Cost Management Flashcards

A project's Estimate at Completion (EAC) is calculated as BAC / CPI. If BAC = $800,000 and CPI = 0.90, what is the EAC?

Answer: $888,889

EAC = BAC / CPI = $800,000 / 0.90 = $888,889, predicting the project will finish over budget.

What is the primary purpose of a cost breakdown structure (CBS) in construction management?

Answer: To organize and categorize all project costs for control and reporting

A CBS hierarchically organizes all project costs, enabling systematic tracking, reporting, and control.

Which contract type places the greatest cost risk on the owner?

Answer: Cost-plus with a fixed fee

In a cost-plus contract, the owner pays all actual project costs plus a fee, bearing the risk that costs may be higher than anticipated.

When performing a construction cost estimate, what does 'direct cost' typically include?

Answer: Labor, materials, equipment, and subcontractor costs directly tied to the work

Direct costs are expenses directly attributable to field construction activities, including labor, materials, equipment, and subcontractors.

A construction manager implements a 'cost-to-complete' forecast each month. What does this metric represent?

Answer: The estimated remaining cost needed to finish all remaining work

Cost-to-complete (CTC) is the forecasted cost of all remaining work, used to project final project cost.

In value engineering during construction, what is the primary goal?

Answer: Achieving required project functions at the lowest life cycle cost

Value engineering seeks to deliver all required functions at the lowest total cost while maintaining quality, safety, and performance.

What is the 'To-Complete Performance Index' (TCPI) used for in earned value management?

Answer: Calculating the cost efficiency needed on remaining work to meet a target

TCPI = (BAC - EV) / (BAC - AC), indicating the efficiency required on remaining work to finish within the original budget.