Cost management

Let’s start with what cost management is, or does. In general concepts, it is an analysis and evaluation that is carried out for the execution of a project, with the objective of maintaining costs or expenses within a previously established budget.

Cost management is a fundamental part of any construction project to ensure its smooth running and correct completion.

Keeping control of a construction can become very complex, and within it, cost management allows determining the economic viability of the project, as well as the greater or lesser need for financing and, above all, the existence of risks or benefits.

The importance of cost management lies in considering all aspects of the project; from planning and estimating to budgeting and controlling associated costs. The structure is mainly based on the following: planning, supervision, resource/time management, and tracking. So we can say that it is made up of the following basic aspects:

→ Resource planning: establishing the WBS of the project (Work Breakdown Structure);
→ Planning of objectives: determining the resources for each activity to be carried out;
→ Cost estimate: including scope and results to be obtained;
→ Budget: determining the phases or stages of the project and assigning the costs to each of them; and
→ Monitoring or cost control: establishing the indicators or parameters for measurement or monitoring.

A bad handling of the costs can bring adverse situations to the work; Here are five situations that can arise due to mismanagement:

→ Additional costs that negatively influence the execution of the work;
→ Time extensions or delays that increase the cost of the project;
→ Loss of confidence of the client or potential clients;
→ Missed milestones; and
→ Economic losses in the project.

Given the sensitivity of this management, the involvement of all parties is of vital importance, since all the project’s human resources are involved in one way or another in cost management. Although the administrative staff (managers and analysts) are more involved in following up on the costs generated by contracts, change orders and additional work, the Technical Construction Inspectors and Project Engineers also contribute by verifying that what is contracted is executed, both in cost and time.

At Mar Azul we have digital tools that help with the correct cost management since they allow the access and exchange of information at all times. In addition to the meticulous and quality-oriented work of the entire team involved, we have the PROCORE platform and its tools (budgets, contracts, change orders, among others).

To conclude, we can recommend three good practices to carry out adequate cost management: planning and estimating as detailed as possible, establishing the parameters for monitoring the budget and cost control, including the changes made during the execution of the work. All this accompanied by a correct registration at each stage.

Let us remember that good cost management can guarantee the completion of the construction within the expected margins and avoid losses that affect time, quality and, of course, its cost.