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GEM Engserv Pvt. Ltd is an ISO 9001:2015 certified organization, certified by TUV India in accreditation with National Accreditation Board for Certification Bodies (NABCB).
GEM Engserv Pvt. Ltd is an ISO 9001:2015 certified organization, certified by TUV India in accreditation with National Accreditation Board for Certification Bodies (NABCB).
Project Cost is one of the most crucial performance indicators for any project. While this varies by sector, every project team is most concerned about total cost at project closure. This is the reason Cost Consulting has grown in significance over the past few years. This function was previously held very closely (in-house) by the project owners, considering that this involves proprietary information (both input and output) and is to be protected at all costs. However, project owners now see more benefit in engaging consultants offering specialized Cost Management expertise rather than relying on in-house capability.
That said, the expectations of owners across the industry are not uniform. This is evident from their questions while evaluating Cost Consultants for an assignment. Most focus largely on capabilities related to Quantity Surveying because it is believed that quantities almost entirely drive the final cost at the end of the project. Here, we examine various capabilities which a Cost Management consultant must possess to perform well. The assumption here is that accuracy in quantification is of course a mandatory skill and hence we do not have a specific note regarding this capability. We are addressing the other additional conditions that ensure a successful outcome. This is something that we as an organization have also learnt over the past few years through good and bad experiences.
At the early (concept) stages of the project, most details regarding the project are fuzzy. It is only during the schematic design and later the detailed design stage that several micro details are finalised by design consultants with the owners. In the absence of this information during the concept stage, quantification of material consumption is not possible. However, adept consultants “thrive under uncertainty”. The only way to arrive at the landing cost of the project is via benchmarking the concept against completed projects. This can be achieved through a comparative study within the network.
Several factors need to be considered, even while preparing these benchmarks – such as geographical location, project configuration, segment of development, grade of materials, contracting strategy, sourcing plan and others. Such a “Cost Plan” does not include a breakdown yet and is a number that is arrived at through a process of debate and alignment with all stakeholders. The project cost at this stage is more aspirational than a function of the design. In fact at this stage, cost should drive design decisions and not the other way around.
Ideal outcome: Broad cost plan at concept level, alignment on list of assumptions
Key skills: Strong network, Handling uncertainty
The adage “Time is Money” is liberally thrown around by project owners but it is not always given the value that it deserves. Cost Plans are prepared in isolation without considering the timeframe allocated to the project. Owners mistakenly assume that the Cost Plan remains constant irrespective of the time taken to finish the project, whereas in reality it is heavily dependent. In order to address this, it is essential to prepare a master schedule based on the target completion date. This should be one of the early stage activities for any project and sufficient time needs to be invested in this. Scheduling helps identify if the target timeframe is feasible and whether any capital expenditure may be required to meet the target. This has a direct implication on the total project cost.
Ideal outcome: Cost plan linked to schedule (month-wise cashflow)
Key skills: Strong scheduling ability (MS Project or Primavera P6)
“The devil is in the detail” is what project owners swear by. The expectation is that the Cost Consultant should be able to look at each constituent of the Cost Plan and offer what are known as Value Engineering ideas. While this term is often misunderstood, the general understanding is that as Cost Consultants, we must be able to bring alternatives to the discussion board. This can be in terms of optimization of structural design, alternative materials at lower cost, some rare cases of alternative materials offering superior functionality, alternate methods or technology to reduce total project timeline, and in very rare cases a better process which leads to cost reduction in the long term.
Ideal outcome: Cost optimization at every stage
Key skills: Pareto focus (20% items that influence 80% cost), understanding of alternatives and their applicability
“The best laid plans go awry” if potential risks are not anticipated and addressed. Adherence to the Cost Plan depends largely upon the contractors and how well they are tied to the outcome of the project. Even if all contract awards collectively fall within the budget, events such as extra items, variations, claims, time overrun and others can lead to escalation in cost towards the end of the project. Contractual conditions need to take into account various possible scenarios and allow for enforcement in favour of the project owner. Contract administration involves a series of techno commercial decisions that can make or break a project from time and cost perspective. Ability to provide a balanced and fair view to the owner on such issues is a valuable skill. This often comes from experience of having handled various situations, good as well as bad.
Ideal outcome: Unambiguous and balanced contract conditions
Key skills: Strong contracts management expertise, experience of contract closure
As mentioned previously, we have not mentioned or elaborated on quantification capabilities as a key skill required for this function. It is assumed to be basic hygiene without which Cost Consulting as a function cannot reach its desired goal. However, accurate quantification isn’t a sufficient condition and must be paired with several of these other capabilities which come together to bring control over project cost.
GEM Engserv Private Ltd. , A-103, The Great Eastern Chamber, Plot No-28, Sector-11, CBD Belapur, Navi Mumbai 400614