Cost Planning & Scheduling

CTC-415

Bid Estimate

• Becomes the project budget upon signing of contract

• Can cost load the schedule– Effective means of cost control– Predict time of cash requirements over course

of project

Activity Cost

• Amount expended by contractor on activity– Includes direct and indirect costs

• Activity value– Amount contractor will receive for completed

activity– Includes activity direct overhead, overhead

allocation, profit

Activity Direct Cost

• Cost of all components which can be directly traced to activity– Incurred as a direct result of the performance of

an activity– Labor– Production equipment– Material and installed equipment– Subcontractors

Labor

• Wage Rate– Does not include fringe benefits, taxes,

insurance

• Labor Burden • All payments over the basic wage• Varies by trade• Includes fringe benefits (paid holidays and

vacations, health & life insurance, pension,training)• Workman’s comp, Unemployment insurance, FICA

Labor

• Unit Labor Cost– Wage Rate + Labor Burden

• Total Labor Cost– Unit Labor Cost * hours worked per craftsman

Production Equipment

• Equipment can be owned or leased by contractor

• Contractor owned equipment– Estimated at internal company rate– Ownership costs

• Depreciation, interest, taxes, insurance,storage, major overhauls

• Operating costs – fuel & oil, routine repairs and maintenance

Production Equipment

• Contractor leased equipment– Lease payment is used to determine the

equipment cost

• How much does that machine cost/day?• (Initial Cost + depreciation + taxes + insurance +

storage +overhauls + O&M)/(expected # of days used over life)

• Expected days used per year – what percent of year?

Production Equipment

• Mobilization/Demobilization Costs– Transportation– Set-up / breakdown– Testing & certification

• Costs need to be apportioned to each activity that uses the equipment

• Cost of equipment that are used on all of project should be put into overhead

Materials & Installed Equipment

• All costs to contractor to – Procure materials

– Installing the equipment

– Special packing charges

– Freight and delivery charges

– Taxes and tariffs

– Insurance and bonds

– Storage and handling

– Inspection and testing

Subcontractors

• Usually a contracted amount

• Activity cost needs to include all subcontractor costs

Overhead Allocation

• Activity Indirect Costs– Project Site Costs

• Not attributable to any one activity

– Home Office costs• O&M of construction firm

Project Site Costs

• Include• Project Administration -Project manager, General Super, Non-

working foremen, clerical support• Utilities• Equipment & Supplies - Office eqiup & supplies, vehicles,

small tools, first aid• Services - Engineering, surveying, testing,legal, security, trash

disposal• Facilities - Storage, sanitary, field office• Insurance, Permits & Fees• Mobilization /Demobilization – access road, laydown

area,dewatering, fences & barricades

Home Office costs• Salaries & benefits• Office rent• Insurance• Utilities• Supplies• Equipment rental• Furnishings• Communications• Legal • Accounting• Vehicles• Travel & lodging• Advertising• Donations• Assoc dues

Overhead Allocation

• Allocate Project and Home office overhead to each activity– Can be based on activity cost– Must be a reasonable allocation

Profit Allocation

• Total Revenues – total cost

• Need to allocate profit to each activity

• Activity profit + activity cost = activity value

• Activity value can be used to determine progress payment amounts

Assigning Cost & Value

• 4 levels of cost or value that can be assigned to an activity– Dependent on info needs of project team– Level must be consistent thru project

Activity Cost/Value Timing

• Cost of work in place– Uniform – work in place is completed at a

steady rate• Reasonable assumption when activity is small in

relation to project

– Non-uniform – work in place is completed in a non-steady rate

Cumulative Cost/Value

• Determine the ES and LS cumulative costs– Same method used in resource leveling– Find cost envelope – area between ES and LS

cum cost curves• This becomes target area for work in place

Cumulative Cost/Value

• Use cum cost curves to determine cash flow – Allows contractor to determine when progress

payments are needed– Allows contractor to determine the amount of

working capital needed to do work• Working capital pays bills from progress payment to

progress payment