Post-contract cost control

Post-Contract Cost Control

Definition

• Post-contract cost control refers to the strategic implementation of processes and procedures aiming to manage and regulate the costs associated with construction projects after the contract has been signed.

Significance

• Post-contract cost control aims to keep the project within the approved budget while maintaining the quality and standard of work.
• It offers a structured process for monitoring expenses to eliminate unnecessary costs and prevent financial wastage.
• This approach assists in mitigating financial risks, allowing contractors to promptly address any potential cost overruns and make corrections where necessary.

Methods

• Performance tracking: Regular assessment of the progress of construction processes against the cost plan to identify areas requiring improvement.
• Cost reports: Periodic financial summaries that depict current spending and provide a projection of future costs.
• Change control: Evaluates and controls changes that can affect the project cost, such as modifications in design, scope, or schedule.
• Valuing variations: Taking into account any changes made to the scope of work detailed in the original contract and assessing their implications on cost.

Tools and Techniques

• Cost Monitoring and Reporting: Adopting regular checks and balances to monitor the actual cost vis-a-vis the planned cost.
• Revised Cost Forecasting: Adjusting cost projections based on the actual costs incurred and potential future circumstances.
• Cost Variance Analysis: Checking the variations between the budgeted cost and the actual cost.
• Earned Value Analysis: A technique estimating the value of work done in relation to the planned schedule and cost.

Benefits

• Helps to maintain financial control of the project by regularly monitoring and adjusting costs where necessary.
• Prevents potential financial hazards by enabling early detection and resolution of budget deviations.
• Promotes transparency in financial management, providing accountability for costs incurred.
• Supports the overall success of the project by ensuring resources are used effectively and efficiently, guaranteeing value for money.

Challenges

• Accuracy of cost data collected at each stage of project execution is pivotal for effective cost control. Inaccurate data could lead to wrong decisions.
• Unforeseen circumstances can result in cost overruns. These could include weather disruptions, regulatory changes or labour disruptions.
• Regularly monitoring and adjusting the budget can be time-consuming and complex, requiring skilled personnel with a thorough understanding of cost management principles.
• Needs comprehensive documentation and communication to maintain transparency and ensure all stakeholders have a clear understanding of the cost control approach and its implications.