27Cost control and EVAApart from ensuring that their project is com- pleted on time, all managers, whether in the office, workshop, factory or on-site, are con- cerned with cost. There is little consolation in finishing on time, when, from a cost point of view, one wished the job had never started!Cost control has been a vital function of management since the days of the pyramids, but only too frequently is the term confused with mere cost reporting. The cost report is usually part of every managers monthly report to his superiors, but an account of the past months expenditure is only stating historical facts. What the manager needs is a regular and up-to-date monitoring system which enables him to identify the expendi- ture with specific operations or stages, determine whether the expenditure was cost-effective, plot or calculate the trend, and then take immediate action if the trend is unacceptable.Network analysis forms an excellent base for any cost-control system, since the activities can each be identified and costed, so that the percentage completion of an activity can also give the proportion of expenditure, if that expenditure is time related. The system is ideal, therefore, for construction sites, drawing offices or factories where the basic unit of control is the man hour.Cost control and EVASMAC Manhour controlSite Manhour and Cost (SMAC)* is a cost control system developed specifically on a network base for either manual or computerized cost monitoring, which enables performance to be measured and trends to be evaluated, thus providing the manager with an effective instrument for further action. The system can be used for all operations where man hours have to be controlled, and since most functions in an industrial environment are based on manhours and can be planned with networks, the utilization of the system is almost limitless.The following operations or activities could benefit from the system:1 Construction-sites 2 Fabrication shops 3 Manufacturing (batch production) 4 Drawing offices 5 Removal services 6 Machinery commissioning 7 Repetitive clerical functions 8 Road maintenanceThe criteria laid down when the system was first mooted were:1 Minimum site (or workshop) input. Site staff should spend their time managing the contract and not filling in unnecessary forms. 2 Speed. The returns should be monitored and analysed quickly so that action can be taken. 3 Accuracy. The manhour expenditure must be identifiable with specific activities which are naturally logged on time sheets. 4 Value for money. The useful manhours on an activity must be comparable with the actual hours expended. 5 Economy. The system must be inexpensive to operate. 6 Forward looking. Trends must be seen quickly so that remedial action can be taken when necessary.The final system satisfied all these criteria with the additional advantage that the percentage complete returns become a simple but effective feedback for updating the network programme.221*SMAC is the proprietary name given to the cost-control program developed by Foster Wheeler.Project Planning and ControlOne of the most significant differences between SMAC and the conven- tional progress-reporting systems is the substitution of weightings given to individual activities, by the concept of value hours. If each activity is monitored against its budget hours (or the hours allocated at the beginning of the contract, to that activity) then the value hour is simply the percentage complete of that activity multiplied by its budget hours. In other words, it is the useful hours as against the actual hours recorded on the time sheets.If all the value hours of a project are added up and the total divided by the total budget hours, the overall per cent complete of the project is immediately seen.The advantage of this system over the weighting system is that activities can be added or eliminated without having to re-weight all the other activities. Furthermore, the value hours are a tangible parameter, which, if plotted on a graph against actual hours, budget hours and predicted final hours, gives the manager a feel of the progress of the job that is second to none. The examples in Tables 27.1 and 27.2 show the difference between the two systems.222Table 27.1Weighting system1234567 Activity no.ActivityBudget 100Weighting% Complete% WeightedActual hours 1001A10000.23210023.21,400 2B8000.186509.3600 3C6000.140608.4300 4D12000.2794011.2850 5E3000.070704.9250 6F4000.093807.4600 Total43001.00064.44,000Overall % complete = 64.4%.Predicted final hours 40000.644= 6211 100 hoursEfficiency = 4300 0.6444000= 69.25%Cost control and EVASummary of advantagesComparing the weighting and value hour systems, the following advantages of the value hour system are immediately apparent:1 The value hours system requires only six columns against the weighting systems seven. 2 There is no need to carry out a preliminary time-consuming weighting at the beginning of the jo