Topic 2 Time and Cost Management - Programming, Scheduling and Budgeting (Part 5 - Budget and Cost C

SCE5281 Construction Management Topic 2 Time and Cost Management - Programming, Scheduling and Budgeting (Part 5 - Budget and Cost C 1 Topic 1 Site Organization and Planning (Part 7 – Budgetary and Cost Control) 2 Budgets and Budgetary Control Budgets are used for planning the income and expenditure of a company or an organization. With the growing complexity of the construction industry, it is essential that firms also plan their policy well into the future. Through budgets such plans can be converted into the quantitative and monetary terms. Policy Budgets A firm can arrive at a tendering price for its projects by budget analysis and knowing what resources are available to carry out the work. From the budgets the firm will know, for example, how much capital is necessary, and can then decide whether to expand or contract any particular aspect of the business. From past results it may also be possible to determine a change in demand that could give an indication of possible new expansion plans. 3 Budgets and Budgetary Control Project budgets and working capital • The contractor has to know what capital is going to be needed for a project and when it will be required. To do this, the contractor will have to grow up a programme for the project and from this find the rate of expenditure and rate of income, based on a particular time period. The difference between these two will give the amount of working capital required in this time period. • If required, budgets can be prepared for the labor to be used (based on the labor graph), for materials and plant (based on schedules and the programme), and for the site overheads (based on the programme). • The working capital of a company is defined as a company’s total current assets. Current assets are made up of case, stocks or raw materials and those incorporated in work in progress. Working capita is required for many regular short-term commitments; to pay salaries and wages, to buy raw materials for construction, to pay interest, etc. • In a construction project, the need for working capital arises because of a delay between the expenditure on resources and the payment for goods subsequently provided. 4 Budgets and Budgetary Control Budgetary control • After a budget has been established, it is important to achieve the target set in the budget through a system of budgetary control. • Budgetary control is a continuous comparison of the actual achievement with the planned. By doing so any deviations from the plan can be seen and necessary actions can be taken either to bring things back on course or to change the plan. 5 Budgets and Budgetary Control Example 1 Non-repetitive construction – construction of a commercial building It is assumed that a contract has been entered into with the client and that payment for work carried out will be made 14 days after the end of the month in which the work is completed. Retention will be 10 per cent of the weekly income received initially with a maximum retention of 5 per cent of the contract sum ($80,790,000). Half the retention will be released 14 days following the completion of the project, the other half will be released six months after completion. The cost per operation has been ascertained and allocated to the master construction programme. From this programme it is now possible to arrive at the expenditure for each month. (Fig. 1.1) Using a similar method, it is possible to arrive at the program of income for the project, the value of each operation were calculated from the bill of quantities. The expected amounts of the monthly income are shown in Fig 1.2. Note: Payment takes place 14 days (2 weeks) after the end of the month in which the work is carried out. 6 Budgets and Budgetary Control Budgets and Budgetary Control Example 1 These figures for income and expenditure have been recorded graphically in Fig. 1.3. the working capital required at any time can now be found from the difference between income and expenditure from the graph. 8 Budgets and Budgetary Control Example 2 Repetitive construction – construction of 10 blocks of residential flat. It is assumed that a contract has been entered into with the client payment will be made in stages for each unit, e.g. excavation, concrete foundations, concrete floors, roof, and roof finishes. Payment will be received one week after completion of a stage, and the contract makes no provision for retention money. It has been ascertained that the total cost of completing the blocks is $13,655,000, which is built up in the following manner: Excavation $165,000 = $16,500 each block Concrete foundations $3,190,000 = $319,000 each block Concrete floors $6,340,000 = $634,000 each block Roof construction $1,320,000 = $132,000 each block Roof finish $2,640,000 = $264,000 each block $13,655,000 9 Budgets and Budgetary Control Example 2 By allocating these costs to the programme of work it can be seen that the distribution of cost will be that shown in Fig. 2.1 10 Budgets and Budgetary Control Example 2 The contract sum $15,710,000 and the value of each stage (calculated form the priced bill of quantities) is as follows: Excavation $190,000 = $19,000 each block Concrete foundations $3,670,000 = $367,000 each block Concrete floors $7,290,000 = $729,000 each block Roof construction $1,520,000 = $152,000 each block Roof finish $3,040,000 = $304,000 each block $15,710,000 11 Budgets and Budgetary Control Example 2 By allocating these values to the programme of work it can be seen that the distribution of the value will be as shown in Fig. 2.2 (only completed stages will be measured at the end of the week). 