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Understanding and Managing Project Costs Session 4

Understanding and Managing Project Costs Session 4. Review of Session 3. The estimate is based on several assumptions that may change as construction progresses. The estimate is based on detail available and should be an accurate prediction of construction costs.

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Understanding and Managing Project Costs Session 4

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  1. Understanding and Managing Project CostsSession 4

  2. Review of Session 3 • The estimate is based on several assumptions that may change as construction progresses. • The estimate is based on detail available and should be an accurate prediction of construction costs. • Mistakes may be made in the estimate. An AGC Construction Learning Tool

  3. Review of Session 3 (2) • Everyone involved has some responsibility for cost control. • Financial risks exist for every project. Labor and equipment are usually the largest risks. • Characteristics of the project present identifiable risks. An AGC Construction Learning Tool

  4. What is Cost Control? • Cost control is a systematic analysis of actual construction costs compared to estimated cost, and the use of that analysis to keep costs within the budget. An AGC Construction Learning Tool

  5. Elements of the Contractor’s Accounting System An AGC Construction Learning Tool

  6. Labor Hours • Labor is coded to the activities • Cost codes are usually arranged in CSI activity numbers • Example: • Summary from time cards • 03302 is cast-in-place concrete walls • 033302-01 is formwork, 03302-03 is pour An AGC Construction Learning Tool

  7. Date Name Classification 03302-02 03302-03 03303-01 7/15 Anderson, F.A. Laborer -2 8 Brown, W.R. Laborer -2 8 Carter, I.L. Laborer -2 8 Smith, N.R. Laborer -2 8 Wilson, D.E. Laborer -2 4 4 Hill, J.S. Carpenter 8 Garcia, J.E. Carpenter 8 Smith, H.H. Carpenter 8 7/15 Totals 36 L2 4 L2, 24 C Example Labor Summary An AGC Construction Learning Tool

  8. Reporting Process, Labor Hours An AGC Construction Learning Tool

  9. Reporting Process, Material Purchases An AGC Construction Learning Tool

  10. Reporting Process, Company-Owned Equipment An AGC Construction Learning Tool

  11. Information Needed to Examine Current Progress • Current Cost • Amount of production to date • Amount remaining to be completed • Compare estimated cost with current cost An AGC Construction Learning Tool

  12. Analysis of Cost Data • Case study: Butch and Bubba @ Lost Lake • Bid of $ 3,200 for installing drywall (taping is in a separate line item) • 10,667 SF • 160 manhours @ $ 20/hr • 2 installers (Butch and Bubba) for 2 weeks An AGC Construction Learning Tool

  13. Case Study • Butch and Bubba want to take a day off and go fishing • Need to complete all work in 9 days instead of 10 • Need to make wages for the last day ($320)+ $65 in estimated expenses • Will use cost data from week #1 to make the decision whether to go fishing An AGC Construction Learning Tool

  14. Monday Tuesday Wednesday Thursday Friday Total 1-Jun 2-Jun 3-Jun 4-Jun 5-Jun Hours 16 16 16 16 16 80 Production 1050 1280 1280 1050 1280 5940 Cost @ $ 20/hr $320.00 $ 320 $ 320 $ 320 $ 320 $1,600.00 Cost/SF 0.30 0.25 0.25 0.30 0.25 0.27 As per bid @$.30/SF $288.00 $ 384.00 $ 315.00 $268.80 $384.00 $1,782.00 Daily Cost Variance $ (5.00) $ 64.00 $ 64.00 $ (5.00) $ 64.00 $ 182.00 Lost Lake Community Center: Week # 1 Cost Data An AGC Construction Learning Tool

  15. Information from Cost Data • Average cost for week was $.27/SF, better than the $.30/SF estimated • Achieved $.25/SF on three days • Made $182.00 beyond the estimate this week. An AGC Construction Learning Tool

  16. Typical Analysis Information from Cost Data • Quantity of work remaining • Current percentage of work completed • Current cost per unit • Estimated cost of remaining work • Project variance • Percentage of variance An AGC Construction Learning Tool

  17. Analysis of Butch and Bubba’s Cost Data, Week #1 • Quantity remaining = Estimated quantity – Quantity completed = 10,667-5,940 = 4,727 SF • % Complete to date=Quantity to date / Total Quantity = 5,940/10,667= 56% • Current Cost/Unit = Current cost / current production = $1600/5940=$.27/SF An AGC Construction Learning Tool

  18. Analysis of Butch and Bubba’s Cost Data, Week #1 • Estimated cost of remaining work = Remaining quantity x $.27 = $1,276.29 • Projected Variance = Estimated cost – (current cost + cost of remaining work)= $3200 –($1,600 + $1276.29) = $323.71 • % of Variance = Variance / estimated cost = $323.71/$3200 = 10% An AGC Construction Learning Tool

  19. Should Butch and Bubba Go Fishing? • Time: • 4,727/4 days = 1,182 SF necessary per day–can do • Cost: • Projected: $323.71 …covers wages • 1½ early on Thursday = $60.00 • Go for it! An AGC Construction Learning Tool

