Construction Projects, 2015

PoC takes into account the actual costs and cost estimation to finish. According to this approach, it will also be possible to calculate partial revenues and profit or losses during the entire project life cycle. After the PoC is calculated, the total project revenues ( R ) are multiplied by the PoC to calculate the revenues relevant to a period t1.

5.6.2.2 Adjustment against the Cost Variance during Project Execution

Despite the accuracy of estimation and the sound approach adopted, supported by management judgement, imprecise evaluation may take place, which will affect the estimated total costs.

Indicator for cost variance

If , then and the actual costs are updated on an actual basis and are not affected. It indicates that the PoC was higher than the correct one at period t0 (Pica, 2015, p.132).

Additionally, the PoC trend against time is also an indicator of the cost control quality and reliability, which points to the cost variance (figure 23).

Figure 23: PoC trends (Project Life Cycle Economics: Cost Estimation, Management and Effectiveness in Construction Projects, 2015)

PoC diagram (a) is regular and (b) is irregular. Therefore, there are some adjustments needed to be adopted to address variance when the situation (b) occurs.

Furthermore, the revenue might be incorrect and overestimated in t0 and thus allocating a part of them in t1 period by reducing the PoC in t1 is necessary.