Cost management

One of the most important project activities is the cost management. Cost management creates price calculations/estimates/budgets, performs value engineering during the design stage and undertakes procurement/tenders in the pre-construction phase. During the construction stage the key activities of the CM are cost reporting, variation management and the cash flow management. The role of the cost manager is closely aligned with the work of the project manager and together they form a very strong team to meet the project targets.

Why cost management?

The main contribution of cost management is not only total cost saving which can be up to 10%, but also complex management of all related tasks which can help the client to manage the project. At the beginning of the project, the cost estimate is produced to allow the client to define the economic effectiveness of the project. Following this, modifications can be made to the design, for the purpose of optimization (value engineering). The client can change standard of materials and technologies and the cost manager recommends alternatives so that the client can realise the anticipated costs In terms of a contractor´s selection procedure – the tender, the cost manager together with the project manager chooses the project execution model (agreeing the forecast price or the maximum guaranteed price, proceeding with sub-contract tenders, confirming contingencies, etc.), receives and analyses the received bids and ensures that the selected/final offers provide value for money. With regards to the complexity of the construction work, and any additional requirements that the Client may have once work commences, the cost manager manages a variation process during the works execution phase. Variation forms have to be administered in accordance with procedures defined within the sub-contractor works contract supplier (e.g. use of the contract unit prices etc.).

Examples of particular activities of cost manager

  • Cost planning & cost estimate
  • Positive cost management of the project design proposal
  • Value engineering
  • Procurement – price crosscheck with potential contractors
  • Procurement – reporting incl. Final Recommendation
  • Procurement
  • Project financial model set up
  • Contract administration (financial part)
  • Cost reporting and cash flow management
  • Final project statement
  • Management of third party payments
  • Variation management – check and comments to the documents issued
  • Variation management – potential project price discounts