Actual Project Cost

How to Track the Actual Cost in a Construction Project

Tracking the actual cost of a construction project is very hard unless there is a proper cost tracking system. In a construction project, the cost can be divided into categories as follows;

1. Material Cost
2. Labor Cost
3. Tools & Equipment Cost
4. Transport Cost
5. Operational Cost (Accommodation, Electricity, Water, Sanitary, Safety, etc.)
6. Overheads such as employee salaries, main office operation, etc.
7. Legal cost
8. Tax's

There may be more cost to it than above based on the business setup and how it operates.

Project Management Team

The main objective of this team is to set an appropriate and executable construction timeline for the project. It should contain all necessary items that cover the whole project within the project timeline. The field experience and knowledge of the different types of construction methods will be very important in this regard. The project management team should often contact the engineering team to discuss that the timeline they provide is executable with the actual site condition.

Quantity Surveying Team

After finalizing the timeline by the project management team, a copy of that should be given along the each team of the project. Therefore, once the project timeline handed over the quantity surveying division they must prepare the material, labor, tools & equipment, transport items are required prior to the timeline. This report should be given to the project purchasing team and the accounting team.

Purchasing Team

Looking into this report issued by the QS team, purchasing team can have a premature idea of the material and labor and other items to be available in the site prior to the timeline. Therefore, they have enough time to contact suppliers and discuss the prices and deliver them without having a delay.

Accounts Team

Same as purchasing team, the accounts team can realize the expenses to be made with the timeline. They can make the cash flow for the project stages wise of the project.

Engineering Team

The engineering team is the most important team in the project. Because they are the ones who actually execute the project. If they do not follow the instructions are given to them, the project will be unsuccessful.      


How to track Actual Cost

When ordering material or service for a particular work, it is necessary to make a material or service requesting note by an authorized person before purchasing the materials or services. Then these request orders will be recorded under purchasing team of the project. Then they make the purchasing of material or services according request order. Once the good received note or service received note arrives from the supplier, we should make the manual Good Received Note (GRN) or Service Received Note (SRN) for the work and record it. This should be done under the financial management team of the project.

Therefore, all the departments have to work as a team to track the actual project cost. If any mistake happens, this system can show it directly who is responsible for the mistake so everyone will have to work properly and accurately.

Advantages of having a proper cost tracking system

•            Figure out the Actual Profit.
•            Figure out the Actual Project Cost.
•            Increase the knowledge about the project in each department.
•            Figure out the financial status in the progress of the project.
•            Figure out the errors in quotations & estimations.
•            For a similar type of future project cost realization.

Rate Analysis for Excavation Work

Excavation Cost & Rate

Rate analysis for excavation work is comparatively easy to establish because it does not require a material analysis. Therefore, we only have to consider the Labour and Equipment cost to determine the rate of excavation work. Generally excavation can be done by handheld tools such as hoes, shovels & etc. or using excavator machine. Depending on the work, we need to decide the method we should go with.

In this article, we are going to discuss the rate analysis for manual excavation using handheld tools. Assume we have to dig a pit for a particular column footing size of 900mm in width and 900mm in length and 1000mm in depth. First thing is we have to investigate the soil type of the site to determine what are the necessary tasks to be undertaken to complete the work properly. Such works can be as follows.

• Shoring
• Working Space
• Dewatering
• Rock required blasting

Assume we need a considerable working space of 150mm for each side to get the work done. Then, the practical excavation size of footing is 1200mm width & 1200mm length and 1000mm depth.

Actual excavation volume as per the drawings;

Volume (Actual) = 0.90 m x 0.90 m x 1.00 m
                      = 0.81 m3

Practical volume to be excavated is;

Volume (Practical) = 1.20 m x 1.20 m x 1.00 m
                      = 1.44 m3 

Assume that 0.50 days required to excavate 1m3 volume using one unskilled labourer. Say the rate for unskilled labourer per day is Rs.1,500.

Therefore, the labour cost of excavation for the given work is;

Labour Cost = 1.44 m3 x (0.50 days / 1m3) x (Rs. 1,500 / 1day)
                     = Rs.1,080

Assume Tools & Equipment Cost = 5% of Labour Cost
                                                       = 0.05 x Rs.1,080
                                                       = Rs.54

Total Basic Cost = Labour Cost + Tools & Equipment Cost
                           = Rs.1,080 + Rs.54
                           = Rs.1,134

Now let's add Overheads & Profit 20%

Therefore, Total with OH & P 20% = Rs.1,134 /(100%/(100%-20%)
                                                          = Rs.1,292.50


After calculating the total cost with OH & P, we have to find the rate for excavation work. In this step, we need to be very careful enough that the total to be divided by the actual volume which is according to drawings. (Should refer the preamble notes in the tender)

Rate for Excavation Work per 1m3 = (Total with OH & P) / Volume (Actual)

                                                         = Rs.1,292.50 / 0.81m3

                                                         = Rs.1595.68/m3

Tender Documents - (Bidding Documents)

Generally tender documents consist with the following sub documents stated below.

• Instruction to Tenderers
• Form of Tender
• Articles of Agreement
• General Conditions of Contract
• Special Conditions of Contract
• Specimen Forms
• List of Drawings
• General Specification
• Particular Specification
• General Notes
• Bills of Quantities
• Schedule of Rates
• Appendix

Instruction to Bidders/ Tenderers

The Scope of Bid :- Brief description about the project including construction period indicated in the contract.

