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1988, we have gradually implemented the system of construction supervision all over the country, which has had some positive effects upon reversing the phenomenon of losing control of a construction project in the implementation period. However, because that system is still in its starting stage, there hasn’t appeared a large batch of professional and socialized supervision teams. In addition, in projects in which construction supervision is carried out, there exist general phenomena, such as “emphasis on quality control at the construction stage and neglect of investment control”, and “emphasis on technical aspects of supervision and neglect of economic aspects of supervision”. In reality, rights of supervision tend to be confined to management of technical aspects, while management of economic aspects is firmly in control of proprietors. Meanwhile, lagging behind of existing construction cost management system is the primary cause for losing control of construction cost. Therefore, as a whole, the phenomenon of losing control over construction project cost is still quite serious, so it is necessary to conduct further study and make further analysis on major factors of current construction cost management and factors at all stages of a construction project that affect construction cost. 2. Primary study content
Aiming at the subject of “control of whole-process of construction project cost”, and based on lots of literature reviews about determination and control of construction project cost both at home and abroad, the author of this paper has collected extensively some relevant provincial and city reports and data after investigation. Afterwards, the author conducts the following work.
1) To analyze formulation of construction project investment and to find out primary reasons for losing control over construction cost at all stages of a construction project. 2) To study and analyze status quo and existing issues of current construction cost management, and study influences of these issues upon determination and control of a construction cost.
3) To put forward effective approaches and methods as well application of value engineering of a construction project from its decision-making stage, design stage, construction stage to the final acceptance of construction stage.
4) To make clear significance, necessity and feasibility of cost control of a construction project so as to provide recommendations for improvement of construction cost management in China.
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2.1 Construction cost control theory and management mode
According to the new cost control theory, cost engineers are “professional persons who undertake cost estimate, cost control, marketing planning and scientific management”. Fields undertaken by cost engineers include such aspects as project management, project planning, progress management and profitability analysis etc of a project construction and its production process. Cost engineers offer service for control over life cycle expenditure, property facilities and production & manufacture of a construction project with their management technique with an overall cost.
2.2 Current construction cost management model and theories in China 2.2.1 Direct regulation and control of the government
Considering development process of quota, it can be discovered that quota has come into being, developed and become mature gradually with development of planned economy after foundation of PRC. Since China has carried out centralized management model of investment system for a long time, the government is not only a maker of macropolicy, but a participant of micro-project construction. Therefore, a unified quota with dense colour of planned economy is able to provide powerful methods and means for the government to carry out macro-investment regulation and control and micro-construction project management.
2.2.2 Valuation basis for current construction cost
Basic materials for calculation of construction cost usually include construction cost quota, construction cost expense quota, cost index, basic unit price, quantities calculation rule and relevant economic rules and policies issued by competent departments of the government, etc. It includes index of estimate (budgetary estimate index), budgetary estimate quota, budgetary quota (comprehensive budgetary quota), expense quota (standard), labor quota, working-day norm, materials, budgetary price of facilities, direct price index of a project, material price index and cost index. And also included is valuation criterion of consumption quota and list of items in recent two years. 2.2.3 Valuation model of current construction cost
Valuation model is a basic aspect of construction cost management. Construction cost management is a governmental behavior, while valuation model is a means for a country to manage and control construction cost. There are two construction valuation models at
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present in China, namely, valuation model according to quota and one according to bill of quantities.
2.2.3.1 Valuation model according to quota
Valuation model according to quota is an effective model adopted during the transition period from planned economy to market economy. Determination of construction cost through valuation model according to quota prevents overrated valuation and standards and prices pressed down to some extent, because budgetary quota standardizes rate of consumption and a variety of documents stipulate manpower, materials, unit price of machines and all sorts of service fee norms, which reflects normativity, unitarity and rationality of construction cost. However, it has an inhibited effect upon market competition, and is not favorable for a construction enterprise to improve its technique, strengthen its management and enhance its labor efficiency and market competition. 2.2.3.2 Valuation model according to bill of quantities
Valuation model according to bill of quantities is a construction cost determination model proposed recently. In this model, the government merely unifies project code, project name, unit of measurement and measurement rule of quantities. Each construction enterprise has its self-determination to quote a price according to its own situation in a tender offer, and price of building products is formed thereby in the process of bidding. 2.3 Cost control in the process of implementation
For a long time, technique and economy has been separated in the field of project construction. Restrained by the planned economy, there lacks the economic concept in the minds of our engineers and technicians, because they regard reduction of construction cost as a duty of financial personnel which has nothing to do with themselves. However, the primary responsibility of financial and preliminary budget personnel is to act in accordance with financial system. Usually, they are not familiar with construction technique, and know little or even nothing about changes of various relations in project design, construction content and implementation of construction. Under such a circumstance, they have no choice but to mechanically work out or audit the expenditure from a financial perspective, which results in mutual separation of technique and economy. They just do what they do, which negatively reflects price of quantities of a project that has been completed, so it is difficult to control construction cost rationally and effectively.
