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PROGRAMME
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269-PC-00-PR-002

COST CONTROL PROCEDURE

FOR MAIN CONSTRUCTION WORKS

APPROVAL OF THE COMPANY

STATUS *
NAME
TITLE
DATE
SIGNATURE
* Please circle the proper letter:
A : Approved

2
1
0
REV.

B : Approved as noted

Re-issued as a common document for ACG & Shah Deniz

Project
Revised as per Company comments dated July 1, 2002.
Transmittal No: FFD-24/AIOC-TKAZ:DT-0168
Issued for approval
DESCRIPTION

C : Not approved, commented.

A.C.C.

I.M.G.

L.K.

08/10/2003

UC/IOO

FB

TB

04/07/2002

UC/IOO
PREPD

FB
CHKD

TB
APPRD

25/06/2002
DATE

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INDEX
SECTION TITLE

PAGE

1.

PURPOSE

2.

SCOPE

3.

REFERENCES

4.

DEFINITIONS AND ABBREVIATIONS

5.

INTRODUCTION

6.

METHOD

7.

REPORTING

8.

RESPONSIBILITIES

9.

REVIEW

10.

APPENDIX

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1. PURPOSE
The purpose of this procedure is to define and set the methods for cost control activities to
control, monitor and forecast the target cost of the project as part of the total project
control system
2. SCOPE
This procedure covers all cost control activities for engineering, procurement,
construction and commissioning activities within the scope of work defined by
contract/agreement for ACG Full Field Development, Phase1, Onshore Terminal, Main
Construction Works.
3. REFERENCES
Tekfen Planning & Control Procedure P4.09.03
ACG, Full Field Development, Phase 1, Contract No. FFD-C-024
Personnel Time Recording Procedure 269-PC-00-PR-004
4. DEFINITIONS AND ABBREVIATIONS
AFC

Approved For Construction

BOAQ

Bill of Approximate Quantities

BOQ

Bill of Quantities measured from AFC drawings

CMS

Contract Master Schedule

PCS

Project Control System

WBS

Work Breakdown Structure

CBS

Cost Breakdown Structure

5. INTRODUCTION
Works that sum up to Target Cost of the project are consisting of Lump Sum Works,
Direct Works paid by Labour and Material rates, Training of Azeri Nationals and Labour
for Commissioning and Startup Support. Risk Allowances are also added to the Target
Cost.

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Lump Sum Target Cost: Lump Sum target will not change unless there is a Fundamental
Change.
Direct Works Target Cost: As Engineering and Construction activities progress, total and
actual quantities and actual spent man-hours are measured. These data are tabulated to
obtain actual and forecast values to compare against Target Cost Summary, as described in
detail in Article 6.
Training of Azeri Nationals: Training cost is reimbursed as per actual values.
Labour for Commissioning and Start-up Support: Cost of labour supplied for
commissioning and start-up support is also reimbursed as per actual hours.
6. METHOD
Direct Works Cost
There are two main factors that may have an affect on Direct Works Target Cost unless
there is a Fundamental Change: Material and Labour. For each of these two factors, there
shall be Target, Actual and Forecast costs. Target costs are given in Contract BOAQ.
Actual costs will be measured, reported and recorded during work progress. Forecast costs
are obtained by measured material quantities from AFC documents and forecast labour
quantities for remaining works utilising the past labour experience during the project.
These three states of cost shall be recorded and /or calculated in one comparative
database. In combination with the schedule, comparative time graphics will be developed
to allow analyses regarding costs.
Material: For all Disciplines, as AFC drawings are issued, quantities shall be measured so
as to be compared against the Bill of Approximate Quantities that leads to the Direct
Works section of the Target Cost. By replacing the estimated quantities in the BOAQ, any
variation on the quantities shall be reflected back to the same section of Target Cost
Summary as the Forecast Cost monthly. As revisions to the AFC drawings are received,
the same procedure for measuring the forecast quantities shall be repeated to keep
quantities information up to date. Major changes in quantities due to revisions in AFC
drawings shall be reported to Company and solutions to minimise the cost effect of
revisions shall be searched. Actual quantities of performed work shall also be recorded
consistent to the BOAQ or in groups as described below to maintain an up to date record
of the budgeted quantities, actual quantities and forecast quantities.
Forecast Material Cost will be calculated in following steps:
1- Measure material quantities from AFC documents.
2- Match measured material quantities to BOAQ item codes, and convert material units if
necessary to obtain the BOQ.
3- Apply original material rates to BOQ items to calculate Forecast Material Cost.