Source of Funds :- Means of the finance stated in the contract.

Qualification of the Bidders :- Tenderers must submit the required qualification and legal status and other relevant documents asked by the client's consultant and those who do not comply with the required qualifications will be rejected.

Bidding Cost :- All costs involve with the bidding to the contractor shall be borne by the contractor himself with no claim by the client.

Site Visit :- It is Contractor's responsibility to visit the site and examine all necessary cost and requirement to be fulfilled with the project and submit them accordingly. No allowance will be given to the contractor to carry out these works and bidders shall bear the site visiting and investigation expenses on their own.

Bidding Document :- These are the document listed under the first paragraph of this article.

Clarification of Bidding Documents :- Tenderers must inform if there are any doubts about the designs, drawings, specification, etc.. and clarify it with the client's representative appointed in the contract. Bidders should inform it prior to the deadline of the tender and no later than the given period in the contract.

Preparation of Bid :- Language of the bid, Currency of Bid & payment, Validity period of Bid, Bid Security, Bid Prices, Documents of the Bid, etc. should be provided.        

• Language of the Bid

          All the documents to be submitted by the stated language in the contract.

• Currency of Bid & Payment

          The bidders should quote the tender rates and prices prior to the currency stated in the contract

• Bid Validity 

          Bidders should indicate the validity period of the bid with the quotation.

• Bid Secuirity

Client can ask to provide a bid security by the tenderers together with their tender from a bank draft or guarantee from a reputed bank in the state. It is a must to provide this guarantee with the tender otherwise bid will be rejected.

Pre-Bid Meeting :- Bidders will be invited by the client to meet them and discuss their doubts and clarify them with the consultant of  the client. Bidders can raise their questions about specifications, drawings, design and whichever things regarding the tender document and clarify it with the consultant. Meeting minutes will be issued to all the tenderers stating all changes of the specifications, drawings, design, etc.. whichever decision  made as a result of the meeting as soon as possible. Anyway absence for the pre-bid meeting will not cause to disqualification of a tenderer.    

Condition of Contract - (Preambles)

Preambles

Preamble notes are one of the most important parts in a tender. It is necessary to discuss the preamble notes when pricing the tender. In preambles, we have all the information and guidelines about the rates and specification. Generally preamble notes contain the general specification of the construction work under each item and how the rate should be established.

Example:

B.1 Excavation & Earthwork

Rate Shall include for:-

• Levelling Bottom of Trenches
• Backfilling with selected excavated material and consolidation
• Dewatering including pumping out water up to the nearest manhole
• Disposal of surplus excavated material away from premises
• Bulking after excavation
• Necessary Shoring and shuttering
• Working space if required only net areas are considered for measurement
• Cost of testing materials and samples to establish to specifications               

B.3 Concrete Work

Unless otherwise stated all concrete shall be:-

1. Grade 20 (3/4" minimum aggregate size)
2. All concrete shall be so cast as to receive only that finishing on it's exposed as specified in the respective items.
3. All concrete shall be made dense with vibrator and finished with monolithic to receive tiles, granite etc. The type and stability which shall be agreed with the consultant prior to commencement of concerning of each item.

Rates shall include for the plant for mixing, handling, hoisting, depositing compacting, vibrating, curing making good after removal of formwork and any test establish the compliances with specification whatever necessary.

Likewise, we will have a set of notes under each work of how the pricing must be done in the quotation. Therefore, it is essential to refer the preamble notes carefully enough where we have all the details to price the tender.

Conditions of Contract - 1

Provisional Sum (PS)

In a tender, the provisional sum can be placed due to lack of details of drawings and undefined work at the tender stage where tenderers unable to quote. The provisional sum is decided by the consultant or client's representative with a nominated subcontractor to carry out the work. The contract amount of provisional sum can be adjusted accordingly under engineer's guidelines.

Prime Cost (PC)

Prime cost is when we are pricing a tender, there can be items that have the brand or specification not defined or are the range of material prices which varies with the design and brand. Therefore to complete the tender we use to include the prime cost for those materials that can not be exceeded the price mention mentioning the brand and specification assumed. If the client wishes to exceed the amount given or change the design, he has to pay the increment cost per each unit. Therefore consultant should decide the prime cost of those items are not the minimum price available in the market so client & architect can decide a better material for the above work.

Variation

The term 'variation' as used in these conditions, means the alteration or modification of design, quality or quantity of the work as shown upon the contract drawings and described by or referred to in the specification and includes the additions, omissions or substitution of works.

The price in the contract schedule or rates mentioned in of these conditions shall determine the valuation of all variation as instructed by the consultant in accordance with the contract. All  variation authorized in terms of the contract by the consultant shall be priced by the contractor with the rates given in the schedule of rates. The contractor shall indicate the additional time required for carrying out variations along with his price for additional work.

All variation shall indicate the progress of work shall be noted and checked by the consultant and evaluated only with the contractor's final bill.
 
Therefore, the contractor before making any variation from contract drawings or specification necessitated by compliance with by law shall give to the consultant a written notice specifying and giving the reason for such variation and apply for instruction in reference thereto. If the contractor within seven working days of having applied for the same does not receive such instruction, he shall proceed with the work confirming to the new provision, regulation or by-law in question and any variation thereby necessitated shall deemed to be a variation.

Claim    

The Claim is that the contractor requested by the client to claim time extension or loss of profit and similar situations due to the negligence of work from clients party. The Contractor should inform it to the client in advance by submitting why and how not less than 28 days.