Other Factors That Influence Project Cost

Front 1

The project contract

Back 1

Influences on how cost are calculated and controlled depends on management of

1 nature of contract

2 cash flow

3 contractors profits

4 Retention money

5 Final closeout payments

6 penalty clauses

Tight time frames and penalty clauses will place pressure on the schedule and may be cost effective to focus on additional resources, the project brief and scope should be done properly to avoid scope creep and cost creep, thorough scope deliverable will make it easier to determine what has to be realised and to identify variations, negotiators has to make sure that contractual matters don't push up cost, has to make provision for closeout activities and has not been completed until closeout finalised. Closeout phase consumes resources which has to be estimated and included in the budget

Front 2

Cost engineering

Back 2

Has both financial and technical skills and are vital to monitor from both a cost and technical point of view and is skilled in being able to review

1 deliverables

2 requirements

3 Specifications

4 Controls

6 Measurement methods for inputs and outputs for acceptability

Decisions on final payments are made on recommendations of cost and quality engineers . Analyse the outcome and solve cost and technical problems that may arise and very valuable member of cost control team

Front 3

Risk and contingencies

Back 3

Contingency an allowance the cost estimator makes in order to have back up for un foreseen costs and contingency reserves are required and need to be budgeted for to offset risk by making large contingency allowances to correct things without a budget over run, cost contingencies are negotiated as when when they are needed and not automatically available

Front 4

Availability of funds and cash flow

Back 4

Funds are made available as when they are needed, when funds are made available from revenues some of these funds still have to be earned as project progresses, cost estimating process needs to estimate the resources and what rate they are required so to avoid cash flow problems if used up to fast, problem with timely payments the supplier will build in stringent payment times and penalties wick push up costs, if project running behind schedule and money being spent to slow funds not being used effectively

Front 5

Escalation

Back 5

An increase in cost that can be foreseen and needs to be taken into account when budgeting, projects are time based and estimate of costs can't take all variables into account, projects with long duration are susceptible to escalation and can occur as a result of

1 cost of labour salary adjustment

2 price of materials increasing

3 currency exchange rate fluctuating

4 lack of clarity forming scope

5 unexpected problems and delays

6 labour strikes

7 delays with material or equipment

8 inflation of material or labour

9 high demand for projecting capacity during periods of economic upswing and shortages of resources