12 Budgets and Budgetary Control Example 2 Both sets of figures can be plotted on a chart (Fig. 2.3) and by subtracting the income from the expenditure the working capital required at that particular time can be found. Income S-curve Budgets and Budgetary Control Project budget and cash flow Example 3 Figure 3.1 shows the programme for an office building. All operations are programmed at their earliest times, but the amount of float available in each operation is indicated by a dotted line. The expenditure on an income for each operation has been ascertained and is shown in Figure 3.2 (The float of an activity is defined as the difference between the latest finish time and the earliest finish time of that activity). It is assume that a contract has been entered into with the client and that payment for the work carried out will be made one month after the end of the month in which the work is carried out. The retention will be 5% throughout. Half the retention will be released one month after the completion. By allocating the planned expenditure and anticipated income to the master programme (see Figure 3.3, operation at earliest times. Numbers above the line are planned expenditure, while those below are anticipated income), it is possible to arrive at the expenditure and income for each month. 14 Budgets and Budgetary Control Example 3 These figures can then be processed further to arrive at the cumulative amounts for expenditure and income, having made the necessary adjustments for retention and payment delays. The figures for income and expenditure have been recorded graphically in Fig 3.4 and 3.4a. The case flow for the project with all the operations taking place at their earliest times can now be found by plotting the monthly planned expenditure and anticipated income as shown in Fig. 3.5. From Fig. 3.5, with all operations starting at their earliest time, it can be seen that the maximum amount of working capital required is $37,781,000 at the end of month 4, and that the project becomes self financing (working capital = 0) at the end of month 6. For the purpose of comparison the process can be repeated to find the effect on the budget and cash flow of carrying out all operations at their latest times. Fig. 3.6 shows the new allocation of planned expenditure and anticipated income with calculation of cumulated income and expenditure at the foot of the chart. 15 Budgets and Budgetary Control Example 3 Fig. 3.7 shows the new graphical presentation of the planned expenditure and anticipated income and Fig. 3.8 shows the new cash flow for the project. The maximum amount of working capital is now reduced to $33,117,000 at the end of month 4 but the project does not become self-financing until the end of month 8. To determine which of these conditions is the most acceptable financially is to find out which of the extremes is the least expensive in terms of interest charges of the borrowed money. There are of course an infinite number of alternative solutions in between the extremes of earliest and latest times which can be used to give the desired cash flow. 16 17 18 19 20 21 Net cash flow curve Max. cash flow curve Cash outflow Cash inflow 22 23 24 25 Budgets and Budgetary Control Multi-project cash flow A company can determine the cash flow for all projects being undertaken using the same technique. Example 4 Fig. 3.9 shows in the planned expenditure and anticipated income for four projects. The cash flows for each of these projects individually and the sum of all four is shown in Fig. 3.10, and graphically as in Fig. 3.11. From the graph, the maximum amount of working capital required to finance these projects is $169,650,000. it can also be seen that the maximum working capital required occurs at the end of month 6, and that the projects become self-financing at around month 12. It can also be seen that in order to fully utilize the available working capital, it is necessary to find a new project which starts in about month 7. 26 27 28 29 Budgets and Budgetary Control Cost of financing projects After the cash flow has been established for the project, we have to determine the way and the corresponding cost of providing the working capital. The cash resources may be available within the company or have to be borrowed from external sources like the bank. The cost of interest payments should be considered even if the company’s own funds are used, as the money could have been used for investment elsewhere to earn money. 30 Budgets and Budgetary Control Example 5 Consider the project shown in Fig. 3.1, it is possible to find which of two cases, earliest or latest start times, induces lesser cost of the interest payments. Consider the case for the earliest start times in Fig. 3.5. The area between the horizontal time axis and the graph below this axis represents the working capital requirement over the duration of the contract in $-months. The area above the line represents the surplus on the contract in $-months. Only the area below the line is considered to determine the cost of borrowing this working capital. Let that the interest rate is 12% per annum. 31 Budgets and Budgetary Control Example 5 Case 1. Earliest start times Referring to Fig. 4.1, the cost of providing the working capital for this project is : $76,939,000 × 12% = $769,390 12 Case 2. Latest start times Referring to Fig. 4.2, the cost of providing the working capital for this project is : $66,493,250 × 12% = $664,933 12 It can be seen that the latest start times solution gives the cheapest solution. Once the project becomes self-financing, the surpluses can either be invested elsewhere or they can be used to finance other projects. 