A cost breakdown structure (CBS) is a detailed framework that categorizes all costs associated with a construction project. It helps in budget planning, cost tracking, and financial reporting by breaking expenses into hierarchical levels.
How a CBS Improves Cost Control
By organizing costs into defined categories, a CBS ensures better financial oversight and allows project managers to track expenses against budgeted amounts. It also helps identify potential overruns early.
Key Components of a CBS
- Direct Costs such as labor, materials, and Subcontractor fees
- Indirect Costs like overhead, permits, and insurance
- Contingency allocations for unforeseen expenses
Related Terms: Work Breakdown Structure (WBS), Job Costing, Construction Budgeting, Earned Value Management (EVM)
FAQs
How does a CBS differ from a WBS?
A: A CBS focuses on costs, while a WBS organizes project tasks and deliverables.
Why is a CBS important for financial management?
A: It provides transparency, improves budget tracking, and ensures better financial decision-making.