Cost Control Its Not Just About Numbers

by Keith Webb 22 February 2007

Cost Control Its not just about numbers! Keith Webb - 22 February 2007

Cost Control What are the objectives?

To focus management attention on potential cost trouble spots in time for corrective or costminimising action. To keep each budget holder informed of their performance against budget. To create a cost conscious atmosphere. To minimise project costs by looking at all activities from the viewpoint of total cost reduction.

Cost Control Its not just about numbers! Keith Webb - 22 February 2007

Cost Control So what are the problems?

Many projects (and organisations) see cost control as merely cost tracking and reporting. Cost control systems dont always live up to their own principles. Many large engineering and contracting companies over-control and over-report.

Cost Control Its not just about numbers! Keith Webb - 22 February 2007

What is Cost Control?

There are three steps to Cost Control. These are: 1. Collating all costs associated with a project, 2. Analysing these costs with regard to the budget, and 3. Controlling these costs by signalling and forecasting potential over-expenditure in a timely manner to enable decisions to be taken to minimise the cost impact.

Cost Control Its not just about numbers! Keith Webb - 22 February 2007

What makes an effective cost control system?

1. A fixed scope and budget estimate. 2. A budget breakdown into identifiable technical items. 3. A regular assessment of cost progress. 4. A regular assessment of outstanding work. 5. A regular comparison of the budget with the forecast final cost. 6. An adequate cost tool 7. Comprehensive written procedures.

Cost Control Its not just about numbers! Keith Webb - 22 February 2007

So what is Cost Control about?

1. Strategy 2. Communication 3. Discipline 4. Timing 5. Focus

Cost Control Its not just about numbers! Keith Webb - 22 February 2007

Cost Control - Strategy

Determine the desired outputs Align with the Execution Strategy Pitch your WBS at the right level Avoid duplication of effort Understand the data sources, dataflow and timing Link electronically where practical Remain open minded Strive for maximum effectiveness Get the right resources
Cost Control Its not just about numbers! Keith Webb - 22 February 2007

Cost Control - Communication

Know your project team Get buy-in to the budget and baseline Cost clarity in Progress Reports Communicate honestly Hold regular Cost Review Meetings Communicate at the right level Dont undermine the PM

Cost Control Its not just about numbers! Keith Webb - 22 February 2007

Cost Control - Discipline

Work processes must be documented Ensure that processes are properly followed Cost movements must be recorded when they occur. Cost records must not be manipulated Make the Close-out report meaningful Capture historical data and lessons learned

Cost Control Its not just about numbers! Keith Webb - 22 February 2007

Cost Control - Timing

Establish the work processes early Capture Trends early Capture Changes early Plan your reporting cycle Achieve your deadlines

Cost Control Its not just about numbers! Keith Webb - 22 February 2007

Cost Control - Focus

Project Familiarity Prime function is analysis and forecasting. Focus on the big items Avoid Analysis Paralysis Understand the contract types and provisions Focus on the uncertainties and things that change Stay Proactive

Cost Control Its not just about numbers! Keith Webb - 22 February 2007

Questions?

Cost Control Its not just about numbers! Keith Webb - 22 February 2007