Research On State-owned Construction Enterprises’ Cost Management System Performance And Driving Factors

Management accounting focuses on serving for corporate decision-making and decision-implementation. And it is more social than financial accounting. The social reflects in that management accounting is affected by organization, behavior and situational. So the concept of Management Situation is emphasized in management accounting research.The construction industry is an important material production sectors in the national economy and a pillar closely linked with the country’s economic development. It plays a prominent role in the growth of the national economy. The construction projects’design, environment, schedule, quality and other factors are difficult to be completely copied. Since the huge differences between different projects the cost reflects the uniqueness. The complexity of building construction will result in the complexity of the construction costs. Because of the irreversible of construction, mistakes in the construction process will result in huge losses. The project often has a long period which makes the cost cannot be determined under the continued market volatility. And the cost faces high risk in that situation. The project in the process of building will be influenced by some non-human controllable factors, so the cost is harder to be controlled than other products. The important position of construction industry in the national economy makes the research of cost management in the industry having practical significance. And the same time, the complexity of the cost management in construction enterprises makes it has high academic value.The state-owned construction enterprises in the industry occupy a significant advantage before, but its dominance has been threaded by the entry of private capital and foreign-funded enterprises. In summary, the research of the state-owned construction enterprises cost management in the current economic situation is of great significance. Because the idea of digital analysis and planned features are consistent with the planned economic system China has followed. The CVP (Cost--Volume--Profit Analysis) and responsibility cost management are the earliest widely used cost management methods in China. The CVP which is promoted early in China is one of the basic methods of management accounting, and it is a relatively familiar enterprises cost management methods. The calculation of breakeven point is also common.The state-owned construction enterprises have the tradition of responsibility cost management and also the responsibility cost preferences complex. In the actual production practice, rich base and experience are accumulated and the performance has also been widely recognized.The standard cost management and target cost management which were introduced into China in the1980s’ market competition are important method bringing substantial increase of enterprise productivity. The standard cost management which is valued by construction enterprises is the control before and during the process.Due to the characteristics of the project construction, projects works as a cost center while the entire enterprise is a profit center. In the actual operation of the project’s construction, project department is the basic unit. So target cost management as an appropriate method has been widely used in the construction industry. At the same time, the current bidding system’s requirement of exact estimation of the cost promotes the usage of target cost management from the other side.With the development of the productive forces, the birth of the flexible production system as well as the increasing of manufacturing costs’proportion, the inherent cost management method cannot allocate costs reasonably. The ABC (Activity-Based Cost management) emerged as a revolutionary method of cost management. Scholars have found that extent and application performance of the ABC are not good as other cost management methods introduced in the past. A large number of papers on how to improve its applicability are published in China.Construction production requires integrated control of quality, cost, duration. Earned value management as the most important and widely used management integrated management approach in project management has been the concern of academics. From the academic significance and practical significance combined with the actual situation of the industry-specific six methods are selected as survey content. The essay reports the application of the six methods in state-owned construction enterprises and tries to analysis the impact factors and the path survey of application and performance.China Railway Group Limited, China Railway Construction Corporation and China Railway Erju Co. are chosen for the survey. The issues involved in the questionnaire replies characteristics, the characteristics of the project department, cost management method application surveys, cost management drivers of investigation, and the implementation of cost management system. We choose seventh-Scale. In order to eliminate the social expectations biases and to reduce the possibility of blindly reply, specific cost management methods were split into concrete steps in the set of issues.According to the questionnaire results, responsibility cost management is in a high degree of application and application performance. Target cost management and standard cost management have high degree of applications and bad performances. The CVP and earned value management in the enterprise being investigated have low level of applications and performances. The ABC’s application level is low but the performance is good.In cost management method choosing, the study shows that "localization" cost management methods’(such as responsibility cost management) applications are significantly better than other methods. At the same time the cost management methods introduced from the West have also been applied. But management methods related to industry characteristics have not yet been taken seriously. The effects of size of the project, the character of the project, the construction area and the life cycle to the cost management methods’applications and the performance are inconsistent. It prompts the author to explore the impact path of different factors on the application and performance.According to Pan Fei’s (2010) discussion of management accounting research framework, the significance of management accounting is to create value for the enterprise. Cost management system as a part of the management accounting system should create value for the enterprise too. There are two main points in management accounting theory. First, what impacts the management accounting? Second, what does management accounting bring? Existing researches of the management accounting methods application basing on the contingency theory focus on the influences of application extend and the influences to the corporate performance. There is a lack that is what the influences of the management accounting systems’performance are. So the complete management accounting research framework consists of three parts reflecting in cost management research are:What is the impact of the application of cost management methods? What is the impact of cost management method results? And how doses the cost management system affect to corporate performance? The empirical part answers the first two questions, which are what factors affect the application and the performance cost management system. This paper tries to explore the internal mechanism of the cost management system by such a consistent path.Basing on contingency theory, there is no optimal cost management methods but optimal cost management methods selection. The organization is an open system. The normal operation of the system needs the consistency of organizations within subsystems as well as between the organization and the environment. In terms of cost management methods application research, it is accordance between cost management method selection and project characteristics, internal management and control characteristics of project department, as well as the external environment.According to the existing literature and previous research, the paper argues that the project characteristics include the character of the project, the project scale and project life cycle. Internal management and control features include internal support and internal communications. The external environment includes government support, government regulation and market competition. The results show that the internal support and internal communications directly affect the application of cost management methods and the performance. Government support and market competition directly affect the application of cost management methods, the indirect impact of the cost of the performance of the management system. The government regulation only affects the performance of the cost management system. The character of the project affects the application of cost management methods and performance at the same time. The size of the project does not significantly affect the application and performance of cost management system.Cost managers will take these three types of factors into considered in the choice of the cost management methods. The performance of cost management system is by the impact of the internal management and control features more. Internal support, especially the support of the senior leadership has an important role in the implementation of cost management methods. First of all, the support includes personnel, equipment and financial support; followed, includes training for the implementation of cost management methods; finally, it should be emphasized that cost management information is easy to be obtained by cost management department for the enterprise. Cost management requires not only information of the accounting department also needs information about the duration, quality operations department. Information communication, cooperation and coordination between various departments are guarantee of good cost management system running. The enterprises should improve the internal flow of information with the works on the basis of cost management method selection according to their own characteristics to provide a suitable environment for the cost management system.The contribution of this paper is reflected in three points:Objects innovation means that the study for the state-owned construction enterprises expand the scope of the cost management research in China which mostly limited in manufacturing enterprises. The construction industry is the pillar industry of our country, but the current management is not good, raising the level of its cost management can bring to the further escalation of the industry. Constructions costs’constitute are complex and need to be integrated with the schedule, quality and other factors which make it hard. So it is a appropriate cost management theory research object.Normative survey is that the questionnaire survey was conducted on the basis of pre-depth interviews, questionnaire are designed through the analysis of interviews records and combined with the existing literatures support. The possibility of blind reply is reduced by splitting cost management methods according to the specific work steps. Practice expert help us to convert academic language into practice language and send out the questionnaires. We used seventh scale rather than the option of Yes or No in order to provide status for path analysis.Path analysis is used to explore the path of impacting on the application and performance of cost management system. The paper completely describes the impact path of the project features, the internal management and control characteristics and external environment. And it also provides evidence to clarify the main points of the state-owned construction enterprises cost management work and helps enterprises find the direction of the future development, as well as give enterprises guidance of their own method selection.