Cost Control and Waste Management

Dr. Sarbesh MishraNICMAR, Hyderabad.

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About Myself

Name : Dr Sarbesh Mishra

Qualifications 1. B.Com (Hons) 2. Post-graduate in Commerce 3. M.Phil in Commerce 4. Ph.D. (Commerce)

Experience :Joined University of Delhi, as a Lecturer in Commerce in 2001 and continued till 2005 and then joined Army Institute of Management, NOIDA as Senior Faculty prior to current appointment at NICMAR.

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Thoughts The most successful man in the life is the

man who has the best information.Benjamin Disraeli, 19th. Century PM of

England

Even if you’re on right track, you’ll get run over if you just sit there.

Will Rogers, Certified Cost Analyst

He who controls the past controls future.George Orwell, Certified Public Accountant

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Contd…. You can’t get caught up in things that

you can’t control…….we can’t control our selling price. We can control our cost of manufacturing. We can control our efficiencies. We can control our waste.

Steven Appleton, CEO of Micro Technology

If you don’t know where you’re going, it doesn’t matter how you get there.

Prof. Sarbesh Mishra, NICMAR, Hyderabad

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Cost Control Project cost control begins with the preparation of

the cost estimate and the construction budget.

The information that is generated for estimating

purposes can be in terms of productivity rates, unit

costs, or both.

Small contractors frequently work in terms of unit

costs while large contractors base their estimating on

productivity rates

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Work Break Down Structure

Work Breakdown Structure (WBS) requires the

project to be divided and subdivided into

smaller parts

The smallest unit of the WBS is the work

package, which called a contract package if the

work is contracted out.

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WORK BREAKDOWN STRUCTURE (cont.)

It is necessary that the scope of the work for each

work package be described in relation to the work

to be done in the other work packages.

Work packages should be defined in terms of

design, construction methods, and completion

requirements, with associated performance dates

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WORK BREAKDOWN STRUCTURE

Project must be structure into small elements that are:

1. Manageable Specific authority and responsibility can be

assigned.

2. Independent With minimum interfacing or dependence on

other elements.

3. Measurable In terms of progress.

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Characteristics of Work Package1. Represents units of work at the level where the work is

performed.

2. Clearly distinguish one work package from all others.

3. Contains clearly defined start and end dates that are

representative of physical accomplishment.

4. Specifies a budget in terms of dollars, man-hour or other

measurable units.

5. Limits the work to be performed to relatively short periods

of time to minimize the work in progress.

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The Project Cost System

Objectives of Establishing Project Cost System.

1. Keep the construction costs of the project within

the established budget,

2. Develop labor and equipment productivity

information for estimating the cost of future

work

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Cost Code

ProjectNumber

AreaCode

Work Type Code

DistributionCode

9708B 05 03157.20 3

Cost Code for stripping concrete formwork for bridge deck (Labor).

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Project Number

9708B 05 03157.20 3

Eighth project in 1997 (Bridge)

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Area Code

9708B 05 03157.20 3

Geographic location

OR Associate Field Cost to Specific

supervisor or Management

Work Type Code

9708B 05 03157.20 3

03 Concrete0315 Concrete Formwork03157 Wood Concrete Formwork03157.20 Wood Concrete Formwork for Deck03157.30 Wood Concrete Formwork for abutment

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Distribution Code

9708B 05 03157.20 3

1. Total2. Material3. Labor4. Equipment5. Sub-Contract

Cost Code and Cost Control

1. All items of expense are charged to the project where they are incurred.

2. "General" or "miscellaneous" cost accounts should not be used, is poor practice, and should be avoided.

3. The cost code is to serve its basic purpose, it must be understood and used consistently by all company personnel.

COST ACCOUNTING REPORTS

Labor and equipment summary cost reports must be

prepared often enough so that excessive costs can be

detected while there is time to do something about them.

Cost report intervals are a function of the project size,

nature of the work, and the type of contract involved.

There must be a balance between the cost of generating the

reports and the value of the management information

received

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COST ACCOUNTING REPORTS (cont.)

Cost reports are frequently prepared daily on

complex projects involving multiple shifts

Most contractors match their cost control system

to their payroll periods and to their time-

monitoring system.

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LABOR AND EQUIPMENT COSTS

The job costs associated with materials,

subcontracts, and non-labor items of project

overhead are of a reasonably fixed nature.

Labor and equipment costs have considerable

uncertainty and fluctuate substantially during

the construction period.

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LABOR AND EQUIPMENT COSTS (cont.)

Contractor can control labor and equipment to some

extent, and require constant management attention

Detailed cost accounting methods must be used with

labor and equipment expenses if effective management

control over them is to be obtained.

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THANK YOU