Cost control and cost control cycle

Cost control

Cost control is the process of keeping the actual cost of the project within the approved budget by recording costs, comparing them with the budget, finding the variances and taking corrective action.

Cost control cycle

Budget baseline -> Record actual cost -> Compare with budget
       ^                                      |
       |                                      v
Update budget <- Corrective action <- Analyse variance
                                      and forecast cost

1. Prepare the budget baseline from the WBS and cost codes.
2. Record the actual costs (labour, material, equipment) from bills and site records.
3. Compare actual with budgeted (earned) cost and find the variance.
4. Analyse the causes and forecast the final cost (EAC).
5. Take corrective action; revise the budget through approved changes; repeat.

Methods of cost control

• Cost budgeting and cost codes by WBS, with a responsible person for each item.
• Variance analysis and exception reports (actual against budget).
• Earned value analysis: CV, CPI and EAC.
• S-curve and cash flow control of planned against actual expenditure.
• Control of changes and variation orders; claims management.
• Procurement and material control: bulk buying, store control, reducing wastage.
• Productivity improvement, better equipment use, and work study.
• Time-cost trade-off (crashing only when the benefit is greater) and value engineering.