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Cost Control

8 replies [Last post]
Jithin Kambhikanam
User offline. Last seen 5 weeks 5 days ago. Offline

Hello Everyone,

 

I would like to learn more abut Cost Control. I do have experience in Cost Control, so could anyone guide me on this.

I work in Oil and Gas Sector, so would liket o learn more.

 

Note: 

This is not related to the topic of using Primavera for Cost Control.

 

Regards

Jithin

Replies

Rafael Davila
User offline. Last seen 5 hours 25 min ago. Offline
Joined: 1 Mar 2004
Posts: 4778

Volume of work and production rates from Rafael Davila
  • Production rates and resource availability change from day to night as well from season to season.  For different shifts per day or if seasonal frequently the whole crew composition and production rate is different.  As things happen and activity moves with time, speed and what is done by the different crews varies. 

Jithin Kambhikanam
User offline. Last seen 5 weeks 5 days ago. Offline

Hi Rafael,

 

Thanks a Lot. Would be a good add on to my knowledge. Have to read and practice a lot. 

Will get back after getting through the Files.

 

Regard

Jithin

Rafael Davila
User offline. Last seen 5 hours 25 min ago. Offline
Joined: 1 Mar 2004
Posts: 4778

Earned value for quantities such as man-hours alone gives you a separate 50% of the whole picture, you got to correlate costs and manhours to volume of work to get the whole picture.  It is simple grammar school arithmetic many people miss to report.

  • Unit production rate to date = Effort hours to date / Units to date
  • Alternatively some people define production rate as the reciprocal; Unit production rate to date =  Units to date / Effort hours to date
  • Unit cost = Cost/units
  • Unit cost to date = Cost to date / Units to date
  • Link to Weekly Unit Cost Report - one of many ways to report the data, it can easily be expanded to report unit production rates.
  • Link to Job Costing paper

  • Link to DOD Unit Cost Handbook

Jithin Kambhikanam
User offline. Last seen 5 weeks 5 days ago. Offline

Hi Rafel,

Ya I like to use the Volume to measuree the Cost with Unit Rate. As I have shown in the Table I compare Budget (Given by Estimation) with Actual and Forecast.

Earned Value can also be measured in volume if you get the reports by volume from field ( Which is what I ask for - Quanitative Report)

Forecast I do it by taking the Overall expected quantity from the Engineering team once the engineering for the Proejct is alsomist completed and the Total Quantity of Project can be measured. So at that time almost I have the unit rate for all the Item which I use to Forecast the Cost, So that the management knows where we are heading to.

One more thing is "If the Manpower is inhouse, then I will look at the Productivity too, but if the work is based on Unit Rate I wouldnt worry much about productivity If I know that we will meet the Schedule completion Date. If I think we wont meet the scheudle completion date then I will look into the Productivity and other Concerns.

 

Guide me If a Cost Control need to look at any other things too..

 

Regards

Jithin

 

 

Rafael Davila
User offline. Last seen 5 hours 25 min ago. Offline
Joined: 1 Mar 2004
Posts: 4778

The devil is in the details.

To know some budget amouts are over or under just gives you half of story.

Say:

  • Budget = 100$
  • Cost to date = 60$
  • % complete = 50%

Then we can say:

  • budget for work performed = 50% of 100$ = 60$
  • Cost to date = 60$
  • we are 10$ over budget

But this is not enogh:

  • what is the volume of work?
  • 200 units?
  • 100 units?
  • what is the unit cost?

Unit costs is what gives physical meaing to the numbers.  Estimators as well as field supervisors use voulme of work quantities, they use historical records for unit cost ot unit man-hours. 

Without volume of work you only get earned value. But earned value of work performed is not enough, even worst it is language not used by the people on the field, the people doing actual work! So people on the field cannot even get at least the 50%, they get less!

Accounting for the costs is the hard part, better done by your accounting, figuring out the volume of work is easy.  I cannot understand why the industry became so lazy.

At home a cost engineer woud be concerned about budget as well as about unit cost and unit production rates.

Jithin Kambhikanam
User offline. Last seen 5 weeks 5 days ago. Offline

Thanks Rafel, have to Study more.

What I did is Take the Budget Cost and then compare with the Actual and Forecast too. 

The Procurement Team would then come to me before issueing a Purchase Order to check if it meets the Budget or not.

I also see that I capture the change orders too.

The Table below is just a Summary,

ItemBudgeted CostChange OrdersRevised BudgetActual CostForecasted Cost
Project Management     
Engineering     
Construction Management     
Procurement     
Costruction     

Zoltan,

What if the Cot comes from a Construction Subcontract by unit rate and not by manpower like say Concrete Unit Rate / Cu M, Structural Steel Unit Rate /Ton, Cable Pulling Unit Rate / MEter , Piping Unit Rate / Size / Joint. So I am not looking for Cost by schedule.

 

What does a Cost Control Engineer do, is it the things which I described up top or is it something else or there is some add on to what I have listed.

 

Regards 

Jithin

Rafael Davila
User offline. Last seen 5 hours 25 min ago. Offline
Joined: 1 Mar 2004
Posts: 4778

While the references are specific to construction accounting software the principles remain the same, whithout quantities you only have raw budgeting. 

Zoltan Palffy
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Joined: 13 Jul 2009
Posts: 2373
Groups: None

resource load your schedule with costs you will learn