Final Thesis Submitted

ADDIS ABABA UNIVERSITY
ADDIS ABABA INSTITUTE OF TECHNOLOGY

SCHOOL OF CIVIL AND ENVIRONMENTAL
ENGINEERING
Assessment of The Practice of Cost Estimation and Control in

Building Projects in Ethiopia as Compared to A Few Selected
African Countries
A Thesis
Submitted in Partial Fulfillment
of the Requirements for the Degree
Bachelor of Science in Civil and Environmental Engineering
Prepared by: -
Name ID. No.
1. Abel Alemu ATR/5510/07

2. Adel Jemal ATR/1526/08
3. Bisrat Gelaw ATR/9096/08
4. Darek Mengistu ATR/3829/08
Advisor :- Mrs. Addis Mesfin
December,09/2020
Acknowledgements
First of all, we would like to thank the Almighty God, who gave us commitment and tolerance to
pass various obstacles that are happening in our world today and develop this thesis.
We want to express our gratitude to all those who gave us all the support to complete this thesis. We
express our most profound appreciation and thanks to our Advisor Mrs. Addis Mesfin for helping us
to complete this thesis by giving us her valuable advice, invaluable suggestions, timely comments,
and guidance through this thesis's work. We want to express our appreciation to all organizations
and individuals who contributed directly or indirectly to this thesis and provided the necessary
materials and support for realization of this thesis.
We would also like to use this opportunity to convey our gratitude to our friends. We also
acknowledge the contributions of all those individuals who had contributed in one way or the other
in the realization of this paper.
Finally, we would like to give our special thanks to our families and friends for their unconditional
love, constant encouragement, and sincere care as they always did all through our life.
Table of Contents
List of Figures...................................................................................................................................I
List of Tables.....................................................................................................................................I
Abbreviations...................................................................................................................................II
Abstract...........................................................................................................................................III
Chapter One......................................................................................................................................1
1. Introduction...............................................................................................................................1
1.1 Background........................................................................................................................1
1.2 Statement of problem.........................................................................................................2
1.3 Objectives of the study.......................................................................................................3
1.4 Scope of the study..............................................................................................................3
Chapter Two.....................................................................................................................................4
2. Literature Review.....................................................................................................................4
2.1 The Construction Industry in Ethiopia...............................................................................4
2.2 Project management...........................................................................................................5
2.3 Project cost management....................................................................................................7
2.4 Resource Planning..............................................................................................................8
2.5 Cost estimation...................................................................................................................9
2.6 Cost Budgeting.................................................................................................................24
2.7 Cost Control.....................................................................................................................24
2.8 International Cost Control Practices.................................................................................28
Chapter 3........................................................................................................................................35
3. Research Methodology...........................................................................................................35
3.1 Introduction......................................................................................................................35
3.2 Research design................................................................................................................36
3.3 Sources of Data and Research Instruments......................................................................36

3.4 Limitations........................................................................................................................36
Chapter 4........................................................................................................................................37
Result and discussion..................................................................................................................37
Zimbabwean cost management practices...............................................................................37
Nigerian cost management practices......................................................................................39
Ugandan cost management practices.....................................................................................40
Cost Management Practices of National Contractors in Ethiopia..........................................41
Chapter 5........................................................................................................................................47
Conclusion and Recommendation..............................................................................................47
5.1 Conclusions......................................................................................................................47
5.2 Recommendation..............................................................................................................48
References......................................................................................................................................49
List of Figures
Figure 1: Generalized Relationship between the Construction Industry and National Economy of
a Country.........................................................................................................................................5
Figure 2: Cost Estimation at Different Stages of Project Phase...................................................10
Figure 3: Estimators Task at Different Project Phases..................................................................11
Figure 4: Accuracy of the Different Types of Cost Estimates.......................................................14
Figure 5: Typical Network Showing Critical Path........................................................................32
List of Tables
Table 1: Cost management strategies followed by contractors in Zimbabwe................................37
Table 2: Cost management strategies followed by contractors in Uganda....................................40
Table 3: Cash Outflow Budget Components of Contractors..........................................................42
Table 4: Summary of Problems Related to Cost Management Practices and Cost Management
Strategy Employed by African Countries.......................................................................................45
I
Abbreviations
WBS - Work Breakdown Structure
PMBOK - Project Management Body of Knowledge
PCC - Project Cost Control
CPM – Critical Path Method
CVR – Cost Value Reconciliation
PERT - Program Evaluation and Review Technique
PV – Planed Value
PMB - Performance Measurement Baseline
BAC - Budget at Completion
EV – Earned Value
AC – Actual Cost
MSP - Microsoft Project
PCS - Project Costing System
COINS - Construction Industry Software
ROM - Rough Order of Magnitude
BOQ – Bill of Quantity
ROW - Right of way
Ce = Expected Cost
Cm = Most Likely Cost
Cp = Pessimistic Cost
Co = Optimistic Cost
II
Abstract
As various studies suggest, the construction industry plays a vital role in developing countries in
economic and social development. The Ethiopian construction sector has shown significant
growth and is given high priority.
Cost estimation is one of the most critical steps in the construction project execution process. An
organization interested in constructing a project attempts to estimate the expected expenditure of
resources such as materials, human resources, machinery, finance, and time in advance
necessarily to realize the intended project. Early-stage cost estimate plays a significant role in the
success of any construction project. All parties involved in a construction project such as owners,
contractors, and donors, need reliable information about the cost in the project's early stages.
Very limited drawings and details are available during this stage.
This research was conducted to assess the extent of cost estimation practices and cost control on
building construction projects in Ethiopia. The final cost of a project can significantly differ from
the initial estimated cost because of numerous reasons. The effects of inaccurate cost estimation
and cost control result in cost and time overruns of building projects, which affect the project's
whole progress. Thus, competent construction cost estimation practices and cost control are vital
to project owners in such a way it addresses properly the required quality of works, time for
completion, and reasonable and sufficient construction costs. It is also vital for keeping the
profitability of construction companies.
Desk study was used to investigate the cost estimation and cost control practices of local
contractors. It was found that the cost estimating system used by local building contractors is
inefficient due to the shortage of skilled professionals, lack of standard estimating guidelines,
lack of accurate and reliable data on resources' price and paper-based cost management
techniques. Additionally, it was found that Ethiopia faces similar problems faced by other
African countries regarding project cost management.
According to the findings which came across the study, relevant recommendations were
forwarded.
III
Assessment of the Practice of Cost Estimation and Control in Building Projects in Ethiopia as Compared
to A Few Selected African Countries
Chapter One
1. Introduction
Construction is a unique industry, which is unfortunately risky; Thus, most projects must be
priced well before they are constructed. Based on the current local construction cost estimation,
control practices, and cost management in Addis Ababa, it is very clear that the local construction
industries cost estimation, cost control, and cost management practices are not accurate in
determining construction costs and less effective in managing construction resources as stated by
different researches and reports. Therefore, we tried to assess the local construction, cost
estimation, cost control, and cost management practices.
1.1 Background
As stated by different research and reports, the construction industry plays a significant role in
developing and achieving the goals of society. The construction industry has complexity because
it contains many parties as clients, contractors, consultants, stakeholders, shareholders and
regulators. It is a unique industry that is risky by nature since most projects must be priced before
they are constructed, whereas, in other industries, the selling price is based on known
manufacturing costs. The success or failure of a project relies on the accuracy of several
estimates done throughout the project. Construction projects involve various costs to the owner in
its lifetime, broadly categorized as the initial capital costs and the subsequent operation and
maintenance costs.
Accordingly, the early stage cost estimate plays a significant role in any construction project
where it allows owners and planners to evaluate project feasibility and control costs effectively.
Also, the cost of a building is significantly affected by decisions made in the early phase. While
this influence decreases through all phases of the building project. Researchers have worked hard
to develop a cost estimate technique that maximizes the practical value of limited information to
improve the accuracy and reliability of cost estimation work.
The magnitude of each of these cost components depends on the nature, size, and location of the
project. Therefore, to decide whether to finance a proposed project or not, owners shall clearly
understand and identify all project-related costs starting from the feasibility study up to the final
testing and commissioning and operation and maintenance costs. Once the project owner has
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proved the intended project is feasible based on the conceptual estimate and accordingly made
arrangements to finance the project, the single most important task remaining is to find a capable
contractor who can deliver the construction phase of the project with the lowest possible
construction cost, high quality of works and shortest time possible. For this purpose, project
owners usually select contractors based on technical and financial competition.
Most of the time, the process of awarding any construction contract is based on competitive
bidding. Contractors will be invited to submit their bids to the owner, who usually awards the
lowest bidder for constructing the project. Previously, both the owner and contractor have to
access the construction cost of the proposed project. This is achieved through a construction cost
estimate.
The preparation of any cost estimate depends on the estimator's experience, the tools used, the
time spent, and the information available. Usually, the preparation of an estimate starts by
breaking down the project into components, then taking off the quantities of each package's
elements and next pricing them all.
Thus this research focuses on the cost estimation, cost control and management practices of
construction projects in Ethiopia.
1.2 Statement of problem
Effective cost estimation is one of the main factors of a construction project's success.
Accordingly, the early stage's cost estimate plays a significant role in any construction project,
where it allows owners and planners to evaluate project feasibility and control costs effectively,
as stated by many studies and reports.
A study made by [CITATION Tad06 \l 1033 ] showed that, in many developing countries including
Ethiopia, the majority of contractors lack expertise in achieving reasonable accurate cost
estimates and have poor cost estimating procedures. Hence, this led to a notable increase in
bankruptcy cases and the delay or complete stop of some projects. The local construction cost
estimation practice clearly indicates that the local knowledge and experience of construction cost
estimation of the local contractors is very poor and on top of all other managerial, economic,
political and social factors, this poor construction cost estimation practice has contributed its own
negative impact on the national economy as well as in the development of the local construction
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industry. Hence, most local contractors are delivering poor quality, delayed projects and suffering
from bankruptcy.
As [ CITATION Abe08 \l 1033 ] stated SMEC international P.I (1999) reported that, most domestic
contactors are characterized by lack of appropriate financial management system. The study
report indicated that the detailed financial knowledge of contractors was mostly absent and there
was little evidence of a system assisting management with timely and accurate financial
information and providing cost information on projects.
Therefore, this research is trying to assess the local practices, so as to give informed data based
recommendations on cost estimation, cost control and management practices in Ethiopia.
1.3 Objectives of the study
1.3.1 General Objective

