APPLICATION OF COST SIGNIFICANCE TECHNIQUE TO TIME AND COST CONTROL OF CONSTRUCTION PROJECTS

Abstract

Construction management consists of the three essential functions: planning, monitoring and controlling. The time and cost element of a construction project are presented in the form of time and cost plans. Networks and barcharts are frequently used to model the time plan of construction while the cost elements are presented mostly through bill of quantities. However, the time and cost elements are interdependent, hence it is unrealistic to model each element separately. Based on the principle of cost significance, it has been established by a number of writers that in bill of quantities, about 80% of the total bill value is contained in the 20% highest value cost items. This 80/20 rule was proposed by the Italian economist, Vilfredo Pareto in 1897. A review of the cost and time control systems is discussed to identify essential characteristics of the integrated cost and time system. The emergence of the 'activity' as a common denominator provided link to describe the project in time and cost. Together with the principle of cost significance, it resulted in a cost and time model of a construction project with built-in bias towards the controllable cost significant activities. This greatly reduced the number of activities (20%) to be monitored and controlled without compromising the value of the project (80%) The use of the feedback form facilitated the means of information flow to update actual site progress for monitoring and comparison purposes. Performance indices were established to compare actual status against planned targets in terms of time and cost to reflect the current status of a project. The case study of a construction project serves to demonstrate the application of cost significance technique to cost and time integration.