-like all-round cost control responsibility system. at the same time, it is necessary to give the responsible entity the right to control the corresponding cost, and it should be linked to the reward and punishment system. through clear rights and responsibilities, rewards and punishments, the effect of performance accumulation can be achieved.

dynamic control principles. due to the dynamic nature of project construction, the cost management strategy should be continuously improved as the project progresses. the dynamic control of project costs is often a complete and orderly operating system with clear implementation steps. dynamic control generally starts from the preparation of project cost plans, determines the target costs, and then through the detection of project costs, the deviations that obviously affect the cost plan are analyzed and corresponding improvement measures are taken. at the same time, cost forecasts are required for unfinished projects to provide a comparative basis for the next step of cost management.

Fourth, the choice of cost control measures at different stages of development

Improve the organizational structure in the early stage and enhance the awareness of cost control. to truly achieve reasonable and effective cost control of engineering projects, we must first change the cost management awareness of the construction enterprises themselves, abandon the stereotypes, and use correct subjective thinking to guide objective practice. 


In order to prevent the cost accounting of enterprises from becoming a formality, employees should be trained in the professional training of cost control, and a sound organizational structure should be established to manage the operating costs of enterprises as a whole and improve the efficiency of resource utilization, so as to give full play to the effectiveness of cost control and bring greater profit margins to enterprises.

In the medium term, a sound project cost management system will be established to consider the cost shortage. engineering projects have their own particularities, there are various unforeseen potential costs, and the general construction period is relatively long, and the cost recovery cycle is long. therefore, every building construction enterprise should fully consider the problem of insufficient cost and formulate a reasonable project cost management system. 


The project cost control always runs through the entire construction process, and construction enterprises should establish a comprehensive cost control system according to their actual situation. the cost control of different stages of the project is closely linked, so that the various costs of various departments of the enterprise are controlled within the planned goals, so as to achieve the purpose of reducing costs and improving operating profits.

Formulate a sound comprehensive evaluation and reward and punishment system. in order to mobilize the enthusiasm of employees, it is necessary to establish a sound comprehensive evaluation and reward and punishment system. only by combining cost control with the practical interests of employees can we reduce the phenomenon of excessive cost control implementation from the root cause. all rights, obligations and reward and punishment systems are reciprocal, and comprehensive evaluation methods are used to motivate employees to strengthen cost control.

Cost controls in the project decision-making phase. Project decision-making must have directionality and operability, and the bidding decision-making stage is mainly to calculate the cost and determine a reasonable bidding quotation on the basis of a certain profit margin. 


Construction enterprises can not blindly pursue the winning bid and reduce the price, should fully consider their own capital costs and overall development needs, to the greatest extent to avoid the project advance and lead to the serious consequences of difficulties in capital turnover of enterprises. For example, the construction company GH Company advises on the design of all payments through dedicated staff on the basic situation of the bidding project. In this way, the enterprise and the owner negotiate the contract to the greatest extent possible to avoid business risks. 


The project decision-making stage is a link that cannot be ignored in cost control, and there may not be a large cost expenditure in the current period, but it has a vital impact on the later project construction, restricting the development of follow-up work and is not conducive to the scientific management of costs.

Cost control measures throughout the project. for the cost control of the whole process of the project, it is necessary to take into account the comprehensive cost management before, during and after the event, and reduce the cost as much as possible. 


The prior control is mainly in the bidding and signing stages, the project is comprehensively analyzed and evaluated, and a series of technical and economic measures are used to implement cost control to lay the foundation for follow-up work. 


Before the implementation of the construction project, the construction enterprise must repeatedly review the drawings under the premise of ensuring the quality of the project, and comprehensively consider the construction methods, construction machinery, construction procedures and flowing water construction, so as to avoid spending more costs in the construction process. 


For the construction period problem, the construction organization design of the project can be optimized, and innovative means can be adopted in the construction process to shorten the construction period and improve the economic benefits with technical advantages. 


In view of the quality cost, enterprises must strictly control the quality control, prevent the occurrence of all cutting corners in the construction process, eliminate the phenomenon of rework, and save costs. the key to post-control lies in the construction settlement and warranty stages, comparing the final actual cost with the target cost, summarizing and summarizing, and continuously optimizing the cost control plan to provide practical experience and scientific basis for the subsequent development of the project.

Fifth, the current construction enterprise construction project cost control form and task

With the development of the market economy, the form of project cost control of construction enterprises is relatively single, and enterprises are often in a state of tension, blindly following the trend of bidding, and ignoring the fundamental cost control. 


Even, in order to be able to successfully win the bid, many companies have reduced the bidding price a lot, resulting in serious consequences of costs exceeding revenue. at present, construction enterprises have failed to grasp the focus of cost control, and cost management methods are still in the traditional cost accounting stage, and cannot adapt to the rapid development of the construction industry. 


In the face of the increasingly fierce competitive pressure between construction enterprises and the defects of the internal system of enterprises, the cost control of enterprises should be grasped from the source, taking into account various factors, and according to their actual situation, a sound and feasible cost control system should be formulated. of course, this is not achieved overnight, and it is necessary to constantly summarize the lessons learned and gradually complete. only by doing this can we change the chaotic situation of cost control of construction enterprises and improve the profit margin of enterprises. 


The cost control is the key to the scientific and long-term development of every construction enterprise, and at the same time has an important impact on the smooth and orderly operation of the entire economy and society. only when enterprises break the traditional cost management concept, use innovative means, comprehensively analyze the development trend of the construction industry, and constantly explore and study effective ways of cost control, can they occupy a place in the fierce domestic and foreign construction industry. 


Therefore, enterprises must continue to learn advanced scientific management models and strengthen the cost control mechanism of enterprises in order to cope with the huge challenges of the construction industry, seize development opportunities, and achieve extraordinary results.

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