CE - 52012 (ch-1)

THE CONCEPT OF COST CONTROL
1
CONTENTS
Introduction
What is Cost control aim?
Need for cost control
The role of quantity surveyor
What is Contract?
2 Types of Contract
Fixed –price contract (or) Lump sum contract
Cost reimbursable contract (or) Cost plus contract
Kinds of Cost reimbursable contract
Other Contracts
Cost control terminology
Course Outcomes
Reference Book
3 Introduction
What is cost control aim?

Cost control is used to the best advantage.
4 Need for Cost Control
It is vital to operate an effective cost control procedure

during the design stage of a project to keep the total cost
of scheme within the building clients budget.
5 Main aims of cost control are threefold
To give the building client good value for money

To achieve a balanced and logical distribution of the
available funds between the various parts of the
building
To keep total expenditure within the amount agreed
by the client
The Role of the Quantity Surveyor
6
It is advisable that the quantity surveyor is

involved in the planning and design stages of
a project
The quantity surveyor can give advice on the
strategic planning of a project which may
affect the decision whether or not to build
where to build how quickly to build and the
effect of time on costs or prices and on
profitability.
7
What is contract?
Contract is an agreement enforceable by law.
A contract is an exchange of promise between two or more parties
to do.
Contractors operate under a contract arrangement with the owner.
8 Types of Contract
1.Fixed - price contract (or) Lump sum contract
2.Cost reimbursable contract (or) Cost plus

contract
1.Fixed – price contract (or) Lump sum contract
 lump sum contract is an agreement in which one
party consents to pay another party a specified
amount normally established by competitive
bidding.
 Generally this type of contract is used for small
9 work.
 In a lump sum contract the owner has essentially
assigned all the risk to the Contractor.
2.Cost reimbursable contract (or)Cost plus contract
In this type of contract all the cost that the

contractor incurs during the project are charge back
to the client, and thus the contractor is reimbursed
costs.
10
11 Kinds of cost-reimbursable contracts
Cost plus fee

(or)cost plus
percentage of cost
contract
Cost-reimbursable
contract (or) Cost Cost plus fixed fee
plus contract contract
Cost plus
fluctuating fee
contract
Cost plus fee(CPF) or Cost plus percentage contract(CPPC)
Cost plus percentage contracts are those in which

the contractor is paid the actual cost of the work plus
and agreed percentage of the actual or allowable cost.
12
13 Cost plus fixed fee contracts
Cost plus fixed fee contracts are those in which the

sum paid to the contractor will be the actual cost
incurred in the execution of the work plus a fixed
lump sum which has been previously agreed upon and
does not fluctuate with the final cost of the project.
14 Cost plus fluctuating fee contracts
Cost plus fluctuating fee contracts are those in

which the contractor is paid the actual cost of the
work plus a fee.
15 Other contracts
Contracts based
Measure and on drawing and Design and
value contract specification build contracts
Design and Develop and

Management
manage construct
contracting
contracts contract
Measure and value contract
The contract includes those based on

schedules of rates, approximate quantities and
bills of quantities.
16
Contracts based on drawing and specification
These are often described as lump sum

contracts although they may be subject to
adjustment in certain instances.
17
Design and build contracts
These constitute a specialized form of
contractual relationship in which responsibility for
design as well as construction is entrusted to the
contractor.
18
Management contracting
In management contracting the contractor is

paid a fee to manage the construction of a project
on behalf of the client and it is therefore a contract
to manage, procure and supervise.
19
Develop and construct contract
In this type of contract consultants design the

building to a partial stage, often called scope design,
the competitive tenders are obtained from contractors
that develop and complete the design and then
20 construct the building.
Cost control Terminology
A number of terms are used widely in cost control work.
1.Cost plan 7.Cost in use

2.Cost check 8.Cost study
3. analysis 9.Cost control
4.Approximate estimating 10.Cost management
21
5.Element 11.Cost planning
6.Cost research
Cost plan
A statement of the proposed expenditure on

each section or element of a new building related
to a definite standard of quality.
22
Cost check
The process of checking the estimated cost of
each section or element of the building as the
detailed designs are developed, against the cost
target set against it in the cost plan.
23
Cost analysis
The systematic breakdown of cost data, often

on the basic of elements, to assist in estimating the
cost and in the cost planning of future projects.
24
Approximate estimating
Computing the probable cost of new building

works at some stage before the bill of quantities is
produced. It is an essential and integral part of the
cost planning process.
25
Element
A component or part of a building that fulfils

a specific function irrespective of it design,
specification or construction, such as wall, floors ,
and roofs. Many cost plan and cost analyses are
26 prepared on the elemental basis.
Cost research
All methods of investigating building costs and

their interrelationship, including maintenance and
running costs, in order to build up a positive body of
information which will form basic guidelines in
27 planning and controlling the cost of future projects.
Cost in use
Investigating the total costs of building projects

initial capital costs and maintenance and running
costs throughout the predicted lives of the buildings.
28
Cost study
 To reveal the distribution of costs between the various parts of
the building.
 To relate the cost of any single part or element to its importance
as a necessary part of the whole building.
 To compare the costs of the same part or element in different
building.
 To consider whether costs could have been apportioned to secure
29
a better building.
 To obtain and use cost data in planning future buildings and
 To ensure a proper balance of quantity and quality within the
appropriate cost limit.
Cost control
All methods of controlling the cost of

building projects within the limits of
predetermined sum, throughout the design and
construction stages.
30
31 Cost management
The synthesizing of traditional quality surveying

skills with structured cost reduction or substitution
procedures using a multi- disciplinary team.
32 Cost Planning
This is often interpreted as controlling the cost of a

project within a predetermined sum during the design
stage, and normally envisages the preparation of a
cost plan and the carrying out of cost checks.
Course Outcome
To give overview knowledge of the concept of cost

control.
33
Reference Book
Construction Management Jump Start 2nd Edition
34
35
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THE CONCEPT OF COST CONTROL

What is cost control aim?

It is vital to operate an effective cost control procedure

To give the building client good value for money

It is advisable that the quantity surveyor is

1.Fixed - price contract (or) Lump sum contract

2.Cost reimbursable contract (or) Cost plus

In this type of contract all the cost that the

Cost plus fee

Cost plus percentage contracts are those in which

Cost plus fixed fee contracts are those in which the

Cost plus fluctuating fee contracts are those in

Design and Develop and

The contract includes those based on

These are often described as lump sum

In management contracting the contractor is

In this type of contract consultants design the

A number of terms are used widely in cost control work.

1.Cost plan 7.Cost in use

A statement of the proposed expenditure on

The systematic breakdown of cost data, often

Computing the probable cost of new building

A component or part of a building that fulfils

All methods of investigating building costs and

Investigating the total costs of building projects

All methods of controlling the cost of

The synthesizing of traditional quality surveying

This is often interpreted as controlling the cost of a

To give overview knowledge of the concept of cost

Construction Management Jump Start 2nd Edition

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