32 33 34 Budgets and Budgetary Control Contract budgets – Tabular presentation Contract budgets can be presented and controlled in tubular form. The elements of work which need very careful control, i.e. labor, material and plant are included. The chart is divided into two main parts, the right hand side gives the current month’s figures whilst the left hand side gives the cumulative figures to date, i.e. including the current month. The technique enables a check to be kept on the current performance, total performance and trends. Any significant variances should be investigated and appropriate action taken to bring the work back into line with the budget. Example 6 Case 1. can either be invested elsewhere or they can be used to finance other projects. 35 Budgets and Budgetary Control Example 6 Fig. 5.1 shows the early stages of a project. Target costs being set by the production control department and the actual cost figures being collected on site as work proceeds. The total cost column records the total cost in the whole project for the particular element. The target cost of work done records what the actual amount of work done should have cost, which can be compared with the actual cost shown in the next column. The variance column records the difference between the figures shown in the previous two columns. The variance % column is found by dividing the variance by the target figures. The totals are arrived at by totalling the columns vertically. In the case of the variance column, the figures in brackets are unfavorable variances (negative values) and the ones without brackets are favorable variances (positive values). The variance % total is not arrived at by totalling this column but by dividing the total variance by the total target cost. 36 37 Budgets and Budgetary Control Example 7 The budget for the shell of a two-storey in-situ concrete framed building is shown in Fig. 5.2. The progress achieved on the project and the cumulative costs after the first four months are as shown in Fig. 5.3 At the end of month 5 the progress achieved and the associated costs are shown in Fig. 5.4. With this information to hand, the cost being incurred on the contract can be analyzed, highlighting what variances are occurring and indicating where action is needed. This analysis is shown in Fig. 5.5. 38 39 40 41 42 Budgets and Budgetary Control Forecasting of cash flow The cash flow calculations presented previously have all been based upon a detailed programme for the project, and detailed figures for the income and expenditure on the project. This type of calculation can only be carried out after the contract had been awarded to the contractor, when such detailed information become available. It would be very useful for the contractor to produce an approximate forecast of the cash flow requirements for a potential contract to establish a forecast of the cash flow. This will enable the contractor to decide whether he has sufficient financial resources to undertake the contract. One method of forecasting cash flow for the project is based on establishing an ideal reference curve derived from cash flow curves for a reasonable-sized sample of similar projects carried out in the past, and using this reference curve to predict the likely cash flow for future projects. A typical ideal reference curve is shown in Fig. 6.1. In the curve, the horizontal axis is divided into one hundred part (percentile points) and represents any project duration. The vertical axis indicates the ash flow ratio, i.e. a proportion for the contract sum 43 44 Budgets and Budgetary Control Example 8 Assuming that we have a contract, value $100,000,000, during 24 months, and that we wish to know what the cash flow will be at the 12 month point, i.e. after 50% of the project duration has elapsed Referring to the reference curve, from the 50 percentile point on the horizontal axis, read the vertical cash flow ration axis, -0.24. The contract sum is then multiplied by this cash flow ratio to give the absolute cash flow for this point in the contract duration ($100,000,000 x -0.24 = -$24,000,000). 45 Budgets and Budgetary Control Example 9 Assuming that the contractor has a predicted cash flow for all his current projects as shown in Fig. 3.10 (established from detailed analysis of the programmes and financial information for all his current projects). He now requires to know whether he can undertake two new projects, E and F. The maximum amount of working capital available is $170,000,000 and the details of projects E and F are as follows: • Project E is scheduled to start on month 7, the contract sum will be approximately $270,000,000 and the project duration will be 18 months. • Project F is scheduled to start on month 9, the contract sum will be approximately $330,000,000 and the project duration will be 21 months. The first step is to calculate the percentile position for each month of each project. This is shown in Fig. 6.2 46 47 Budgets and Budgetary Control Example 9 The next step is to find the cash flow for each project This is shown in Fig. 6.3 and Fig. 6.4 By inspecting Fig. 6.5 it can be seen that the maximum negative cash flow for all six projects is $169,650,000 for month 6 and does not therefore exceed the maximum amount of working capital available. This occurs before projects E and F start and that once these projects are both running the maximum working capital requirement does not exceed $155,440,000, which is on month 13. It will therefore be possible to undertake projects E and F with the present financial resources. The cash flow for all six projects is therefore as shown in Fig. 6.5 48 49 Cost Control Cost control is an important activity in the construction industry, the simplest type of control used by some firms only gives the total cost of the project when it has been completed. This is then compared with the amount received, but if the project has lost money there is little that can be done about it. It is obviously a great advantage if a contractor knows which section of a project is in deficit and when it starts losing money. Cost control techniques have been developed for this purpose. 