GROUP 8- TOPIC 3 Crasco De Guzman Miranda Rañola Ybay

TOTAL PROJECT COST

INTENDED LEARNING
OUTCOMES

To identify what to be included in

the computation of the total
project costs
Course OUTLINE
TOTAL PROJECT COST;

INTRODUCTION

PROFESSIONAL ENGINEERING COST

CONSTRUCTION COST

LEGAL, LAND, ADMINISTRATION,

STUFFING AND FINANCIAL COST

CONTINGENCY ALLOWANCE
 TOTAL PROJECT COST
REFERS TO THE TOTAL FINANCIAL EXPENDITURE
REQUIRED TO COMPLETE A PROJECT. IT ENCOMPASSES
ALL THE EXPENSES ASSOCIATED WITH THE INITIATION,
PLANNING, EXECUTION, AND CLOSURE OF A PROJECT.
THESE COSTS INCLUDE BOTH DIRECT AND INDIRECT
EXPENSES AND CAN COVER A WIDE RANGE OF
CATEGORIES, SUCH AS LABOR, MATERIALS, EQUIPMENT,
OVERHEADS, AND OTHER RESOURCES REQUIRED TO
DELIVER THE PROJECT’S OBJECTIVES.
 PROFESSIONAL ENGINEEERING
TYPES OF PROJECT COST COST

refers to the expenses associated with hiring engineers and other

technical professionals to provide their expertise, design, and
oversight for a project. These costs are part of the overall project
budget and contribute to the successful planning, design, and
execution of engineering projects.
 COST ENGINEERING
It is the application of scientific principles and techniques to
problems of estimation, cost control, business planning and
management science, profitability analysis, project management, as
well as planning and scheduling.

It is also the practice of managing costs involved on a construction

project. This includes activities such as cost control, budgeting,
forecasting, estimating, investment appraisal and risk analysis.
 AACE INTERNATIONAL
CONSTITUTION AND BYLAWS
Article I - Section 2: The Association is dedicated to the tenets
of furthering the concepts of Total Cost Management and Cost
Engineering. Total Cost Management is the effective
application of professional and technical expertise to plan and
control resources, costs, profitability and risk. Simply stated, it
is a systematic approach to managing cost throughout the life
cycle of any enterprise, program, facility, project, product or
service. This is accomplished through the application of cost
engineering and cost management principles, proven
methodologies and the latest technology in support of the
management process.
 Article I - Section 2: Total Cost Management is that area of
engineering practice where engineering judgment and
experience are utilized in the application of scientific principles
and techniques to problems of business and program planning;
cost estimating; economic and financial analysis; cost
engineering; program and project management; planning and
scheduling; and cost and schedule performance measurement
and change control.
 Cost Estimating predicts the quantity and

COST ELEMENTS FOR

cost of resources needed to accomplish an
activity or create an asset

COST MANAGEMENT Cost Budgeting are allocating estimated

costs to different project phases or tasks.

Cost Monitoring & Reporting are Cost Control are tracking actual cost
regularly reviewing financial versus budgeted cost, implementing
performance and generating reports. corrective actions to prevent cost overruns
and utilizing tools like Earned Value
Management or EVM for performance
Financial Risk Management
measurement.
identifies potential cost risks such as
inflation, resource shortages, or Lifecycle Costing considers cost over the
unexpected delays. entire lifecycle of a project or product,
including maintenance and disposal
CONSTRUCTION COST
CONSTRUCTION COST
Construction cost refers to the total expenditure incurred
to complete a construction project, including all activities,
from planning and design through to completion and
handover. It is essential to accurately estimate, manage,
and control construction costs to ensure that a project is
completed within budget and to the required standards.
Construction costs can vary widely depending on the type,
size, location, complexity, and timeline of the project.
Components of Construction Costs

INDIRECT ADDITIONAL
DIRECT COST
COST COST
 Labor Costs: Salary, wage, and fringe benefit for
each laborer and contractor working in the

DIRECT COST
project, e.g., general laborer, skilled technicians,
engineers, and supervisors. Also included is the
cost of laborers, in the form of subcontractors
who are used on specialized assignments.

Direct costs are charges which are Material Costs: The total expenditure of

straightly related to the work in purchasing raw materials such as concrete, steel,
lumber, tiles, glass, paints, and other project
building. The charges include: components utilized to build the project.

Equipment Costs: The costs of hiring or buying

construction equipment and machines, including
cranes, bulldozers, excavators, scaffolding, and
power tools.
INDIRECT COST
Indirect costs are necessary for the completion of the project but are not
directly tied to the physical construction work. These include:

01 Site Overheads: Costs related to

managing and maintaining the
construction site, such as utilities,
02 Project Management: The cost of
managing and overseeing the project,
including project managers, engineers,
temporary offices, site security, and architects, and administrative staff. This
temporary facilities (e.g., toilets or also includes expenses for project
storage). scheduling, monitoring, and reporting.

