Using Location-Based Techniques for Cost Control

Olli Seppänen1 & Russell Kenley2

1PhD Student, Department of Civil and Environmental Engineering, Helsinki University of Technology, Technology Manager Dynamic System Solutions Ltd., Pohjoinen Rautatiekatu 29B, FIN-00100 Helsinki, Finland, E-Mail olli.seppanen@dss.fi, website www.dss.fi
2Professor of Construction. School of Built Environment, Unitec New Zealand, Private Bag 92025, Auckland, New Zealand, Phone +64 9815 4321 (7374), FAX +64 9815, rkenley@unitec.ac.nz

Abstract

Performance measurement is an important component of lean-based management systems, however cost management systems or analysis have largely been applied at a high level and have not attempted to measure or model the production cost impacts of disruption on a lean project. While it is important to develop systems for practical site management, it is equally important to ensure that such systems can accommodate mainstream performance measurement systems. In this paper, the performance system known as Earned Value Analysis is adapted to a location-based method for planning and controlling work known as flowline or line-of-balance. The resultant method for forecasting cash flow, modeling the costs of interference and controlling costs, is described. The method is compatible with location-based scheduling methods. It uses location-based quantities and their unit prices as starting data. Because the location-based quantities are also used in developing the flowline schedule, the start and finish date for each quantity is also known. This information can be used to calculate cash flow more accurately than previously. In the preplanning phase, quantity estimates and estimated prices are used to create a location-based cost estimate. During the production phase, more accurate quantity data is available and prices from contracts can be used directly to arrive at a first cost forecast, before commencing the work. When the work is being done, cost controlling can be done by surveying the actual quantities of each location. The cost forecast is then updated based on these actual quantities and using the contract prices. The location-based schedule forecast can be used to forecast overhead costs and to forecast costs of interference. The paper contributes to our understanding of monitoring and control in a flowline-based management system in a lean-construction methodology. It also demonstrates that effective locationbased control of the payment system allows better management of sub-contractors during production.

Keywords

Cash flow, Earned value, Cost forecasting, Cost control, Flowline, Location-based

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Reference

Seppänen, O. & Kenley, R. 2005, 'Using Location-Based Techniques for Cost Control' In:, 13th Annual Conference of the International Group for Lean Construction. Sydney, Australia, 19-21 Jul 2005. pp 253-261

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