DIRECT COST CONTROL

Direct & In Direct Cost

In construction, it is required to have a clear understanding of the different costs associated with a project. These costs can be broadly
categorized into direct costs and indirect costs which play a significant role in the overall financial management of a construction project.
Direct Cost in Construction:
Direct costs are expenses that are directly attributable to a specific construction project and can be easily quantified and allocated to a
particular aspect of the project.
Following are the major elements that include in Direct costs.
• labor,
• materials,
• equipment, and
• subcontractor expenses.
Each of these components contributes to the overall direct costs of a construction project and requires careful consideration and
tracking.

PROJECT MANAGEMENT THEORY M. Shobha Rani

DIRECT COST CONTROL
ASSIGNMENT-3 23261NC017
 DIRECT COST CONTROL

Direct & In Direct Cost

Indirect Cost in Construction:
Indirect costs in construction are not directly assignable to a specific project or item. Instead, they are expenses incurred by a company as
a result of undertaking multiple projects simultaneously. Indirect costs are often referred to as overhead costs since they are necessary
for the overall operation of the company.
Indirect costs in construction include
• general administration expenses, such as office rent, utilities, insurance, and salaries of support staff.
• Depreciation of equipment, tools, and vehicles used across various.
• Indirect costs also encompass expenses related to construction permits, licenses, and professional fees Etc.

PROJECT MANAGEMENT THEORY M. Shobha Rani

DIRECT COST CONTROL
ASSIGNMENT-3 23261NC017
 DIRECT COST CONTROL

Major Elements of Direct Cost

• Labor costs: Labor costs encompass wages and benefits for workers involved in the project. Construction projects require skilled and
dedicated labor, and their compensation forms a substantial portion of the direct costs. Accurately estimating and tracking labor costs
is crucial for budgeting and resource allocation.
• Materials: Construction projects rely on various materials such as concrete, steel, wood, and more. These materials are directly linked
to the project and contribute to its overall cost. Monitoring the prices, availability, and quality of materials is essential to ensure that
direct costs remain within the budgeted limits.
• Equipment: Equipment rentals or purchases are also considered direct costs. Construction projects often require the use of
specialized equipment, such as cranes, excavators, and concrete mixers. Renting or purchasing these equipment incurs direct costs
that need to be accounted. Proper management of equipment-related expenses helps in optimizing the project's budget and ensuring
smooth operations.
• Subcontractor: Subcontractors are hired to perform specific tasks within the project, such as electrical work, plumbing, or carpentry.
Their payments are directly tied to the project and contribute to the overall direct costs. Keeping track of subcontractor expenses is
vital for accurate cost estimation and financial control.

PROJECT MANAGEMENT THEORY M. Shobha Rani

DIRECT COST CONTROL
ASSIGNMENT-3 23261NC017
 DIRECT COST CONTROL

Direct Cost Control

Cost control is the process of monitoring, tracking, and controlling the actual cost of any construction project. This includes:
• Monitoring cost performance
• Ensuring all changes are correctly submitted
• Announcing any changes and impact to costs to project stakeholders.
• Following are to be followed in the Cost Control Process.
1. Estimating and planning costs,
2. Project budget,
3. Cross Checking & controlling spending and
4. tracking costs in real-time to make sure there are no unexpected changes.

PROJECT MANAGEMENT THEORY M. Shobha Rani

DIRECT COST CONTROL
ASSIGNMENT-3 23261NC017
 DIRECT COST CONTROL

Direct Cost Control

• Tracking direct costs is crucial for successful project management in the
construction industry. By closely monitoring these expenses, construction
professionals can have greater control over the project's budget and financial
health.
• Accurate tracking of direct costs allows project managers to make informed
decisions. It helps in identifying cost-saving opportunities, such as finding
alternative suppliers or optimizing labor utilization.
• By understanding the direct costs associated with each aspect of the project,
construction professionals can allocate resources effectively and ensure that
the project remains within the budgeted limits.
• Moreover, tracking direct costs safeguards the project's financial health.
Construction projects involve significant investments, and any
mismanagement of direct costs can lead to budget overruns and financial
instability. Actual Cost update
PROJECT MANAGEMENT THEORY M. Shobha Rani
DIRECT COST CONTROL
ASSIGNMENT-3 23261NC017
 DIRECT COST CONTROL

Direct Cost Control

• By maintaining accurate records of direct costs and regularly monitoring their
progression, project managers can take timely corrective actions and ensure that
the project's financial health is protected.
In conclusion, direct costs in construction are expenses that are directly attributable to
a specific project and can be easily quantified and allocated. Labor, materials,
equipment, and subcontractor expenses are some of the key components of direct
costs. Accurate tracking of direct costs is vital for successful project management, as it
enables better budget control, resource allocation, and overall financial health of the
Summary Report
project

PROJECT MANAGEMENT THEORY M. Shobha Rani

DIRECT COST CONTROL
ASSIGNMENT-3 23261NC017