Construction Economics and Project Management
Measurement and cost control
Construction Economics and Project Management covers measurement, bills of quantities, cost planning, procurement, contract administration and programme control. Key instruments: the standard method of measurement adopted by the contract, preliminaries, provisional and prime cost sums, variations, interim valuations, retention (commonly 5%), defects liability, fluctuation clauses and final accounts. Cost control compares committed and actual cost with budget; value engineering tests function against cost. On programme, use critical path analysis, total and free float, and earned value.
Earned value formulas
Cost variance = earned value − actual cost; schedule variance = earned value − planned value; CPI = EV/AC; SPI = EV/PV. Negative cost variance means overspend.
Worked example
Contract sum ₦200m. Work executed ₦80m, materials on site ₦5m, previous certificates ₦40m, retention 5%. Gross valuation = ₦85m. Retention = 5% × ₦85m = ₦4.25m. Net valuation = ₦80.75m. Less previous certificates ₦40m = ₦40.75m due on this certificate. The reasoning: retention is held on the gross value of work and materials, then previous payments are deducted to avoid double payment. Half the retention is normally released at practical completion, the balance after the defects period.
Traps
Deducting retention twice; treating provisional sums as measured work; misreading the sign of cost variance; assuming float belongs to the contractor when it is total float; ignoring time-related preliminaries when granting an extension of time; certifying materials not yet on site.