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Cost Estimation Versus Cost Controlling

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Izam ZakariaMember for 20 years 4 months
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Hi,


I do need your favor and point of view because this great experience will bring me another one step ahead.


Just wanna to seek your advice regarding cost control versus cost estimation.

My understanding as following below:- (please correct if I’m wrong)


Cost estimation done during bidding phase which we need to analyze such like:-


E – Especially man-hours cost, how many man-hours are required for project. During this phase we should get rate for every single post and will multiply with period working duration.


P – I guess this is most important part cause involve with big percentage such likes turbine gas, compressor. Any good or bad result will impact to EPCIC project. On this we should get the price of equipments and compromise with vendor (common practice the lowest bidder will win the competition.



C – This the most difficult things since we’re going to get MTO before we keep calculating the cost of Structural, Piping, Mechanical Skid or Support, HVAC, Architectural and so on. This including cranes and the rest usage.


I – On this part they must concern on Integration and sail away milestone dates since we’re going to rent the barge and heavy cranes for the execution. The renting cost by daily rates and once it slip away then it will troublesome to the project budget.

We called it contingency plan that we should alert highly and put some plan "b" there.


C – I’ve no idea on commissioning part. TBA please…..


Once all of this done, then we can continue with cost monitoring (the estimation curve as early progress plan curve)

Thanks in advance for your future helping hand

U also can reply via my email aizam.zakaria@sbmoffshore.com
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4 replies

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  1. 0
    Samer Zawaydeh ·
    #1
    Dear Izam,

    Cost Estimation is done prior to the start of the project.
    Cost Control is done once the Letter of Commencement is issued to the Contractor.

    Usually you will have a budget (excel or other) stating the amount of money dedicated for every activity required to complete the work. You can start with general headlines like; Design, Engineering, Procurement, Fabrication, Excavation, Construction, Erection works, Testing and Comissioning.

    Testing and commissioning cost depends on the equipment that you are testing. This can be a large Turbine or a small HVAC equipment. And it can be done by specialist with fixed contracts.

    Hope this information was helpful.

    Best,

    Samer
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  2. 0
    Izam Zakaria ·
    #2
    Is it fair If I’m declare that Cost actual will equivalent with progress actual? It won’t right? Is all about how we run capex and opex? So the question how we do to manage it? Is it we will come out two reports of S-Curves and monitoring report?
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  3. 0
    Samer Zawaydeh ·
    #3
    Dear Izam,

    You are correct, you always have two reports. One from site and the other is from your Financial Department controling the spenditure on the project.

    Best Regards,

    Samer
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  4. 0
    R. Catalan ·
    #4
    Izam/Samer,

    If I may add to the discussion and in addition to what Samer has said;

    S-curve can be develop by showing:

    For Accounts section:
    Cash In/Out (Payment In from PCs / Payment out to suppliers, subcons, etc.), and could be track by comparing planned vs. actual

    For Cost Control:
    S-curve that will show
    Planned Value (PV or BCWS)
    Earned Value (EV or BCWP)
    Actual Value (AV or ACWP)

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