51 Cost Control Objectives of cost control The main objectives of cost control are: 1. To arrive at the cost of each stage, operation, or unit, and to carry out a continuous comparison with the target cost to get feedback of the gain or loss on each, so as to ensure that planned profit margins are maintained. 2. To provide immediate warning of the uneconomic operations, both in the long and short term. 3. To provide the relevant information on cost, which have been qualified in details by all the considerations under which the work has been carried out, to the estimator who is responsible for establishing the standards both historical and future. 4. To provide data to assist in the valuation of those variations that will arise during the course of the work. 5. To promote cost consciousness. 6. To summarize progress. 52 Cost Control Timing of presentation of cost information When cost control is in operation, the site manager must be made aware of any deviations from planned cost as soon as they are recognized. Ideally the costs should be checked daily, but on most operations this would be extremely expensive and the cost of the work done is in consequence usually checked weekly. Cost coding systems A system of identification coding for the basic cost data is important especially when the system is computer-based. Either alphabetical (e.g. LCOST) or numerical symbols (e.g. 1224), or the combination of both (L1224), for coding purposes is acceptable. Purely numerical system is preferred. 53 Cost Control 54 Cost Control Coding systems based on standard classification • This is the most useful method of coding as far as accounting and costing procedures are concerned. • The principle of this coding is to divide the list of items to be coded into classes at various levels of detail. • The first level is broad and general categories. • Each category is then further broken down and developed in more details for the subsequent levels down, until the required degree of detail is obtained. • Expansion of items at various levels is possible if the structure of the code has been well planned. 55 Cost Control Example: A coding system based on systematic classification and an all-numeric form of code. 56 Cost Control Example: A coding system based on systematic classification and an all-numeric form of code. 57 Cost Control Cost control system for a construction project • The cost of operating the control system and the benefits it provides should be considered when deciding upon the cost control system. • Control of the work can be done on a unit basis, or on a section or stage basis. • In some systems only certain sections of the projects are selected for control. • In site cost control, it is usual to control the cost of labor and plant, because they are likely to have the greatest amount of variability. • The choice of cost control system depends on the size of the company, the nature of work and the type of contract. 58 Cost Control Cost control system for a construction project • In setting up a cost control system, it is important to identify elements of cost. These must reflect the way in which the work is broken down into operations of activities and the level of breakdown must provide sufficient details for good control. • The estimate of cost should also be closely followed so that control in the field will provide feedback for the estimating process. • The breakdown into elements will preferably follow a pattern which is reasonably standard throughout a particular company so that comparisons can be made between various items in different jobs. 59 Cost Control Variances and standard costs • It is necessary to have some form of norm or standard against which the actual performance can be measured and compared • The standards are generated from past experiences of like or near-like situations where possible, and they are then used in establishing the initial budget. • Alternatively, standards may be derived from the use of work measurement techniques where historic records do not exist. • Any subsequent departure from the set standard in practice is known as variance. • An unfavorable or adverse variance is one in which the planned or budgeted standard has been exceeded in the cost and/or use of resources. • A favorable variance represents a situation in which less cost or resource has been incurred in order to complete an operation or activity than was budgeted. 60 Cost Control Reasons for variance form budget costs The reasons for variance form budget costs are as follows: • Workmanship performance • Technical and administrative performance • Inaccurate estimate or budget • Special circumstances affecting the progress of the work, such as strikes, poor weather, poor foundation conditions. 61 Cost Control Unit costs • The unit cost for any item or operation is the direct cost for one unit of measurement for that item. • For example, in excavation the unit cost can be the cost of excavating one cubic meter of material under those given conditions; or, it might be the cost of one square meter as a stated average depth. • It is necessary to ensure that the measurement of the actual work carried out relates directly and accurately to the costs incurred in carrying it out over the actual work period. • Cost control information must be accompanied by a full description of the conditions under which the work was carried out, as conditions can vary a great deal from one contract to another. • The unit costs can be stored in terms of money terms or they can be stored as man-hours. • It is always a risky and approximate business to bring up to date costs in dollars over a certain period of time. 62 Cost Control Unit costs • Whereas measurement in terms of man-hours will be more likely to remain constant, given similar conditions, over the years. • One the other hand, if a number of units of mechanical equipment are used it is not easy to correlate the working of a machine having a particular size, under specific circumstances, for one hour with one or more man-hours of labor. • Money often means more than man-hours for cost control to measure the efficiency of an operation in progress. Money is likely to make a greater impact than man-hours upon the managers involved in controlling the costs. • Data can be collected in terms of both money and man-hours, the former for immediate use and the latter as historical data and feedback for use in future estimating work. • In using either unit, it is not necessary for details of every single operation involved in a contract to be fed back to the estimating department. 