Obviously, there is no need to explain in great detail how inconvenient, and, in some cases, how detrimental it can be if we under- or overestimate the budget of an investment. In case of an underestimated budget, we are forced to create additional funding while the project is underway, or perhaps to reduce the originally planned technical content, which could mean additional costs, and a delay, or even obstacle that prevents project completion. And if we overestimate the budget of the investment, then we reserve funding sources for the project needlessly, or, in some cases, apply for a bigger loan unnecessarily.
The use of incompletely gathered, or, in a lot of cases, obsolete cost indicators could cause a substential difference between the estimated budget and the realization cost of the project. Nowadays this is aggravated by hectic market conditions, and often by the lack of real competition.All of these factors could justify the involvement of an expert in cost management from the concept phase to project completion.
The steps of cost management
Cost management is an activity that accompanies the investment process in relation to the costs, in accordance with the phases of the project. Its main steps are the following:
- preliminary cost estimation, cost planning – in the preparatory phase of the project
- value engineering, reviewing contractor’s bids – during of tendering and contracting
- cost control, cost evaluation of additional and deleted works – in the phase of project implementation
- recalculation – in the phase of the final evaluation.
In our upcoming blog posts we will explore these topics in details.