Research into Cost Control Strategy in Engineering Construction Project

（Yancheng Institute of Technology， Jiangsu Yancheng 224000）

Abstract. Cost control of engineering construction project is to make guidance， monitoring， adjustment and restriction on all kinds of resources and expenses consumed in engineering construction during the formation of the project costs. In this way， it can get rid of the possibly occurred errors in time and control the actual amount of all expenses within the plan cost so as to realize the target of lowering the cost. It aims to reasonably use human resources， materials and finance， to lower the cost and to increase the revenue. It endeavors to improve the management level of engineering project cost and create relatively good economic benefits. This paper takes the improvement of work as the methods and lowering the costs as the target. Through strengthening the cost control， the enterprise management level can be promoted and get comprehensive improvement.

Key words： Engineering construction； cost management； construction project

1.Function of Engineering Cost Control

1）The implementation of cost control is an important method to ensure the enterprise has finished the set cost target. Cost control is a broad set of cost accounting methods and management techniques with the common goal of improving business cost-efficiency by reducing costs， or at least restricting their rate of growth. Businesses use cost control methods to monitor， evaluate， and ultimately enhance the efficiency of specific areas， such as departments， divisions， or product lines， within their operations.

2）The implementation of cost control is to lower the product costs， to increase benefits and to improve the economic efficiency. The objective was often to be the low-cost producer in a given industry， which would typically allow the company to take a greater profit per unit of sales than its competitors at a given price level.

3）The implementation of cost control provides system guarantee to protect the security integrity of enterprises. It is a complex business requires frequent information about operations in order to plan for the future， to control present activities， and to evaluate the past performance of managers， employees， and related business segments.

4）Cost control has played a comprehensive role in all control systems in enterprises. Performance evaluation measures outcomes of employee's actions by comparing the actual results of business outcomes to predetermined standards of success. In this way management identifies the strengths it needs to maximize， and the weaknesses it seeks to rectify. This process of evaluation and remedy is called cost control.

2.Existing Problems in Cost Control of Engineering Construction Project in our Country

2.1Cost control system is not strict and responsibilities， rights and benefits are not clearly divided

For effective cost control， most organizations use standard cost systems， in which the actual costs are compared against standard costs for performance evaluation and the deviations are investigated for remedial actions. Cost control is also concerned with feedback that might change any or all of the future plans， the production method， or both.

2.2 Cost control method is single and efficient control over target cost is in lack of

Cost accounting information is designed for managers. Since managers are taking decisions only for their own organization， there is no need for the information to be comparable to similar information from other organizations. Instead， the important criterion is that the information must be relevant for decisions that managers operating in a particular environment of business including strategy make. Cost accounting information is commonly used in financial accounting information， but first we are concentrating in its use by managers to take decisions. The accountants who handle the cost accounting information generate add value by providing good information to managers who are taking decisions. Among the better decisions， the better performance of your organization， regardless if it is a manufacturing company， a bank， a non-profit organization， a government agency， a school club or even a business school. The cost-accounting system is the result of decisions made by managers of an organization and the environment in which they make them.

2.3Material management is in chaos and efficient system restrictions are in lack of

The organizations and managers are most of the times interested in and worried for the costs. The control of the costs of the past， present and future is part of the job of all the managers in a company. In the companies that try to have profits， the control of costs affects directly to them. Knowing the costs of the products is essential for decision-making regarding price and mix assignation of products and services.

3.Measures that should be taken in Cost Management of Engineering Construction Project

3.1Change thoughts and ideas and establish accurate management strategies

The cost accounting systems can be important sources of information for the managers of a company. For this reason， the managers understand the forces and weaknesses of the cost accounting systems， and participate in the evaluation and evolution of the cost measurement and administration systems. Unlike the accounting systems that help in the preparation of financial reports periodically， the cost accounting systems and reports are not subject to rules and standards like the Generally Accepted Accounting Principles. As a result， there is a wide variety in the cost accounting systems of the different companies and sometimes even in different parts of the same company or organization.

