Project Cost Control Procedure

Topics: Costs, Cost, Cost accounting Pages: 54 (16767 words) Published: November 13, 2014
Project Administration, Procedure No: 1


Three distinct tasks are required to achieve effective cost control of a project. These are:a. Planning and Organising the project.
b. Recording and Reporting Costs during the execution of the project. c. Taking Corrective action if the cost reports indicate such action is necessary.
The greatest control of costs is achieved at the planning and organising stage of any project, more so if the design of permanent or temporary works is involved. Effective cost control is achieved at this stage by means of close analysis of alternative designs (permanent and temporary works), the realistic pricing of alternatives, analysis of alternative methods of construction, realistic pricing of these alternatives, detailed planning of the task, proper purchasing procedures, organising resources, etc, etc.

2. This procedure deals with the Reporting task involved in the project cost control process, and also covers some aspects of the Corrective Action task. 3. This procedure consists of the following sections :

Section 1 This introduction.
Section 2 Cost Code Numbering system and the Estimate Split
Section 3A Labour (Manhour reporting).
3B Labour (Cost reporting).
Section 4 Plant Cost Reporting.
Section 5A Commitment Reports.
5B Historical Cost Reports.
5C Escalation.
5D Project Assessment & Summary.
Section 6 Variations and Extras.
Section 7 Exceptional items.

This introductory section of the Project Cost Control procedure discusses the philosophy of the standard cost reporting system, but the details are covered in the other sections above. The system applies in principle to all types of contract, i.e., lump sum, schedule of rates and cost reimbursable, although the details and requirements will vary.

October 2007

Page: 1 of 6

Project Administration, Procedure No: 1

The procedure describes a manual method of project cost control reporting. “Company Name” objective is to use payroll data, financial and estimate figures for project cost control reporting system based on the manual method. This procedure has a number of draft report formats that "Company Name" intends to implement, and are attached to this procedure marked “Attachments”. For the purpose of putting in place the “COMPANY NAME”. Project Cost Control Procedure, it shall be refered to as the “manual method” where it may be necessary to set up the reports in appropriately designed spreadsheets to suit manual entry of data obtained through “COMPANY NAME”’s Financial and Payroll Systems.

Overview of Cost Control Reporting System

In outline, the key elements of an effective cost control reporting system are:a.

Proper design of an effective cost code numbering system and correct allocation of alloweds into this system.


Prompt accurate reporting of commitments and/or costs against alloweds, taking realistic account of escalation, variations, etc.

c. Intelligent analysis of reports leading to specific action plans for improvement.
d. Implementation of the action plans.
(Note that in effect items b, c and d form a continuing cycle.) 7.

The emphasis of the cost control reporting system is to report at the earliest stage of incurring cost. For many items, this can be achieved by reporting at the time of placing an order i.e. at commitment. For such a system to succeed it is essential that expenditure is not incurred without the issue of a properly costed order signed by an authorised person. However, with certain items it is impractical to report costs at the time of commitment. The cost control reporting system provides alternative methods for reporting these items, which include labour and miscellaneous materials etc.

Effective Cost Control Reporting

The principles for effective cost control reporting are:a. Concentrate on the "critical few" rather than the trivial many. b....
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • PROJ 592 Project Cost and Schedule Control Essay
  • Procedure Cost Control Essay
  • control procedures Research Paper
  • PROJ 592 Project Cost and Schedule Essay
  • Cost Control and Cost Reduction Essay
  • Cost Control and Cost Reduction Essay
  • Cost Control and Cost Reduction Essay
  • Cost Control and Cost Reduction Essay

Become a StudyMode Member

Sign Up - It's Free