Time cost and resource

management in construction
Asst Prof:Dashnaamurthy.M
Estimating Resources
• Estimate Activity Resources is the process of estimating
the type and quantities of material, human resources,
equipment, or supplies required to perform each
activity.
• The key benefit of this process is that it identifies the
type, quantity, and characteristics of resources required
to complete the activity which allows more accurate
cost and duration estimates.
Types of Resources
At this stage each task on the task list is scrutinized and the
resources required to perform the task are identified. For
small projects there are four major types of resources:
• Labor
• Tools & equipment
• Material & supplies
• Fixed cost items like subcontractors, etc.
Labor
Accountants divide labor into three categories:
• Direct. Work that results in production units. The hourly unit rate of a laborer, or a salary divided
into the number of days or hours they work on the project. It must also include benefits,
retirement contributions, bonuses, and any other expense associated with the employee.
• Indirect. Work that is required to produce deliverables but doesn’t directly translate into
production. This includes things like quality control, production supervision, and yes, project
management. This type of labor needs to be included in estimates to give an accurate project
cost. It needs to be divided into each task and allocated as much as practical.
• Overhead. Organizational administration costs like CEO’s salaries are not attributable to the
project but, depending on the organizational structure, sometimes must be paid for by all
projects. Normally the organizational administration (non-project) expense is calculated yearly
and divided among the number of employees to arrive at a unit rate which is added to the direct
labor rate.
Tools & Equipment
• This category generally includes all of the items that do not go into the finished product. Things
like drill bits that are used up during a project, or the addition of new tools that the company
doesn’t already own, and equipment such as software, forklifts, and excavators.
• Often the tools and equipment will be used over multiple projects. In this case it is important to
divide the cost over a conservative amount of projects to get a realistic idea of how much the
project is “paying” for it. Conservative means a low number of projects – You want to make sure
you are justifying the cost of the equipment.
Materials & Supplies
This includes the items that become part of the finished product, like timber for a log home or gravel
for the driveway. Often these items are quoted by the unit, such as per foot of timber. Normally you
have to calculate the exact quantity and include a bit extra, for things like:
• The material is not produced in the exact lengths required.
• The project will generate some waste.
Once those factors are taken into account, a contingency factor of 10% (more or less) can be applied to
arrive at the final estimated quantity.
Where there are many small supplies it is generally recommended to include a catch-all item like
“Landscaping Supplies.”
Fixed Cost Items
• Often everything else can be lumped together into fixed cost items.
• For example, subcontractors are a common requirement which must be tracked under each
task. But be careful to read the fine print or you might discover the hard way that it isn’t as “fixed
cost” as you think. Contracts, by definition, identify a scope of work and a price associated with it,
and in every industry that I know of contractors can, and do, regularly request “scope changes.”
Other Resources
For larger projects, or where greater project management effort is justified, the following resources
can also be used.
1. Organizational/Administration. The portion of the organization’s administration cost that the
project must pay for.
2. Facilities. The purchase or rental of buildings to perform the work.
3. Financing costs. The interest cost for loans required to carry out the project.
4. Contingencies. Where the complexity of the project justifies contingencies as separate resource
items, they can be tracked separately.
5. Overtime pay. This applies to people as well as to equipment who’s rates increase after a certain
point in time.
Importance of project schedule and cost control in project
management
• Delivery of a successful project is defined by your overall cost performance and ability to meet
project deadlines. Project managers need to have the ability to allocate time and resources
efficiently to manage costs and keep the project on its tracks. Almost all organizations look for
these project management skills because they showcase your ability to stay organized and
communicate with team members, especially when handling complex projects.
When practicing cost control, project managers should pay attention to the following:
• Original budget
• Approved cost
• Forecasted vs. Actual cost
• Committed costs
Project scheduling is just as important as cost budgeting as it determines the timeline, resources
needed, and reality of the delivery of the project. Project managers that have experience are better
able to properly dictate the tasks, effort and money required to complete a project.
The processes, steps, tools and techniques involved in planning and analyzing cost control and project
scheduling when managing a project from start to completion.
Importance of project schedule and cost control in project
management
I. Cost Control
A. What is a Project Baseline?
• Stakeholders measure projects by how well they are executed within the project constraints or
baselines. A project baseline is an approved plan for a portion of a project (+/- changes). It is used
to compare actual performance to planned performance and to determine if project performance
is within acceptable guidelines. Every project has at least four project baselines. There may be
others, depending on the project and definitions used.
B. What are Project Baselines in Project Management?
• Budget Baseline
• Schedule Baseline
• Scope Baseline
• Quality Baseline
Importance of project schedule and cost control in project
management
• Schedule and Budget are the focus of this post, and the terms activity and work elements are
synonymous. Schedule and cost (budget) are two of the major legs of the project constraint
polygon. Without the schedule and budget baselines plans, one does not know where the project
stands relative to planned schedule progress or planned budget performance.
• The schedule and budget baselines, along with other baselines, are developed in the planning
phase of the project. The project plan is approved prior to execution by the project sponsor or an
appropriate senior level manager. The project plan includes the cost and schedule. The schedule
determines when work elements (activities) are to be completed, milestones achieved, and when
the project should be completed. The budget determines how much each work element should
cost, the cost of each level of the work breakdown schedule (WBS), and how much the total
project should cost. Actual performance can be compared to these plans to determine how well
the project is progressing or finished.
• Schedules and budgets are interlocked, and most likely an increase in one causes an increase in
the other.
Importance of project schedule and cost control in project
management
II. Project Budget
• The project budget is a financial plan for all project expenditures (cost). Success in project budget
