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(CSC-3683) A Cost Control Model for a Medical Facility in China

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Level: Basic
TCM Section(s):
2.4. Project Control Process Map
8.1. Project Control Plan Implementation
Venue: 2021 AACE International Conference & Expo

Abstract: When North America investors build their facility in China, it is common that the project are overrun in the cost. One of the reasons is the Contractor adopts the "low bid, high claim" strategy. How to keep the cost under the budget? The traditional control model is to set a contingency funding to cover the cost changes and claims from the contractor which always results the cost overrun at the end. A dynamic cost control model (CCM) might solve the problem. This paper starts client's procurement strategy based on the supply chain theory that the client shall select the most suitable and able contractor to build the facility at a competitive price. Then, based on the Process Diagram from PMBOK, a Client's Cost Control Model is developed, follow by a case study. A good procurement strategy such as bid out for general contractor, direct purchase major equipment and performance packages will ensure the quality and also obtain a competitive price that result significant saving that could be utilized to cover the cost changes and possible claims from the contractor. A fair and transparent evaluation and communication with the contractor on monthly basis and the settlement that presented in the model will keep the project under the budget. The CAM might be a useful tool for the client to control the cost.