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Cost Management at the Investment Decision-Making and Design Stage
Background
In the near future, the effective management has become the consensus of contemporary enterprises, the cost management which is the important part of the project management continued to increase in the complex process of project construction. In this paper, the investment decision-making stage and design stage of the impact of the project costs of the link to proceed to analyze how the building works carried out in the effective cost control. Recently, as the requirements of houses are increasing, a lot of buildings are built each year, and the quantity is increased year by year in China. In the UK, there has the oldest housing stock in the developed world with 8.5 million properties over 60 years old. According to the current demolition rates, those properties have to last for many years than it was originally built to stand. In addition, more than 80% of existing UK houses was suggested that they will still stand in 2050. Therefore, there is a big requirement for houses in UK as well. However, the number of claims is increasing as the project costs have not been effectively managed which result in the project costs is overrun. And the overruns usually is caused by the budget of investment decision-making and design stage which do not accurately reflect the project costs. It reflects the problem of how important of project cost management at the investment decision-making and design stage for successfully delivering project within the budget.
Topic-- Cost Management at the Investment Decision-Making and Design Stage
A project costs include sunk costs, fixed costs, variable costs, opportunity costs, indirect costs and direct costs.
Project cost management can be defined as “Project cost management is going to plan and budget your projects for you achieving your project goals within the expenditure allocated.” A project manager should have those techniques to examine that are estimating costs, relationships among project schedules, work breakdown structures and cost estimates. In addition, discovering the difference between project cost estimates and budgets, and use contingency and management reserves those techniques should be had by a cost manager as well. When the project cost manager do budget reviews and approvals, and identify the cost variances and budget baselines, a various factors should be considered by him. In fact, it is
Comment [TW1]: Statements like this should be supported by numbers and referenced to source.
Comment [TW2]: Again, reference to source
Comment [TW3]: What is your evidence for this statement? Are you saying this is equally true in UK and China or that it is more of a problem in one of these countries?
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very difficult to consider and manage everything in the whole process to complete a project. Therefore when the cost overruns the budget, the cost overruns should be recovered. Managing the cost does not overrun this is the first task, then you should consider how to reduce the cost to earn more values. Sometimes, those values can be used to counteract the cost overruns when it cannot be recovered. As the above stated, everything else in the project must be managed, if you do not to do so, the costs will just keep on climbing. In addition, a project cost management has four processes that are resource planning, cost estimating, cost budgeting and cost control. Obviously, there are four tasks of the project cost management that are collecting data, estimating cost, budgeting cost and controlling cost.#p#分頁(yè)標(biāo)題#e#
In the resource planning process, what physical resources and what quantities of each resource should be used to perform project activities are determined.
The cost estimating process is going to estimate an expected cost of project activities when the resource planning is ready, and the estimate of the costs of resources which are used to complete the project activities is developing as well. Furthermore, there are several types of tools available to be used to perform the actual estimating, and one or more type of them can be used for estimating cost. Those tools are bottom-up estimating, analogous estimating, parametric estimating, design-to-cost estimating and computer tools.
When the costs have been estimated for each work breakdown structure task, and all these are put together for an overall project cost, it is the time to move to the cost budgeting process to constructed a project budget or cost baseline.
Cost control process consists of efforts to track spending and ensure it stays within the limits of the cost baseline. And project cost manager need to manage the actual changes when they occur.
The phase of investment is the first phase of the whole project, a reasonable plan of investment ensures that the employer can achieve the profit. Investment decision-making is a choice and decided to invest in the course of the Program of Action is the need for the feasibility of proposed projects for technical and economic feasibility studies, building programs for different technical and economic comparison choices, decisions and decision-making process. Pre-investment projects are to determine the economic effects of a critical period, investment in the project investment decision-making phase of the project estimate is directly related to the trade-off, the owners of the cost control should be as soon as possible to participate in the detailed cost estimates, the project in detail is to understand the economic background, standards, such as taxes and fees. At this stage, a system of cost control should be gradually established. At the investment decision-making stage, an accurate budget of investment can be determined through collecting data, scientifically analyzing the data and estimating budget.
Construction design is going to conduct a comprehensive planning and specific intent to
Comment [TW4]: ? What are trying to say?
Comment [TW5]: This next page down to the literature review heading is a brief and very basic description of the process of cost management. It needs a section heading and some sense of purpose in this „background?.
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describe the process of implementation is the owners to carry out the main elements of cost control. Practice at home and abroad shows that the greatest impact on project cost is about the stage of the project cycle, a quarter of the total building design stage, especially in the preliminary design stage, the economic impact of the project, the construction design stage, the influence of 35% -75 %, and construction organizations through technical measures for the possibility of cost savings and only 5% -10%. Design can be seen as a direct impact on the quality of the project cost, construction period, as well as the quality of the project during the construction of human, material and financial resources input. At the design stage, the collected data can be used to select the reasonable material, technology and project programme etc through an aright analyzing, and the project costs are controlled by comparing the prices of materials, technology etc as well. in addition, the budget of design should be estimated at this stage.#p#分頁(yè)標(biāo)題#e#
Existing literature There are several articles which write about the project costs management. Those articles show how to manage a project costs and what should be done in the project costs management.
The case of building a new campus (Nanhu campus) by China University of Mining & Technology will be used as an example to show what we do for managing the project costs in China.
The university adopted a lot of method to managing the project costs in this case. As the old campus (Wenchang campus) of China University of Mining & Technology has become saturated after 20 years development and the campus has over 30,000 students, the university decided to build the Nanhu campus. The university collected data by conversing with the other universities that recently built new campus. And the university also gained some usefully historical data from the past experiences of itself. The data of price and quality were compared and analyzed for selecting materials and control the project costs.