management depends on, amongst other things, the creation of a comprehensive, consistent, and
reliable project budget. Some people want to use the term "accurate" in the above definition. But,
the word "accurate" has no place in the project management world. Reliable and consistent are
the terms that should be used. By definition, the project budget cannot be accurate as it is an
estimate. Normal ranges of project budget variability depend on the project, the organization, the
type of business, and many other factors, but usually falls within +/- 10%.
Importance of project schedule and cost control in project
management
A. How to Develop a Project Budget
• There are two processes to developing a project budget. The first process is Estimate Cost, which
is often confused with the Determine Budget process. Both processes are normally preceded by a
project management team planning process, which is executed as part of the Develop Project
Management Plan. This planning process is known as the Project Cost Management or the Cost
Management Plan. The Cost Management Plan outlines the processes involved in determining
organizational cost categories, estimating, budgeting, and controlling cost, so that the project can
be executed within the approved budget.
• The Estimate Cost process is not only confused with Determine Budget but is also widely
misunderstood. Many think that this process estimates the total cost of the project. But this is not
correct, at least not directly. The Estimate Cost process estimates the cost for each of the work
elements and records the basis of that cost. That is as far as Estimate Cost goes!
• The second of the three processes in Project Cost Management is the Determine Budget process,
which rolls work element cost upward, applies cost aggregation, applies project contingency,
makes a cash flow estimate, and now you have a budget for the various levels of the WBS and the
total project.
Importance of project schedule and cost control in project
management
B. Tools to Help Analyze Cost Budget Performance
Based on the work above, we now have a budget for:
• Individual Activities
• Work Packages
• Deliverables
• The Total Project
This level of detail allows a project manager (PM) to evaluate the budget performance of the project
from the top down or from the bottom up. If a work package is running over or is in danger of
overrunning the budget, the project manager can drill down until he/she finds the problem or
potential problem. The drill down can be by the PM or in conjunction with the assigned team member.
Importance of project schedule and cost control in project
management
C. How to Successfully Manage a Project Budget
• Capture all of the scope (scope statement, WBS, and WBS dictionary). If you do not capture the
total project scope correctly, there is little hope that the project can be executed for the budget or
schedule.
• Insist on input from all stakeholders. Penetrate through stated needs and include implied needs.
• Determine the various cost categories used at the organization.
• Develop Project Team and Project Management Team trust.
• Develop a reliable, consistent, sufficiently detailed WBS and time decomposition structure.
Estimate Cost and Determine Budget.
• Stop scope and grade creep. Eliminate gold plating. None of these adds value to the project. Your
team is your first line of defense.
• Perform EVM, variance, and trend analysis.
• Continuously communicate to stakeholders on project status, project direction, and what the
project will look like at completion.
• Use organizational process assets (OPA) to develop, analyze, and challenge.
• Take action when indicated (sooner rather than later)!
Importance of project schedule and cost control in project
management
III. Project Schedule
• In project management, the project schedule is a document that, if properly prepared, is usable
for planning, execution, monitoring/controlling, and communicating the delivery of the scope to
the stakeholders. The main purpose of project scheduling is to represent the plan to deliver the
project scope over time.
• A project schedule, in its simplest form, could be a chart of work elements with associated
schedule dates of when work elements and milestones (usually the completion of a deliverable)
are planned to occur. In addition to guiding the work, the project schedule is used to communicate
to all stakeholders when certain work elements and project events are expected to be
accomplished. The project schedule is also the tool that links the project elements of work to the
resources needed to accomplish that work.
Importance of project schedule and cost control in project
management
At a minimum, the project schedule should include the following components:
• All activities
• A planned start date for the project
• Planned start dates for each activity
• Planned finish dates for each activity
• Planned finish date for the project
• Resource assignments
• Calendar based
• Activity durations
• The "flow" (sequence) of the various activities
• The relationships of activities
• An identified critical path(s)
• Total and free float
Work Breakdown Structure (WBS)
Breaking work into smaller tasks is a common productivity technique used to make the work more
manageable and approachable. For projects, the Work Breakdown Structure (WBS) is the tool that
utilizes this technique and is one of the most important project management documents. It
singlehandedly integrates scope, cost and schedule baselines ensuring that project plans are in
alignment.
The Project Management Institute (PMI) Project Management Book of Knowledge (PMBOK) defines
the Work Breakdown Structure as a “deliverable oriented hierarchical decomposition of the work to be
executed by the project team.” There are two types of WBS: 1) Deliverable-Based and 2) Phase-Based.
The most common and preferred approach is the Deliverable-Based approach. The main difference
between the two approaches are the Elements identified in the first Level of the WBS.
Deliverable-Based Work Breakdown Structure
A Deliverable-Based Work Breakdown Structure clearly demonstrates the relationship between the
project deliverables (i.e., products, services or results) and the scope (i.e., work to be executed). Figure
1 is an example of a Deliverable-Based WBS for building a house.
Phase-Based Work Breakdown Structure
In Figure 2, a Phase-Based WBS, the Level 1 has five Elements. Each of these Elements are typical
phases of a project. The Level 2 Elements are the unique deliverables in each phase. Regardless of the
type of WBS, the lower Level Elements are all deliverables. Notice that Elements in different Legs have
the same name. A Phase-Based WBS requires work associated with multiple elements be divided into
the work unique to each Level 1 Element. A WBS Dictionary is created to describe the work in each
Element.
 Work Breakdown Structure (WBS)
• A good WBS is simply one
that makes the project more
manageable. Every project
is different; every project
manager is different and
every WBS is different. So,
the right WBS is the one
that best answers the
question, “What structure
makes the project more
manageable?”.
CPM and Pert Analysis
Critical Path Method (CPM)
• CPM is a technique which is used for the projects where the time needed for completion of
project is already known. It is majorly used for determining the approximate time within which a
project can be completed. Critical path is the largest path in project management which always
provide minimum time taken for completion of project

