Cost Control Of Large Scale Air Separation Unit Project

Cost control theories have become a very mature management science after many years' development in developed countries. After the national reform and opening-up of China, cost control theories have been developed greatly domestically, which has made outstanding contributions to the development of various industries.However, since large scale air separation unit projects have their own unique characteristics, including but not limited to large amounts of capital investment, long term services after project completion, high reliability on customers' project progress and chemical industry, cost control theories must be connected with these characteristics closely when they are applied in large scale air separation unit projects. Currently, large scale air separation unit projects still have some problems, such as low qualities of customers, disorder of investment categories, control of cash-out to suppliers, frequent change orders, high reliability on customers' project progress, lack of incentive system of cost control performance and lack of historical cost control database. The cost control process must be modified by some improvement measures.This graduation paper is based on the author's practical large scale air separation unit projects management experiences, illustrates the cost control theories and refers to related documentations and historical experiences. With the overall process of large scale air separation unit projects cost control method, by analyzing the relationship among the initial phase, middle phase and phase after project completion of cost control of large scale air separation unit projects, this graduation paper defines the status and role of initial phase in the cost control process. Two main problems in this phase are therefore concluded, namely low qualities of customers and disorder of investment categories. Accordingly, the reasons are analyzed and improvement measures are raised by listing the evaluation criteria of customers' qualities and WBS method to define the investment categories. For the middle phase, namely the project execution phase, this graduation paper firstly states the main work scope in this phase and concludes the three main problems, namely frequent change orders, control of cash-out to customers and high reliability on customers' project progress. Based on the analysis of the reasons of the three problems, this paper comes up with several measures to solve them, which are strengthening of design review, “ locking of exchange rates”, earned value method and project “Gates” measures. Finally, in the phase after the project completion, the main work scope is capitalization. By analyzing the “two lacks” in this phase, namely lack of incentive system of cost control performance and lack of historical cost control database, it modifies the current monthly cash-out report format and comes up with a clear bonus/malus calculation formula which can be used to quantify the cost control performance of subcontractor. It also lists the conditions and methods to set up a useful historical cost control database. Meanwhile, considering the cost control practice of large scale air separation unit projects, this graduation paper applies and verifies the main measures raised in this graduation paper and preliminarily evaluates the effectiveness of the measures.