For capital projects’ owners, having cost curves to monitor, evaluate and report the performance and status of those projects’ financial performance is of great importance. Mainly there will be three curves to manage, assuming that the awarded contracts on those capital projects will be based on lump sum contracts. In other words, there will be no cost variance for completing the agreed scope of work. The approved cost associated with additional scope of work will adjust the project budget and commitment contracts. Accordingly, the curves that will be monitored, evaluated and reported on are the planned budget spending, actual cost or earned cost for completed and approved works and the forecast cash flow for the balance work to complete.

Using a Project Management Information System (PMIS) like PMWeb, capital project owners will have a single platform to capture the details of all records needed to generate those curves as well as produce the needed reports and calculate the required measures. This will be achieved by using PMWeb ready-to-use modules for budget, budget adjustments, progress invoices, miscellaneous invoices and forecast.

Cost Breakdown Structure

It is very important that the cost breakdown structure (CBS) is aligned with the work breakdown structure (WBS) which will be used to progressively elaborate a project’s scope of work and schedule. Therefore, it is important that the Cost Plan is structured around a progressive breakdown structure like the UniFormat™ numbering system that enables elaborating the cost plan as it evolves during the project lifecycle stages.  

PMWeb 7 Cost Breakdown Structure

Accordingly, the cost breakdown structure will be created using the PMWeb Cost Accounts module. The CBS will include the four UniFormat™ levels. This will enable the project management team to elaborate the project cost as the project’s scope of work gets better defined and detailed.

PMWeb 7 Cost Managment Budgets Cost Codes

Budget and Planned Budget Spending Curve

The budget represents the investment that has been approved by the capital project owner for the project under review. The budget will include all direct and indirect project costs as well as the allowance for contingency reserve. The PMWeb Budget module will capture the details of the approved budget as well as the planned spending plan for the project budget. PMWeb can maintain versions of all budgets created for the project but the final approved baseline budget should be based on the awarded commitment contract to ensure correct comparison as well as it should include the approved contingency amount. The planned budget spending plan will reflect advance payment, advance payment recovery, retention and retention release which are related to the award contract or contracts.

PMWeb 7 Cost Managment Budgets Budgets Projection

Adjusting the Baseline Budget

Any adjustments for the approved baseline budget will be captured using the PMWeb Budget Request module. This could include funds transferring from one cost center to another, for example transferring funds from contingency to concrete works, as well as any adjustments that could result in increasing or decreasing the project budget. All those adjustments need to be posted to the relevant project period to ensure that the budget spending plan reflects the latest status. Similar to all other PMWeb modules, a workflow will be assigned to the budget adjustment to secure the needed reviews and approvals which will incorporate the approval authority levels.

PMWeb 7 Cost Managment Budgets Budgets Requests

Awarding Commitments Against the Approved Project Budget

PMWeb Commitment module will be used to create a sperate commitment for each commitment contract planned for the project as per the approved procurement strategy. The Commitment module will be used to capture all potential change orders, change orders, progress invoices and actual payment of approved progress invoices.

PMWeb 7 Cost Managment Contracts Commitments

Managing Changes to Approved Commitments and Ensure Alignment with Budget Adjustments

PMWeb Potential Change Order feature allows all authorized project entities to submit change request that they believe could have an impact on the awarded project commitment. The potential change order could be rejected or approved to become a change order for which it will be generated from the Potential Change Order feature.

PMWeb 7 Cost Managment Change Managment Online Change Requests

In addition, the PMWeb Change Order feature will be used to capture all changes that could impact a commitment contract. The change orders will be posted to their respective periods to ensure that the commitment cash flow is complete and correct. Similar to other PMWeb modules, supportive documents will be attached to the change order as well as a workflow can be assigned to ensure the required reviews and approval are carried out.

PMWeb 7 Cost Managment Change Managment Commitment COs

To ensure that there is proper alignment between approved change orders and budget adjustments. The PMWeb Change Event feature will be used. This feature will list the change orders that are related to each budget request that could have increased or even decreased the approved baseline budget.

PMWeb 7 Cost Managment Change Managment Change Events

The Actual Cost Curve

The second curve will be the actual cost curve which will be captured from PMWeb Progress Invoices, which will calculate the approved payment to be made to made to the contractors at end of each period. The actual cost will reflect the advance payment, payment recovery, retention and retention release values when they are actually paid. The progress invoice will also include payments made against approved change orders.

PMWeb 7 Cost Managment Invoices Progress Invoices

In addition, the actual cost incurred by the project could be from non-commitment invoices. Those could include management expenses, purchase of land, fees associated with permits among others. PMWeb Miscellaneous Invoices will be used to capture those actual expenses. In addition, an integration can be created with the organization ERP application to import those other expenses to the miscellaneous invoice module.

PMWeb 7 Cost Managment Invoices Miscellaneous Invoices

Further, project resources, labor and non-labor, that are assigned to the project and are not part of a commitment agreement, PMWeb Timesheets will be used to capture the actual spent hours of those resources. PMWeb allows setting different billing rates for those resources which could include regular, overtime, weekend, holidays among others.

PMWeb 7 Toolbox Timesheets

Balance to Complete Curve

PMWeb Forecasts will be used to calculate the projection for the balance to complete which is the difference between the budget at completion (BAC) and actual cost (AC). This will be achieved by selecting the start and finish dates which will be aligned with the linked project schedule activity start and finish dates along with the spending projection curve. Of course, the balance to complete projection values can be manually added for each period. The balance to complete projection analysis will be performed at the end of each progress period.

PMWeb 7 Cost Managment Budgets Forecast

Visualizing Real-Time Status of All Project Financial Transactions

PMWeb Cost Worksheets allows creating customized spreadsheets to detail the desired financial transactions values posted against each cost breakdown structure level. For example, a cost worksheet can be used to show the original approved baseline budget, approved budget adjustments, revised project budget, awarded commitments, approved commitment change orders, revised commitments, actual approved cost against commitment contracts, actual approved cost against non-commitments, total actual cost and balance to complete. A cost worksheet could also include formulas to calculate percentages as well as values.

PMWeb 7 Cost Managment Budgets Cost Worksheets

Presenting the Cost Curves

Accordingly, the three cost curves that capital projects owners must have to monitor, evaluate and report a real-time single version of the truth of their projects’ performance and status are the planned budget spending, actual cost and balance to complete. Using PMWeb Report Writer, a report will be created to present those curves for the project duration. In addition, the report will show the variance between what was budgeted and the actual cost or earned value per period. The report will also display the schedule performance index (SPI) at the current period along with the total variance or schedule variance (SV).

PMWeb 7 Project Flow Analysis


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