工程造价专业外文文献翻译中英文对照.docx
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工程造价专业外文文献翻译中英文对照.docx
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工程造价专业外文文献翻译中英文对照
山东建筑大学毕业设计外文文献及译文
外文文献:
Project Cost Control:
The Way it Works
By R. Max Wideman
In a recent consulting assignment we realized that there was some lack of understanding of
the whole system of project cost control, how it is setup and applied. So we decided to write up a
description of how it works. Project cost control is not that difficult to follow in theory.
First you establish a set of reference baselines. Then, as work progresses, you monitor the
work, analyze the findings, forecast the end results and compare those with the reference
baselines. If the end results are not satisfactory then you make adjustments as necessary to the
work in progress, and repeat the cycle at suitable intervals. If the end results get really out of line
with the baseline plan, you may have to change the plan. More likely, there will be (or have been)
scope changes that change the reference baselines which means that every time that happens you
have to change the baseline plan anyway.
But project cost control is a lot more difficult to do in practice, as is evidenced by the
number of projects that fail to contain costs. It also involves a significant amount of work, as we
shall see, and we might as well start at the beginning. So let us follow the thread of project cost
control through the entire project life span.
And, while we are at it, we will take the opportunity to point out the proper places for
several significant documents. These include the Business Case, the Request for (a capital)
Appropriation (for execution), Work Packages and the Work Breakdown Structure, the Project
Charter (or Brief), the Project Budget or Cost Plan, Earned Value and the Cost Baseline. All of
these contribute to the organization's ability to effectively control project costs.
Footnote
I am indebted to my friend Quentin Fleming, the guru of Earned Value, for checking and
correcting my work on this topic.
The Business Case and Application for (execution) Funding
It is important to note that project cost control is most effective when the executive
management responsible has a good understanding of how projects should unfold through the
project life span. This means that they exercise their responsibilities at the key decision points
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between the major phases. They must also recognize the importance of project risk management
for identifying and planning to head off at least the most obvious potential risk events.
In the project's Concept Phase
• Every project starts with someone identifying an opportunity or need. That is usually someone
of importance or influence, if the project is to proceed, and that person often becomes the
project's sponsor.
• To determine the suitability of the potential project, most organizations call for the preparation
of a "Business Case" and its "Order of Magnitude" cost to justify the value of the project so that it
can be compared with all the other competing projects. This effort is conducted in the Concept
Phase of the project and is done as a part of the organization's management of the entire project
portfolio.
• The cost of the work of preparing the Business Case is usually covered by corporate
management overhead, but it may be carried forward as an accounting cost to the eventual project.
No doubt because this will provide a tax benefit to the organization. The problem is, how do you
then account for all the projects that are not so carried forward?
• If the Business case has sufficient merit, approval will be given to proceed to a Development
and Definition phase.
In the project's Development or Definition Phase
• The objective of the Development Phase is to establish a good understanding of the work
involved to produce the required product, estimate the cost and seek capital funding for the actual
execution of the project.
• In a formalized setting, especially where big projects are involved, this application for funding
is often referred to as a Request for (a capital) Appropriation (RFA) or Capital Appropriation
Request (CAR).
• This requires the collection of more detailed requirements and data to establish what work needs
to be done to produce the required product or "deliverable". From this information, a plan is
prepared in sufficient detail to give adequate confidence in a dollar figure to be included in the
request.
• In a less formalized setting, everyone just tries to muddle through.
Work Packages and the WBS
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The Project Management Plan, Project Brief or Project Charter
• If the deliverable consists of a number of different elements, these are identified and assembled
into Work Packages (WPs) and presented in the form of a Work Breakdown Structure (WBS).
• Each WP involves a set of activities, the "work" that is planned and scheduled as a part of the
Project Management Plan. Note, however, that the planning will still be at a relatively high level,
and more detailed planning will be necessary during execution if the project is given the go ahead.
• This Project Management Plan, by the way, should become the "bible" for the execution phase
of the project and is sometimes referred to as the "Project Brief" or the "Project Charter".
• The cost of doing the various activities is then estimated and these estimated costs are
aggregated to determine the estimated cost of the WP. This approach is known as "detailed
estimating" or "bottom up estimating". There are other approaches to estimating that we'll come
to in a minute. Either way, the result is an estimated cost of the total work of the project.
Note:
that project risk management planning is an important part of this exercise. This should
examine the project's assumptions and environmental conditions to identify any weaknesses in
the plan thus far, and identify those potential risk events that warrant attention for mitigation.
This might take the form of specific contingency planning, and/or the setting aside of prudent
funding reserves.
Request for capital
Converting the estimate
• However, an estimate of the work alone is not sufficient for a capital request. To arrive at a
capital request some conversion is necessary, for example, by adding prudent allowances such as
overheads, a contingency allowance to cover normal project risks and management reserves to
cover unknowns and possible scope changes.
• In addition, it may be necessary to convert the estimating data into a financial accounting format
that satisfies the corporate or sponsor's format for purposes of comparison with other projects and
consequent funding approval.
• In practice all the data for the type of "bottom up" approach just described may not be available.
In this case alternative estimating approaches are adopted that provide various degrees of
reliability in a "top down" fashion. For example:
Order of Magnitude estimate – a "ball park" estimate, usually reserved for the concept phase
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山东建筑大学毕业设计外文文献及译文
only
Analogous estimate – an estimate based on previous similar projects
Parametric estimate – an estimate based on statistical relationships in historical data
• Whichever approach is adopted, hopefully the sum thus arrived at will be approved in full and
proves to be satisfactory!
This is the trigger to start the Execution Phase of the project
Note:
Some managements will approve some lesser sum in the mistaken belief that this will help
everyone to "sharpen their pencils" and "work smarter" for the benefit of the organization. This is
a mistaken belief because management has failed to understand the nature of uncertainty and risk
in project work. Consequently, the effect is more likely to result in "corner cutting" with an
adverse effect on product quality, or reduced product scope or functionality. This often leads to a
"game" in which estimates are inflated so that management can adjust them downwards. But to
be fair, management is also well aware that if money is over allocated, it will get spent anyway.
The smart thing for managements to do is to set aside contingent reserve funds, varying with the
riskiness of the project, and keep that money under careful control.
Ownership of approved capital
• If senior management approves the RFA as presented, the sum in question becomes the
responsibility of the designated project sponsor. However, if the approved capital request
includes allowances such as a "Management Reserve", this may or may not be passed on to the
project's sponsor, depending on the policies of the organization.
• For the approved RFA, the project sponsor will, in turn, further delegate expenditure authority
to the project's project manager and will likely not include any of the allowances. An exception
might be the contingency allowances to cover the normal variations in work performance.
• The net sum thus arrived at constitutes the project manager's Approved Project Budget.
Note:
If management does not approve the RFA, you should not consider this a project failure.
Either the goals, objectives, justification and planning need rethinking to increase the value of the
project's deliverables, or senior management simply has higher priorities elsewhere for the
available resources and funding.
The Project's Execution Phase
The project manager's Project Budget responsibility
• Once this Approved Project Budget is released to the project manager, a reverse process must
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take place to convert it into a working control document. That is, the money available must be
divided amongst the various WBS WPs that, by the way, have probably by now been upgraded!
This results in a project execution Control Budget or Project Baseline Budget, or simply, the
Project Budget. In some areas of project management application it is referred to as a Project
Cost Plan.
• On a large project where different corporate production divisions are involved, there may be
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