HOW TO CONTROL CONSTRUCTION COST OVERRUN




Controlling construction cost overrun

The construction activity accounts for about 50% of the national development expenditures. Therefore, timely implementation of projects is important to avoid cost overrun. Now-a days, construction of projects is mostly complex, both technically and commercially. Therefore, it is necessary that the construction manager should have the right skill both technical and managerial, innovative approach foresight and awareness of national and international markets. The power of innovation must be increasingly utilized in improving functional efficiency and optimum utilization of available resources. Appropriate cost effective and innovative technologies of construction and high level of project management backed by dynamic management information system and logistics are of paramount importance in achieving economy and speedy execution. it is necessary not only to devise and detail the projects with foresight and precision so as to obviate and participation of all concerned in this giant exercise.

MAJOR THRUST AREAS
The major factors responsible for time and cost overrun are:

  1. Inadequate project formulation, investigations and technical specifications.
  2. Deficient estimation of cost and quantity of work.
  3. Midstream changes in scope and volume of work.
  4. Improper vendor/contractor selection.
  5. Late starting of work.
  6. Non/late receipt of government clearance.
  7. Delay in order placement.
  8. Delay in release of adequate funds.
  9. Delay in receipt of equipment from indigenous/imported source.
  10. Non-sequential ordering/receipt of equipment.
  11. Defective equipment requiring rectification at site.
  12. Delay in mobilization of internal resources by contractors.
  13. Delay in design engineering.
  14. Strikes, lockouts, industrial relation problems, go-slow, stoppage of work by contractors.
The time and cost overrun due to foreign exchange fluctuations, statutory duties/taxes may be considered beyond the control of the project authority.


Controlling construction cost overrun

AREAS OF WEAKNESS
The following are the possible areas of weakness in the present-day project implementation systems which result in time and cost overrun.
  1. Project planning.
  2. Estimating project cost.
  3. Contracting, vendor analysis and rating.
  4. Project manuals.
  5. Monitoring.
  6. In-house consultancy.
  7. Plant and corporate office interface.
SOME ACTION POINTS:
  1. Relevance of Technology Adaptation Transfer and Development: The construction process is basically interlinked with various disciplines/systems which influence the technology of construction to a great extent. It is desirable to adopt appropriate technology with minimum borrowed technology and maximum utilization of local resources. The possible areas in which construction technology may be improved are: systems approach to project management, information technology, weather technology, space technology, robotics in construction etc. Our thinking and approach to any problem must be scientific
  2. Discourage Midstream Changes in Specification and Scope of Work Tender Finalization.
  • Ensure thorough scrutiny of draft scope of work/specification by concerned departments/agencies. A task force may be constituted for better coordination.
  • Thorough site survey, site investigation and collection of necessary data/information. The knowledge may be enriched through site visits when similar installations are existing. Post-project appraisals of similar projects may be analysed.
  • Experienced consultants may be approached in case in-house expertise is not available.
  • Select process technology which should be best suitable for the organisation.
  • Carry out specification audit by experts before tender finalization.
  • Drawings of turnkey contractor be over viewed only and not approved/scrutinized except general arrangement plans etc.
      3. Improve Contract Management


Controlling construction cost overrun


  • A panel of contractors with good track record for various categories/disciplines be constituted.
  • Provide more thrust on selection of contractors/subcontractors. Only reliable contractors with good track record should be awarded the job.
  • Provide stringent clauses of penalty in case of failure of contractors to execute a job in time.
  • Standardize and develop a fair and equitable contract document. Possibility of adopting standard forms of contract such as FIDIC (International Contract) be explored.
  • Analyse risk if any, the client should take more responsibility rather than passing on to the contractor.
  • Coordinate and monitor the order placement on vendors to ensure that they are not overbooked with reference to their capabilities.
  • Use modern techniques such as MSP, PRIMAVERE, ERP and value engineering in the contract.
  • Billing schedule with the contractors/suppliers be so designed that the payments should be incentive for the site progress, but in no circumstances the purchaser should lose control over the agency on the progress of work.
      4. Provide Effective Planning, Monitoring and Control.


Controlling construction cost overrun

  • Develop an integrated project planning system in construction with consultants, contractor and user department.
  • Ensure realistic planning with proper delineation of basic items of work. This must be thoroughly scrutinized and vetted by the the Project Manager.
  • Encourage computerized network planning.
  • Ensure effective project control instead of mere monitoring of progress such as:
            a) Regular updating of network on a predetermined level.
            b) Preparation of control reports on project progress.
            c) Delay analysis and review to determine remedial measures for controlling seepage.
            d) Carrying out modification of network wherever necessary.
  • Provide effective monitoring system which may include the following sub-systems:
            a) Social monitoring.
            b) Physical monitoring.
            c) Financial monitoring.
            d) Administrative monitoring.
            e) Technical monitoring.
            f) Resource monitoring.

      5. Improve Project Implementation Process
          Effective strategies must include


Controlling construction cost overrun

  • Decide implementation methodology/work packaging/interfacing based on in-house expertise or consultant's advice such that it will be economically viable and time saving.
  • Provide adequate infrastructure facilities such as construction power, construction water, road, railway etc.
  • Ensure improved interfacing between projects and operation/user department.
  • Develop partnership approach in which the client, the consultant and the contractor will work as a strong team.
  • Organize, develop/train all concerned in construction management including design, planning, material management with emphasis on low cost and high-quality construction.
  • Encourage mechanized method of construction.
  • Consultants should have site organisation to provide expeditious site/design decisions.
  • Provide full fledged inspection agency to carry out both stage-wise as well as final inspection of the equipment to ensure quality and timely supply.
  • Encourage one union operation in the organization so that meaningful negotiations can be held whenever necessary.
  • Encourage use of new and cheaper building materials of proven quality for economy and and environmental protection.
  • Provide effective coordination among various participants.
  • Ensure openness of communication. Right information must be communicated to the higher authorities without fear so that corrective action, if any, can be decided.
  • Set performance standards and targets for each staff of the project team in key result areas.
  • Apply appropriate logistics and creativity to achieve speedy execution.
  • Encourage use of computers for resource planning and systems approach to project monitoring.
  • The construction team be headed by an experienced, dynamic and result oriented Project Manager. The team must work with dedication, sincerity, commitment and strive for professional excellence. The manager must create an atmosphere in which they can motivate themselves.
  • Every individual in the team must apply principles of 3 'I's, i.e, Intelligence, Initiative and Interest, in the work for successful implementation of a project.

Controlling construction cost overrun


     6. Focus on Quality Assurance:
         For this, there is an immediate need of:

  • Formulation of quality assurance policy and implement at various levels.
  • Follow a total quality management system.


                                                                             - THANK YOU -



















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Green Environment

Hi, I’m Gobinda Burman (Green Environment). More than 27 years in the field of Building Construction industry, I’ve completed many high-rise building projects successfully. I have got the opportunity to learn and solve the critical practical problems related to building construction. I love to share my knowledge with those people who wants to build their own home and the budding civil engineers willing to build their career in this field..

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