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2.4 Control of cost in the process of construction
Implementation stage of a construction project is a stage which requires the most assets in the whole process of a project construction, and is also a vital stage for pecuniary resources to transform into building entities. Cost control at the implementation stage refers to confine construction cost within a scheduled control scope through a scientific cost control theory and method on the condition of ensuring project quality and time limit. The process of generation of a building entity is inreversible, so if effective automatic control and precontrol cannot be conducted over construction cost, then economic loss might be caused that cannot be made up for.
2.5 Analysis of major factors that affect construction cost at the stage of implementation
Implementation stage of a project refers to the period from completion of construction documents design and examination and submission to the construction party to the final completion acceptance of the project and until it is put into use. According to the basic operation procedure of the implementation stage of a construction project, formation of a construction cost has to undergo such major aspects as bidding, contract signing and management, joint auditing of a shop drawing, investigation of a construction management plan, material management and completion settlement, etc. All these aspects affect construction cost settlement to different degrees. In that process, after evolving from budgetary price, price for successful bidding, refurbishing cost for a contract, the construction cost is finally determined in the form of settlement price for project completion. Factors affecting construction cost are various, but from the perspective of analysis of cost formation, there are primarily the following reasons.
1) Influences of a project bidding. Bidding can determine price for successful bidding, while contract price is determined on the basis of price for successful bidding. If something goes wrong with bidding, then it might result in distortion of the price for bidding, and it is impossible to provide accurate and reliable foundation for cost control, and even result in losing control over the cost.
2) Influences of contract signing and management. Determination of a contract price further makes precise target of cost control, and an initial draft of a contract term provides correct foundation and principles for cost control. After signing of a contract, contract items are regarded as foundation, which will have strict contract control over design
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changes at the construction stage, project measurement, payment of a construction debt, and construction compensation, etc, and which will ensure realization of a control target. Therefore, losing control over signing and management of a contract will necessarily result in losing control over construction cost.
3) Influences of examination of construction management plan. Construction management plan is one of important foundations for determine a project bidding price and contract price. In the process of construction, adjustment of a contract price should also be determined according to construction management plan, because quality of construction management plan will directly affect quality and progress of a project. Therefore, losing control over examination of construction management plan will bring extremely unfavorable influences upon control over construction cost.
4) Influences of material management. On one hand, material price is an important component of bidding price and contract price. On the other hand, material expense accounts for a large proportion in construction cost, because price of materials determine construction cost. Therefore, losing control over material management will necessarily result in losing control over construction cost.
5) Influences of settlement, examination and verification of a project completion. Settlement, examination and verification is the final stage of a construction cost control at the implementation stage. A strict and meticulous settlement, examination and verification can ensure accuracy and authenticity of settlement cost of a project.
According to previous analysis, we believe that all aspects of cost control can have effect upon formation of construction cost, among which bidding of a project, contract signing and management, examination of a construction management plan and management of materials all have decisive effects upon formation of construction cost, and are vital aspects in cost construction at the implementation stage of a project, so neglect of these four aspects is a direct cause for losing control over construction cost.
In this paper, the author summarizes relevant issues in construction cost control at the decision-making stage of a construction project, at the design stage and construction stage, and puts forward principles or resolutions for handing such issues. Especially, as a method of combination of technique and economics, application of value engineering is elaborated at all stages, so that construction cost gets effective controlled. This paper cannot conclude all such issues existing, and also resolutions to resolve these issues cannot cover and
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contain everything, but with development of construction, new issues and new trains of thought will continue to emerge.
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