63 Cost Control Unit costs • The ‘80/20 rule’ is often quoted with regard to civil engineering bills of quantities, meaning that 80 per cent of the value of the work is often in 20 per cent of items in the bill. • Obviously, this 20 per cent must receive a great deal of consideration both in the tendering procedure and in subsequent cost control. 64 Cost Control Construction Cost report In order to have a complete picture of the cost control on a construction site, it is necessary to have a wide range of cost reports. Cost reports need to be considered in association with reports concerning the general progress of work. 65 Cost Control Construction Cost report A construction cost report has the following functions: 1. To compare the actual cost of construction with the budget for the equivalent work and to calculate the difference between the two so that causes for any variance can be found. It is necessary to break down the work into comparatively defined activities if a thorough investigation is to be made. 2. To report certain statistics of the construction costs. These will show the actual cost of work constructed and total sums of money incurred such as the cost of labor and of machines. They may include the break-down of labor into trades, the progress of sub-contractors, the total quantities of construction items such as concrete and earthworks in a subdivisions of a project. 3. A forecast of the end result of the project in terms of cost from the past work. This can be compared with the total estimated cost of works,. so that as estimate on the impact of the firm’s profit when considering other projects together. 66 Cost Control Reporting systems One of the basic reports for the control of costs on site is the weekly cost record. This gives a complete record of the quantities and cost of work of certain operations. The purpose of these reports is to analyze and find out operations which are proving to be unprofitable, and probably therefore inefficient, so that proper corrective action can be taken. 67 Cost Control Weekly cost record with unit cost Each of the figures of quantity, cost, and unit cost are prepared on the basis of the working during the week, the total work in previous weeks, the total work to date, and an estimated total of the work to complete that operation. The relevant unit costs for each of these four totals are similarly records. 68 Cost Control Example 10 Figure 1 shows an example of a typical weekly cost record for two sample operations. For the unit costs for excavation, the work carried out during this week has been at a lower unit cost than the average of the work previously. The unit cost to date is consequently reduced below the previous unit cost, indicating a trend towards the reduction in the overall unit cost for the work. In the fourth column under ‘Unit cost’ is shown the unit cost of the estimate. Such a record is not an attempt to indicate the time progress of the work, although a comparison of the total quantities to date with the estimated total gives an accurate percentage completion on the particular operation. Such a cost record would not be prepared for every operation. For the weekly cost record, only the major operations involving large quantities and considerable cost would be chosen, since the preparation of cost records involves a great deal of time and cost. 69 Cost Control Example 10 Items that are showing a unit cost in excess of the estimate will require further investigation into the plant and labor costs involved. It is not usual to include the cost of materials used in a weekly cost record. The decimal system of classification, facilities the collection of cost data for almost any operation or particular aspect of an operation. For a weekly cost record used by the site staff at comparatively short intervals, it is important to provide information in as simple, concise, and accurate a manner as possible. The provision of too much extraneous information will encourage the controlling staff to ignore the cost record sheets. 70 71 Cost Control Weekly cost record without unit cost An alternative method of presenting the cost information on a weekly basis or for a longer period, is without the use of unit costs. Example 11 The figures inserted in the form in Fig. 2 are the same as those used in the weekly cost record of Fig. 1 The information on this form is restricted to the quantity of work carried out in the week, the total to date, the estimated value of the total to date, and the total actual cost. Column G shows the excess or deficiency on the total operation to date. Negative indicates a loss so far of $64,000. Column H shows the last reported estimate and indicates a loss at that stage of $50,000. 72 Cost Control Example 11 Although this type of weekly cost record does not give nearly as much information as the previous record, it does indicate that the operation is still being carried out unprofitably, and some further investigation is required into this operation. Although it is simpler to prepare the form in Fig.2, it requires the collection of a similar amount of data as that of the unit cost record. As the collection of data is one of the most expensive operations in any cost control system, the record of Fig.1 is likely to be favored because more information are being presented. Yet, a further variation of the presentation as illustrated by Fig.2 is the division of the total value of column E between plant and labor costs and carrying out the same procedure with the total cost to date. The excess or deficit of columns G and H is also divided into plant and labor costs, giving a closer indication of the unprofitable areas. 