Tuesday, 17 March 2015

Importance of Cost Management in Project Management

Importance of Cost Management in Project Management

Project management success depends on the ability to manage customer expectations, as well as the capacity to maintain a calibrated approach to all projects within the portfolio. And while time and resource issues are always significant, the factor that often has the biggest influence on project success or failure is whether or not the project team can – or cannot – optimize project outputs with effective cost management.

Construction cost is one of the most important criteria of success of project throughout the lifecycle of the project and is of high concern to those who are involved in the construction industry. In order to manage construction project successfully various procurement strategies have been introduced. In spite very rarely projects are completed within estimated budget.

Keeping construction projects within estimated costs and schedules requires sound strategies, good practices, and careful judgment.

Factors affecting Construction Cost Performance

There are several factors that affect the construction cost and various studies have been conducted to address these factors.

Low quality materials cause higher construction cost than expected because of the loss of materials during construction. This results from a lack of standards for materials and management systems. Lack of ability to prevent cost overruns or to control construction costs causes many construction companies to fail.

A major factor contributing to the time-delay and cost-increase is the inadequacy of money and time allocated to the design phase. The three main causes of time-delays are, in order, the number of change orders, financial constraints and owners’ lack of experience in construction.

Design changes, inadequate planning, unpredictable weather conditions; and fluctuations in the cost of building materials are other common factors causing cost overruns.

To sum up, following are the factors affecting Construction Cost management:

  • Fluctuation in prices of materials
  • Frequent design changes
  • Unforeseen ground conditions
  • Change in the scope of the project
  • Low speed of decisions making
  • Lack of communication among parties
  • Delay in Material procurement
  • Underestimate project duration resulting Schedule Delay
  • Owner interference
To avoid the above, project needs special knowledge and expertise to handle it ,which is most efficiently provided by Cost Managers of an effective PMC.

About Masters

Quite simply, Masters completely and clearly understands the importance of cost management as a subset of project management. It demonstrates this by enabling organisations to efficiently and effectively assess all costs associated with a construction project, including (but not limited to): original budget cost, current approved cost, forecasted vs. actual cost, and committed cost.

Our Cost Consultancy services are classified into four typical stages:

  • Pre contract
  • Tendering & Documentation
  • Post contract Cost Control & Monitoring
  • Post contract Financial Management

Some of our Cost Consultancy Projects are:

- Project management & Cost Consultancy for Novotel Hotel Mumbai
- Project Management & Cost Consultancy for The Imperial, Mumbai 
- Project Management & Cost Consultancy for Trilium Mall, Amritsar

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