A new method of project cost management - Cost chain management and its implementation

As one of the most important components of Project Management, particular emphasis of construction companies are placed on how to make the cost management more effectively. This paper introduces the thinking of SCM into cost management and defines the concept of Cost Chain Management (CCM), which describes the whole process of cost management in the whole project life cycle, and makes the Cost Management in an all-around way. But the conventional method of cost estimation and management is always based on resources and sections. Therefore the paper proposes that construction companies should determine the "target cost" of the project by using the Market Oriented Direct Cost method. Then they can put forward a competitive offer during bid phase according to this "target cost", and in construction phase they can set up cost management system by breaking down the target to each department. Finally the compositive control of cost chain is carried out. A modem cost management system based on cost chain is set up.