The objective of this research is to assess the cost estimation, cost control and management
practices in construction projects in Ethiopia.
1.3.2 Specific objectives

 Assessing cost estimation and cost control practices in construction projects in Ethiopia
 Comparing the cost estimation and cost control practices of Ethiopia with other African
countries.
 To identify drawbacks and limitations of the existing practice.
 Forwarding recommendations to improve existing cost management practices.
 Forwarding recommendations regarding better cost management practices.
1.4 Scope of the study
The scope of this study is limited to the cost estimation, cost control and cost management
practices of building projects in Ethiopia. Due to time constraint, this research is concerned with
construction building projects only (housing, commercial, hospitals, etc.), and will not take into
account the other categories of engineering projects.
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Chapter Two
2. Literature Review
2.1 The Construction Industry in Ethiopia
The construction industry is a sector of the economy that changes various resources into built
physical, economic, and social infrastructure necessary for socio-economic development. It
encompasses how the said physical infrastructure is planned, designed, procured, constructed or
produced, altered, repaired, maintained, and demolished. The industry comprises organizations
and persons who include companies, firms, and individuals working as consultants, main
contractors, sub-contractors, material and component producers, plant and equipment suppliers,
builders, and merchants. The industry has a close relationship with clients and financiers. The
government is involved in the industry as a purchaser (client), financier, regulator, and operator.
[CITATION Min12 \l 1033 ]
In Ethiopia's history, the construction industry was not considered an independent sector of the
national economy. It was rather considered as incapable of generating national wealth. As a
result, no comprehensive strategy for its development was considered. This, in turn, has led to the
unwanted features of the current construction sector. These features include lack of clear
developmental objectives for the industry; inadequate coordination of planning between the
industry and infrastructure programs in the various sectors of the economy, heavy dependence on
Imported resources such as materials, equipment, and expertise representation of the role players
in the construction sector by inadequate and ineffective organizations inadequate numbers of
suitably qualified and experienced personnel at all levels that include engineers, technicians,
mechanics, operators and foremen, etc. inadequate relevant local construction regulations and
standards and inadequate consideration given to the use of local resources (including community
participation in labor-based works).[CITATION TEC12 \l 1033 ]
According to Abraham (2008), as cited by [CITATION TES19 \l 1033 ] , the construction industry in
Ethiopia, like other developing nations suffers many difficulties and shortages. The major ones
are:
4|Page
 Scarcity of finance: Finance is one of the big problems that domestic construction firms
are facing today.
 Big projects off-limits to domestic firms: Although most local construction firms
specialize in infrastructures, most of them lack the experience and the capacity to
undertake major road projects that require a significant sum of money and high
technology.
 Lack of skilled workforce and professionals: The success of any project greatly depends
on its human resource capability. To improve workmanship, design, and other related
jobs, skilled laborers and professionals are indispensable.
So, if any intervention is applied to lift the sector’s difficulties and shortages, the domestic
contractors would eventually become beneficiaries or vice versa. A generalized relationship of
actors in the construction industry and the country's national economy is shown in the figure
below.
Figure 1: Generalized Relationship between the Construction Industry and National Economy of
a Country[ CITATION TES19 \l 1033 ]
2.2 Project management
A project is a sequence of unique, complex, and connected activities that have one goal or
purpose and that must be completed by a specific time, within budget, and according to
specification, [ CITATION Rob191 \l 1033 ] . Projects are temporary and have definitive start dates
and definitive end dates. The project is completed when its goals and objectives are accomplished
5|Page
to the satisfaction of the stakeholders. Sometimes projects end when it’s determined that the goals
and objectives cannot be accomplished or when the product, service, or result of the project is no
longer needed, and the project is canceled. [ CITATION Kim13 \l 1033 ]
Project management brings together a set of tools and techniques that people perform to describe,
organize, and monitor the work of project activities. Project managers are the people responsible
for managing the project processes and applying the tools and techniques used to carry out the
project activities. [ CITATION Kim13 \l 1033 ]
According to [CITATION AGU08 \l 1033 ], Project management is applying knowledge, skills, tools
and techniques to project activities to meet the project requirements. Project management is
accomplished through the appropriate application of project management processes comprising
the 5 process groups. These 5 groups are:
 Initiating
 Planning
 Executing
 Monitoring and Controlling, and
 Closing.
Project Management is the art and science of mobilizing and managing people,
materials, equipment and money to complete the assigned project work on time within
budgeted cost and specified technical performance standards. Project management in practice
is very complex and diverse. It is due to its complexity that it incorporates different
professionals. Under project management, there are several subdivisions including:
1) Project scope management
2) Project integration management
3) Time management
6|Page
4) Cost management
5) Quality management
6) Personnel management
7) Equipment management
8) Risk management
However, this research mainly focuses on project cost management.
2.3 Project cost management
Project cost management means the process concerned with planning, estimating, budgeting,
and controlling costs so that the project can be completed within the approved budget or under it.
According to [CITATION AGU08 \l 1033 ], project cost management provides an overview of the
following major processes:
I. Planning construction costs- Resource planning involves determining what physical

resources (people, equipment, materials) and what quantities should be used to perform
project activities. It is part of the project management plan that produces a cost
management plan. The cost management plan arranges and establishes the criteria for
estimating, budgeting and controlling project costs. Planning construction cost comes
before project cost management processes, which are cost estimating, budgeting, and
control.
II. Cost Estimating- Estimation is a methodology for forecasting and predicting cost and
expenditures of a future project and to produce a budget.
III. Cost Budgeting- Cost budgeting involves allocating the overall cost estimates to
individual work items in order to establish a cost baseline for measuring project
performance the summations of the estimated costs of individual activities or work
packages to establish a cost baseline.
IV. Cost Controlling- deals with influencing the factors that cause cost variances and
controlling changes to the project budget.
7|Page
The above processes (cost estimating, budgeting, and control) are interdependent with each
other and other fields. Each process occurs in each phase of the project. (In the project's
Concept Phase, in the project's Development or Definition Phase, Construction phase)
According to [ CITATION AGU08 \l 1033 ] , on some projects, especially smaller ones, resource
planning, cost estimating and cost budgeting are so tightly linked that they are viewed as a single
process (I.e. they may be performed by a single individual over a relatively short period of time)
2.4 Resource Planning
2.4.1 What is Resource Planning

Resource planning involves determining what physical resources (people, equipment, materials),
what quantities should be used, and when needed to perform project activities. Resource planning
has the following inputs, tools and techniques and output according to [ CITATION AGU08 \l 1033 ]
2.4.2 Inputs to Resource Planning
 Work Breakdown Structure (WBS)- The work breakdown structure identifies the project
deliverables and processes that will need resources, and thus is the primary input to
resource planning. It is a means of dividing a project into the easily managed elements
that ensure the completeness and continuity of all the work that is required for successful
completion of the project. According to [ CITATION Par02 \l 1033 ] WBS is a uniform,
consistent, and logical method for dividing the project into small, manageable
components for planning, estimating, and monitoring. A WBS facilitates and encourages
the feed-forward of information within the project. It will provide a roadmap for planning,
monitoring, and managing all faces of the project, such as the following:
- Definition of work - Resource allocation
- Cost estimates - Expenditures
- Budgeting - Changes to the project plan
- Time estimates - Productivity
- Scheduling - Performance
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 Historical Information- This is useful for having a small picture of what types of
resources are required for the project by comparing to similar work on previous projects if
available.
 Scope Statement- The scope statement contains the project justification and the project
objectives, both of which should be considered explicitly during resource planning.
 Resource Pool Description- Knowledge of what resources are potentially available is

necessary for resource planning. The amount of detail and the level of specificity of the
resource pool description will vary.
 Organizational Policies- The policies of the performing organization regarding staffing

and the rental or purchase of supplies and equipment must be considered during resource
planning.
2.4.3 Tools and Techniques for Resource Planning

 Expert Judgement- Expert Judgement will often be required to assess the inputs to this
process. Such expertise may be provided by any group or individual with specialized
knowledge or training and is available from many sources including as stated by many
studies and researches:
 Other units within the performing organization
 Consultants
 Professional and technical associations
 Industry groups
 Alternatives Identification
2.4.4 Output of Resource Planning
 Resource Requirements- The output of a resource planning process is a description of

what type of resources are required and in what quantities for each element of work
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breakdown structure. These resources will be either through staff acquisition or
procurement. [ CITATION AGU08 \l 1033 ]
2.5 Cost estimation
2.5.1 What is Cost estimation?

The PMBOK defines the cost estimation process as “the process of developing an approximation
of the cost of resources needed to complete project work.”. As stated by [ CITATION Hir941 \l 1033 ]
Estimating is a fundamental part of the construction industry. It is a business skill of utmost
importance. The success or failure of a project is dependent on the accuracy of several estimates
throughout the course of the project, that is, from conceptual and feasibility estimates through to
the detailed or bid estimates. The estimate, at best, is an approximation of the expected cost of the
project. At each stage, estimates are required, and financial commitments are made based on
these estimates. Initially, an owner commits to the project based on feasibility estimates. Later,
designers develop a project's scope within target cost restraints, with estimates providing the
necessary information for making decisions. Finally, the contractors will commit their resources
to the project, with profit being the motive. The financial profit or loss of each of the participants
depends on the accuracy of anticipated cost targets established based upon the estimates. The
other component for success is an execution plan, which is compatible with the forecast of events
that constitute the estimate. [ CITATION Hir941 \l 1033 ]
A cost estimate approximates a project’s probable cost. Cost estimates are prepared at the concept
stage, refined throughout the project-preparation process, and updated during implementation.
It’s explained in the figure below. [ CITATION Asi14 \l 1033 ]
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Figure 2: Cost Estimation at Different Stages of Project Phase[ CITATION Asi14 \l 1033 ]
Accurate estimates optimize fair contracting. As a result, inaccurate estimates provide improper
guidelines for project management. Unrealistic targets produce unrealistic expectations.
[ CITATION Hir941 \l 1033 ]
According to many studies The project cost estimate is primarily focused on the cost of resources
needed to complete the project activities. The methods used to estimate the project's cost during
the selection phase are generally faster and use fewer resources than those used to create detailed
estimates in later phases. They rely more on experienced managers' expert judgment who can
make accurate estimates with less detailed information.
2.5.2 Knowledge and Managerial skills for Cost Estimation

The Following knowledge, managerial talents and degree of construction experience make up a
good estimator according to [ CITATION AAi20 \l 1033 ] are:
 Ability to read and understand contract documents and drawings

 Ability to accurately takeoff the quantities of construction works
 Ability to visualize the future building from drawings
 Knowledge of arithmetic, basic geometry and statistics
 Familiarity with estimating software in depth
 Knowledge of building construction methods
11 | P a g e
 Knowledge of labor productivity, crew composition and impacts of various forecasted site
conditions on crew output
 Possession of office managerial skills in organizing project related cost information
 Ability to work under pressure and to meet all bid requirements and deadline
Figure 3: Estimators Task at Different Project Phases
2.5.3 Role of Estimation in the Construction Industry
Estimates serve several different functions in the construction process. In the early stages of a
construction program, the owner needs an estimate of the probable cost of construction to assess
the project's financial feasibility. This conceptual estimate has to be prepared from a minimum
amount of information because it is required when the project is often a little more than a vague
idea in the owner's mind. There will be few if any design details at this stage because the design
process will not begin until the owner is satisfied that the cost of proceeding with it is justified.
12 | P a g e
Once the construction is underway, budget amounts can be established for the project's various
elements using procedures for a preliminary estimate. These cost budgets are compiled in a cost
plan that is a summary of all anticipated project expenditures. The budget amounts in the cost
plan are verified from time to time during the design phase using more accurate estimating
methods based on the specific design details that emerge in this phase of the project. This cost
management process also includes estimating the cost of alternative designs so that informed
decisions can be made on what to include in the design. When the design is completed, a final
pre-bid estimate can be compiled to anticipate the contractor’s bid price for the work. If this
estimate is accurate, the bid prices obtained will be within the owner’s budget for the project.
Most contracts that transpire in the construction industry result from competing bids from
contractors to supply goods and services to meet individual specifications for a specified sum of
money. The sum of money specified in such a bid represents the total amount that the contractor
will receive for performing the work described in the contract; clearly, an accurate forecast of the
cost of the work is necessary if the contractor is to profit from his or her endeavors and also be
competitive. Providing this cost forecast is the prime function of the contractor’s bid estimate
prepared from the drawings and specifications supplied by the owner to define the scope of the
contract work.
Estimates are also required after work starts on the project. In cost control programs, estimating is
required to control the expenditure of funds on a project. Contractors set cost targets based on
their estimates of the cost of each component of the work. Then they compare the actual cost of
work against these target amounts to determine where corrective action is needed to bring
productivity up to the required levels. Often during construction operations, the owner or the
designer asks the contractor to quote prices for proposed changes in work scope. Each of these
quotes amounts to a mini-bid that involves an estimate of the change's full cost, followed by an
offer to make the change for the price quoted to the owner.[ CITATION Dav10 \l 1033 ]
2.5.4 Types of Cost Estimates
There are many ways of classifying building cost estimates. The most significant of these are the
degree of project definition, the end usage of the estimate, and the estimate generating
methodology. In the first classification, the degree of project definition is based upon the
percentage of completed architectural and engineering designs. It defines available input
13 | P a g e
information to the estimator. The second classification, the end usage of the estimate, is based on
available data progress and covers conceptual estimates for investment feasibility, and studies
funding authorization, budgets, and contractor detail estimates for lump-sum bidding. The third
classification, the estimate generating methodology, is based on processes employed to forecast
building costs that are stochastic and deterministic.[ CITATION Cal03 \l 1033 ]
The types of cost estimates based upon the percentage of completed architectural and engineering
designs are conceptual, preliminary and detailed cost estimates.
2.5.4.1 Conceptual Cost Estimates

Conceptual estimates are often called ballpark estimates. Typically, there are no drawings
available at all. You can use conceptual estimates when you are in the idea or concept stage of a
project. Often, an owner doesn’t really know whether their idea is economically feasible. They do
not start spending money on design until they know that the project is at least possible. An
experienced estimator can help out in a situation like this by offering a rough order of magnitude
(ROM) estimate.[ CITATION Abo \l 1033 ]
Several difficulties may be encountered using this technique of estimating the cost of a building
based on available data summaries.
1. Published cost standards seldom represent 100% of the project under consideration.
2. The location factor of adjusting a city or community is not accounted for in the published
standard.
3. The time factor involved in extrapolating future construction cost variations may differ.
[ CITATION Cal03 \l 1033 ]
2.5.4.2 Preliminary Cost Estimates

If you have a preliminary set of drawings with overall dimensions, you can move to the next level
of estimates. Preliminary estimates provide a somewhat higher accuracy level and may be used to
establish initial budgets and preliminary financing outlines. However, these estimates should
never be used to commit to a contract price because too many factors can influence the numbers'
reliability. [ CITATION Abo \l 1033 ]
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2.5.4.3 Detailed Cost Estimates
When the design is completed (including contracting documents), a client may advertise for
competitive bids, request proposals for competitive bids or request proposals for a negotiation
leading to a negotiated contract. When project financing is based on public funds (city, county,
state, federal), then competitive bids are required. Both approaches require the interested
contractors to estimate the probable cost of completing project requirements. [ CITATION Cal03 \l
1033 ]
Detailed estimates are the most accurate. But keep in mind that as the accuracy increases, so
makes the time, effort, and skill required to complete the estimate. Although computerized
estimating has reduced the time needed to compile project costs, it can still take two to three
weeks and a team of estimators to put together a detailed estimate for a large, multistory
commercial building. The estimators still have to put the bid packages together and spend time
soliciting subcontractor and vendor pricing.[ CITATION Yas \l 1033 ]
Figure 4: Accuracy of the Different Types of Cost Estimates[ CITATION Abo02 \l 1033 ]
2.5.5 Basic Cost Components of a Construction Project

According to (Ostwald, 2001) the cost of any construction project comprises direct costs, including
the direct cost of materials, labor, and equipment, and indirect costs, including head office and site
overhead costs. Therefore, the accuracy of construction cost estimates for construction projects
depends on the precision of identifying, quantifying, and obtaining commercial and technical data
15 | P a g e
on the project's direct and indirect costs. Moreover, risk allowance, profit, and income tax
estimations shall be considered in estimating the total construction cost of a project.
A. Direct Construction Cost
Direct construction costs are all costs that can be booked explicitly with an activity in a
construction project. The direct cost covers the most considerable portion of the total project cost.
The current trend is to assign costs to direct costs as much as possible costs as these costs can be
budgeted, monitored, and controlled far more effectively than the indirect costs. The direct
construction costs mainly include material, labor, equipment, and subcontract costs. [ CITATION
AAi20 \l 1033 ]
a) Direct Material Costs - These costs referring to the cost of construction materials,
consumables and components used for executing an activity including the allowances for
scrap and wastages.
b) Direct Labor Costs - All costs related to the workers working on a specific activity
such as carpenters, masons, erectors, painters, plumbers and so on.
c) Direct Equipment Costs - These costs referring to the costs of machineries and plants
used in executing a specific activity.
d) Subcontract Costs - the subcontract price will be considered as the direct cost of the
activities to be executed by the subcontractor if there is any.
B. Indirect Construction Cost
Indirect construction costs are all costs that cannot be directly booked with a specific activity in a
construction project but required to keep the whole project operational. Indirect construction
costs mainly include head office overhead costs and site overhead costs.
a) Head Office Overhead Costs - Head office overhead costs are all costs required to run the
whole operation of the construction company, which usually administers different projects
at a time. These include:
i) Senior management costs
ii) Indirect labor costs
iii) Head office building costs
iv) Bidding expenses
v) Expertise service costs
16 | P a g e
vi) Office furniture costs
vii) Office running expenses
viii) Bank charges
ix) Insurance Charges
x) Transportation and travel expenses
b) Site Overhead Costs - Site overhead costs are all costs required to run the whole operation
of a specific construction project at site level. These include:
i) Site management costs
ii) Indirect labor costs
iii) Mobilization and demobilization costs
iv) Tender expenses
v) Site office costs
vi) Expertise service costs
vii) Office furniture and equipment
viii) Office running expenses
ix) Radio communications
x) Camp facilities
C. Risk Allowance
Contractors usually incorporate risk allowances in their tender prices to compensate for the
negative impacts of different risks such as contractual, technical, political, and economic risks.
Contractual risks are usually stemming from the contract agreements with the project owner,
subcontractors, and suppliers. Technical risks are usually associated with clarifying the technical
specifications, working drawings, construction technology, and difficulties in understanding the
new construction method. Political and economic risks reflect the impact of political situations,
the stability of economic policies, inflation, and price fluctuation of the inputs (material, labor,
equipment, and other related costs) on the intended construction project's execution. [ CITATION
AAi20 \l 1033 ]
D. Profit and Income Tax
Contractors execute construction projects by investing capital to get the maximum possible profit
from the contracts to be performed. The profit margin entirely depends on the existing market
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competitiveness and company strategies. Moreover, from the gross profit gained by completing
the construction projects, the contractors shall pay 30% per the Ethiopian income tax
proclamation No. 286/2002. [ CITATION AAi20 \l 1033 ]
2.5.6 Tools and Techniques for Cost Estimation

