Construction Enterprise Target Cost Management
Cost management is a crucial element of the management of any construction enterprise. It is important that the target costs of a project are known and managed effectively so that the costs of the project do not exceed the budget and the project is completed without any additional or unnecessary expenses. Target cost management involves setting a target cost for a project before the project begins, and then monitoring and controlling the costs to ensure that the target cost is not exceeded.
The first step in target cost management is to identify the target cost that should be set for the project. This can be done by analyzing the scope of the project and assessing the resources that are required to complete the project based on the scope. Resources such as materials, labour, and equipment should be factored into the target cost so that the final cost of the project is accurately captured. After the resources are identified, their associated costs should be estimated. This estimation process should take into account any contingencies so that the final costs do not exceed the budget.
Once the target cost has been determined, the construction company must create a plan of action that will be used to monitor and control the cost of the project. This plan should include the identification of the parties responsible for cost management, the tracking of costs, and the reporting of any variances. The process should also include the development of cost controls such as provider selection, cost estimation, and quality assurance. These controls should be in place to ensure that the final cost of the project is in line with the target cost.
When the project begins, the construction company must be vigilant in monitoring the project costs and any variances. This can be done through regular cost reviews that are carried out throughout the duration of the project. The cost reviews should be conducted by the individuals who were identified in the plan of action as responsible for cost management. Through the cost reviews, any variances to the target cost should be reported, and corrective action should be taken to address any deviations from the target cost.
The construction company should also take steps to ensure that all individuals who are involved in the project understand the importance of target cost management and that any actions that are taken during the project should be done with the target cost in mind. This can be done through regular meetings and training sessions that are designed to focus on target cost management.
Finally, it is important that the construction company takes the time to review the target cost management process after the project has been completed. This review will allow the company to assess the effectiveness of their target cost management process and to identify any areas in which it can be improved. The review will also provide an opportunity to learn from past mistakes, so that the company can be better prepared for future projects.
By following these steps, the construction company can effectively manage the target cost of their projects and ensure that the project is completed within budget. Through effective cost controls and regular monitoring, the company can ensure that the project is delivered on time and within budget.
