Optimal Techniques for Cost Reduction and Control in Construction Sites

Sherif Mohamed Hafez; Remon F. Aziz; Hala Mostafa Mohamed Elzebak

doi:doi:10.11648/j.jhrm.20150303.11

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Optimal Techniques for Cost Reduction and Control in Construction Sites

Sherif Mohamed Hafez, Remon F. Aziz, Hala Mostafa Mohamed Elzebak

Published in Journal of Human Resource Management (Volume 3, Issue 3)

Received: 4 May 2015 Accepted: 15 May 2015 Published: 28 May 2015

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Abstract

Despite the availability of various control techniques and project control software many construction projects still do not achieve their cost objectives. Research in this area so far has mainly been devoted to identifying causes of cost overruns. The earned value is a leading technique in monitoring and analyzing project performance and project progress. Although, it allows exact measurement of project progress, and can uncover any time and cost deviations from the plan, its capability in reporting accepted level of deviation is not well studied. There is limited research geared at studying factors inhibiting the ability of contractors to effectively control their projects. To fill this gap, a survey was conducted on 22 construction project organisations. It was noted that most project managers and contractors in Egypt find difficulty in controlling project costs due to problems which include Change order, Changes in the design, Errors in the design, current economic situation deterioration, Delay project and Rising prices of materials. The study was able to establish that the problem was actually not the techniques to use but rather the lack of knowledge of the techniques, the poor management of the cost control methodology, and the general poor site organisation and inadequate supervision. In addition, the main object of this study is to demonstrate the use of Activity Based Costing (ABC) approach as an alternative cost accounting system to the Traditional Cost Accounting System to determine the real and accurate cost of the projects. Activity Based Costing (ABC) prevents cost distortions which traditional cost accounting can not provide, this study presents an application of ABC and an example of applying ABC to construction projects. The conclusions of the study show that the application of ABC leads to better knowledge in tender pricing, more ability to estimate the cost and updating costs data. It also saves the suitable information which are necessary to enter the bidders and to compete to win them. This system helps in supervising and controlling the activities which the company do, and to make rational and correct decisions. The results of this study recommended that there is a need to change the traditional awarding system for contracts from the first lowest bidder to the most accurate one.

Published in	Journal of Human Resource Management (Volume 3, Issue 3)
DOI	10.11648/j.jhrm.20150303.11
Page(s)	17-26
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Construction Management (CM), Earned Value Management (EVM), Target Cost (T.C), Value Engineering (V.E), Activity Based Costing (A.B.C)

References

[1]	Adrian, J. (1987). Construction Productivity Improvement. Elsevier Science Publishing, Amsterdam, Netherlands.
[2]	Aref, A. (2012). Construction Blues. Business Today Egypt .
[3]	Australia, E. (2012). Recommended Practices for the Application of Activity based costing Methods to Building New Australian LNG Capacity.
[4]	Baccarini, D. (1996). The concept of project complexity-a review. International Journal of Project Management Vol. 14, No. 4, pp. 201-204
[5]	Ballard, H. G. (2000). The Last Planner System of Production Control. Faculty of Engineering, The University of Birmingham.
[6]	Mostafa E. Shehata, K. M.-G. (2011). Towards improving construction labor productivity and projects’ performance. Alexandria Engineering Journal 50, 321–330 .
[7]	Olawale, Y. A., & Sun, M. a. (2010). Cost and Time Control of Construction Projects:Inhibiting Factors and Mitigating Measures in Practice. Construction Management and Economics, 28 (5), 509 – 526.
[8]	Peter Andrejev, C. C. (2012). Improving Complex Facility Construction Projects by Using an “Owner’s Paladin”.
[9]	PMI. (2008). A Guide to the Project Management Body of Knowledge (PMBOK® Guide) - Fourth Edition. PMI.
[10]	Refaat H. Abdel-Razek, H. A.-H. (2007). Labor productivity: Benchmarking and variability in Egyptian projects. International Journal of Project Management 25,189–197 .
[11]	Reginato, J. M., & Graham, S. T. (2011). Implementing the Last PlannerTM System in Large Public Lump Sum Bidding for Building Projects. 47th ASC Annual International Conference Proceedings.

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APA Style

Sherif Mohamed Hafez, Remon F. Aziz, Hala Mostafa Mohamed Elzebak. (2015). Optimal Techniques for Cost Reduction and Control in Construction Sites. Journal of Human Resource Management, 3(3), 17-26. https://doi.org/10.11648/j.jhrm.20150303.11

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ACS Style

Sherif Mohamed Hafez; Remon F. Aziz; Hala Mostafa Mohamed Elzebak. Optimal Techniques for Cost Reduction and Control in Construction Sites. J. Hum. Resour. Manag. 2015, 3(3), 17-26. doi: 10.11648/j.jhrm.20150303.11

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AMA Style

Sherif Mohamed Hafez, Remon F. Aziz, Hala Mostafa Mohamed Elzebak. Optimal Techniques for Cost Reduction and Control in Construction Sites. J Hum Resour Manag. 2015;3(3):17-26. doi: 10.11648/j.jhrm.20150303.11

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@article{10.11648/j.jhrm.20150303.11,
  author = {Sherif Mohamed Hafez and Remon F. Aziz and Hala Mostafa Mohamed Elzebak},
  title = {Optimal Techniques for Cost Reduction and Control in Construction Sites},
  journal = {Journal of Human Resource Management},
  volume = {3},
  number = {3},
  pages = {17-26},
  doi = {10.11648/j.jhrm.20150303.11},
  url = {https://doi.org/10.11648/j.jhrm.20150303.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jhrm.20150303.11},
  abstract = {Despite the availability of various control techniques and project control software many construction projects still do not achieve their cost objectives. Research in this area so far has mainly been devoted to identifying causes of cost overruns. The earned value is a leading technique in monitoring and analyzing project performance and project progress. Although, it allows exact measurement of project progress, and can uncover any time and cost deviations from the plan, its capability in reporting accepted level of deviation is not well studied. There is limited research geared at studying factors inhibiting the ability of contractors to effectively control their projects. To fill this gap, a survey was conducted on 22 construction project organisations. It was noted that most project managers and contractors in Egypt find difficulty in controlling project costs due to problems which include Change order, Changes in the design, Errors in the design, current economic situation deterioration, Delay project and Rising prices of materials. The study was able to establish that the problem was actually not the techniques to use but rather the lack of knowledge of the techniques, the poor management of the cost control methodology, and the general poor site organisation and inadequate supervision. In addition, the main object of this study is to demonstrate the use of Activity Based Costing (ABC) approach as an alternative cost accounting system to the Traditional Cost Accounting System to determine the real and accurate cost of the projects. Activity Based Costing (ABC) prevents cost distortions which traditional cost accounting can not provide, this study presents an application of ABC and an example of applying ABC to construction projects. The conclusions of the study show that the application of ABC leads to better knowledge in tender pricing, more ability to estimate the cost and updating costs data. It also saves the suitable information which are necessary to enter the bidders and to compete to win them. This system helps in supervising and controlling the activities which the company do, and to make rational and correct decisions. The results of this study recommended that there is a need to change the traditional awarding system for contracts from the first lowest bidder to the most accurate one.},
 year = {2015}
}

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TY - JOUR
T1 - Optimal Techniques for Cost Reduction and Control in Construction Sites
AU - Sherif Mohamed Hafez
AU - Remon F. Aziz
AU - Hala Mostafa Mohamed Elzebak
Y1 - 2015/05/28
PY - 2015
N1 - https://doi.org/10.11648/j.jhrm.20150303.11
DO - 10.11648/j.jhrm.20150303.11
T2 - Journal of Human Resource Management
JF - Journal of Human Resource Management
JO - Journal of Human Resource Management
SP - 17
EP - 26
PB - Science Publishing Group
SN - 2331-0715
UR - https://doi.org/10.11648/j.jhrm.20150303.11
AB - Despite the availability of various control techniques and project control software many construction projects still do not achieve their cost objectives. Research in this area so far has mainly been devoted to identifying causes of cost overruns. The earned value is a leading technique in monitoring and analyzing project performance and project progress. Although, it allows exact measurement of project progress, and can uncover any time and cost deviations from the plan, its capability in reporting accepted level of deviation is not well studied. There is limited research geared at studying factors inhibiting the ability of contractors to effectively control their projects. To fill this gap, a survey was conducted on 22 construction project organisations. It was noted that most project managers and contractors in Egypt find difficulty in controlling project costs due to problems which include Change order, Changes in the design, Errors in the design, current economic situation deterioration, Delay project and Rising prices of materials. The study was able to establish that the problem was actually not the techniques to use but rather the lack of knowledge of the techniques, the poor management of the cost control methodology, and the general poor site organisation and inadequate supervision. In addition, the main object of this study is to demonstrate the use of Activity Based Costing (ABC) approach as an alternative cost accounting system to the Traditional Cost Accounting System to determine the real and accurate cost of the projects. Activity Based Costing (ABC) prevents cost distortions which traditional cost accounting can not provide, this study presents an application of ABC and an example of applying ABC to construction projects. The conclusions of the study show that the application of ABC leads to better knowledge in tender pricing, more ability to estimate the cost and updating costs data. It also saves the suitable information which are necessary to enter the bidders and to compete to win them. This system helps in supervising and controlling the activities which the company do, and to make rational and correct decisions. The results of this study recommended that there is a need to change the traditional awarding system for contracts from the first lowest bidder to the most accurate one.
VL - 3
IS - 3
ER -

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Author Information

Sherif Mohamed Hafez

Construction Engineering and Management, Structural Engineering Department, Faculty of Engineering, Alexandria University, Alexandria, Egypt
Remon F. Aziz

Structural Engineering Department, Faculty of Engineering, Alexandria University, Alexandria, Egypt
Hala Mostafa Mohamed Elzebak

M. Eng. Candidate Department of Civil Engineering, Alexandria University, Alexandria, Egypt

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APA Style

Sherif Mohamed Hafez, Remon F. Aziz, Hala Mostafa Mohamed Elzebak. (2015). Optimal Techniques for Cost Reduction and Control in Construction Sites. Journal of Human Resource Management, 3(3), 17-26. https://doi.org/10.11648/j.jhrm.20150303.11

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ACS Style

Sherif Mohamed Hafez; Remon F. Aziz; Hala Mostafa Mohamed Elzebak. Optimal Techniques for Cost Reduction and Control in Construction Sites. J. Hum. Resour. Manag. 2015, 3(3), 17-26. doi: 10.11648/j.jhrm.20150303.11

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AMA Style

Sherif Mohamed Hafez, Remon F. Aziz, Hala Mostafa Mohamed Elzebak. Optimal Techniques for Cost Reduction and Control in Construction Sites. J Hum Resour Manag. 2015;3(3):17-26. doi: 10.11648/j.jhrm.20150303.11

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@article{10.11648/j.jhrm.20150303.11,
  author = {Sherif Mohamed Hafez and Remon F. Aziz and Hala Mostafa Mohamed Elzebak},
  title = {Optimal Techniques for Cost Reduction and Control in Construction Sites},
  journal = {Journal of Human Resource Management},
  volume = {3},
  number = {3},
  pages = {17-26},
  doi = {10.11648/j.jhrm.20150303.11},
  url = {https://doi.org/10.11648/j.jhrm.20150303.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jhrm.20150303.11},
  abstract = {Despite the availability of various control techniques and project control software many construction projects still do not achieve their cost objectives. Research in this area so far has mainly been devoted to identifying causes of cost overruns. The earned value is a leading technique in monitoring and analyzing project performance and project progress. Although, it allows exact measurement of project progress, and can uncover any time and cost deviations from the plan, its capability in reporting accepted level of deviation is not well studied. There is limited research geared at studying factors inhibiting the ability of contractors to effectively control their projects. To fill this gap, a survey was conducted on 22 construction project organisations. It was noted that most project managers and contractors in Egypt find difficulty in controlling project costs due to problems which include Change order, Changes in the design, Errors in the design, current economic situation deterioration, Delay project and Rising prices of materials. The study was able to establish that the problem was actually not the techniques to use but rather the lack of knowledge of the techniques, the poor management of the cost control methodology, and the general poor site organisation and inadequate supervision. In addition, the main object of this study is to demonstrate the use of Activity Based Costing (ABC) approach as an alternative cost accounting system to the Traditional Cost Accounting System to determine the real and accurate cost of the projects. Activity Based Costing (ABC) prevents cost distortions which traditional cost accounting can not provide, this study presents an application of ABC and an example of applying ABC to construction projects. The conclusions of the study show that the application of ABC leads to better knowledge in tender pricing, more ability to estimate the cost and updating costs data. It also saves the suitable information which are necessary to enter the bidders and to compete to win them. This system helps in supervising and controlling the activities which the company do, and to make rational and correct decisions. The results of this study recommended that there is a need to change the traditional awarding system for contracts from the first lowest bidder to the most accurate one.},
 year = {2015}
}

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