There are many ways we could use to estimate a project cost according to different sources. Some
of these are:
a) Analogous Estimation
b) Parametric Estimation
c) Bottom-up Estimation
d) Three-Points Estimation
1. Analogous Estimation
Analogous estimating, also called top-down estimating, means using the actual cost of a previous,
similar project as the basis for estimating the cost of the current project. It is frequently used to
estimate total project costs when there is a limited amount of detailed information about the
project. Analogous estimating is a form of expert judgment. Analogous estimating is generally
less costly than other techniques, but it is also generally less accurate. It is most reliable when:
 the previous projects are similar in fact and not just in appearance, and
 the individuals or groups preparing the estimates have the needed expertise. [ CITATION
AGU08 \l 1033 ]
You use this technique when limited project information is available. This technique does not
provide a reliable estimation. The benefits of this technique are a quick result with less effort.
Here, you estimate the project's cost by comparing it with any similar project in the past. You
will look into the organization’s historical records. Then you will use your expert judgment to
find your project’s cost estimate. If your organization has completed many similar projects, you
will select the one that most closely resembles yours. You will then draw a parallel between
current and past projects and make adjustments to get the project cost. The estimate can be
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accurate if the similarity is high and the estimator is subject experts. Analogous estimating is also
known as top-down estimating. [ CITATION Fah191 \l 1033 ]
2. Parametric Estimation
Parametric modeling involves using project characteristics (parameters) in a mathematical model

to predict project costs. Models may be simple or complex. Both the cost and accuracy of
parametric models vary widely. They are most likely to be reliable when:
 the historical information used to develop the model was accurate
 the parameters used in the model are readily quantifiable, and
 the model is scalable (i.e., it works as well for a huge project as for a very small one)
[ CITATION AGU08 \l 1033 ]
Like analogous estimating, parametric estimation uses historical data to calculate cost; however,
it uses statistical data. It takes variables from similar projects and applies them to the current one.
For example, you will take the cost of concrete per cubic meter from your past projects, find the
quantity of concrete for the current project, and you will multiply them together. This will give
you the total cost of concrete for your project. Similarly, you can calculate the cost of other
parameters: human resources, materials, equipment. Parametric estimation is more accurate than
analogous estimation.[ CITATION Fah191 \l 1033 ]
If the project consists of common activities to many other projects, average costs are available
per unit. Estimates that are calculated by multiplying measured parameters by cost-per-unit
values are parametric estimates.
3. Bottom-up Estimation
This is also called the “definitive technique.” This is the most accurate but the most time-
consuming and costly technique. Here, you will calculate the cost of every activity with the
highest level of detail and roll them up to calculate the total project cost. Simply put, you will
break the project work into its smallest work components. You will then estimate the cost of each
component and aggregate it to get the project cost estimate. [ CITATION Fah191 \l 1033 ]
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This technique involves estimating the cost of individual work items, then summarizing or
rolling-up the individual estimates to get a total. The cost and accuracy of bottom-up estimating
is driven by the size of the individual work items: smaller work items increase both cost and
accuracy. The project management team must weigh the additional accuracy against the
additional cost. [ CITATION AGU08 \l 1033 ]
The most accurate and time-consuming estimating method is to identify each item's cost in each
activity of the schedule, including labor and materials. If you view the project schedule as a
hierarchy where the general descriptions of tasks are at the top and the lower levels become more
detailed, finding the price of each item at the lowest level and then summing them to determine
the cost of higher levels is called bottom-up estimating.
Moreover, we can use this technique When all the project details are in hand.
4. Three-Points Estimation
According to [ CITATION Fah191 \l 1033 ], this technique helps reduce biases and uncertainties
while estimating assumptions. Here, you determine three estimates, instead of one, and you take
their average to reduce the uncertainties, risks, and biases. There are two commonly used three
points estimates, namely beta and triangular.
I. PERT (Program Evaluation and Review Technique) is based on the beta

distribution.
The PERT estimate formula is:
Ce = (Co + 4Cm + Cp) / 6
Where Ce = Expected Cost
Cm = Most Likely Cost (considers a typical case where everything goes as usual)
Cp = Pessimistic Cost (where almost everything goes wrong.)
Co = Optimistic Cost (where everything goes better than presumed)
II. The triangular estimate formula is:
Ce = (Co + Cm + Cp) / 3
This technique generally minimizes the biased views of the data.
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2.5.7 Factors Affecting Project Cost Estimation
Construction is a unique industry that is inherently risky because most projects must be priced
before they are constructed. In contrast, in other industries, the selling price is based on known
manufacturing costs. A serious industry problem in most developing countries. [ CITATION
Adn07 \l 1033 ]
Many factors influence a building construction's project cost estimation. Some of the key factors
are listed below.
A. Project Size
Project sizes can affect the unit cost of construction. This is not simply an issue of supply and
demand is also an issue of production efficiency and economy of scale. Generally, the unit price
for smaller quantities of a given material will be more than that for larger quantities. Suppliers
usually offer discounts for larger quantity orders. Mobilization and overhead, such as site and
head office costs, are all spread out over a larger quantity, thus reducing their effect on each unit.
Wastage, to some extent, is also spread over a larger quantity, thereby having a smaller effect on
each unit. However, sometimes huge projects with huge quantities of certain materials may cause
an increase in the unit bid price. [ CITATION Tra13 \l 1033 ]
The smaller the project in terms of scope or the number of square feet, the more it will cost per
square foot. Contractors have a set of basic “start-up costs.” Thus, the startup costs will be a
small percentage of the total construction cost for a huge and expensive project. For a small
project, since start-up costs remain stable, they will constitute a large percentage of the total
construction budget. [ CITATION Bud14 \l 1033 ]
B. Type of project
The cost of construction depends on the time the contractors will need to execute the work, the
degree of specialization of the work to be done, and the materials' cost. Different types of projects
have different levels of complexity and detail. A school cafeteria would not require the same
amount of time, nor the same level of complexity, as a four-star restaurant. Construction costs for
the four-star restaurant would be much higher than the cafeteria, even though it probably would
have smaller square footage. [ CITATION Bud14 \l 1033 ]
C. Bidder competition
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A lack of competition often leads to higher bid prices. Generally, projects that are tendered
during a period of time when a large number of contractors are available are bid more
competitively.[ CITATION Tra13 \l 1033 ]
D. Type of client
If the client has been difficult during the design process, these difficulties will affect the
construction process. A demanding client who may anger construction crews, an indecisive client
who may wish to make changes up to the last minute or later will raise costs. The client’s
problematic behavior is challenging to explain, let alone bill. [ CITATION Bud14 \l 1033 ]
E. Construction season/duration
The part of the year during which the Project is to be awarded for contract and the time estimated
for completion may significantly influence price selection. Factors such as a restriction on
working hours during the summer and major holidays and suspension or delay due to inclement
weather will affect bid prices. Accelerated or compressed construction schedules can potentially
increase costs. [ CITATION Tra13 \l 1033 ]
F. Geographical location of the site
Geographic considerations can have a considerable effect on the selection of unit bid prices.
Whether in a densely populated area (urban) or sparsely populated (rural) area, the project
location should be considered in establishing bid prices. A suitable cost relating to a project’s
location may be accounted for relative to the Project being in a populated area with, for example,
greater traffic volumes, confined working spaces (limited right-of-way [ROW]), and limited
hours of operation (especially in residential areas) and nighttime work. However, some of these
factors may be balanced by the availability of local contractors, materials, equipment, and
personnel. [ CITATION Tra13 \l 1033 ]
Groundwater conditions can vary greatly and need to be investigated to determine the extent of
dewatering required for foundations and other structures such as stormwater retention ponds.
[ CITATION Dev15 \l 1033 ]
G. Practical experience of the estimator
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Construction contract price forecasting practice is, with very few exceptions, heavily dependent
on the forecaster's skill. This skill is associated with the other factors affecting the quality of
forecasts - the nature of the target, information, technique, and feedback - and the personal
attributes of the forecaster himself/herself combining to provide the general term of 'expertise'.
Together with some observations regarding the acquisition and application of forecasting
expertise, these influences constitute the remainder of this review. [ CITATION Ski901 \l 1033 ] As
sited on [ CITATION AND15 \l 1033 ]
H. Project Information
The level of information available to the estimator increases as the design progresses. The effect
of increasing information can therefore be comparing the accuracy of estimates made in the early
stages of design (conceptual estimates) with those made when the design is substantially
complete (detailed estimates) [ CITATION Ski88 \l 1033 ] As sited on (Danait, 2015)
Construction price forecasting involves the acquisition of two classes of information relating to
the contract market. Firstly, information that identifies the specific market under consideration
and information of the general price levels is associated with that market. The information
concerning general price levels for a particular construction contract market is held by forecasters
in various forms and extracted from various sources [CITATION Ski901 \l 1033 ] As sited on
[ CITATION AND15 \l 1033 ]
I. Project Duration
The cost estimator has to tie up the earning and purchasing power of money to time and consider
the inflation rate. According to [ CITATION Par02 \l 1033 ], once the cost and duration of a proposed
project have been predicted using historical data, the resulting values need to be adjusted and
normalized in the light of time. The term time refers to the year in which the existing project is
completed. Comparison between the delivery dates would provide the basis to adjust the estimate
based on the inflation rate or the time value of money. [ CITATION AND15 \l 1033 ]
Applying inflation is an important step in cost estimating. If a mistake is made on the inflation
amount, cost overruns will likely happen. Applying inflation correctly for the project duration is
necessary if the cost estimate is to be credible [CITATION Uni09 \l 1033 ]
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J. Market Condition
Estimators should take into account market conditions while developing a cost estimate. If the
economy is experiencing a downturn and more competition for projects, Contractors will bid
competitively with less profit. Conversely, if the market is booming and more projects are
advertised, Contractors will bid on projects with higher mark-ups [ CITATION Tra13 \l 1033 ]
2.5.8 Factors That Affect Estimate Accuracy