3.2 Care the subsequent control of construction project

With the rapid popularity of computer equipments， computer has been the daily office facilities for every unit. In project cost composition， the cost for computer equipment procurement has accounted a major share. It is the key to control the project cost. Cost accounting has long been used to help managers understand the costs of running a business. Modern cost accounting originated during the industrial revolution， when the complexities of running a large scale business led to the development of systems for recording and tracking costs to help business owners and managers make decisions.

3.3 Reflect the implementation conditions of all indexes in engineering construction

In the early industrial age， most of the costs incurred by a business were what modern accountants call "variable costs" because they varied directly with the amount of production. Money was spent on labour， raw materials， power to run a factory， etc. in direct proportion to production. Managers could simply total the variable costs for a product and use this as a rough guide for decision-making processes.

3.4 Design cost examination periods scientifically and reasonably

The overall purpose of the casebook is to help students develop analytical skills by organizing unstructured information in a case， devise appropriate analyses and draw appropriate conclusions. In project cost composition， the cost for computer equipment procurement has accounted a major share.

3.5 Pay enough attention to material procurement work

Centralized procurement aims at finding the best deals with local vendors for the corresponding location of the company department. Avoids duplicity of orders and promotes benefits arising from the high volume bulk discounts， lower transportation and inventory management costs， organized transactions and improved vendor relationships.

4.Cost Control during Engineering Construction

4.1Strengthen management on engineering task list and limitation material list

In a reverse auction， a buyer puts a contract out for bid， either using specialized software or through an online marketplace. Multiple sellers offer bids on the item， competing to offer the lowest price that meets all of the specifications of the bid. As the auction progresses， the price decreases as sellers compete to offer lower bids than their competitors. Bidding performed in real-time via the Internet results in a dynamic， competitive process. This helps achieve rapid downward price pressure that is not normally attainable using traditional static paper-based bidding processes.

4.2 Compare and check balance and budgets

Reverse auctions should be largely kept to the supply of commodity products rather than proprietary ones； and having a strong， competent bidder leading your effort at the time of the auction. Therefore， the procurement department and the design department should cooperate with each other well.

4.3 Collect and arrange original materials of monthly revenue

In modern cost accounting， the concept of recording historical costs was taken further， by allocating the company's fixed costs over a given period of time to the items produced during that period， and recording the result as the total cost of production. It also essentially enabled managers to ignore the fixed costs， and look at the results of each period in relation to the standard cost for any given product.

4.4 Carry out responsibility cost check based on monthly revenue check

As business became more complex and began producing a greater variety of products， the use of cost accounting to make decisions to maximize profitability came under question. As business management learned to identify the constraints， they increasingly adopted throughput accounting to manage them from each unit of constrained resource.

4.5 Regularly check contract implementation with foreign economics

The company's operations manager knew that recent investment in automated foundry equipment had created idle time for workers in that department （generally once a month）. The constraint on production of the rail coaches was the metalwork shop. She made an analysis of profit and loss if the company took the contract using throughput accounting to determine the profitability of products by calculating revenue less variable cost in the metal shop.

4.6 Regularly check cost control conditions of each responsible department and responsible persons

There are two main thrusts for Lean Accounting. The first is the application of lean methods to the company's accounting， control， and measurement processes. This is not different from applying lean methods to any other processes. The objective is to eliminate waste， free up capacity， speed up the process， eliminate errors & defects， and make the process clear and understandable.

5.Conclusion

Cost control of engineering project has gone through the entire process of the engineering construction， from its bidding to the successful building. It is an important link in the comprehensive cost management of the enterprise. High attention should be given on organization and control measures so as to improve the target of enterprise economic benefits. It can get rid of the possibly occurred errors in time and control the actual amount of all expenses within the plan cost so as to realize the target of lowering the cost. It aims to reasonably use human resources， materials and finance， to lower the cost and to increase the revenue. It endeavors to improve the management level of engineering project cost and create relatively good economic benefits. This paper takes the improvement of work as the methods and lowering the costs as the target. Through strengthening the cost control， the enterprise management level can be promoted and get comprehensive improvement.

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