Cost Control in Building Projects

Appropriate adjustments need to be carried out on the resultant cost reports if any deviations are noted. The changes can be used as a benchmark to deal with all building projects in the future. However, in cases where all activities have already been undertaken, it might be impossible to use corrective measures. The current cost control framework includes carrying out of thorough observation of the ongoing project, comparing the collected information with the budgeted standard, and exploring required adjustment techniques. This study examines the cost control methods used by various constructionists and aims at getting enough feedback from participants to determine whether the existing approaches and procedures are reliable or if there is a need to capture new techniques. A lot of risks usually face the construction industry.

Equally, construction companies find it hard to be competitive because they operate in environments with meager profit margins because getting contracts has become difficult by day thereby cost control cannot be underestimated (Abanda, Tah and Cheung, 2013). Since they have small profits, construction firms are always on the lookout for bigger projects that can help them get enough returns. In most cases, large projects have substantial financial risks that if they are not adequately controlled they end up increasing. During the early phases of a project, budgeted costs can be changed without any form of hardship. A recommendation on how to develop an improved cost control technique will be provided with an objective of subjecting it to future studies to ensure cost overruns are substantially reduced.

Objectives The major goal of a company is to maximize profits. Therefore, any technique that helps managers to lower loses and optimize income is welcome. In this case, cost control is used to provide checks and balances on the expenses to that are likely to decrease the projected profits. Presently, no exhaustive literature expansively explores the issue of cost controls in building projects. Usually, the construction stage has the greatest potential of altering the projected cost overruns. The study classifies the building project based on various resources such as materials, labor, equipment, and contractors. It’s only registered and licensed contractors that will be considered in this research. Also, more considerations will be given to large firms because they have the financial ability to use effective cost control designs.

Significance of Study Despite the role of cost controls in the building industry, no existing study explores how it is carried out. In 2018, Johnson and Babu published an article known as “Time and cost overruns in the UAE construction industry: a critical analysis,” which explored cost control techniques used during the planning phase of building projects. Further, the research investigated cost controls during the pre-construction stage, during the construction of a building, and after the project is completed. They found out that the main problem of controlling costs comes up from the realization that most customers have insufficient finances and the budgets are used to establish the limit of what can be availed. In most cases, cost overruns are likely to stretch the financial ability of the client to the extent that the project’s quality might be affected or the customer may decide to abandon the project completely (Chau, 1993).

Clients become frustrated by contractors that ask them to pay more than what was initially budgeted. This implies that cost controls are systematically carried out after a problem has occurred thereby there is the possibility of costs in the current project to increase. However, the recommendations therein can be used to provide a ground of argument for similar projects in the future. Building projects are always multifaceted and uncertain ventures where the results are often dependent on the probability of either being positive or negative. The construction industry is characterized by the building of structures on areas with varying conditions and challenges (Khosrowshahi and Kaka, 1996). Every building project has a distinct model and faces unique construction constraints that are always explored by the firms that have been tasked with that specific project.

Usually, the main agenda of contractors is to maximize profits. In most countries, building projects are acquired through competitive tendering frameworks. This technique often has the power of reducing the profits contractors can quote while exploring avenues of winning the tender. During recessionary periods, companies tend to charge no profits provided they get the tender that will help them have some cashflows (Lind and Brunes, 2014). In such situations, the contractors will look for other ways to recover possible losses from the customer. Cost overruns occur whenever an uncertain event takes places thereby resulting in delays. Cost controls that consider taking corrective measures after cost overruns have occurred are usually ineffective. In case, you find that the cost control systems are dormant and reactive.

However, a good cost control model should be active and functional throughout the building project cycles. Willis (1990) argues that regular cost control frameworks provide actual dynamics through constant monitoring and reporting of expenditure. Methodology A qualitative approach was considered the most appropriate methodology for this study. Semi- grounded theory technique is used to propel the dynamics of the topic under investigation. As an emerging methodological framework, the semi-grounded theory is perceived to be more exhaustive compared to the existing research systems. Besides, it goes beyond hypothesis testing and explores the nature of established principles. Thus, it captures theories that navigate the actual state of the study. Despite the variations of causes of increased expenses, the outcome is perceived to have the same weight.