Program Evaluation and Review Technique (PERT)

• PERT is appropriate technique which is used for the projects where the time required or needed
to complete different activities are not known. PERT is majorly applied for scheduling,
organization and integration of different tasks within a project. It provides the blueprint of project
and is efficient technique for project evaluation .
CPM and PERT in Construction Projects
• The difference between the CPM and PERT is that the PERT is mainly used where the time
required for completion of each of the activities involved cannot be accurately defined nor are the
resources to be used for the activity readily available. The events could however be readily
definable.
• This technique is based on the probabilities of completing each activity in time. The time is not of
much importance in this technique, and completion of each event is taken care of.
• This technique is therefore most suited to projects like research and development, investigation,
design etc. Also PERT because of the large number of calculations involved is essentially a
computer-based system.
• CPM technique is used in construction projects based on the knowledge and experience of the
past projects for predicting accurately the time required for various activities during the execution
of the project. Time required for each activity is known and defined for the project.
Direct Costs of Construction Project

• The costs and expenses that are accountable directly on a facility, function or product are called as
direct costs. In construction projects, the direct costs are the cost incurred on labor, material,
equipment etc. These costs for a construction project are developed as estimates by means of
detailed analysis of the contract activities, construction method, the site conditions, and
resources. Different direct costs in construction projects are material costs, labor costs,
subcontractor costs, and equipment costs.

Indirect Costs of Construction Project

• The costs, unlike direct costs, is not directly accountable for a particular facility, product or
function. Indirect costs can be either variable or fixed. The main sections coming under indirect
costs are personnel costs, security costs, and administration costs. These costs do not have a
direct connection with the construction project. The indirect cost can be classified as:
1. Project Overhead Costs
2. General Overhead Costs
Indirect Costs of Construction Project
1. Project Overhead Costs
• In a construction project, the cost of some of the items cannot be directly allocated for a specific
activity. Most of the site related costs come under this section and are categorized as project
overhead costs. Project overhead costs can either be fixed or time-related costs. Different costs
coming under overhead costs are the costs of stores, safety facilities, workshops, offices, staffs
and parking facilities. All those plants that are required to support the working crews will come
under this cost. The overhead cost is estimated by a detailed analysis of the site-related activities
and their cost. Hence an accurate cost estimate is obtained. Most of the companies make use of
forms and checklist developed by them to estimate these costs. The site overhead costs account
for 5 to 15% of the total project costs.
2. General Overhead Costs
• The general overhead costs cannot be directly charged for a specific project. These form the costs
that are used to support the overall activities of the company. The general overhead costs will
include the cost of the design engineers, expenses of head-office, cost of directors and managers,
schedulers etc. The general overhead expense and cost are found reasonable through continuous
monitoring of the company expenses. The general overhead costs account for 2 to 5 % of the
contract direct costs. The amount of the general overhead that should be allocated to a specific
project equals: