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Financial Progress

15 replies [Last post]
Mon, 2009-08-17 08:11
ismail khan
User offline. Last seen 14 years 44 weeks ago. Offline
Joined: 9 Nov 2008
Posts: 21
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Dear Planners,

Please help me in this topic.
My project cost is divided into six price schedule in the tender stage itself, where the project cost is splited in each price schedule. My client says that your project weightages has to be as per the Price schedules given.


Example:
Cost % Cost Time %Time
Price Schedule A-Rs 5.00 5% 3 Days 3.8%
Price Schedule B-Rs 20.00 20% 10Days 12.5%
Price Schedule C-Rs 30.00 30% 25Days 31.3%
Price Schedule D-Rs 25.00 25% 7Days 8.8%
Price Schedule E-Rs 15.00 15% 15Days 18.8%
Price Schedule F-Rs 15.00 15% 20Days 25%

As given above in the table the total project cost is Rs100 and the total project duration is 80days.

Please note that my Invoices will be certified by client considering the project progress.that means i cannot invoice more than project progress.In this scenoria please advice me how can I decide on my weightages. So that time and cost both are considered.

One case study is: if i have completed the activities in Price schedule A i can claim 5% value of the project, but as per time my weightage will be only 3.8% which is less than the cost.

I request some one in the forum to help me to come out of this.

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Replies

Mon, 2009-08-24 01:10
#1
Safak Vural
User offline. Last seen 5 years 2 days ago. Offline
Joined: 12 May 2008
Posts: 117
Groups: Petro-Chem / Oil & Gas
Dear Ismail,

The way to go is EVA (Earned value Analysis). You can create activity weightage from number of documents, total purchase cost and estimated manhours for engineering, procurement and construction respectively. For commissioning and documentation you can use 5% of the related construction activities (you can have more experienced guys guesses also). After all you can compare all of the LVL1 WBS levels with costs. Ex:

Enginnering: 500 USD (10 %)
Act 1A: 10 Drw (40 %)
Act 1B: 15 Drw (60 %)

Procurement: 2000 USD (40 %)
Act 2A: 1000USD (50 %)
Act 2B: 1000USD (50 %)

Construction: 2000 USD (40 %)
Act 3A: 100Mhr (20 %)
Act 3B: 400Mhr (80 %)

Commissioning&Documentation: 500 USD (10 %)
Act 4A: 25 Mhr (100 %)

Total: 5000 USD

Weightage %
1A: 10%*40% = 04%
1B: 10%*60% = 06%
2A: 40%*50% = 20%
2B: 40%*50% = 20%
3A: 40%*20% = 08%
3B: 40%*80% = 32%
4A: 10%*100%= 10%

Total: 100%


Then you can assign this resources to the activities. Now you can track your progress with this resource and EVA.

Regards,

Safak
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Fri, 2009-08-21 23:55
#2
ismail khan
User offline. Last seen 14 years 44 weeks ago. Offline
Joined: 9 Nov 2008
Posts: 21
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Dear Mr.Nicolas,

Thanks for the reply. If i do as per that, if i want to have more progress to show to the client , i can load more cost towards mobilisation activities which is the primafacie activity and it will take only 14 days to 1 month of contract.

so the client can catch me in this

regards,

ismail
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Fri, 2009-08-21 07:54
#3
Nicolas Igersheim
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Joined: 25 Jun 2007
Posts: 62
Groups: Petro-Chem / Oil & Gas
Hi Ismail

We lack some information in order to answer you.

The projects stages per price schedules are strictly sequential, no overlap at all?

Who will establish project progress? You?

In such a case I suggest you weigh your activities
using cost percentages.
For instance, once you have finished first two activities,
project progress will be 25%
Invoicing will also be 25%.




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Thu, 2009-08-20 00:23
#4
Scarllet Pimpernel
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Joined: 19 Jul 2009
Posts: 152
Groups: GPC Qatar, Pinoy Planning Planet Community
Dear Ismail,

You can have one weightage system that you will load to your activities.

Then, you assign the cost in wbs activity. In this way, whatever percentage you will have in your progress will be reflected in the percentage of wbs activity.

So now you will have a much between your progress and payment progress. This will also cover you question regarding testing and commissioning since the wbs activtiy will catch the testing and commissioning activity if it ongoing or completed.

Thank you,
Scarlett
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Wed, 2009-08-19 13:12
#5
Samer Zawaydeh
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Joined: 3 Aug 2008
Posts: 1664
Groups: Civil Engineering, Regional Representatives
Dear Ismail,

This is an Excel spreadsheet. If you have a monthly invoice, then you update the progress in each Schedule at the end of each month. Then you multiply each Schedule by its weight percentage, 5%, 25%, etc.

