Guidelines for Improving Cost Management in Fast, Complex and Uncertain Construction Projects

Andrea P. Kern1 & Carlos T. Formoso2

1M.Sc., Assistant Professor at UNISINOS, Ph.D. Candidate at the Federal University of Rio Grande do Sui (UFRGS), Building Innovation Research Unit (NORIE), apkern@euler.unisinos.br, Av. Osvaldo Aranha 99, 3° andar, CEP 90035-190. Porto Alegre-RS
2Ph.D., Associate Professor, Federal University of Rio Grande do Sui (UFRGS), Building Innovation Research Unit (NORIE), formoso@vmtex.ufrgs.br, Av. Osvaldo Aranha 99, 3° andar, CEP 90035-190. Porto Alegre-RS

Abstract

Existing traditional cost management systems are mostly based on the same principles that have been conceived for cost accounting in the mid Twenties. Cost information is usually produced too late, and it is too aggregated and too distorted to be relevant for production management. Consequently, traditional cost accounting systems often fail to support decision making in product development and production control. Particularly in the construction industry, the inadequacy of cost accounting systems has resulted in the dissociation between cost management and other managerial processes, contributing to increase the fragmentation of construction management. In general, construction cost control consists of simply monitoring actual performance against cost estimates and identifying variances. This paper discusses traditional cost management practices in the construction industry and proposes some guidelines for improving cost control in fast, complex and uncertain construction projects. Such guidelines involve the integrated application of operational cost estimating, target costing and S-curves.

Keywords

Cost management, cost information, production control.

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Reference

Kern, A.P. & Formoso, C.T. 2004, 'Guidelines for Improving Cost Management in Fast, Complex and Uncertain Construction Projects' In:, Bertelsen, S. & Formoso, C.T., 12th Annual Conference of the International Group for Lean Construction. Helsingør, Denmark, 3-5 Aug 2004.

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