Budget

Level 1 Construction Fundamentals Study Guide BUDGETING, COSTS, AND COST CONTROL The Estimate and the Project Budget The estimate is a static document at a specific point in time (Bid time). The estimate reflects what the project was bid for and the quantities and unit prices used. The project budget continuously evolves until project completion. The project budget reflects the actual scope atthe site and the actual quantities from construction issued drawings and a standard productivity rate. The project budget will always include change orders and extra work orders in terms of changed quantities and costs. These terms are important because the productivity and labor cost reports should reflect the project budget. Therefore, the project budget should reflect the actual quantities placedand a standard unit rate for each work activity. This is considered the project budget. The project budget should be compared to the estimate but this comparison should only be made in the Project Cost Summary Report. This report compares the actual and projected quantities, workhours and costs for the project to the estimated costs. This reports the current status and the latest forecast ofprofit or loss by cost codes. The Earned Workhour An Earned Workhour is defined as the budgeted workhours earned for the quantity placed using the budgeted standard. The earned workhours for a work activity are calculated by multiplying the in place quantities (#units) by the budgeted standard workhours per unit rate (whr per unit).

Determining the Budgeted Quantities The budgeted quantities shouldreflect the actual project being built, therefore, these quantities should be calculated by someone in the office capable of determining the quantities for each work item from the construction issued drawings. These budgeted quantity takeoffs should be tabulated in enough detail for each work item that the field can easily identify the quantity. The quantity tabulation form should identify thetake off by drawing numbers, revision numbers, area numbers, equipment item numbers, system numbers and elevation. These quantity tabulation sheets are sent to the field and they are used to show work completed. There are three basic Cost Control Reports. They are the Earned Workhour Report, the Labor Cost Report and the Project Cost Summary Report. The purpose of the reports is to compare actualexpenditures to the budgeted costs by the cost code established by the company and organized into a Work Breakdown Structure. 355

Level 1 Construction Fundamentals Study Guide The Earned Workhour Report This report is used by the superintendent to track productivity on each work activity. This report compares the actual workhour per unit rate to the budgeted workhour per unit rate on a daily orweekly basis for each activity. A budgeted Whr per unit rate is established for each work item (cost code) using the contractor’s records for crew sizes and daily outputs. This budgeted Whr per unit rate is standardized throughout the company so that all superintendents are compared to the same workhour per unit rate for each work item. This budgeted standard unit rate may or may not be the rateused in the estimate, but for productivity purposes, all superintendents must be compared to the same rate. The budgeted standard unit rate is established by determining a base year, the standard crew size and daily output for each activity. The budgeted standard will never change, but the standard can be adjusted for each job due to working conditions, location and trade agreements. The EarnedWorkhour Report is used to compare the actual workhours expended to the budgeted workhours and project the final workhours for each activity. The following discussion describes each column of the Earned Workhour Report and the procedure used to arrive at the answer. 1. 2. Cost Code. The Cost Code in the Example is 035300. Activity Description. The cost code and description are from the contractor’s...