CONSTRUCTION COST CONTROL
A contractor has successfully negotiated a contract to construct a pre-engineered
building and the following scenario prevails for the various construction activities:
•The mobilization and site clearance can commence on day one (June 1st), will take six
weeks and will cost $60,000.
•Foundation and slab construction will cost $96,000, can commence two weeks after
day one and will take eight weeks.
•Delivery of the pre-ordered pre-manufactured building worth $240,000 can commence
immediately after the site clearance is complete and will take four weeks.
•Erection of the building will take eight weeks at a cost of $10,000 per week and will
commence immediately after delivery of the building.
•Internal tenant improvements and equipment will cost $360,000, take 12 weeks and
can commence two weeks after erection of the building commences.
•Commissioning of the equipment will cost $4,000 per week, will commence two weeks
before the pre-manufactured building is complete and cannot be completed until two
weeks after the tenant improvement and equipment installation are complete.
•Completion of the site development will cost $72,000, take eight weeks and will
commence immediately after the erection of the pre-manufactured building is complete.
•Site overheads are $6,000 per month and head office fees and overheads are 10% of
direct project costs. (Site overheads and head office fees should be every month till
the end of the project)
•All monthly periods are deemed to have four weeks.
•All activity costs are deemed to occur evenly during the duration of the activity.
List any other assumptions required:
Prepare two bar charts (one original and one revised) as in the template on
Revised total duration and revised cost of the project incorporating the following event:
The foundations and slab construction activity took 125% of the planned time and cost
50% more than originally estimated?
Using the data presented and assuming that:
•Progress draws subject to 10% holdback are made monthly (four week monthly
•Payments are due 28 days after the progress draw date;
•Completion is certified without reservation the day work is completed;
•Holdback is released 56 days after completion;
Draw a monthly income and expense profile for the project. Clearly indicate the
cumulative monthly figures throughout the duration of the profile.
1- Direct cost = sum of the various construction
2- Indirect cost = site overheads
3- Markup = office overheads
4- Total invoice = indirect cost + direct cost + markup
5- Expenditure = direct cost + indirect cost
6- Holdback = 10% (indirect cost + direct cost + markup)
7- Revenue of the first month would be zero.
The second month = the first month of the invoice.
The third month = the second month of the invoice.
8- Balance= Released holdback +Revenue – Expenditures.
9- Cumulative of the first month=Balance of the first month.
Cumulative of second month= Cumulative of first month+ Balance of second month.