03 Insurance: The cost of obtaining various

insurance policies, including worker’s
compensation, liability insurance,
04 Legal and Regulatory Fees: Fees for
securing permits, licenses, and approvals
needed to comply with local zoning laws,
property insurance, and professional building codes, and safety regulations.
indemnity insurance, to cover potential
risks and liabilities.
 ADDITIONAL COST

Contingency Cost: Funds set aside Financing Cost: If the project is

to cover unforeseen circumstances financed through loans or credit,
such as unexpected design changes, interest payments, loan fees, and
material price fluctuations, labor associated costs are considered
shortages, or weather delays. part of the construction budget.
Estimating Construction
Cost

Unit Cost Analogous Parametric

Estimating Estimating Estimating
01 02 03
Unit Cost Estimating Analogous Estimating Parametric Estimating
This method calculates the cost Analogous estimating uses Parametric estimating uses
per unit of measurement (e.g., historical data from similar statistical models and data to
per square foot, cubic meter, or projects to predict costs. It’s a estimate costs based on certain
linear meter) of the project. It quick and useful method but project parameters (e.g., area
involves determining the cost of may not always account for of the building, number of
materials, labor, and overheads unique factors specific to the floors). It’s efficient and relies
for each unit and then current project. on past data to create cost
multiplying by the quantity estimates for similar types of
required for the entire project. projects.
Legal, land, administration,
staffing and financial cost
These costs which include audits, the cost of issuing bonds, land costs,
and interest for borrowed money during construction, are part of the
probable total project cost and can be estimated in cooperation with
the client because they are usually outside the knowledge and control
of the Civil Engineer.
 Legal Costs
These include expenses related to permits,
contracts, legal advice, and potential litigation.
 Land Costs
This encompasses the cost of acquiring land, including
purchase price, taxes, and any associated legal fees for land
transactions.
 Administrative Costs
These are the overhead expenses related to project
management, such as salaries for project managers, office
rent, utilities, and other administrative overhead.
 Staffing Costs
This includes salaries, wages, benefits, and other expenses
related to the project team, including engineers, construction
workers, and other staff.
 FINANCIAL COSTS
THESE INCLUDE INTEREST ON LOANS, FINANCING FEES, AND
ANY OTHER FINANCIAL CHARGES ASSOCIATED WITH THE
PROJECT.
CONTINGENCY ALLOWANCE
 A contingency allowance is a critical financial tool in
construction project management. It provides a safety net
for unexpected challenges, ensuring that a project can
continue to progress without going over budget. By
calculating an appropriate contingency allowance, closely
CONTINGENCY managing its use, and monitoring any changes in the
ALLOWANCE project, project managers can maintain financial control and
deliver successful projects on time and within budget.
Ultimately, a well-managed contingency allowance helps to
mitigate risks, manage uncertainties, and safeguard the
overall project outcome.
 Purpose and Importance
The main purpose of a contingency
allowance is to provide financial flexibility
in the face of unexpected events.
Construction projects are inherently
prone to unforeseen risks and changes,
and a contingency allowance helps
manage these effectively.
Types of Contingency Costs

Construction Design
Contingency Contingency
 The construction contingency allowance is the most
common form of contingency. It is intended to cover
unforeseen events or issues that arise during the actual
CONSTRUCTION construction process. Construction projects are subject to a
CONTINGECY variety of risks, including site conditions, labor issues, and
weather delays, making this allowance essential for
maintaining the project’s financial stability.
 This allowance is set aside during the design phase to
account for changes, revisions, or uncertainties related to
DESIGN the design. Design changes may be required as new
information or issues arise that affect the original plans.
CONTINGECY These changes could be due to client preferences, new
regulations, or design conflicts.
Estimating the
Contingency Allowance
Estimating the appropriate amount for a contingency allowance is a
crucial part of the budget planning process. The amount allocated for
contingency depends on several factors, including the complexity, size,
and risk profile of the project.
 Methods for estimating the
contingency allowance include

Percentage of Risk-Based
Total Project Cost Approach
 A common approach is to set the
Percentage of Total contingency allowance as a percentage

Project Cost of the total project cost. This

percentage typically ranges from 5% to
15% of the total estimated cost, but it
can be higher for complex or high-risk
projects.

Risk-Based
Rather than using a flat percentage, some
projects use a risk-based approach to

Approach calculate the contingency. This approach

involves identifying potential risks and
estimating the likelihood and potential
impact of each risk. Based on this analysis,
an appropriate contingency fund is
established.
 Common Risks Covered by Contingency
Allowance
Unforeseen Site Conditions: Issues such as unexpected soil conditions, the discovery
of hidden utilities, or the need for additional excavation work can increase costs.
Material Price Fluctuations: The prices of materials like steel, lumber, and concrete can
fluctuate based on market conditions, impacting the project’s cost.
Labor Issues: Labor shortages, strikes, or workforce inefficiencies can cause delays and
increase labor costs.
Weather Delays: Adverse weather conditions, such as heavy rainfall, snow, or extreme
heat, can cause delays in construction, thereby increasing costs.
Regulatory Changes: Changes in building codes or environmental regulations that
require modifications to the design or construction process.
Design Changes: Client-driven design changes or the discovery of design flaws during
construction can require adjustments to the project, which will be covered by the
contingency allowance.