Cost Control Software: The key to managing project cost management & project cost control.  

Being in the construction industry often calls for the not faint of heart.  

Capital intensiveness and instability in the market cause many construction companies to fail within the first five to ten years of operation. Therefore, project performance is critical in creating and sustaining a successful business. 

Often business owners will determine the success of a project based on profitability. However, establishing a narrow view of project success limits the business’ capability to implement future process improvements.  

Creating a 360-degree view of project milestones and outcomes such as timeline, budget, customer satisfaction, and meeting project deliverables needs to be accounted for. Inclusive of how these outcomes compared to the initial project costs and cost control measures.  

To quantify the ins and outs of project performance, all variables need to be easily inputted, tracked and readily accessible for analysis.  

In this article, we review the techniques used by construction companies to manage project performance and best practice techniques to ensure consistent project performance.  

Why is project cost management & cost control important? 

Understanding the meaning and principles of project cost management and project cost control equip businesses with the fundamentals to monitor all aspects of project performance.  

Below outlines the key differences between the two terms and how they interrelate.   

• Project Cost Management:  

Project cost management is actioned and implemented before the commencement of a project. The process involves assessing the labour, material, equipment and unexpected costs associated with project milestones. Project managers create the project budget based on the total estimate of costs and factoring in cost overruns such as project delays and overtime.  

• Project Cost Control: 

Using the project budget, project cost control is then the methodology used during the project life cycle to monitor costs and productivity. The majority of projects encounter delays which result in cost overrun for both contractors and sub-contractors alike. Cost control measures ensure enough capital to complete the project and future projects in the pipeline.  

Despite the multitude of project variables, overruns associated with labour, mistakes in estimation, equipment hire and price inflation, there are sophisticated tools available to navigate corrective action.  

How to manage and monitor project performance. 

There are many techniques and tools available to assist construction companies in remaining on time and in line with the project budget.  

Cost Control Software: 

Cost Control Software provides an integrated solution enabling readily accessible insights regarding the project status, resources and financials.  

The software is designed to account for both Project Cost Management and Project Cost Control. A good Cost Control software should include solid reporting options to allow for budget comparisons, dashboards, Gantt charts, workflow and time tracking.  

Cost Control Software is designed for every type and sized construction company. The software makes real-time updates and reviewing project data easy, allowing all types of businesses to plan for the unexpected and prevent financial turmoil in the future.  

Excel: 

In the initial stages of a single project, some businesses find tasks manageable via Excel tools. Business owners are familiar with the program, and there’s no additional capital required. Chaos can ensue with manually entering data, double and soiled data. Keeping systemised and standardised information is very difficult as tracking changes and version control is limited.  

Earned Value Management (EVM): 

Earned Value Management is an analysis methodology allowing project managers to objectively quantify project performance. It relies on a complex and comprehensive formula that considers planned value, actual value, costs, schedule variance, cost performance index, schedule performance index and much more.  

The limitations of this technique are that it requires a specialised skill set and a comprehensive understanding of how the formula works. EVM is generally not a practical methodology for small to medium operations due to the need for a dedicated team member to perform this task.  

To Complete Performance Index (TCPI):  

To Complete Performance Index (TCPI) is a metric used by Earn Value Professionals to measure and estimate the efficiency of project completion is reasonable and in line with costs required to complete the project.  

The methodology measures resources, performances and costs aligned to the budget to complete the project. Like EVM, professionals need to be trained to practically apply the formula, which is generally limited to more extensive construction operations.  

Due to the critical nature of cost control, every construction business needs to have a consistent, standardised and efficient methodology to keep project performance on track.  

Based on the easy to use, integrated and automated nature of Cost Control Software, we recommend this software as best of practice methodology to monitoring and measuring project performance.   

What are the three pillars of successful Cost Control Software? 

There are three considerations for exceptional project controls and cost management solutions to successful project portfolio management.  

1. Visibility: Effective Cost Control Software should enable you to track, view and analyse all cost considerations across multiple projects. This should include multiple budget revision capabilities, including labour hours, costs and quantities, forecasted cash flow, and scenario forecasting.  
2. Efficiency: Good Cost Control Software needs to save business owners time with automated workflow, email notification, and business rules for change approvals. Quick links to document history such as contracts and purchase orders need to apply to several current budgets and forecasts.  
3. Standardisation: Automation and integration is key to consistent project management regardless of team size and portfolio. Providing access to consistent tabular and graphical reporting empowers staff members to alert management to critical changes. In addition, historical and real-time comparisons enable simplified reporting and auditing of project changes.  

Leveraging cost management best practice requires sophisticated software designed for everyday businesses. Cost Control Software provides the most efficient means to managing project performance by removing the barriers to project collaboration and standardisation.  

If you feel that your company can benefit from an integrated cost control software solution, give one of our industry experts a call at Thrive on 1300 868 474.