Estimated costs are based on a combination of historical data and price quotations. Several
influences contribute to the uncertainty, including the method of gathering historical data. To
some degree, each project and the conditions under which the project will be executed are unique.
The estimating process is a forecast of the future, a process that is therefore risky. Estimating
errors are always a concern but can be minimized with adequate procedures. However, there are
other degrees of uncertainty present. The price of materials delivered to the site may be variable
but determined with a high degree of accuracy by soliciting quotations. A construction estimate
utilizes historical published data that reflect average or ideal conditions. The question always
remains as to what factors will cause a variance. If one considers a new environment, such as a
new location, the most difficult factors to predict are those that affect labor productivity. Work-
study methods could be used to establish production rates, but these studies are rarely carried out
during the estimating stage.
The factors that modify productivity are broadly grouped as those governed by the economy's
state and specific job circumstances. General economic conditions include the local and regional
business activity, which determines employment and available labor supply. A buoyant economy
applies pressure to escalate prices and labor rates. Labor skills, training, pay, quality of
supervision, quality of communication, and management approach are a mixture of factors that
affect productivity. Job planning and schedule-related factors that affect productivity include
work sequence, craft availability and mix, and overtime. Several job characteristics that must be
considered are job size and complexity, changes, rework, and site conditions. Two other obvious
factors to consider are climatic conditions and work methods. As can be seen, numerous factors
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must be forecast in order to produce a reliable estimate. These same factors must later be
considered for cost control. [ CITATION Hir941 \l 1033 ]
2.6 Cost Budgeting
2.6.1 What is Cost Budgeting?

Cost Budgeting involves allocating the overall cost estimates to individual work items in order to
establish a cost baseline for measuring project performance.
2.6.2 Inputs to Cost Budgeting

a. Cost estimates
b. Work breakdown structure
c. Project schedule
2.6.3 Tools and Techniques for Cost Budgeting
 Cost estimating tools and techniques
2.6.4 Output of Cost Budgeting
 Cost baseline- The cost baseline is a time-phased budget that will be used to measure and
monitor cost performance on the project. It’s developed by summing estimated costs by
period and is usually displayed in the form of S-curve.
2.7 Cost Control
2.7.1 What is Project Cost Control?

According to [ CITATION AGU08 \l 1033 ], Control costs is the process of monitoring the status of
the project to update the project budget and managing changes to the cost baseline.
Project cost control seeks out the causes of both positive and negative variances, and it includes:
 Influencing the factors that create changes to the authorized cost baselines
 Ensuring that all change requests are acted in a timely manner
 Managing the actual changes when and as they occur
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 Ensuring that cost expenditures do not exceed the authorized funding by period and in
total for the project
 Monitoring cost performance to isolate and understand variances from the approved cost
baseline
 Monitoring work performance against funds expended
 Preventing unapproved changes from being included in the reported cost or a resource
usage
 Informing appropriate stakeholders of all approved changes and associated cost
 Acting to bring expected cost overruns within acceptable limits
2.7.2 Concept of Project Cost Control

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 results are not satisfactory, you make adjustments as necessary to the progress
and repeat the cycle at suitable intervals. If the results get out of line with the baseline plan, you
may have to change it. More likely, there will be scope changes that change the reference
baseline, which means that you have to change the baseline plan every time that happens.
2.7.3 Challenges of Project Cost Control

Construction project cost control is one of the difficult tasks in most contractors' current project
cost management. The practice of cost control is a required task for every construction
organization's survival and growth in every nation and especially in a country like Ethiopia,
which are considered developing countries. In developing countries, Project cost overrun is
severe, indicating that PCC is a challenge to contractors and project team members handling
construction projects. [ CITATION KOA171 \l 1033 ]
The following are the challenges of PCC practice according to [ CITATION KOA171 \l 1033 ]:
 Using obsolete Methods and Concepts
 Lack of knowledge on the use of available tools and technology
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 Over emphasizing on results while ignoring the process of PCC
 Lacking PCC processes and systems suitable to the enterprise
 Abandonment of complicated strategies
 Lack of consistency in cost management by managers
 Serious decision failure, exorbitant marketing expenses
 Poor attitude towards Information Communication Technology (ICT) usage
 Difficulty in monitoring different sources of day-to-day cost data
 Variations in contract
 Lack of financial commitment in projects
2.7.4 Tools and Techniques for Project Cost Control
 Budget planning
 Cost tracking
 Time management
 Project change controlling
 Earned value analysis
Earned value analysis

Earned Value analysis is a method of performance measurement. Earned Value is a program
management technique that uses “work in progress” to indicate what will happen to work in the
future. Earned Value is an enhancement over traditional accounting progress measures.
Traditional methods focus on planned accomplishment (expenditure) and actual costs. Earned
Value goes one step further and examines actual accomplishment. This gives managers’ greater
insight into potential risk areas. With a clearer picture, managers can create risk mitigation plans
based on the work's actual cost, schedule, and technical progress. It is an “early warning”
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program/project management tool that enables managers to identify and control problems before
becoming impossible. [ CITATION Sag12 \l 1033 ]
It is essential to state that before any earned value analysis can occur, a few fundamental project
management activities must happen with each project according to [ CITATION Jas07 \l 1033 ]. They
are listed below.
1. Divide the project into manageable parts or packages of authorized work. This is
commonly referred to as establishing the work breakdown structure (WBS)
2. Ensure that the parts are defined in a manner so that each activity can be allocated
duration of time to be complete and a cost to complete
3. Allocate cost and effort to all parts across the entire project. Essentially establishing a
baseline.
Once the above steps have been completed and the project has started earn value analysis can
begin. The simple and repeatable process steps are outlined below.
1. Update the schedule based upon the current progress
2. Update the actual cost associated to the current progress
3. Calculate and graph key values, variance and ratios
4. Analyze the results and take corrective actions
According to (A Guide to the Project Management Body of Knowledge, 2017), Earned value
analysis compares the performance measurement baseline to the actual schedule and cost
performance. EVM integrates the scope baseline with the cost baseline and schedule baseline to
form the performance measurement baseline. EVM develops and monitors three critical
dimensions for each work package and control account:
Planned value (PV): is the authorized budget assigned to scheduled work. It is the authorized
budget planned for the work to be accomplished for an activity or work breakdown structure
(WBS) component, not including management reserve. This budget is allocated by phase over the
project's life, but at a given point in time, planned value defines the physical work that should
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have been accomplished. The total of the PV is sometimes referred to as the performance
measurement baseline (PMB). The total planned value for the project is also known as the budget
at completion (BAC).
Earned value (EV): is a measure of work performed expressed in terms of the budget authorized
for that work. It is the budget associated with the authorized work that has been completed. The
EV being measured needs to be related to the PMB, and the EV measured cannot be greater than
the authorized PV budget for a component. The EV is often used to calculate the percent
complete of a project. Progress measurement criteria should be established for each WBS
component to measure work in progress. Project managers monitor EV, both incrementally to
determine current status and cumulatively to determine the long-term performance trends.
Actual cost (AC): is the realized cost incurred for the work performed on an activity during a
specific time period. It is the total cost incurred in accomplishing the work that the EV measured.
The AC needs to correspond in definition to what was budgeted in the PV and measured in the
EV (e.g., direct hours only, direct costs only, or all costs, including indirect costs). The AC will
have no upper limit; whatever is spent to achieve the EV will be measured.
Cost performance measurements are used to assess the magnitude of variation to the original cost
baseline. An essential aspect of project cost control includes determining the cause and degree of
variance relative to the cost baseline and deciding whether corrective or preventive action is
required.
Cost variance (CV): is the amount of budget deficit or surplus at a given point in time,
expressed as the difference between earned value and the actual cost. It is a measure of cost
performance on a project. It is equal to the earned value (EV) minus the actual cost (AC). At the
end of the project, the cost variance will be the difference between the budget at completion
(BAC) and the actual amount spent. The CV is particularly critical because it indicates the
relationship between physical performance to the costs spent. A negative CV is often difficult for
the project to recover.n
2.8 International Cost Control Practices
There are multiple cost control practices used internationally. They are both manual and software
aided. These include:
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 Project cost-value reconciliation
 Overall profit or loss
 Cost Reports
 Cash flow analysis
 Resource Management
 Earned value analysis
 Program evaluation and review techniques (PERT)
 Leading parameter method
Software’s used for project cost control according to (Yakubu Olawale, 2014)
 Microsoft Project (MSP)
 Project Costing System (PCS)
 Asta Power Project
 Primavera Suretrak
 Excel Spreadsheet
 Construction Industry Software (COINS)
 WinQs
During the execution of a project, project control procedures and record-keeping become
indispensable tools to managers and other construction processes. According to Dharwadker
(1985), as cited by [ CITATION Geo \l 1033 ]. Cost control can be achieved by selecting the right
man for the right job, the right equipment, tools for the right work, and the right quality of
materials, in the right quantity, from the right source, at the right price, and delivered the right
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time. Managers are expected to be well equipped to execute the project, with due consideration to
the quality of work, yet within the estimated cost and limits. [ CITATION Geo \l 1033 ]
Having accurate project estimates and a project budget accordingly is essential to deliver the
project within the project budget. That estimation and planning called the planning part. Without
keeping an eye on the actual costs meanwhile, the project is being preceded, the project can never
be delivered on-budget (Sharma & Rupen, 2013) as cited by [ CITATION AGD \l 1033 ]
As mentioned in the PMBOK (A Guide to the Project Management Body of Knowledge), there
are some techniques used to control and monitor the cost of projects. Some of the advanced
techniques are Earned Value Management, To-Complete Index, Forecasting, Variance Analysis,
and Performance Reviews. Among the above techniques, earned value management is one of the
main techniques. Earn value system is firstly used by the Department of Defense. There are some
basic steps which should follow before applying this theory (Owens et al, 2007) as cited
by[ CITATION AGD \l 1033 ]
Software’s Used for Project Cost Control

