Cost management of a construction company based on functional cost analysis

Abstract

In conditions of environmental instability and uncertainty, one of the factors for the effective functioning and development of a construction company is high-quality and continuous cost management. The cost management process is aimed at maximizing profits by increasing the efficiency of the use of all resources. It requires constant monitoring to make adjustments to the planned costs and their amounts. Cost management is impossible without careful analysis. Along with the traditional methods of cost management, it is advisable for construction companies to apply functional cost analysis, which is an effective tool for optimizing costs and the quality of production functions performance. The research studies a construction company. Particular attention in the study is paid to indirect costs due to an increase in their share in the structure of the construction products cost. Within the framework of the functional cost analysis, an ABC analysis was carried out and a Pareto curve was modelled. It allowed us to focus on the allocated cost areas and classify the processes into main, basic and supportive ones. The significance of the identified processes was determined using the paired comparisons method. The results obtained allow us to draw a conclusion about the correspondence of the share of cost items and their significance for the analyzed construction company. The research materials are of interest and practical importance for the CEOs of construction companies.

Keywords

• cost management
• functional cost analysis
• abc analysis
• construction company
• process