All organizations, whether they were project owners or contractors, have been using ERP, financial and other types of accounting systems (ERP) to provide them with the actual cost incurred in delivering their capital construction projects. Nevertheless, those organizations also know that they have two key challenges that they always encounter when using an ERP to have true and accurate actual cost status against the revenue they booked at the closure of each period. Those challenges affect the true actual cost to date and the justifiable amounts they need to allow for potential costs that they could be liable for the work already completed.The first of those challenges is how to account for the actual cost for work in a place that either has been invoiced but not yet approved or for work in a place that has been approved but has not yet been even invoiced. This also includes all miscellaneous invoices received against non-contract dues but not yet approved. The second challenge is how to account for the cost of change or variation orders that are pending approval as well as the cost of valid potential change orders associated with submitted claim notices, early warning notifications, field change orders, design change notices, and other types of potential changes. Of course, those are the pending and potential changes that have a high likelihood to be approved and eventually paid.
Using a Project Management Information System (PMIS) like PMWeb, those two challenges can be easily addressed. PMWeb comes ready with the business processes needed to capture interim progress invoices, miscellaneous invoices, change orders, potential change orders, and joint measurement reports. Unlike an ERP, PMWeb allows capturing the details of all transactions associated with those business processes whether they are approved, pending approval, disputed, rejected, or withdrawn. In addition, the PMWeb cost account module helps align the cost data captured in PMWeb with the cost account number used by the organization’s ERP. PMWeb cost account module allows defining up to 16 cost breakdown structure (CBS) levels, each 10 digits long. For each cost breakdown structure (CBS) item, PMWeb allows assigning the cost account number of the ERP associated with the CBS item. This is a key requirement for providing the true actual cost to be recorded at each period.
Of course, the level of detail of data captured in the different cost-related business processes managed in PMWeb is more than what the organization would have in their ERP. Nevertheless, this is not be an issue if the alignment between the two accounts had been done accurately.
PMWeb commitment module maps all contracts and purchase orders created in the ERP. Those can be either added to PMWeb or included in the PMWeb-ERP integration the requirement to create those in PMWeb from the already created contracts and purchase orders in the ERP. Those contracts include all approved and pending interim progress invoices and change orders. The PMWeb and ERP integration is configured to import all approved interim payment certificates and change order data from PMWeb to the ERP.
PMWeb potential change order module captures all claim notices, early warning notifications, field change orders, design change notices, and other types of potential changes that have been submitted but have not yet become a change or variation order record. For potential change orders that were determined to have merit, although they will be approved, this does mean that they will be converted into change orders. To enable having a realistic provision for those potential change orders, it is recommended to include a field for the likelihood percentage of the actual cost to be incurred against each potential change order that has merit. The same field also exists in the change order module to be used with those that are still pending approval.
For non-contract-related actual costs, PMWeb miscellaneous invoices helps capture the details of all those expenses whether they were approved or pending approval. Of course, it is assumed that all approved miscellaneous invoices are already captured in the ERP system.
For the completed and approved work in place including delivered material and equipment during a financial period that has not yet been invoiced yet, PMWeb joint measurement report (JMR) or product report is used. The JMR is usually issued on weekly basis, although it can be daily, to capture the details of completed works and deliveries done against each contract agreement. The JMR report enables having a true real-time report of the actual cost incurred on the project even before it is invoiced. This is needed as most projects set a specific date at the end of each month where all invoices for interim payment certificates can be submitted.
Similar to all other business processes managed in PMWeb, supportive documents that are usually associated or required for each interim progress invoices, miscellaneous invoices, change orders, potential change orders and joint measurement report business processes’ transaction can be attached to their relevant templates. It is highly recommended to add details to each attached document to better explain to the reader what is being attached and viewed. In addition, links to other relevant records of other business processes managed in PMWeb can also be linked to the records of those change orders-related business processes.
It is highly recommended that all those supportive documents, regardless of their type or source, get uploaded and stored on the PMWeb document management repository. PMWeb allows creating folders and subfolders to match the physical filing structure used to store hard copies of those documents. Permission rights can be set to those folders to restrict access to only those users who have access to do so. In addition, PMWeb users can subscribe to each folder so they can be notified when new documents are uploaded or downloaded.
To ensure that the submit, review, and approve dates of each interim progress invoices, miscellaneous invoices, change orders, potential change orders, or joint measurement report business processes’ transaction submission are captured, assign a workflow to each one of those business processes. The assigned workflow maps the submit, review, and approve tasks, roles or roles assigned to each task, task duration, task type, and actions available for the task. In addition, the workflow could be designed to include conditions to enforce the approval authority levels as defined in the Delegation of Authority (DoA) matrix.
When any of the interim progress invoices, miscellaneous invoices, change orders, potential change orders, or joint measurement report business processes’ transaction is initiated, the workflow tab available on the relevant template captures the planned review and approve workflow tasks for each transaction as well as the actual history of those review and approval tasks. The captured workflow data includes the actual action data and time, done by who, action taken, comments made, and whether team input was requested.
The cost report generated from the data captured in the ERP system and the additional data captured in PMWeb for the additional cost that is not accounted for in the ERP system provides a real-time single version of the truth of each project’s actual cost to date. The reader of the report can trace the source of the reported cost data to have insight into those expenses. The report allows grouping, sorting, summarizing, and filtering the reported cost data by many fields such as project, cost account center, and type of additional cost expenses considered by each organization.
