This course introduces the types of cost estimation from the conceptual design phase through the more detailed design phase of a construction project. In addition, the course highlights the importance of controlling costs and how to monitor project cash flow. Students will work on a break-even analysis of construction tasks in a project.
Close Out Activities
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Construction Cost Estimating and Cost Control
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Close Out Period
Ian Taylor, Project Manager at Turner and Townsend, Inc., introduces cost management close out and punch-list review.
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Ibrahim Odeh, Ph.D., MBAInstructor, Department of Civil Engineering and Engineering Mechanics, Columbia University
Director of Research and Founder, Global Leaders in Construction Management
Okay, so we're now at the very final stage, of constructions.
So in this section, we're going to discuss the close-out
activities involved, as a cost manager or as a cost estimator.
We're going to discuss, the actual Final Account document itself.
We're going to touch on the client care review, which is something that Turner and
Townsend do and we feel that is, very important towards the end of a project.
And then the actual Handover Documents, to complete this section.
So what is Project Close Out?
It's making sure you are ready to wrap up the project and
leaving it in a clean, sensible.
Organized financial status.
So as we were discussing earlier in your role, as a cross manager or
cross estimator.
It's your duty to be managing the costs and the budget, throughout the project.
So it's also your job to make sure you close out the project financially,
in the most organized and sensible way.
This includes, ensuring all change orders have been closed out, and agreed.
You don't want to be leaving any change that are still outstanding.
You going to make sure you've gone through all of them properly,
with the contractor and with the client.
And make sure you're happy, that they're either rejected or approved.
Then you have the final payment, so you need to be close to, or
have completely executed the final payment.
Then there's the final reporting, and the project turnover.
So what is a Final Account?
It's a document that shows the original contract sum,
adjustments to the contract sum, confirmation of change orders.
Loss and expenses claims, and confirmation of contractors agreement to final sums.
So final account, is a clear statement showing the contract sum
followed by all the necessary adjustments, to the contract sum.
So what are the procedures involved, with putting together a final count.
You need to always refer back to the contract sum.
It's a collaborative approach.
You need to make sure to incorporate, all final change orders and claims.
So we at Turner Townsend, understand that Final Accounts are very project specific.
And they use the contract sum, as the starting point.
The template for such Final Accounts, can often be the same or
similar to your monthly cost report.
So, in theory the Final Accounts, is your final cost report
concluding all financial monitoring, of the project itself.
Under the terms of the contract, the cost manager is responsible for
its preparation.
But in reality the best approach, is a collaborative effort by both the clients.
The general contractor, and the cost manager,
to work together to produce an agreed account.
A final account, is the agreed statement of the amount of money to be paid at
the end, of a building contract by the client.
To the general contractor.
A final account encourages a sense of finality,
to negotiations leading up to agreement of the Final Account.
Between the parties to the contract.
Turner and Townsend ensure that in accordance with our standard practice,
both the client and the general contractor.
Sign the final account statement.
To signify that the Final Account figure, represents the full and
final settlement of change orders and claims.
So really here, what you're trying to do there as a cost manager,
you need to be leaving the project and the account.
In a nice healthy order, and the client will not want to see further invoices,
or claims coming through post this period.
Looks clumsy, often funding and projects are closed out in this period.
And it's hard therefore to pay any outstanding money owed,
to whoever owned that project.
Now, contract's very important here, as part of the final count.
Hopefully you're referring to the contract throughout the construction periods,
as a cost manager.
But under the terms and conditions of the contract,
the contractors to provide the cost manager with new documents necessary.
For the Final Account preparation,
not later than three months and after practical completion.
And re-contract is different, that typical was three months.
Within one month of the receipt of these documents,
the cost manager is to prepare and assert in the Final Account sum.
And send this to the contractor.
The bulk of the Final Account,
would generally consist of work priced at the original contract rate.
if the general contractor has reason to doubt,
the accuracy of the original build items.
He can make a request to the cost manager, for what concern to be reviewed on site.
This will need to happen before coming to the very end,
of finalizing the account document.
The adjustment of the contract sum in the Final Account,
normally falls on the seven relevant items.
Although, the cost manager must have regards to all the matters listed,
in the standard form of contract and conditions.
As I was just saying, need to make sure you request all the information
from the contractor, no later than three months before PC, or project completion.
You need to commit to have your review period, within one month from PC.
Need to liaise directly with contractor, to review any disputed items on site.
Need to make final adjustments to Final Account sum.
As required.
Also it's very important to take on board the contract conditions,
that tabulate all the matters that shall be dealt with in the Final Account.
In order to adjust the contract sum, in accordance.
With conditions.
So firstly items to be deducted.
Rejected change orders.
Design errors and omissions.
