Activity-Based Cost Controlling (ABCC) Model for Management of Project Overheads during the Construction Stage

PROBLEM 1. The traditional costing system remains shortcoming,

including unclearly defined, arbitrarily allocated, and mostly inaccurately distributed project overheads to related activities. It requires appropriate cost ac-counting methods to enable accurate assigning of project overheads to every activity of construction projects (refer to figure 1).

2. The current cost accounting management approach focuses on recording and reporting financial transac-tions, this pays little atten-tion to improve project cost management and controlling practices. It re-quires appropriate models, tools and techniques to enable effective manage-ment and control of pro-ject overheads related to construction activities (refer to figure 2).

AIM The aim of this research is to develop the ABCC Model for the management of project overheads during the construction stage. The specific focus is on substructure activities of construction building projects.

OBJECTIVES 1. To identify project overheads during the construction stage 2. To analyse important CSFs for the management of project overheads 3. To investigate an underpinning philosophy of the ABC system in construction projects 4. To develop the ABCC model for substructure activities of construction building projects 5. To refine and justify the ABCC model through project case studies and expert interviews

CONCEPTUAL MODEL A process of abstracting model is shown in figure 3. It represents the relation-ships between ideas and objectives which have incorporated to enable problem so lv ing. The important CSFs (abbreviations) and relevant aspects of the ABCC model (costs, activities, man-agement, and controls) are included to monitor project process and performance for improving the management of project overheads and controlling practices.

RESEARCH METHODS The case study strategy and multiple case with single unit of analysis designs have been chosen according to the criteria by Yin (2009). The case study data is trian-gulated to increase validity and reliability through collecting and analysing the mul-tiple sources of evidence: Project overheads are identified through literature review and empirical studies. Important CSFs are analysed through literature review and case study questionnaires. Underpinning philosophy of the ABC system in construction projects is investigated through

literature review and empirical studies. The ABCC model is developed and refined through literature review and case study documen-

tation (e.g., overhead cost data). Development of the ABCC model is justified through expert interviews

RESULTS This research identified initial findings as listed below: Two types of overheads (i.e., general-office and site-project overheads) and four categories of

site-project overheads (i.e., unit, batch, project, and facility levels) including their specific overheads are related to substructure activities of construction building projects.

Eight groups of important CSFs are related to cost management and controlling practices of project overheads.

The ABCC model and tools are examined for the cost management and controlling practice of project overheads.

By: Nyoman M Jaya

Supervisor: Dr. Chaminda Pathirage Co-supervisor: Dr. Monty Sutrisna

Management in Construction Research Centre, School of the Built Environment, the University of Salford, Manchester M5 4WT United Kingdom

Figure 1: Overhead Allocation Problem in Construction Projects Source: Adapted from Cockins (2001)

Figure 2: Overhead Management and Controlling Practices in Construction Projects Source: Adjusted from Jaya et al (2010b)

Figure 3: Conceptual Model

ABSTRACT Construction projects appear to have high expenditures that involve a wide range of participants, stakeholders, investments, and technologies. These could increase overheads considerably for sustaining overall activities of construction projects. The traditional costing system and current cost accounting man-agement approach cannot satisfy cost management and controlling practices for monitoring the project status regarding to project overheads. This research analyse Critical Success Factors (CSFs) and investigate the application of the Activity-Based Costing (ABC) system in construction projects. The Activity-Based Cost Controlling (ABCC) model is developed and refined through project case studies, and then justified through expert interviews. The findings would contribute to the main body of knowledge, academic milieu, project practices, and provide organisational advantages in term of project overhead and cost management and controlling practices. Keywords: ABC system, ABCC model, CSFs, Construction project, cost management and controlling practices, overheads

Pictures: Mobilisation and Substructure Activities of Construction Building Projects

Sources: Documented from Contractors and Projects