What are the base elements for construction cost control?

During the construction and civil projects, it is essential to focus on all essential cost elements. For a construction company, the cost elements to consider while partnering with a civil estimating services company or budgeting by itself are:

  • Costs of the materials are a function of required quantities, their corresponding market prices, and their waste.
  • Labor costs depend on numerous things. Some examples are the work to be done, salary rates, associated costs with salaries, the organizational structure, and the performance or productivity of said labor.
  • Construction equipment costs are a function of the work to be performed, its fixed or ownership costs, its variable or operating costs, and the overall performance or efficiency of such equipment.
  • Indirect costs depend on many aspects. Overall, some of them are costs of logistics to support production in the works and the fixed expenses of the company. 
  • Other costs include concepts you can ultimately reduce to a treatment similar to one of the three elements mentioned subsequently.

Generally, we propose that you need to consider cost elements in a basic system for the control of construction costs with the help of Xactimate estimating services. The estimating firms provide these services to integrate the following categories or groups of inputs:

Materials provided by the builder

Under this section, we include all those materials that builders provide us. More essentially, we require these materials for the work. Actually, maybe the reason is that you have installed them in it. Examples are concrete, glass, steel, etc. Additionally, you may require some materials for incorporating others (nails and wood for formwork, wire for mooring rods, etc.). Likewise, we exclude expressly all those materials that our clients provide to us. 

Direct Labor

It is all the construction workers who belong to the payroll of the construction company (carpenters, welders, electricians, etc.). Furthermore, we exclude that personnel expressly from this list who a company hires on a piece-rate basis for the execution of subcontracts.

Construction equipment and tools

Subsequently, they are all the equipment and tools necessary to carry out the construction activities. More interestingly, the construction company can own them or rent them out. Furthermore, we expressly exclude any equipment provided by the client.

Permanent equipment provided by the builder

They are all those pieces of equipment that become a definite part of the built work. It is because you install them for that purpose (pumps, electrical panels, fire-extinguishing equipment, boilers, elevators or escalators, etc.). Here, you need to exclude expressly any equipment provided by the client.

Labor subcontracts

They represent all the personnel hired on a piece-rate basis by the builder to install permanent materials or equipment provided by the construction company or client. Furthermore, these personnel work with the company’s equipment or tools or provide their tools and equipment depending on the contract (sandblasters, block gluers, ceramic installers, etc.).

Subcontracts at all costs

They represent any portion of the work contracted on a piece-rate basis by the builder to install permanent materials or equipment provided by subcontractors who work with their equipment and tools. More importantly, it is essential to mention that civil estimating services play a significant role in managing the costs. Mainly, the reason is that the construction company may not handle these subcontracts conveniently.

Normally, this personnel makes up of companies specialized in their field (glaziers, joinery carpenters, installers of thermal insulation in pipes, etc.). In many cases, you can carry out permanent equipment installation through these contracts (elevators, air conditioning, escalators, etc.).

Transport and freight

They represent all those transportation or freight services required for material transfer, equipment, or personnel of the construction company.

Field indirect

They represent all those costs of materials, equipment, or labor of the construction company used to provide logistical support to the construction. 

Indirect of operation

They represent all those company expenses required for its operation as a business unit. The construction companies assign it partially to each project, prorating their amount among the different works that the company builds (manager, administrator, rental of office space, etc.). The Xactimate estimating services companies express them as a fixed percentage of the sum of all previous costs.

The Chart of Accounts, a requirement for cost management

For the proper functioning of the construction costing, you need to have a proper chart of accounts. It is nothing more than the subdivision of the work in cost centers, both for estimation and control purposes. Moreover, it represents the list of project cost accounts and defines the level of detail used to control construction costs.

We can define the said list of accounts based on a numeric or alphanumeric coding system of the individual concepts set for civil estimation services, costing, and control purposes. Mainly, the experts call them the cost codes. More interestingly, we can conceive it as a kind of financial map of the cost elements of the works. 

Overall, using top-notch estimation processes offered by civil estimating services companies help control costs. Moreover, it helps keep the budget in control. Here, some may claim that internal costing and estimation can be more beneficial and cost-effective. However, we recommend partnering with estimating firms. The reason is that they can make a budget to save more money and time for a construction firm.

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