Understanding Planning and Scheduling Software
According to [ CITATION PAU10 \l 1033 ], planning and scheduling software enables the user to:
 Enter the breakdown structure of the project deliverables or products into the software.
This is often called a Work Breakdown Structure (WBS) or Product Breakdown Structure
(PBS),
 Break a project down into the work required to create the deliverables and enter these
into the software as Activities under the appropriate WBS,
 Assign durations, constraints, predecessors and successors of the activities and then
calculate the start and finish date of all the activities,
 Assign resources and/or costs, which represent people, equipment or materials, to the
activities and calculate the project resource requirements and/or cash flow,
 Optimize the project plan,
 Set Baseline Dates and Budgets to compare progress against,
 Use the plan to approve the commencement of work,
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 Record the actual progress of activities and compare the progress against the Baseline
and amend the plan when required, allowing for scope changes, etc.,
 Record the consumption of resources and/or costs and re-estimate the resources and/or
costs required to finish the project, and
 Produce management reports.
As the level increases, the amount of information required to maintain the schedule will
increase and, more importantly, your skill and knowledge in using the software will increase.
[CITATION PAU10 \l 1033 ]
1) Microsoft Project Software
Microsoft project is the software developed by Microsoft to plan and schedule various activities
involved in a project. MSP helps to define the activities' hierarchy by defining the start date and end
dates of the various activities. Using MSP, various resources involved in the project are efficiently
handled, the project's cost budget can be defined prior to the start of the project or at any stage of the
project. MSP prevents the project's delay by showing the critical path of the project that can be
continuously taken care of. MSP gives an option to track the project regularly, by which the project
can be compared with the baseline of the project created prior to the scheduling stage. [ CITATION
Mon17 \l 1033 ]
Schedule Development in MS project
A feasible schedule is developed by following these steps: data required for the project is collected
from similar successfully executed projects, all the data required for the preparation of the schedule
is collected from the site, and the site conditions are thoroughly studied; which includes drawings,
labor allocation details, and site survey reports. With the available data and expert judgment, various
project activities are listed, and the relationships between every task or activity are defined. Start and
end dates for the completion of every activity are defined.
The resources available are allocated for every activity; the project calendar is set per the companies'
working days and working hours per day. The activities are represented by a graphical
representation called a Gantt chart, which clearly indicates the activities' relation easily. Over
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allocated resources are leveled by reducing the work hours or increasing labor as per the required
quantity. [ CITATION Mon17 \l 1033 ]
Schedule Estimation
The resource for the specific task can be allocated only by knowing the quantity of the work to be
performed or by knowing the number of materials to be used for that particular activity, the number
of materials to be used and the quantity of work to be performed in order to complete a particular
activity can be calculated or obtained from the BOQ prepared from a detailed drawing.
Result of MS Planner
As a result of implementing MSP in the construction schedule development:
 A construction activity is developed.

 An appropriate activity sequence is listed based on the expert judgment.
 Project starts and finishes is set.
 Various resources used for the project are allocated.
 Budget cost of civil works is obtained.
 A critical path is obtained in the Gantt chart of MSP.
The following figure shows a typical network diagram showing the critical path.
Figure 5: Typical Network Showing Critical Path
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Advantages of Using Microsoft Planner Software
 Using MSP as a construction project management tool, project planning is done accurately,
this enables the management to organize the resources required for the project effectively
 A sequential arrangement of all the construction activities and their graphical representation
on various charts are useful for better understanding of the project.
 Resources of the project can be effectively used as the resources are planned, assigned, and
allocated to each and every activity of the project.
 Budget cost of the project is easily obtained as all the resources required for the project are
planned and allocated priory in MSP.
 Critical activities of the project are obtained from MSP, the delay in project and increase in
budget cost can be prevented by carefully following the critical path of the project.
 Labor management becomes easier as the over allocated activities are leveled using the
leveling option available in MSP this helps to optimize the duration of the project, without
affecting the original duration of the project.[ CITATION Mon17 \l 1033 ]
2) Asta Power Project

Asta Power project is widely used to plan and manage all aspects of the construction lifecycle for
simple tasks through to some of the world’s most complex construction projects, such as
Europe’s tallest building, The London Shard; Jumeirah Park, Dubai; The Reichstag, Berlin;
Petronas Towers, Malaysia; and Durban International Airport.
Unlike other software that can only address parts of the construction lifecycle, the Asta Power
project can be relied upon to create a plan and develop it through every stage, giving you one
quality software solution for all your project needs. [ CITATION Ast12 \l 1033 ]
3) Primavera Suretrak
Primavera Project Planner provides an easy-to-use approach to project planning with an intuitive
interface that makes project planning and control easy and fun, without sacrificing the powerful
sophistication of high-end project-management software that you expect from Primavera.
[CITATION Pri99 \l 1033 ]
Schedule Development in Primavera
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The software calculates the shortest time in which the project may be completed. Activities are
moved forward in time until they meet a Relationship or Constraint or a calendar nonwork time.
Un-started activities without logic or constraints are scheduled to start at the Project Start Date or
as permitted by calendar nonwork times. Scheduling the project will identify the Critical Path(s)
when there is a Closed Network. The Critical Path is the chain(s) of activities that takes the
longest time to accomplish; a delay to any activity in the chain will delay the project's end date.
The calculated completion date depends on the critical activities starting and finishing on time. If
any of them are delayed, the whole project will be delayed. [ CITATION Pri99 \l 1033 ]
Schedule estimation
Primavera calculates the activities’ dates/times. Primavera Schedules the project to calculate the

Early Dates, Late Dates, Free Float, and the Total Float. This will enable you to review the
Critical Path of the project. Sometimes it is preferable to have the software recalculate the
schedule each time an edit is made to an activity, which affects any activity dates. [ CITATION
Pri99 \l 1033 ]
Figure 6: A typical activity path on primavera
Advantages of Using Primavera Suretrak Software
According to [ CITATION Pre15 \l 1033 ], Using Primavera has the following advantages.
 Diminished risk along with cost connected with schedule overrun.

 It helps easily prepare and control project things to do.
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 It optimizes management off resources.
 It offers clear field of vision of what’s taking in the particular project.
 It allows quick and easy forecasting connected with WBS’s, things to do or assignments.
 You can monitor progress along with view past period efficiency for credit reporting
purposes.
 Assists you easily breakdown projects’ along with activities’ structure.
Chapter 3
3. Research Methodology
3.1 Introduction
Research is a careful consideration of a study regarding a particular concern or problem using

scientific methods. According to the American Sociologist Earl Robert Babbie, “Research is a
systematic inquiry to describe, explain, predict, and control the observed phenomenon. Research
involves inductive and deductive methods.”[ CITATION Wha \l 1033 ] Therefore research
methodology is a way that brings all the research processes together and leads the researcher to
accomplish the objectives of the study.
We can broadly classify research methods as quantitative and qualititative. According to