73 74 Cost Control Graphical presentation The information presented in Figs. 1 and 2 can be presented in the form of graphs. Graphs give a good indication of trends and also, as with the comparison of previous and present unit costs, can indicate whether action by the management in controlling costs has been effective. Example 12 Figure 3 shows the graphical presentation in respect of the excavation work. If excavation costs are clearly too high during one week of the programme and some attempt is made to modify the methods employed or the machines used. Provided the rearrangement is effective, it would be expected that the unit cost would fall week by week thereafter. In the graphical presentation of this information, it is possible to chart the time when specific action is taken and relate to it the progress made in the reduction of costs. 75 Cost Control Example 12 A report of this type needs to present two graphs, as in Fig. 3. In the first, the weekly cost of excavation is plotted on a weekly basis. Weekly cost = (total cost of the excavation during that week) / (quantity of excavation carried out in the same time) This is plotted as the full line in the upper 1 graph of Fig. 3. To indicate the trend of the unit cost per week, the average cost over the period to date on the same chart is plotted. This is indicated in Fig. 3 by the broken line in the upper graph. Average cost = (Total cost to date) / (Total quantity of excavation to date) 76 Cost Control Example 12 Adjacent to the graph of unit cost, we plot in the lower part of Fig. 3, a graph of the cumulative total week by week, to get some indication of the amount of work in the operation. A graph of average output each week can also be plotted, thus indicating the trend. In Fig. 3, the unit cost for the fourth week’s excavation has shot up from $490 to $630 per cubic metre. Immediate investigation is required to see whether this was due to inefficient planning. It may be due to a major breakdown in the equipment, bad weather, labor troubles, or other reasons. As an example, it may be found that a face shovel has insufficient trucks to carry away the excavated material at a first enough rate, causing it to stand idle between discharging its loads into one truck and the arrival of the next. The action of adding more trucks will clearly help to solve a problem, and a note of the action taken can be put on the chart. 77 Cost Control Example 12 If the action taken in effective, the result should be similar to that shown for weeks 5 and 6 in the graph, with the unit cost dropping considerably and the average cost showing a trend, which also falls over the job’s duration. To add further information, a horizontal line is drawn, as in Fig. 3, showing the estimated rate for the work, including the cost of laboring and plant in the unit cost. A straightforward comparison can then be made, setting the costs of labor and plant against the estimated costs. Charts illustrated above tend to make easier and more interesting reading. Trends become far more obvious and easier to spot in reports graphically presented. 78 79 Cost Control Monthly reporting At monthly intervals, it is desirable to prepare a cost statement in more detail than the weekly control statements. It is highly desirable to have the estimate of the cost of the work yet to be completed. This may well vary from the original estimate, and should be prepared based on the latest information. For example, if laying drains has so far proved more expensive than was originally- estimated and every step has been taken to improve the efficiency of operations without success, the cause of the change must be incorporated in the estimate for work yet to be performed. 80 Cost Control Example 13 A cost report for the monthly interval is shown in Fig.4. In this particular example, quantities are separated from cost, so that comparisons can be made between these different units. Column D, E, F and G gives some idea whether the scope of the work has increased or decreased, how the work is currently progressing, and whether the operation is nearly complete or in its initial stages. The columns under ‘Cost’ follow similar lines, except that it is possible to make a statement here whether the work is being carried out profitably or not. Column K gives the valuation of the work carried out to date in accordance with the estimated rates, or with those rates taken from the bill of quantities. 81 Cost Control Example 13 The difference between the valuation and the actual cost appears in L, which also shows the profit or loss on the particular operation as it has so far proceeded. As estimate of the total cost to completion (actual cost to date plus estimated cost of work to be completed) of that operation was made in column M and can be compared with N, which is the valuation based on the tendered rates (all costs are estimated) for the estimated final quantities. These figures will give rise to column O, in the form of a final profit or loss figure for the complete operation. In the case of driving the pile-cases, the work is only a little over 50 per cent complete, but the estimated profit on the operation amounts to $2,500,000. The estimate includes the amount of work yet to be carried out. It, therefore, cannot be treated as a firm figure like the -$250,000 in the temporary cofferdam (construction completed), but must be treated with reserve until it becomes a final figure. 82 83 End 84