Three very important questions one must ask when initiating a project…
- Does the project have an adequate budget?
- Will the project come in on time and on budget?
- If not, who is going to pay for the extra costs incurred?
Cost Controls
Lagrange applies the fundamentals of project management in our cost controls by initially creating a baseline budget. The baseline budget is created by utilizing the project cost estimate. The baseline is then used for the tracking of cost deviations and variances as the project progresses. We strive to provide visibility of the budgeted costs and how the estimates / budgets were determined for everyone involved to ensure the project team is in alignment.
Cost Control Methods
Design-To-Cost (Dtc) – Cost Evaluation And Estimate Of Probable Cost
As the design documents evolve, we will compare variances to previous estimates and prepare reasoning for the cost variances. We then find a path forward to mitigate cost risk for the project and prepare Estimates of Probable Costs with the applicable markups such as soft costs, contingencies and price escalation.
Earned Value Management and Change Controls
We track Earned Value to see if the project is staying true to the budget and planned burn rate. Project controls become even more important when changes occur as a result of unforeseen conditions, scope change etc. Any time there are unforeseen expenditures, we document the cause of the changes and who is responsible for the extra costs.
With this on-going measurement of the cost and completion schedule, we can advise the management team of any potential issues completing the project on time and / or within budget.
If requested, we will also become involved in contractor dispute negotiations required to resolve the discrepancies.
Trending and forecast Variances are important
With Lagrange involved in the monitoring of expenditures against the budget elements, we not only monitor actual costs to date, but build a comprehensive trending system that identifies and tracks all current and potential issues that can impact cost and / or schedule.
Then, in combination with the trending system, we are able to manage changes, forecast cost variances and determine the estimated cost at completion.
Probabilistic Forecasting
Probabilistic or risk based forecasting utilizes the Monte Carlo simulation methodology to determine the probabilistic outcome of the estimated cost at completion. This method typically provides a significant added value in providing accuracy, visibility and credibility to the cost controls process.