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Actual Material Cost will be calculated in following steps:

1- Get received material quantities from Warehouse
2- Match received materials to BOQ item codes and convert material units if necessary to
obtain the BOQ of received materials
3- Apply material rates to BOQ items of received materials to calculate Actual Material
Cost.
Labour: Actual man-hours spent shall be monitored at schedule activity level. Each
schedule activity shall consist of a group of BOAQ items of specified amounts of
quantities. Actual man-hours spent per group of BOAQ items (schedule activity) shall be
obtained either from the daily time sheets or from the electronic time measuring system as
described in 269-PC-00-PR-004 Personnel Time Recording Procedure.
Actual manhour norms of performed work shall be measured by the actual man hours
spent versus the actual performed quantity of work. The efficiency values of performed
work shall be compared to the values in original BOAQ, any major deviations shall be
reported to Construction team, reasons for non-productivity shall be investigated and
necessary actions shall be taken.
Actual manhour norms for the performed work shall be used as the forecast values if the
quantity of work performed to date is greater than 50% of the forecast quantity. If the
value is less than 50%, the original efficiency values shall still be used as the forecast
manhour norms.
Forecast cost for the direct works shall be calculated by the forecast quantities and
forecast manhour norms.
Actual Labour Cost will be calculated in following steps:
1- Get data for hours worked, detailed in trade and activity for each team from the
electronic card system or daily timesheets
2- Input worked hours into a labour database.
3- Get labour costs per activity (multiply hours by unit rates of trade) and distribute
activity labour cost to BOQ items that comprise it, proportional to their earned
manhour values. See attached distribution method.
4- Retrieve total labour cost for each BOQ item (Each BOQ item may have its share of
labour cost from different activities.) and calculate Actual Labour Cost.
Forecast Labour Cost will be calculated in following steps:
1- Get total actual manhours spent per activity from above.
2- Distribute actual manhours per activity to BOQ items that comprise activities,
proportional to their earned manhour values. Obtain actual to date manhour norms per

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BOQ item by dividing actual to date manhours by actual quantities. See attached
method.
3- To calculate remaining manhours to go, multiply remaining quantities by actual to date
manhour norms if the quantity of work performed to date is greater than 50% of the
forecast quantitiy, if not, by target manhour norms.
4- To calculate actual to date manhour rates divide actual to date labour cost by actual to
date manhour values per BOQ item.
5- To get forecast remaining labour cost, multiply remaining manhours to go by actual to
date manhour rates, if the quantity of work performed to date is greater than 50% of
the forecast quantity, if not, by target manhour rates
6- Add actual labour cost to remaining labour cost to calculate Forecast Labour Cost.
(DELETED)Schedule activities, where actual manhours spent shall be monitored for, shall
(DELETED)be measurable according to following baselines:
-

Steelwork: Piperack fabrication and erection and sleepers steelwork shall be measured
in kilograms as per the activities in work schedule detailed by locations

Pipework: Fabrication and erection of pipes & fittings and erection of valves for
diameter sizes of 12 or above, 6-10, 3-4, 2 and below.

Equipment: Mechanical installation shall be measured per unit for each equipment

Electrical: Fabrication and Erection of Supports shall be measured in kilograms,

Racks, Trays; Installation and Termination of Cables shall be measured in groups by
their types and sizes; Installation of boxes, fixtures, accessories shall be measured in
numbers for each type; Heat Tracing shall be measures similar to piping.

Instrumentation: shall be measured for each type of instrument.

Insulation: for piping shall be measured in square meters as per pipework breakdown,
insulation for equipments shall be measured in square meters for each equipment.

PFP: shall be measured in square metres.

Painting & Coating: shall be measured per square metre for steelwork and in meters
per diameter for pipework.

Civil Works: Roads shall be measured per square metre; Earthworks shall be measured
by location per cubic metre, Concrete works shall be measured per cubic metre for
cable racks, piperacks, sleepers; Underground piping works shall be measured in
meters by location and type.

Buildings: shall be measured separate for each building, Civil works are broken down
as foundation excavation, concrete, structural works and finishing, Mechanical works
are broken down into systems, Electrical works are broken down into systems.

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Other Reimbursable Costs

Other reimbursable costs resulting from training, input to design and commissioning
assistance shall be monitored as per occurrence and the values shall be compared to the
original target costs. Percent of actual costs to the original target costs shall be reported.
Forecasts for the total costs for these items shall be calculated considering the current
status of these activities and any major variances foreseen shall be highlighted with the
possible effects to total target cost.
7. REPORTING
Following items shall be included in the Cost section of Monthly Progress Report:
-

Cost and manhour performance reports for the month and cumulatively by work
package.

Contract Price summary activities broken down by month with estimated, actual and
forecast costs and cumulative expenditure.

Updated expenditure profile indicating the actual estimated value of work executed
each month for the duration of the contract.

Updated cash flow profile indicating the estimated invoice amounts to be submitted on
a monthly basis for the duration of the contract.

8. RESPONSIBILITIES
Technical Office Manager is the overall responsible for implementation of this procedure.
Forecast Quantities shall be obtained from the AFC documents by Construction
Department. Manhour norm and rate calculations shall be done by Cost Control Engineer
utilising the Personnel Time Recording Procedure for obtaining actual man-hours spent.
Comparisons and analyses of Target vs. Forecast Cost and reporting shall be done by the
Cost Control Engineer.
9. REVIEW
This procedure is reviewed prior to start of work and every six months, if not required
otherwise.
10. APPENDIX
Appendix 1:

Sample calculation for actual to date manhour norm and rates

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APPENDIX 1
SAMPLE CALCULATION FOR ACTUAL TO DATE MANHOUR
NORM AND RATES