A model for integrating cost management and production planning and control in construction

Abstract

Traditional cost management systems adopted by construction firms have many problems, which are widely discussed in the literature: the information provided by them is usually too late, and tends to be too aggregated and too distorted to be relevant for production management. The main objective of this research work is to propose a project cost planning and control model for construction firms. This model aims to support the development of production management systems, in which cost management and production planning and control can be gradually integrated, in order to overcome the existing limitations of cost accounting systems. The scope of the model was limited to building projects carried out by small and medium sized companies, involved in both product development and production. The development of the model was based on the literature review and also on the results of nine empirical studies conducted in four different Brazilian construction firms. The model suggests the integrated application of three fairly well known cost management techniques: operational cost estimating, S‐curves and target costing. By using this set of tools, it is expected that cost management will become more proactive, and able to deal with the dynamic, uncertain and complex construction environment that exists in most projects. The model was partially tested in two case studies, in which it provided key information for supporting decision making related to design, production planning and contracts with suppliers.

Citation

Kern, A.P. and Formoso, C.T. (2006), "A model for integrating cost management and production planning and control in construction", Journal of Financial Management of Property and Construction, Vol. 11 No. 2, pp. 75-90. https://doi.org/10.1108/13664380680001081