Now we solved the progress percentage. We need to come to the time constraint. If you finish Schedule A before 3 days then you can not claim the money, but if you finish it after the 3 days limit, then you can claim the money.

Hope the information helps.

With kind regards,

Samer
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Wed, 2009-08-19 05:54
#6
ismail khan
User offline. Last seen 14 years 44 weeks ago. Offline
Joined: 9 Nov 2008
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Dear gary,

Thanks for the suggestion.

ismail
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Wed, 2009-08-19 05:52
#7
ismail khan
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Joined: 9 Nov 2008
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Dear Mike,

Thanks for the reply, EVA Reports are used to find the progress after assigning the weightages, but i am struck in the first level og assigning the weightages.

ismail
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Wed, 2009-08-19 05:50
#8
ismail khan
User offline. Last seen 14 years 44 weeks ago. Offline
Joined: 9 Nov 2008
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Dear Vishnu,
Thanks for the reply.

But one more clarification.

let me explain the whole scenerio.

I have two things

1.Price Schedules - which is splitup of my project value
2.Payment terms - How the value will be paid to me
eg:10% advance
75% agianst supply, construction and erection
10% against handing over after commissioning
5% after defect laibility period of 1 yr

as stated above, after i complete my supply,construction and erection also i will be paid only 85% of the contract value. the without commssioning and running the plant i cannot claim my 100%.

so how to assign the weightages now.

ismail


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Wed, 2009-08-19 04:49
#9
Mike Testro
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Hi Ismael

It seems to me that you are talking about a standard EVA report.

Best regards

Mike Testro.
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Wed, 2009-08-19 04:23
#10
Sreejish Vishnu
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Groups: GPC Qatar
Dear Ismail,

You may maintain two weigtage systems if it is imperetive to have time based weigtage for internal monitoring. But I personally have never seen using time for weigtage factor calculation. It was mostly based on physical completion of the activity/work package.

What is linked with commissioning in the case you said. Nothing? which means your client has to pay the whole contract amount if you completed supply and construction. also the contractor gets complete amount without commmissioning. if that is the case then the project is 100% complete without commissioning (if i think from the contractor’s management’s perspective). In that case contractor will not show interest in completing the commissioning. So there will be normally some cost provisions attached with commissioning. and in case of power projects a percentage of payment will be normally attached with commissioning and the further achieving of performance parameters (like full load performance etc)
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Wed, 2009-08-19 03:08
#11
Gary Whitehead
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Ismail,

How did you estimate the price when bidding for these projects? It may well be that this estimate is at a sufficiently detailed level to provide a basis for your weightings.

If not, go and talk to the guys who will actually be doing the work, ask them for manpower estimates, and use this as a basis for your weightings (while you’re there, ask them for duration estimates too to help build your project plan).

Cheers,

G
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Wed, 2009-08-19 01:19
#12
ismail khan
User offline. Last seen 14 years 44 weeks ago. Offline
Joined: 9 Nov 2008
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Dear Mr.gary,

Thanks for the reply, but the problem we are facing is we dont have any timesheet or database system for manhours calculation and the projects we are dealing with is related to power generation and distribution systems.so it is difficult for us to assess this parameters.

ismail
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Wed, 2009-08-19 01:12
#13
ismail khan
User offline. Last seen 14 years 44 weeks ago. Offline
Joined: 9 Nov 2008
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Dear Mr.Sreejish,

Thanks for suggestion.It means that i should adapt two weightage system one for cost and one for time.

Case study:
For eg: I dont have any payments for commisssioning the plant. My payment terms are only against supply and construction. So if i finish the supply and construction then can i say that my project is 100% complete with out commissioning the plant eventhough it is under my scope.



Ismail

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Tue, 2009-08-18 08:03
#14
Gary Whitehead
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You don’t need to consider time when calculating weightages –it is irrelevant.
For each payment schedule, weight your activities according to manhours, concrete used, length of pipe laid, planned expenditure, or whatever is the most appropriate measure for that schedule. Time is very rarely an appropriate measure for progress weightings.

It is to be expected that sometimes you will complete a greater %age of work in a lower %of time, and visa versa. If progress and time elapsed were directly related, all your progress S-curves would be straight lines!

Regards,

Gary
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Tue, 2009-08-18 05:41
#15
Sreejish Vishnu
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I dont think the cost weightages match exactly with the time. Because there could be high value items requiring very less time to execute. The construction of such items will require a very less duration, but those items will give a good invoice amount.

I think you can provide a weightage factor based on the cost of the items if you have to match with invoices. present that to client and use the time based weightages only for internal monitoring.
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