This document discusses project cost management. It describes how project cost management deals with controlling the costs of resources needed to complete project activities. The main steps in project cost management are: 1) resource planning schedules, 2) cost planning, 3) cost budgeting, and 4) cost control. Resource planning schedules show quantity requirements of resources on a weekly or monthly basis. Cost planning aims to ascertain costs before design decisions. Cost budgeting allocates overall cost estimates to individual work items. Cost control ensures final costs do not exceed planned costs by observing, comparing, and computing variances of actual versus standard costs.

1. PROJECT COST MANAGEMENT
 A project consists of number of activities. Each of these activities consumes
resources. Resources cost money.
 PROJECT COST MANAGEMENT deals with controlling cost of the resources
needed to complete project activities.
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2. STEPS IN PROJECT COST MANAGEMENT
1. Resources planning schedule
2. Cost planning
3. Cost budgeting
4. Cost control
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3. 1: Resources planning schedule
 These schedules shows the quantity requirement of each of the resources
either on weekly basis or on a monthly basis.
 Resources schedules such as material schedule , labour schedule, staff
schedule , equipment and plant schedule , subcontractor or specialist.
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4. 2: COST PLANNING
 It aims at ascertaining cost before many of decisions are made related to
design of facility.
 The essential components of cost planning are the project schedules and
estimates.
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5. 3: COST BUDGETING
 It is the process of allocating the overall cost estimate to individual work
items of the project.
 Work items are group of similar activities taken from bill of quantities.
 For example: concreting a different grades can be grouped under one
common head “CONCRETE”.
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6. 4: COST CONTROL
 The aim of cost control is to ensure that the final cost of project doesn’t
exceed to planned cost.
 The steps of cost control are :
-observe the cost expended for an item
-comparing it with available standards
-compute the variance between the observed cost and standard cost.
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7. Collection of cost related information
 Labour cost
 Material cost
 Plant and equipment cost
 Subcontractor cost
 Overhead cost
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8. COST CODES
 It is the standardization of letters, number, words or symbols for
representation of various items of works.
 It is the code assigned to an activity for which a particular cost is incurred.
 They are allocated by planning department depending on the nature of
activity at site.
 The number of cost codes should neither be too large nor too small.
 They are also called cost heads.
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9. COST STATEMENT
1. Cost codes are alloted.
2. Collection of cost related information .
3. Determination of provision for expenses.
4. Determination of deferred expenses
5. Compilation of above costs in the given formats, finalizing total cost code
wise, and arriving at project cost.
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10. A typical cost statement
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11. VALUE MANAGEMENT IN CONSTRUCTION
 Value engineering is defined as systematic objective and analytical approach
to effectively identify unnecessary costs in construction.
 It is also known as value management or value analysis.
 Value index = worth / cost
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12. Value index can be increased by :
 Improving the utility with no change in cost.
 Retaining the same utility for less cost.
 Combining improved utility and less cost.
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13. Steps in application of value engineering
1. Different plant and non plant structures are compared with respect to their
cost .
2. Various elements and materials aspects are analysed cost wise.
3. A “FAST” diagram is constructed.
4. All the possible alternatives are then generated to cater to the functions
identified in previous step.
5. The identified alternative are then evaluated in two stages
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14. 6. The criteria with the highest mean value is rated as first and vice versa.
7. The weights of each criteria is then obtained by evaluation matrix.
8. The alternatives are evaluated against each of the performance criteria.
9. The ranks given are multiplied by corresponding weights of criteria and
receptioning scores are calculated.
10. The alternative with the highest score is thus selected.
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15. THANK YOU
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