A centralised cost management system: exploiting EVM and ABC within IPD

Abstract

PurposeIntegrated project delivery (IPD) is highly recommended to be utilised with building information management (BIM), specifically with BIM level-3 implementation process. Extant literature highlights the financial management challenges facing the proposed integration. These challenges are mainly related to the IPD compensation and the conventional cost control approaches that are not consistent with IPD principles. As such, this paper presents an integration of several methods to support automating risk/reward sharing amongst project parties thus enhancing IPD core team members’ relationship.Design/methodology/approachThe literature review was used to highlight the challenges that face the IPD-based cost management practices such as the risk sharing/reward sharing amongst IPD core team members and potential methods to bridge the revealed IPD gap. A framework was developed by integrating the activity-based costing (ABC) – as a method to analyse the cost structure – and earned value management (EVM) to develop mathematical models that can determine the three main IPD financial transactions (i.e. …) fairly. To demonstrate the applicability of the developed system, a real-life case study was used, in which, promising results were collected in regard to visualising the cost control data and understanding of the accumulative status of the project cost and schedule for team members.FindingsA centralised cost management system (CCMS) for IPD is developed to enable the IPD cost structure as well as automating the risk-sharing/reward-sharing calculations. This system is linked with a web-based management system to display the output of proposed risk-sharing/reward-sharing models. Moreover, a novel grid is developed to show the project status graphically and to respect the diversity in core team members backgrounds. In addition, the case study showed that the proposed integration of different methods (ABC, EVM, BIM and web-based management system) is interoperable and applicable.Originality/valueThis research presents a comprehensive solution to the most revealed challenges in cost management practices in IPD implementation. The outcome of this research contributes to the body of knowledge through presenting new extensions of the EVM to be used with the IPD approach to calculate risk/reward. Moreover, the implementation of the proposed tools such as centralised cost management system (CCMS) and CCMS for IPD web system will enhance/foster the implementation of the IPD in conjunction with BIM process.

Cost Early-Warning Model System of Large-Scale Construction Project

“…Company A's cost management system is imperfect, and the division of rights, responsibilities, and benefits is unclear, which leads to the widespread phenomenon that the management departments of Company A pay insufficient attention to cost management. Most departments lack communication, and cost management mainly focuses on the comparison of the difference between budget cost and actual cost, neglecting to find effective strategies, which restricts the development of the construction industry [ 25 – 28 ]. Therefore, it is urgent to strengthen the attention of each management department, establish an effective internal control mechanism of enterprises, and cultivate the consciousness of cost management among all employees.…”

Feasibility of implementing IPD approach for infrastructure projects in developing countries

“…Elghaish et al (2020b) propose a strategy for implementing blockchain technology into IPD applications. By coding the three major activities of IPD projects: reimbursement expenditures, profit, and cost savings as functions of the IPD smart contract, the framework would enable core project team members to perform all financial transactions automatically (Elghaish and Abrishami, 2020c). The proposed usage of the IPD-based blockchain provides a variety of benefits, including 1) simplifying decision-making among IPD core team members, 2) recording cumulative risk/reward values for each network participant, and 3) establishing smart contracts that address legal problems (Hunhevicz et al, 2020, Elghaish et al, 2020b The Internet of Things (IoT) envisions a future in which digital and physical things or objects (such as mobile devices, machines, and tools) may be linked together using appropriate information and communication technologies to allow a variety of applications and services (Razzaque et al, 2015, Rahimian et al, 2008.…”

Implementation of the Activity Based Costing Method in Construction

“…The preparation of ASB is important to do because there are often injustices and budget irregularities between similar activities (Ahmad et al, 2013). Expenditure Standard Analysis (ASB) can determine the reasonableness of costs and workload for carrying out activities so that it can minimize the occurrence of unclear expenditures that cause budget inefficiencies (Elghaish & Abrishami, 2021).…”