The university also did a research for deciding the scale of the new campus. They collected the data of how many students will study in the new campus and whether the number of the students will increase or decrease. Then they analyzed those data for the result of the number of students to decide the scale of the new campus.
In addition, the university collected the data of lights and compared the price for decided the type of lights will be install in the new campus to control the project costs.
At the design stage, the university used the methods of design tender and limited cost design for ensuring a good quality design will be provided and the project costs were controlled. Moreover, the case of the University of Surrey shows the University of Surrey chose
Comment [TW6]: There is a library full of text-books, journals, research papers, professional guidance notes (eg. APM, CIOB,, RICS and OGC Achieving Excellence Procurement guides) as well as online material. What is the basis on your selection? You need to identify a clear sense of purpose to the analysis of this information, otherwise it is simply a disjointed selection of extracts. This is how it appears at present.
Comment [TW7]: If this is to be a comparison of practice in China compared with practice in UK, we need a chapter introducing good practice guidance in UK and a following chapter covering practice in China. Then you could use two project case studies to compare practice, eg. compare practice on Nanhu campus with practice on UWE student village.
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refurbishment instead of building new buildings. This decision achieves the aim that the project cost is a reasonable cost by an effective managing at the investment decision-making stage.
Study method
All cases will be deeply analyzed to identify what they did for managing the project costs. And each identified method of project cost management should be illustrated at detail. Firstly, relative theories should be read and connect relative theories with the project cost management.#p#分頁(yè)標(biāo)題#e#
Secondly, focus on relative theories to search information for analyzing. For example, collecting information about materials prices, like prices of reclaimed water and drinking water for comparison. And the information of what will affect the project costs, like the location, scale and structure etc. Thirdly, an interview will be used to collect the detail information about how the university managed the costs of Nanhu campus. The people in charge of cost management of Nanhu campus will be interviewed. And the information also will be collected by searching on the internet.
Fourthly, analyzing the information what I collected by search and interview, selecting the useful information and divided them to different group, the deeply analyzing are giving to each group.
Finally, according to the results that I analyzed information of each group writes different part of the report which according to the groups of information. When all parts of the report are finished, them will be arranged to complete a report.
This research is going to illustrate what they did for project costs management at the investment decision-making and design stage.
Study programme
I am planning to use about one month to find some relative books for reading, and find the main body of the theory that has to search. But these books are not only used to read during this period, they should be read and deeply analyzed to complete the report.
Then around two month will be spent on searching, collecting and dividing information to different groups. And I will interview the people who in charge of cost management of the new campus. For interviewing, firstly, I have to prepare some question about general project cost management. Those questions should be selected to detailed address what they did for project cost management by answering.
Analyzing information of each group will be carried out on next two week. Any key point was
Comment [TW8]: What is the point you are trying to make?
Comment [TW9]: What theories? What is the link to prices of water?????????
Comment [TW10]: Has this been done? Who did you interview? What questions were asked and how did your literature review help inform and structure this interview? How did you analyse the responses?
Comment [TW11]: What different groups and what is the basis of selecting these groups? Are you now looking at university buildings, although your opening paragraphs talked about housing?
Comment [TW12]: This suggests more than one. Are you proposing to talk to client, project manager, architect, engineer, cost consultant, contractor, etc?
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found during this period should be recorded for writing report.
Finally, the report should be completed during a month, the key points which were recorded in the analyzing stage will assist to complete the report.
Ethics When doing the research, I should not plagiarize any other people?s articles. I should have ideas of my own, they are not borrowed from another people.#p#分頁(yè)標(biāo)題#e#
During the period when doing the search and interview, some private secrets or private business information which people do not want to show to the other people should not be included in the report. This is a principle which cannot be overstepped.
Research should strive to do good not harm. For example, the price of a renewable energy is higher than traditional energy, but the traditional energy pollutes the environment. It is necessary to encourage using a renewable energy for operating a campus or any construction and reduce the pollutions as well as some method should be taken for recycling waste onsite. In the case of Nanhu campus, they recycled wastewater for irrigation. It is a good idea that recycled wastewater to be used for irrigation.
The designer should consider how to provide a good quality of design. The cost manager should consider how to help the client controlling the project costs and how to assist the designer to provide a good quality of design.
When doing research, I should be keep honesty, and making sure does not disclose any private secrets and private business information.
Conclusion
This research aimed at how to manage the project costs effectively and what should be done for managing project costs at investment decision-making and design stage. As a lot of project were not completed at the original budget without an effective project costs management. And managing the project costs at investment decision-making and design stage can provide an effective project costs management. Therefore, we should be encouraged to shift the project costs management to investment decision-making and design stage.
Comment [TW13]: You need to draw on information from referenced sources and analyse these to construct your own conclusions within the specific context and specific research question you have set yourself.
Comment [TW14]:
Comment [TW15]: You seem to be wanting to argue for greater importance to be attached to clear project definition and budget setting process, eg. by using the OGC Gateway Review process, but no mention of these.
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Reference
1. Keith Potts, (2008), Construction Cost Management: Learning from Case Studies.
2. Don R. Hansen, Maryanne M. Mowen, Liming Guan. (2009), Chapter 17, Cost Management: Accounting & Control.
3. Cost Management, http://www.yancy.org/research/project_management/cost.html
4. A University Renovation: A Case Study. http://www.sustainablebuild.co.uk/university-renovation-case-study.html.
Comment [TW16]: You have not specifically linked data in the main text to these sources. For a masters dissertation, you should typically be thinking of identifying 30-40 sources of referenced data.