The Cost
Control Problem
During the execution of a project, procedures for
project control and record keeping become indispensable tools to managers and
other participants in the construction process. These tools serve the dual
purpose of recording the financial transactions that occur as well as giving
managers an indication of the progress and problems associated with a project.
The problems of project control are aptly summed up in an old definition of a
project as "any collection of vaguely related activities that are ninety
percent complete, over budget and late." The task of project control
systems is to give a fair indication of the existence and the extent of such
problems.
In this chapter, we consider the problems
associated with resource utilization, accounting, monitoring and control during
a project. In this discussion, we emphasize the project management uses of
accounting information. Interpretation of project accounts is generally not
straightforward until a project is completed, and then it is too late to influence
project management. Even after completion of a project, the accounting results
may be confusing. Hence, managers need to know how to interpret accounting
information for the purpose of project management. In the process of
considering management problems, however, we shall discuss some of the common
accounting systems and conventions, although our purpose is not to provide a
comprehensive survey of accounting procedures.
The limited objective of project control deserves
emphasis. Project control procedures are primarily intended to identify
deviations from the project plan rather than to suggest possible areas for cost
savings. This characteristic reflects the advanced stage at which project
control becomes important. The time at which major cost savings can be achieved
is during planning and design for the project. During the actual construction,
changes are likely to delay the project and lead to inordinate cost increases.
As a result, the focus of project control is on fulfilling the original design
plans or indicating deviations from these plans, rather than on searching for
significant improvements and cost savings. It is only when a rescue operation
is required that major changes will normally occur in the construction plan.
Finally,
the issues associated with integration of information will require some
discussion. Project management activities and functional concerns are
intimately linked, yet the techniques used in many instances do not facilitate
comprehensive or integrated consideration of project activities. For example,
schedule information and cost accounts are usually kept separately. As a
result, project managers themselves must synthesize a comprehensive view from
the different reports on the project plus their own field observations. In
particular, managers are often forced to infer the cost impacts of schedule
changes, rather than being provided with aids for this process. Communication
or integration of various types of information can serve a number of useful
purposes, although it does require special attention in the establishment of
project control procedures.
Related Topics
Privacy Policy, Terms and Conditions, DMCA Policy and Compliant
Copyright © 2018-2024 BrainKart.com; All Rights Reserved. Developed by Therithal info, Chennai.