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The project budget is continually
monitored during the construction,
and financial information is fed back
progressively to the stakeholders.
The best and most accurate labour ‘cost
to complete’ is still an estimate, no matter
how well it is done.
By definition, an estimate is a prediction
that includes objective and subjective
elements. As a result, risk and uncertainty are
central to estimating and forecasting, and
usually there will be some variance between
actual and estimated labour costs.
SETTING BUDGETS
For cost control on a project, it is good
practice for the estimator to provide an
estimated cash flow, which becomes a
baseline reference for subsequent project
monitoring and control.
The final or detailed cost estimate
provides a baseline for the assessment of
financial performance during the project. To
the extent that costs fall within the detailed
cost estimate, the project is thought to be
under financial control.
Overruns in particular cost categories
signal the possibility of problems and give
an indication of exactly what problems are
being encountered.
In addition to cost amounts, information
on material quantities and labour inputs in
each sector of the project is also typically
retained in the project budget. With this
information, actual materials usage and
labour employed can be compared with the
original estimate.
As a result, cost overruns or savings
on particular items will be highlighted as
being due to changes in material prices,
labour productivity or the amount of
material consumed.
In summary, whether it be a large
company tendering on multi-million dollar
projects – with a bid team of financial,
legal, marketing and administration
managers – or a sole trader focusing on
minor works, success depends on the
estimator providing the facts based on the
above criteria.
Industry consultant Brian Seymour, MBE,
is the author of
Electrical Estimator’s Labour
Unit Manual
and
Starting Out
. He conducts
regular industry training programs
throughout Australia on behalf of the
electrical and air conditioning industries.
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