What Is a Formal Charge?

The ability of project cost management and control depends on three elements: people, methods and tools. Method refers to the entire mode of project cost management, including objectives, requirements, specifications, methods, standards, forms, checklists, reports, coding structures, work procedures, approval processes, personnel duties, etc. The method needs to be updated and optimized according to different needs.

Project cost management

Right!

The ability of project cost management and control depends on three elements: people, methods and tools. Method refers to the entire model of project cost management, including goals, requirements,

A tool refers to a suitable project cost management information system. It is often said that money and time are the two major goals of construction project management, but time is money, so it is absolutely important to be able to control the actual costs to complete the project within a specified budget. Strangely, many project leaders know how to use advanced software to help control progress and schedules, and even specify other project participants in the contract to use a certain progress software. However, when it comes to expense control, most of them still stagnate in traditional manual or simple Excel, or rely on accounting and financial systems. It is necessary to know that the advanced project cost management system can standardize business processing and project management process, unify and optimize core work processes, unify business processing methods, and improve work efficiency and the company's overall management level.

All methods and tools for cost control must be implemented and used by humans. Whether an enterprise wants to adjust or transform "traditional methods" or try to use "informatization tools" to improve its ability to control project costs, it will eventually encounter problems from different levels of human origin, including resistance, negative attitudes, fear of change, and Reasons for criticism, excuses remain unchanged, etc. The most common objection is that after changing methods and using the system,

The cost estimate refers to the approximate value of the cost of the resources (personnel, materials, equipment, etc.) required to complete the work of the project. The price estimate is an important factor when the project is implemented under certain constraints.

Cost estimates should be linked to results of quality of work.

In the process of cost estimation, various forms of cost exchange should also be considered. For example, in most cases, extending the duration of work is usually associated with reducing the direct cost of work. Conversely, additional costs will shorten the project work. Duration. Therefore, in the process of cost estimation, the impact of additional work on the expected shortening of the project duration must be considered.

Information on cost estimates

Resource demand planning: the result of the resource planning arrangement.

Resource price: In order to calculate the cost of each project, you must know the unit price of various resources, including man-hour cost, cost per unit volume of materials, etc. If the actual price of a resource is unknown, it should be estimated.

Duration of work: The duration of work will directly affect the estimation of project work expenses, because it will directly affect the amount of resources allocated to it.
Historical information: The historical data of similar projects is always the most valuable information that can be referenced during the project implementation process, including project files, shared project cost estimation databases, and project team knowledge.

Accounting forms: Accounting forms explain the code structure of various expense information items, which should be very helpful for the estimation of project costs and the correct accounting catalog.

Tools and methods for cost estimation

Analog estimation method: The analog estimation method is usually used to make an analogy with the original similarly executed project to estimate the cost of the current project. Usually, it is effective to estimate the total cost of the project when detailed information of the project is difficult to obtain

Cost budgeting involves allocating the full cost of each individual job to obtain a baseline of costs for measuring project execution.

The cost budget can be divided into the following three parts:

Direct labor cost budgetAuxiliary service cost budget

Cost estimate

Work breakdown structure project schedule: The allocation and arrangement of costs should be compatible with the schedule.
Cost budgeting techniques and methods: Similar to cost estimation.

The result of cost budget: The main result of cost budget is to obtain the cost line. The cost line will be used as the basis for measuring and monitoring the cost of the project during its implementation. The relationship between the general cost curve and time is a

Expense management cannot exist independently of technical management and schedule management. On the contrary, a comprehensive balance must be made between cost, technology and schedule. Timely and accurate cost, progress and technology tracking reports are the basis for project fund management and cost control.

Cost control is to ensure that tasks are performed within their respective budgets. The basis of cost control is to budget the cost of the project in advance.

The basic method of cost control is to require each department to report its expense report on a regular basis, and then the expense review by the control department to ensure the legitimacy of various expenditures, and then compare the expenses incurred with the budget and analyze whether they are overspending. , And take corresponding measures to make up.

Content of cost control

Expense control is mainly concerned with various factors that affect changing the expense line, determining whether the expense line has changed, and managing and adjusting actual changes. Cost control includes:

Monitor cost performance to determine deviations from plan

Make sure all changes happening are accurately recorded on the cost line

Avoid incorrect, inappropriate or invalid changes reflected on the cost line

Variety of information

Expense control should also include finding the reasons for the changes in costs, both positive and negative. At the same time, it must also consider coordination with other control processes (scope control, schedule control, quality control, etc.). Problems or cause unacceptable project risks.

Basis of cost control

Cost line

Implementation report: This is the basis of cost control. The implementation report usually includes all the expenses of each project's work, and is also the most basic basis for finding problems.

Requests for change: Requests for change may be oral or written, direct or indirect, formal or informal, and changes may be requested to increase or decrease the budget.

Method and technology of cost control

Expense control change system: It is usually the basic steps that explain the cost line is changed. This includes paperwork, tracking system and adjustment system. The cost change should be coordinated with other control systems.

Implementation measurement: It mainly helps to analyze the causes of various changes. There are two methods:

Additional plan: Few projects can be accurately executed according to the expected plan, and unforeseen circumstances require new estimates and modifications to the project costs during the project implementation process.

Calculation tools: Tracking the impact of planned, actual, and forecasted cost changes is usually done with the help of related project management software and spreadsheets.

Results of cost control

1. Revised cost estimates

2. Budget update

3. Corrective activities

Estimated EAC: Estimate the total cost of completing the project under implementation based on completion EAC:

EAC = actual expenditure + changes to the remaining budget based on implementation. This method is usually used when current changes can reflect future changes.

EAC = actual expenditure + new estimates of all remaining work in the future. This method is usually used when the past performance shows that the original assumptions are basically invalid or the original assumptions no longer apply due to changes in conditions .

EAC = actual expenditure + remaining budget, applicable to the current change is only a special case, the project manager believes that similar changes will not occur in the future implementation.

4. Lessons learned: Saved in the form of a case library for future reference

Project Completion Cost Estimate

EAC = actual cost + (total budget costBCWP) * (ACWP / BCWP)

EAC = 205 + (340185) * 205/185 = 376.76 (or EAC = actual cost + (total budget costBCWP) / CPI) (or EAC = 205 + (340185) /0.9024=376.76)

EAC = Total Budget Cost * (ACWP / BCWP)

EAC = 340 * 205/185 = 376.76 (or EAC = Total Budget Cost / CPI) (EAC = 340 / 0.9024 = 376.77)