Macro Cost Estimation, Construction- Manhattan Company
The operation within the Manhattan Company, which deals with construction of armories, has a setback of harmonizing the budgetary allocation with the high inflation rates. State agencies face the problem of controlling budgets within their jurisdiction due to poor estimation of the costs. This spans from the time of planning to eventual implementation, where there have been substantial evidences of delay in completion in such a way the current price of commodities does not tally with the afore budget. This is a detriment to the development process since the organization does not have a form of building cohesion between the budget and inflation. Moreover, the resources vested towards the launch of such projects go to waste due to poor implementation strategies.
The current form of modeling cost estimations does not put in practice the prospected inflation rates, whereas the projects run for long periods that the budgetary system is caught up with a setback of inflation. This has led to increased value of raw materials and labor in the course of implementation of the construction projects. For instance, the presumed budget for construction of a dam or road might increase by 5% over a period of one year due to inflation while the budget estimates made at the start of the construction remains the same.
[...] This would lead to a budget that is higher than the real budget. Moreover, the cost stipulations will be higher leading to loss of affordability of the construction commodities. In addition, there is a setback in terms of the other man-made forces such as stability among nations, which controls the performance of currencies. The more polar the nations are, the riskier it is to the project. However, the project puts in place some assumptions to take care of the possible risks. For example, the trends of inflation are assumed to be linear. [...]
[...] This would be essential in reducing the time for learning of the operations within the project. The organization should also review the salaries of employees to suit this program. This is from the fact that the rates of inflation are not a setback only to the goods and materials for construction but also on the services provided. The cost of provision of services increases with time, which implies that this might affect future budgetary allocations if this is not put into consideration. Bibliography Lock, D. (2007). Project management. Burlington, Vermont: Gower publishing. Zaccaria, V. (2003). [...]
[...] Strategy The timeline for the project lies within the mandate of a construction bid. After a successful bid, the expert staff will assess on the trend of inflation and correlate it with the time for completion of the construction work. This would give the estimates in percentages in the inflation rates for the entire period of construction, which would be correlated with the current budget to suit the cost of the items at completion of the project. For instance, if the projected price of a good The expert staff will then train the existing staff on the analysis of datum using a computerized program so as to link the budgetary allocation with the most-preferred trend of inflation. [...]
[...] This has led to increased value of raw materials and labor in the course of implementation of the construction projects. For instance, the presumed budget for construction of a dam or road might increase by over a period of one year due to inflation while the budget estimates made at the start of the construction remains the same. In consideration, inflation is an independent variable in relation to the stipulated budget, which is a depended variable. As inflation eats into the budget, the prices for the commodities that the budget reads out will still be the same. [...]
[...] There is a possibility of contradiction between the stipulations in the current budget and the real costs of items due to inflation rates. A research into this budgetary allocations and recommendation would see a merger of the budget and the prospected inflation rates, which would give a lead to a harmonious budget that caters for this. Moreover, there could be zero chances of stagnation in constructions due to eventual affordability of commodities. Proposal for a merger of budget and inflation. The Manhattan construction company has the jurisdiction of tendering for construction projects, where it gives the best bids for construction. [...]
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