  20. Monday Tuesday Weds. Thursday Total for Total for 8-Jun 9-Jun 10-Jun 11-Jun Week Job Hours 16 16 16 12 60 140 Production 1280 1280 1280 887 4727 10667 Cost @ $ 20/hr $ 320.00 $ 320 $ 320 $ 240 $1,200.00 $2,800.00 Cost/SF 0.25 0.25 0.25 0.27 $ 0.25 0.26 As per bid @$.30/SF $ 384.00 $ 384.00 $ 384.00 $ 266.10 $1,418.10 $3,200.00 Daily Cost Variance $ 64.00 $ 64.00 $ 64.00 $ 26.100 $ 218.10 $ 400.00 Lost Lake Community Center: Week # 2 Cost Data An AGC Construction Learning Tool

  21. Friday, June 12 Gone Fishing! An AGC Construction Learning Tool

  22. Labor Material Total Cost to Date $12,214.00 $ 2,928.00 $15,052.00 Quantity (SFCA) to date 4,320 SFCA Quantity (SFCA) remaining 6,480SFCA % Complete 40% 80% Estimate Cost to Date $13,093.92 $ 3,024.00 $16,117.92 Current Variance $ 969.92 $ 96.00 $ 1,065.92 Current Cost/SFCA $ 2.81 $ .34 $ 3.15 Estimated Cost/SFCA $ 3.03 $ .35 $ 3.38 Projected Cost $30,348.00 $ 3,660.00 $34,008.00 Projected Cost/SFCA $ 2.81 $ .34 $ 3.15 Projected Variance $ 2,386.80 $ 120.00 $ 2,506.80 % Variance 7% Solution to Analysis of Cost Data Activity An AGC Construction Learning Tool

  23. Labor Material Total Cost to Date $12,214.00 $ 2,928.00 $15,052.00 Quantity (SFCA) to date 4,320SFCA Quantity (SFCA) remaining 6,480SFCA % Complete 40% 80% Estimate Cost to Date $13,093.92 $ 3,024.00 $16,117.92 Current Variance $ 969.92 $ 96.00 $ 1,065.92 Current Cost/SFCA $ 2.81 $ .34 $ 3.15 Estimated Cost/SFCA $ 3.03 $ .35 $ 3.38 Projected Cost $29,488.32 $ 3,660.00 $33,148.32 Projected Cost/SFCA $ 2.73 $ .34 $ 3.07 Projected Variance $ 3,246.48 $ 120.00 $ 3,366.48 % Variance 9% Solution if Crew 2 can produce as much as Crew 1 An AGC Construction Learning Tool

  24. Guidelines for Converting the Estimate to Cost Control • Cost control item needs to be easily identifiable • Work activity is unique for reporting and historical cost data • Cost control item shouldn’t be too small • Cost control item should match the firm’s cost control data where possible An AGC Construction Learning Tool

  25. Item CY Manhours Per Hour Labor Cost Quant Unit Price Mat. Cost Total Cost Footings 5.4 12 $30.36 $364.32 132 SFCA $.40 $375.47 $739.79 Walls 10.8 24 $30.36 $728.64 528 SFCA $.40 $856.53 $1585.17 Slab 2.7 20 $26.64 $532.80 2.7 CY $60 $261.33 $794.13 19 $1625.76 $1493.33 $3119.09 Balance $ 1,625.76 $1528.14 $3135.00 BF Wall Framing 541 8 7 $ 31.82 $ 27.44 $ 446.64 .541 MBF $400/MBF $ 273.43 $ 720.07 Roof Framing 266 6 6 $ 31.82 $ 27.44 $ 355.56 .266 MBF $800/MBF $ 349.69 $ 705.25 Floor Framing 85 6 $ 31.82 $ 190.92 .01 MBF $800 MBF $ 176.89 $ 367.81 Total $1793.13 Activity: Converting the SureFresh Estimate to Cost Control An AGC Construction Learning Tool

  26. Item CY Manhours Per Hour Labor Cost Quant Unit Price Mat. Cost Total Cost Abutment Forms 40 Crew hours $ 150.34/ crewhour $6,013.60 2107 SFCA .50 $1053.5 $7067. Abutment Rebar 5.3 ton $4240.00 5.3 ton $600 $3180. $7420. Pour Abutment 136 CY 8 crew hours $ 169.02/ crewhour $1352.16 136 CY $60 $8160. $9513 $24000. Activity: Converting the SureFresh Estimate to Cost Control, Bridges An AGC Construction Learning Tool

  27. Using on the Job What You Have Learned Today • Jobsite assignment: • Examine your company’s cost control system: • Do you have daily cost information? • Does your cost control system give you the opportunity to make decisions about the costs during the progress of the activity? • How does your firm establish cost control items? • Do you have the opportunity to make additional cost control items? An AGC Construction Learning Tool

  28. Using on the Job What You Have Learned Today • To Get Ready for Session 5 • Read Session 5 in the Participant’s Manual, pages __ to ___ • Look at how your firm plans its cost control program • Look at how your firm uses a “bill of material” and how it relates to the cost control system. An AGC Construction Learning Tool

  29. An AGC Construction Learning Tool

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