This research is set out to determine things that lead to additional costs and significant ways of controlling costs. Thus, making it easy to identify a plausible method that can be used to control the costs of resources and thereby decreasing the total project cost. Currently, most of the building projects being implemented are not cost effective. The relevance of this field of study becomes important when project execution has cost overruns and time delays. Results Analysis Cost control is an integral part of building project management. Failure to integrate it into the system it is impossible to attain the optimal possible profits. Based on the results, it is notable that all participants use different techniques to explore cost controls. The majority believe that cost controls are significant in the construction industry.

According to Table 2, eighty percent of respondents agreed that tracing the causes of cost overruns is important in establishing strategies to undertake corrective measures. In this study, cost control approaches were categorized into levels based on the previous and present literature. Based on table 1, individuals involved in building projects can be divided into four levels, which include the following; level 0, level 1, level 2, and level 3 pegged on how they are committed to utilize and execute cost control approaches. The outcome showed that the majority of participants, seventy-five percent, use the performance of the project to roll out corrective measures to control costs. It is notable that thirteen percent of the respondents focus on utilizing preventive techniques. Ten percent of participants suggested that they do use any designs to implement their cost control methods.

However, the contractor should be considerate enough not to tamper with the quality of resources as they were initially specified. Sometimes the customer may suggest changes while the building project is ongoing. Cost overruns that result from such cases are directly linked to the client; therefore, not problematic to the contractor in any way. However, the customer will not be liable to any claims forwarded to him or her by the contractor and was due to the contractor’s negligence. As shown in table 2, seventy percent of participants argued that there is nothing that can be done about losses resulting from the contractor’s carelessness. Equally, S-curves can be applied to analyze the progress of the project. Another method that can be sufficiently used is the exploration of the bill of quantities.

The actual amount of material used can be compared with the recorded estimates. Consumption of extra materials must be justified. In cases where contractors fail to verify the utilization of surplus resources then they must be captured as cost overruns (Oxley and Poskitt, 1996). Currently, the cost of acquiring building resources has increased thereby raising the resultant expenditure on projects. Thus, adequate utilization of cost control techniques is vital in reducing costs. Proper organization and execution of a building project must tap from the benefits of other cost management components such as planning, monitoring, and controlling. The targeted cost must be exhaustively covered, and reasonable changes are noted so that the project can be completed within the estimated range. Building projects require huge investments.

Equally, policies requiring contractors to have some insight on cost controls should be adopted by construction companies. Conclusion The research question factors were classified into eight based on the feedback given by the respondents. From the results analysis, it is notable that many contractors use approaches they easily understand to carry out cost controls. Checks and balances between the budgeted costs and the actual expenses is the most common method applied. Equally, as a way of correcting possible deviations, the quantity of material ordered is compared against the actual quantity that had been utilized. However, preventive cost control has not been applied widely due to lack of adequate materials and documents capturing past challenges and experience. Besides, the existing resources have been thoroughly analyzed.

Therefore, most contractors depend on their memory. They only cover few areas that they are able to recall and leave a significant portion that is usually vital unattended. A high percentage of respondents were satisfied by techniques they used. References Abanda, F. , Tah, J. and Cheung, F. Mathematical modelling of embodied energy, greenhouse gases, waste, time–cost parameters of building projects: A review.  Building and Environment, 59, pp. and Al-Hussein, M. Energy-based target cost modelling for construction projects.  Journal of Building Engineering, 20, pp. Bowen, P. , Cattel, K. Comparing contributors to time and cost performance in building projects.  Building and Environment, 34(1), pp. Dzeng, R. The Cost Efficiency of Construction Industry in Taiwan.  The Open Construction and Building Technology Journal, 6(1), pp. New York: Wiley.

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