Cost management in construction: the small-firm version of the discipline
- Work order total
- $863.16
- Labour
- $510
- Parts, marked up
- $288
Every figure on this page is computed from the inputs entered, by the method stated below it. Jobcardo publishes no tax rate, no wage figure and no trade standard: the rate, the markup and the tax on the parts line are yours, and the defaults are a worked example to replace with your own figures.
Cost management in construction is usually written about as a discipline for large contractors with quantity surveyors, cost codes and earned value reporting. The small firm version is the same idea with fewer people: know what each element was priced at, know what it has cost so far, and know the gap before the job ends rather than after. Everything else in the subject, from cost codes to variance reporting, exists to make that comparison possible at a scale where no one person can hold it in their head.
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Cost management of construction projects starts with elements you can measure
Cost management of construction projects starts at the estimate, not at the first invoice. If the quote is one number, nothing can ever be compared to it. Priced by element, groundworks, frame, envelope, mechanical, finishes, each element becomes a line the costs can be posted against.
Cost management in construction projects: post the cost to the element, every time
Cost management in construction projects lives or dies on whether the invoice reaches the right line. A supplier bill split across two elements needs splitting on the day it arrives. A week of unallocated costs is a week where the variance you are reading is not the variance you have.
Read the variance while it can still be acted on
The purpose of the exercise is a decision: order differently, change the sequence, raise a change order, or accept the loss and price it into the next job. A cost report read at practical completion is history. The cost management construction firms actually keep up with is the version reviewed at the same time each week, on one page.
Cost management in construction: common questions
Is cost management the same as budgeting? No. A budget is a plan made once. Cost management is the ongoing comparison of that plan with what is happening, and the decisions taken as a result. A firm with a good budget and no cost management finds out how it did at the end of the job.
How many cost elements should a small job use? Enough to locate a problem and few enough to maintain, which for most residential and light commercial work is between six and twelve. One line per subcontract package plus materials and labor for the work you self-perform is a reliable starting structure.
What is the most common mistake? Comparing costs to the contract value rather than to the priced elements. The contract value tells you whether the whole job is profitable when it is over. The element comparison tells you which part is going wrong while you can still do something about it.
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