Cost Control

It is the process of comparing planned cost and progress with actual cost and progress, and then acting on the variance. Good cost control also forecasts the final cost before the project ends. It serves construction, shipbuilding and repair, marine and offshore, mining and quarrying, and project-based manufacturing companies.

Each BoQ item links to WBS activities in Primavera P6 or MS Project and to internal cost codes. As a result, progress, time and cost are measured on one structure.

It reports BCWS, BCWP and ACWP, together with CV, SPI, CPI, BAC, EAC, VAC and TCPI. Each user can personalize these reports.

Start with earned value and actual cost measured against the same scope and reporting date. If the project’s cost efficiency to date is likely to continue, divide the approved budget at completion by the Cost Performance Index (CPI) to estimate final cost.

For example, if the approved budget is $10 million, planned value is $5 million, earned value is $4 million and actual cost is $5 million, CPI is 0.80. Under that assumption, the Estimate at Completion is $12.5 million. Check that measured progress and posted costs cover the same period and scope. If the remaining work has a different cost profile, estimate that work separately and add it to actual cost.

Actual cost comes from the other modules. Material issues, labor hours, equipment use and subcontractor certificates post to the same BoQ items and cost codes automatically, so there is no double entry.

Update forecast cost using measured site performance. At Bridge Pier 1, the groundwater sub-BoQs and cost recipes show what pumping, drainage and other added work have cost and what remains to be spent. For the utility pipe, the affected WBS activity shows how standby and resequencing affect cost and timing. Linked method statements, drawings, inquiries and approvals explain what changed and what decisions are pending.

At each reporting date, separate the forecast cost of completing the work, the recovery expected and when payment could arrive. Use the BoQ and WBS links to trace each revision to the measured work or delay and its evidence. Update the forecast as approvals and measurements come in and compare it with the current approved baseline. Apply company accounting policy to determine what to recognize.

Record site progress and resource use against the same work that project controls and finance track. Use the bill of quantities (BoQ) item for scope, the work breakdown structure (WBS) activity for the schedule and the cost code for reporting. ProjectVIEW captures progress, labour, equipment and subcontractor work, with actual costs coming from the relevant operational modules.

At Bridge Pier 1, the baseline allows one month and US$1,000 to excavate 1,000 m³. If 500 m³ are scheduled by the end of week two, the budget for that quantity is US$500. If the site excavates 500 m³ but the labour, machinery and other resources used cost US$650, the team meets the quantity target and spends US$150 more than budgeted for that work. Linking the BoQ and WBS to actual resource costs shows quantity, time and cost together. A 50% progress entry alone would miss the cost variance.

Track labour, materials, equipment and subcontracts, as well as indirect expenses such as site supervision, temporary facilities and shared overhead. Record costs by project and cost code, and link them to the BoQ item and WBS activity where applicable. Allocate shared expenses consistently so teams can compare budgets, commitments and actual costs and trace variances to the underlying transactions.

Subtract forecast final cost from expected contract revenue. Compare with the tender margin and explain changes in approved contract value, resource rates, productivity and remaining quantities. Show potential recoveries from unapproved variations and disputed claims in separate scenarios so management can compare outcomes with and without recovery.

A commitment is an obligation such as an approved purchase order. Actual cost is the cost already recorded for the project. Forecast final cost combines actual cost and the expected cost of finishing the work. For a steel order, record the commitment at approval, record deliveries on receipt and match the invoice against the order and receipt. Include only the remaining expected cost of the order in the forecast alongside steel still needed that has yet to be ordered.