Cost Control and Waste
Management
Dr. Sarbesh Mishra
NICMAR, Hyderabad.
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 Package
1. 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
Project Area Work Type Distribution
Number Code Code Code
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
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Work Type Code
9708B 05 03157.20 3
03 Concrete
0315 Concrete Formwork
03157 Wood Concrete Formwork
03157.20 Wood Concrete Formwork for Deck
03157.30 Wood Concrete Formwork for abutment
Distribution Code
9708B 05 03157.20 3
1. Total
2. Material
3. Labor
4. Equipment
5. Sub-Contract
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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
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
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