Cost management

What is cost management?

Cost management refers to the systematic planning, management, and control of costs in a project. It encompasses all measures aimed at efficiently managing and optimizing the costs incurred during a construction or real estate project. In the construction industry, cost determination is performed on a component-oriented basis and is carried out using cost elements—the smallest planning units. These elements are defined in accordance with DIN 276 and form the basis for the preparation of budgets and cost estimates.

The Importance of Cost Management in Project and Real Estate Controlling

Cost management is a critical component of project controlling and financial planning. Through effective cost management, companies can ensure that projects are carried out within the intended budget and avoid unnecessary expenses. The key tasks of cost management include:

• Cost planning: Defining a clear budget based on project requirements and resources.
• Monitoring cost trends: Continuously monitoring and adjusting expenditures to prevent budget overruns.
• Identifying opportunities for cost savings: Identifying areas where costs can be reduced or optimized.
• Forecasts and updates: Estimating projected costs and adjusting the budget in response to changes in the course of the project.

Component-based cost estimation and cost elements

In the cost management of a construction project, costs are determined using component-based cost elements. These elements are structured in accordance with DIN 276 and describe the individual components required to calculate a project’s costs. The most important characteristics of cost elements are:

• Quantities: The required quantities of materials, areas, or labor hours.
• Services: The specific construction or engineering services that must be provided.
• Costs: The financial expenses for materials, labor, and other resources.

The sum of all cost elements results in a cost estimate or cost projection, which in turn forms the basis for the entire project financing.

Typical components of cost management

Cost management in construction projects involves several key steps that are critical to a project’s financial success:

• Cost planning: Preparing the project budget based on cost elements, material prices, and performance requirements.
• Cost control: Monitoring and comparing planned costs with actual expenditures during the project.
• Cost forecasts: Ongoing adjustments to the original cost estimates to account for unforeseen cost increases or decreases.
• Change Order Management: Managing changes and additional requirements during the construction phase that may result in change orders and additional costs.

Cost Management in the Real Estate and Construction Industry

In the construction and real estate industry, cost management is of critical importance, as it often involves large investments and complex projects. The most important applications include:

• New construction projects: In these cases, all costs must be carefully tracked and monitored to ensure the project is completed within the allocated budget.
• Renovations and refurbishments: Cost elements are also used for existing properties to determine and manage renovation costs.
• Real Estate Development: The development of real estate portfolios or large-scale projects requires precise cost planning to ensure the project’s profitability.

Related terms

• Cost estimate
• Budgeting
• Cost control
• Project Financing
• Supplementary management

Cost Management in PROBIS

PROBIS offers a comprehensive cost management solution that integrates all relevant functions. With PROBIS, users can:

• Perform cost planning: Cost elements are calculated precisely based on quantities, prices, and services.
• Manage cost updates: Changes to project data are immediately incorporated into cost forecasts.
• Avoiding budget overruns: All cost trends are continuously monitored and documented.
• Generate reports: Cost reports and analyses are automatically generated to ensure transparent communication with investors and stakeholders.
• Change Order Management: PROBIS enables the seamless integration of change orders and modifications into project costs.

PROBIS helps you keep track of all costs and makes financial planning efficient and transparent.

Conclusion: What is cost management?

Cost management is an essential component of successfully executing construction and real estate projects. By identifying cost elements on a component-by-component basis in accordance with DIN 276, precise and transparent cost planning is made possible. With PROBIS, project managers gain a powerful tool for planning, monitoring, and optimizing costs, enabling projects to be completed efficiently and within budget.