Amounts enjoyed by the client.
So this is typically the contingency.
You might have various contingency, within the actual contract sum.
You might have a client contingency, you might have a project contingency.
So this is where these now are deducted, from the Final Accounts.
Now if you're doing a fantastic job as a cost manager,
hopefully you've always had the right allocation of contingency.
Throughout the project, you draw down against that contingency,
and you're either left with a very small sum at the end.
Which looks good, or sometimes you still have a fair bit.
Either way, you deduct it from the Final Accounts.
Then your items to be added back in.
The original contract fees, approved change orders, and again.
If you're being a good cost manager throughout,
you're monitoring your change orders properly.
You're recording it in your cost reports.
And this is when it filters through to your final account,
as approved change orders.
Then you got all the taxes and regulator filing fees, and testing and
insurance fees, they needed to be added back in.
And shared saving clauses and provisions.
Now, you don't always have a shared saving clause,
but a lot of projects these days are set up, with a shared savings clause.
It could be finishing on time, or finishing under budget.
It's those kind of clauses.
Then there's performance incentives.
Similar to the above.
Again, making sure that they're added back in.
Or whatever items must be shown separately, in the Final Accounts.
And the net amount of each change order, and amounts due to each nominated
subcontractor, and nominated supplier listed.
When preparing the Final Accounts,
the cost manager should give the general contractor the opportunity to present.
When filled views and details are recorded, so
that the document is prepared before liaison with the contractor.
Delays in the settlement of the Final Accounts,
represent additional cost to the contractor.
And in the majority of cases,
the client is anxious to know their ultimate financial commitment.
The contractor and cost manager have a contractual responsibility,
under the contract to keep the date stipulated.
In the contract for completion of the Final Accounts and the contractor,
should produce area assistants.
In the prompt disclosure and the supply, of all necessary supporting data.
Finally, you must understand that the clients,
will typically expect a formal set of final handover documentation.
So these items include as-built drawings, ONM manuals, warranties and
your actual physical final project and cost management report.
That's your actual Final Accounts document there.
So lots of companies do this, this is something that Turner and Townsend do, and
we feel it's very important.
Towards the end of the project.
So you would have finished your Final Accounts, by this stage or
you're at least in that Final Accounts period.
And it's always good for someone senior within your
organization, to perform a Client Care review of.
Your role as a cost manager or the cost team's role, or
even the company you work for, their role overall with the clients.
It's a critical component of a project closeout.
Engages client for active feedback.
And we only learned from feedback, sometimes constructive which is
the most positive way and sometimes you learn the hard way.
You can only get better from this feedback.
That's really important to receive the feedback there.
It offers constructive criticism to improve,
as a professional and it enhances client retention rates.
Finally, you must understand that the client will typically expect.
A formal set, of final handover documentation.
These items should include as built drawing, O&M manuals,
the project warranties, and the final project and cost management reports.
So that's your actual final report.
So that's actually your Final Accounts, included there in that last point.
I want to go on Client Care now.
At Turner and Townsend, we thought this is very important at the end of the project.
So you've either finished your Final Accounts or your Final Accounts stage,
and we thought it is very important, to get feedback from the client.
To see how you've done in your world as a cost manager,
how possible your cost team have done.
Or even the company you work for, how you performed.
Now, we can only get better, from feedback and learn from constructive criticism.
So it's really important that you get this Client Care.
As an overview, so it's a critical component of a project closeout.
Engages client for active feedback.
Offers constructive criticism to improve, as a professional and
enhances client retention rates.
So what we're saying here is as.
Cost managers, we strive to deliver excellent services in order to build
long-term relationships with our clients.
And to differentiate ourselves from our competitors.
A defined client care process, allows us to continually check that we're delivering
against our client's expectations.
So remember, they pay our company,
they pay our salaries that puts food on our table so we can eat.
We use the Client Care process, to gather feedback from our clients.
About the following aspects of our services.
Performance, how satisfied is the client that we deliver on our brief and promises.
Contribution, how satisfied is the client that we understand your specific needs and
provide tailored relevant solutions.
The people itself, how satisfied is the client with our people and
the way they relate to your team.
Are there any staff that stood out?
In terms of our management, so the management side of cost management.
How satisfied is the client with our team's leadership,
the structure, and the continuity?
Communications, how satisfied is the client with the way we communicate plans,
progress, and issues.
And turning down to skills and processes, how satisfied is the client
without technical expertise, and tools, and systems we use.
Now innovation is really important.
How satisfied is the client that we have.
Practically come up, with solutions to your problems.
And one of the key points to being a cost manager, is value for money.
How satisfied is the client that we are providing value for
money to them, to the project, to the team.
And getting overall value for money, from our role.
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