Determining Expected Cost in the Target Costing Process

Ari Pennanen1 & Glenn Ballard2

1Adjunct Professor (Tampere University of Technology). Partner of Haahtela Project Management Group, Finland. ari.pennanen@haahtela.fi. www.haahtela.fi
2Associate Adjunct Professor and Director, Project Production Systems Laboratory, University of California, Berkeley; Director, Lean Construction Institute. ballard@ce.berkeley.edu

Abstract

Previous IGLC papers have presented a target costing methodology that begins with reconciliation of the client’s allowable cost and the expected cost of the product they want to accomplish their purposes. This methodology has been derived from publications describing how target costing is used in product development. This paper evaluates the extent to which target costing applied to construction matches up with the target costing methodology from product development and also presents a building information model to define expected cost. The information model uses customer requirements for the spaces and site conditions as initial information and develops the life cycle costs of the spaces. It models building components in relation to customer requirements and prices them with market data, consistent with product development practice.

Keywords

cost modeling, expected cost, knowledge management, project management, target costing

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Reference

Pennanen, A. & Ballard, G. 2008, 'Determining Expected Cost in the Target Costing Process' In:, Tzortzopoulos, P. & Kagioglou, M., 16th Annual Conference of the International Group for Lean Construction. Manchester, UK, 16-18 Jul 2008. pp 589-600

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