[ CITATION Stu \l 1033 ] quantitative research is concerned with trying to quantify things; it asks
questions such as ‘how long,’ ‘how many’ or ‘the degree to which’. It looks to quantify data and
generalize results from a sample of the population of interest. They may measure the incidence of
various views and opinions in a chosen sample or aggregate results. Quantitative research is a
structured way of collecting data and analyzing it to conclude. Unlike qualitative methods, this
method uses a computational and statistical process to collect and analyze data. [ CITATION Wha \l
1033 ]
[ CITATION Stu \l 1033 ] stated qualitative research as concerned with the quality of information.
Qualitative methods attempt to understand the underlying reasons and motivations for actions and
establish how people interpret their experiences. Qualitative methods provide insights into the
36 | P a g e
setting of a problem, generating ideas or hypotheses. Qualitative researches are designed to help
reveal a target audience's behavior and perception concerning a particular topic. [ CITATION Wha \l
1033 ]
[CITATION DAV16 \l 1033 ] said that desk research is not about collecting data. Instead a researcher
caries out a desk research to review previous research findings to gain a broad understanding of
the field.
We chose desk research approach because of time constraints and the Covid19 pandemic.
Primary data was difficult to obtain. This research is of both qualitative and quantitative research
type.
3.2 Research design
According to [ CITATION CRK04 \l 1033 ] , “A research design is the sequence of criteria for
collection and analysis of data in a manner that aims to combine relevance to the research
purpose in procedure.” The research design is the conceptual structure within which research is
directed; it constitutes the outline for collecting, measuring, and analyzing data. It encompasses
what the researcher will do from writing the hypothesis and its operational implications to the
final data analysis.
3.3 Sources of Data and Research Instruments
This research used the following source of information and methods of data collection (research
instrument):
Source of information
The information source was existing information that includes reports, previous research, books,
journals, and any documents related to the research topic.
Research Instrument
The research instrument used for the collection of relevant information was the desk study
approach. The desk study was mainly carried out to obtain data from different researches
regarding the research topic. This is an approach selected due to the Covid-19 pandemic. The
37 | P a g e
secondary data involves information from published documents such as academics publications,
journals, government publications, past research papers and internet resources.
3.4 Limitations
This research exclusively used secondary data to achieve set out objectives due to the current
global pandemic and unstable situations arising in the country. Therefore, the original plan of
collecting primary data by using of questionnaires and interviews was out of reach because
nationwide quarantine was in effect. It was also difficult to meet with group members and our
advisor.
Chapter 4
Result and discussion
Zimbabwean cost management practices
According to research conducted by (Benviolent Chigara, 2013), The Zimbabwean construction

industry has suffered from the consequences of construction projects being hardly
completed within budget. This background is considered unhealthy for an industry whose capital
consumption is heavy, and related cost overruns spell disastrous financial consequences on the
investor. The strategies employed by contractors to manage construction project costs in Zimbabwe,
along with their percentage usages, are summarized in the table below, as stated by (Benviolent
Chigara, 2013).
No. Cost Management Strategies Percentage Used (%)
1 Cost Reports 31.8
2 Cost Estimating And Budgeting 36.4
3 Variance Analysis 54.5
38 | P a g e
4 Resources Management 59.1
5 Cost Value Reconciliation (CVR) 31.8
6 Cash Flow Analysis 18.2

And Work Programs
7 Project Meetings 13.6
Table 1: Cost management strategies followed by contractors in Zimbabwe
The research included 3 types of contractors namely Category A, B and C, which usually
undertake medium-to-large magnitude projects and such ventures involve a substantial capital
injection. Category A contractors enjoy unrestricted caps on tendered jobs, while category B and
C contractors are registered for projects of a maximum value of US$ 6,000,000 and US$
3,000,000 respectively.
The problems encountered by contractors in managing project cost as found out by (Benviolent
Chigara, 2013) are summarized by the following bar chart below.
Figure 7: Challenges Encountered by Contractors in Managing Project Cost
The study of (Benviolent Chigara, 2013) also observed that the cost management process in Like in
other developing countries in Africa and elsewhere, Zimbabwe is still dominated by the traditional
paper-based system or ‘prematurely’ developed automated systems of managing project cost
39 | P a g e
information. Moreover, the study suggested that the strategies instituted to manage project costs and
the challenges to such practice are not significantly different from the ones in other developing
countries, including but not limited to South Africa, Botswana, Nigeria, and Uganda.
The research recommends that contractors pay particular attention to problem areas that significantly
affect cost management (labor, material and related organizational challenges), engagement of
experienced cost management personnel or upgrading of staff’s professional ingenuity through
conventional training, refresher courses or participation in seminars; and regular review of cost
management systems and strategies. It also recommended the contractors to automate their cost
information management systems to increase the effectiveness of the above-stated strategies to
manage project cost.
Nigerian cost management practices
According to [ CITATION Ola18 \l 1033 ], the most important variables causing construction delays and
cost overruns in Nigeria are poor contract management, financing and payment of completed works,
changes in site conditions, shortage of materials, imported materials and plant items, design
changes, subcontractors and nominated suppliers.
Variation works are the cause of cost overrun. [ CITATION Ola18 \l 1033 ] identified and examined
factors influencing the magnitude/frequency of variations in building projects. These were: client
characteristics, especially lack of prior experience and knowledge of construction project
organization/production processes; characteristics such as type, size, complexity and duration of the
project
In Nigeria, many construction projects have failed due to the various technical and financial
pressures of cost limit, quality, and value optimization. [ CITATION CIA13 \l 1033 ]
Another reason for this high rate of projects abandonment and failed contracts in Nigeria as stated
by [ CITATION CIA13 \l 1033 ] , is that in most government projects, the mobilization fee which is given
to the contractor is reimbursed to those who awarded the contract as "bribe" usually of huge sums of
money and this thereby increases the cost of the project, affects the quality of job executed by the
40 | P a g e
contractor and will also leave the project either unexecuted or abandoned. This is because the money
meant for the project execution has been diverted into individual pockets.
The tools used by management and cost supervisors in Nigeria for planning, monitoring and
controlling of projects according to [ CITATION CIA13 \l 1033 ] include, among others:
 The Gantt chart and

 The network analysis which comprises: -
I. Critical path method (CPM)
II. Performance evaluation and review techniques (PERT)
Ugandan cost management practices
According to research done by [ CITATION Placeholder2 \l 1033 ] many projects in Uganda and
worldwide have suffered from cost and time overruns due to factors stemming from poor cost
control during the design and project implementation stages. This research aimed at studying the
cost control techniques being used in Uganda and was done on a selection of 130 contractors
involved in the construction of buildings in Kampala City. It specifically studied the cost control
techniques currently being used by individual developers.
The research identified seven commonly used cost control techniques, including schedules,
budget, inspection, meetings, reports, records, monitoring & evaluations.
Cost Management Strategies Contractors Usage(%)

No.
1 Work Programmes 16.3
2 Inspection of Works 14.1
3 The project Budgets 12.4
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4 Site Meetings 11.1
5 Record Keeping 13.6
6 Monitoring work and cost performance 13.6
7 Evaluation of works carried out 14.4
8 Others 8.1
Table 2: Cost management strategies followed by contractors in Uganda
Some of the problems encountered by contractors in managing project cost as found out by
[ CITATION Placeholder2 \l 1033 ] was that most project managers and contractors in Uganda find
difficulty in controlling project costs due to problems which include delays by clients to release
money, delay to make a decision, lack of materials and equipment, bad weather, overlapping of
activities, unclear and incomplete drawings, making good defective works, and general failure to
control the productivity of resources. Other reasons include theft and vandalism, interference by
clients, high labor turnover, and insufficient knowledge on cost control techniques.
The study concluded that the problem was not the techniques to use but rather the lack of
knowledge of the techniques, the poor management of the cost control methodology, and the
general poor site organization and inadequate supervision.
[ CITATION Placeholder2 \l 1033 ] recommended that contractors frequently attend refresher courses
in construction project management. The study identified a lack of knowledge of the cost control
techniques and inadequate cost control methodology as the biggest problem. In almost all sites,
workers were not aware of the performance targets, implying a lack of knowledge and
communication lapses between supervisors and workers.
Cost Management Practices of National Contractors in Ethiopia
Copare (1990) as cited by [ CITATION Abe08 \l 1033 ] identified inaccurate cost estimates,
inadequate accounting records and inefficient cost controlling practices as the major factors
42 | P a g e
which obstruct contractors from maintaining healthy cash flow and securing the anticipated profit
amount from projects.
[ CITATION Abe08 \l 1033 ] conducted a research to investigate the current cost management
practices of contractors in Ethiopia. All the included contractors in the research use standard or
detailed estimating techniques for the purpose of cost estimation.
According to the study results by [ CITATION Abe08 \l 1033 ], the cost controlling by the majority of
the contractors do not consider other functions except checking profit. Of the surveyed
contractors in the study, some of the contractors mentioned that their controlling system is
capable of tracking and indicating activities which suffer inefficiency and identifying causes of
the observed inefficiency; and some of the contractors use the reports of the controlling system to
monitor the performance of labor and equipment resources. The Cash outflow budget components
of contractors as found out by [ CITATION Abe08 \l 1033 ] is summarized in the table below.
No Cash Outflow Budget Contractors Usage (%)

Components
1 Material, Labor and 65%
Equipment Requirements and
associated costs
2 Material Requirements and 20%
Costs only
3 Material, Labor and 15%
Equipment Requirements and
associated costs, overhead
costs budget
Table 3: Cash Outflow Budget Components of Contractors
Analysis of the survey data collected by [ CITATION Abe08 \l 1033 ] revealed that only 35% of the
contractors have a cost controlling system that is primarily based on budget. The survey
revealed that only 10% of the contractors employ the method of earned value management
technique to facilitate the cost controls and time/schedule control. Direct cost
variance analysis, which compares the actual direct costs with the budgeted costs for a particular
work package or activity and analyzes the reasons for variations, is only used by 16% of the
43 | P a g e
surveyed contractors. 26% of the contractors use comparison of actual unit costs with contract
unit prices.
[ CITATION Abe08 \l 1033 ] finally concluded that:
I. The application of estimating software which can give advantages in speed, man hour
saving, reliability and accuracy of estimates is very limited. The contractors stated the
following reasons for avoiding use of the software:
 Unfamiliarity with the softwares or insufficient information about their benefits
 The softwares is expensive
 The softwares don’t make significant difference in the estimation process.
But, using such software will obviously make differences with regards to producing
accurate and reliable estimates and with regard to saving man hours.
II. Most of the contractors use their own estimating formats which are developed from Excel
spreadsheet.
However, the formats are mainly used to compute activities’ direct unit costs and do not
integrate the estimating process with the budgeting and cost controlling processes. The
formats fail to reflect total resource requirements and associated costs, which are basis for
the project budget.
III. Lack of accurate and reliable data on resources' price and labor and equipment
productivity standards are identified by surveyed contractors and majority of them do not
incorporate allowances for risk in their tender price, mainly due to difficulties in
identifying, forecasting and quantifying potential risks
IV. Contractors’ cost controlling system allocates much attention to the material cost
component. Most of the contractors stated that the material cost component should get
more attention owing to its high proportion and sensitivity to price changes.
But, labor and equipment costs being the components where inefficiency is encountered
most of the time, the system should focus more on these items. Moreover, overhead costs,
as they constitute significant proportion of total project costs, should receive balanced
attention from the system.
The recommendations forwarded by [ CITATION Abe08 \l 1033 ] after finalizing the research to
mitigate the effects of poor cost management practices were that:
44 | P a g e
I. The estimating formats should be integrated with those used for budgeting and cost
controlling purposes. The formats should also indicate the overall cost and quantity of
resources to be employed which are necessary for preparing the project budget.
Contractors, to the extent possible, need to use standard or off the shelf estimating
software, as they give advantage in speed, accuracy and reliability of the estimate and
man hour saving. Besides, it is highly recommended that contractors keep records of the
details of the estimates prepared during the tendering stage, as they can serve as baselines
for the cost controlling process.
II. The cost controlling system implemented should be able to identify activities which are
being carried out uneconomically and indicate the causes, whether they are due to in
efficiency or deviation from estimated productivity or due to underpricing or due to
wastage like earned value management system. Besides, the cost controlling system
should be able to provide feedback to the cost estimating process. Moreover, the cost
controlling by contractors should give more attention to the labor and equipment
components of the project cost. This is because they constituent the greatest risk for large
cost overruns, which occur as a result of inefficiency or deviations from assumed
productivity standards. These costs need to check at a maximum of weekly intervals, so
that early interventions can be taken when deviations arise.
A research was conducted by [ CITATION Fet081 \l 1033 ] investigating the causes and effects of
cost overrun in public building construction projects in Ethiopia. The researcher was able to
identify 39 causes of cost overrun, out of which cost underestimation or inaccuracy is one of the
major factor that causes cost overrun in Ethiopia.
Another research conducted by [ CITATION AND15 \l 1033 ] evaluating the cost estimating system of
building contractors in Addis Ababa, concluded that:
 Cost estimating system used by the local building contractors seems to have some
drawbacks due to the shortage of skilled professionals and technicians.
 Most contractors are interested in using detailed analysis for all components of single
items which are advantageous in getting accurate cost estimates. However, 55% of
them use detailed analysis only for big value items which may be due to limited time
45 | P a g e
available for tendering. This is a major drawback that affects the accuracy of cost
estimation.
 The majority of respondents indicate that good understanding of the magnitude and
the scale of the project and assessment of risk and profit allowance are necessary
tools in cost estimating process.
[ CITATION AND15 \l 1033 ] forwarded the following recommendations:
 The Ethiopian Contractors Association in close cooperation with experienced

professionals should focus more on preparing standard guideline specifically in cost
estimating, as it will help in improving the effectiveness and efficiency of the local
contractors in cost estimating of building projects.
 Intensive trainings, workshops and seminars should be arranged by cost estimating
experts to eradicate the problems that arise from lack of skill, awareness and knowledge.
 Local contractors are advised to develop software system for more efficient and effective
estimating technique in order to address the problem of inaccuracy of the estimated cost
and submit the bid with in the specified date.
 The de signer should provide complete and correct drawings with sufficient information
to minimize risky and faulty assumptions during the estimation process.
Country Problems related to cost management Cost management strategy employed

practice
Labor related challenges, material related Cost Reports, Cost Estimating and
challenges, variations, inaccurate cost Budgeting,Variance Analysis, Resource
Zimbabw estimates, deficient cost control systems, Management, CVR, Cash Flow
e unautomated cost management system Analysis and Work Programs, Project
Meetings
Poor contract management, shortage of locally Gantt Chart, CPM, PERT
Nigeria available materials, design problems, variation
works, bribery
Delays by clients to release money, bad Work programs, Project Budget, Site
weather, theft and vandalism, insufficient meeting, Record keeping, Monitory
Uganda knowledge on cost control technique, Work and Cost Performance,
inadequate supervision Evaluation of work carried out.
46 | P a g e
Unautomated cost management system, Project Budget, Earned Value
lacking of reliable on cost of resource, Management, Direct Cost Variance
Ethiopia exclusion of some cost components during Analysis
estimation, non-uniform estimating formats
shortage of skilled professionals
Table 4: Summary of Problems Related to Cost Management Practices and Cost Management Strategy Employed by African
Countries
The common problems observed related to cost management practices among the countries stated
include:
 Inaccurate cost estimates

 Unautomated cost management system
 Theft and vandalism
 Shortage of skilled professionals
 Poor application of cost management techniques
47 | P a g e
Chapter 5
Conclusion and Recommendation
This chapter includes conclusions and recommendations that conform to the research objectives
stated by considering the results, analysis and discussions. The research carried out has shown
some of the problems associated with the existing local contractors’ cost estimating system. The
recommendations drawn from the evaluation may help the local contractors in Ethiopia to
improve their practices in cost control and cost estimation.
5.1 Conclusions
Identification and application of cost management practices is a prerequisite to minimize or to

avoid cost overrun in the construction industry. The main objective of this research is, therefore,
to identify and investigate the cost management practices of contractors in Ethiopia to overcome
the effects of cost overrun on building construction projects in Ethiopia. Desk study was used to
investigate the cost estimation and cost control practices of local contractors.
The following conclusions are drawn from the results of the analysis of desk study:
1. Cost estimating system used by local building contractors is inefficient due to the shortage
of skilled professionals and technicians and due to lack of standard estimating guidelines.
2. The cost estimating system employed by local contractors is mostly not automated, which
inhibits from enjoying the advantages in speed, man hour saving, reliability and accuracy
of estimates.
3. Most contractors don’t give proper attention to some construction cost components during
estimation like exclusion of risk allowance and improper estimation of overhead costs.
4. Lack of accurate and reliable data on resources' price and price escalation are also
significant reasons for inaccurate cost estimates.
5. The cost controlling techniques employed by contractors lacks real time reporting feature.
48 | P a g e
6. The Ethiopian construction industry suffers almost similar challenges to the strategies
instituted to manage project cost in other developing countries in Africa like bribery and
vandalism, shortage of skilled professionals and technicians in cost management and
outdated cost management techniques.
5.2 Recommendation
Local contractors in Ethiopia may improve their cost management practices and exterminate
related consequences like cost and time overrun by applying the proposed recommendations.
The following recommendations are given based on the findings:
1) The appointment of experienced cost management personnel or upgrading of already

existing employees’ professional skill through training programs is vital for
eliminating the inefficiency in cost estimation.
2) The use of estimation softwares should be popular among contractors due to the
advantages in terms of speed, reliability and accuracy of estimates.
3) Standard estimation guidelines should be put forth by government authorities like
Ministry of Urban Development and Construction.
4) Contractors should coordinate their effort to convince the concerned body of the
government to regulate the inflation on resources.
5) Contractors should use softwares like Microsoft Project and Primavera Suretrak,
which have real time reporting features for project cost controlling, so as to identify
any deviations from scheduled programs in terms of cost and time and take measures
to correct them.
6) The government should enforce severe punishment to those involved in corruption so
that bribery, nepotism and vandalism are abated.
49 | P a g e
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ADDIS ABABA UNIVERSITY

ADDIS ABABA INSTITUTE OF TECHNOLOGY

Assessment of The Practice of Cost Estimation and Control in

Name ID. No.

1. Abel Alemu ATR/5510/07

Advisor :- Mrs. Addis Mesfin

1.2 Statement of problem.........................................................................................................2

1.3 Objectives of the study.......................................................................................................3

1.4 Scope of the study..............................................................................................................3

2.1 The Construction Industry in Ethiopia...............................................................................4

2.2 Project management...........................................................................................................5

2.3 Project cost management....................................................................................................7

2.4 Resource Planning..............................................................................................................8

2.5 Cost estimation...................................................................................................................9

2.6 Cost Budgeting.................................................................................................................24

2.7 Cost Control.....................................................................................................................24

2.8 International Cost Control Practices.................................................................................28

3.2 Research design................................................................................................................36

3.3 Sources of Data and Research Instruments......................................................................36

Result and discussion..................................................................................................................37

Zimbabwean cost management practices...............................................................................37

Nigerian cost management practices......................................................................................39

Ugandan cost management practices.....................................................................................40

Cost Management Practices of National Contractors in Ethiopia..........................................41

Conclusion and Recommendation..............................................................................................47

PMBOK - Project Management Body of Knowledge

PCC - Project Cost Control

CPM – Critical Path Method

CVR – Cost Value Reconciliation

PERT - Program Evaluation and Review Technique

PMB - Performance Measurement Baseline

BAC - Budget at Completion

MSP - Microsoft Project

PCS - Project Costing System

COINS - Construction Industry Software

ROM - Rough Order of Magnitude

BOQ – Bill of Quantity

ROW - Right of way

Cm = Most Likely Cost

1.2 Statement of problem

1.3 Objectives of the study

1.3.1 General Objective

1.3.2 Specific objectives

1.4 Scope of the study

2.2 Project management

 Monitoring and Controlling, and

1) Project scope management

2) Project integration management

However, this research mainly focuses on project cost management.

2.3 Project cost management

I. Planning construction costs- Resource planning involves determining what physical

2.4 Resource Planning

2.4.1 What is Resource Planning

- Definition of work - Resource allocation

- Cost estimates - Expenditures

- Budgeting - Changes to the project plan

- Time estimates - Productivity

 Resource Pool Description- Knowledge of what resources are potentially available is

 Organizational Policies- The policies of the performing organization regarding staffing