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Table of Contents for our draft Cost Management Standard of Practice

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Christopher (Chri...
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Dear PPers,

We are rapidly completing the Table of Contents for our draft Cost Management Standard of Practice, and will be looking for participants in the development of the Standard. I have discussed the current ToC with a number of people and received some preliminary feedback. For example, John Hollmann, the cost expert who was the developer of the highly respected AACE (Association for the Advancement of Cost Engineering) International’s Total Cost Management Framework, says that we are missing the entire pre-project cost engineering knowledge as well as offering other suggestions.

We are posting the draft ToC here and asking for feedback. Those of us who developed this draft clearly are more comfortable in the project-phase of cost management, and it’s important that we determine where the value to the industry lies in developing this body of knowledge. Please post comments at a high level about the scope of cost management that you believe would be the most useful to the project controls community.

Regards...

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Rafael Davila
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There is an abysmal difference between cost accounts coding versus CPM activity coding, to say they are the same is misleading, the difference is on the sheer number of accounts and on the use of same codes when using cost accounts versus thousands of different activity codes per job that is not equal among different jobs.  CPM based costing is a theoretical illusion.

Most Construction Contractors do their cost control at the process level and not at the individual activities level.  For a construction Contractor a process might be tile installation, a single process across the duration of the job that spans many activities. The activity schedule assists in activity timing and resource planning.  In a single job there might be hundreds of activities for tile installation but a single cost code to track the unit cost for tile installation. It is almost universal in construction accounting software to break down each cost code into cost-types for labor, equipment, materials, subcontract and other.

There is a relevant difference between Job Cost Budgeting and Unit Costing, Budgeting uses only dollar amount, unit costing relates dollar amount to volume of work quantities.  Many of today Job Costing modules misses to link dollar amount to volume of work, they lack the weekly reports on unit costs and productivity, they simply do not provide for contractor to input the quantities, just dollar amounts.  As a result some contractors end up without these valuable reports because transferring the raw data to worksheets is too time consuming.

None of the contractors I know use RS Means Database, they use the paper book editions and use it to plug in those items they have no or little experience or cost records, and this happens very rarely.   After over 25 years of PM experience I make most of my living as estimator, CPM scheduling is the fun part.  What I am saying is not taken from foreign reference books but real life experience with my few former employers and many more as clients. Those who have formal unit costing, at time of costing the quantity take off use their Unit Cost records, those who have non formal unit costing use their imagination as well as reference cost books foreign to their company experience.  There is a consensus there is more reliability on estimates based on the actual experience of each particular company.

To say all contractors use EVM is misleading they do not use EV as a management tool but a few as a progress reporting tool.  They do not make use of the flawed part of EVM, the part that relates to schedule, they understand that EVM misses the link with critical path activities.  A few use it as another view that is far from perfect, a very few [rare birds around here] I believe might use it if doing non-fixed price work for the DOD.

Dr. Paul D Giammalvo
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Rafael, you stated above "It makes sense and agree 100%+ common practice is not necessarily the best practice.  Best practice shall be not only feasible but also pragmatic."

There is a VERY IMPORTANT part of what we wrote which you missed out on that is worth clarifying.  We are not merely advocating "best practices" which can be and are often arbitrary, but "best tested and PROVEN practices" which by the expanded definition, includes pragmatic.

Having explained that, you stated that "I know of no single contractor that integrates Accounting software with CPM software, they just do not do it."

I would argue that nearly any contractor that uses RS Means databases (which includes all the major estimating software packages) is in fact, using a form of Activity Based Costing, whether or not they directly integrate it with their accounting system (very few) or if their cost estimators/project controllers do it manually.  But at some point in time, we need to reconcile the bills being submitted by our vendors/subbies and our foremen's time sheets with work outputs, which is the very essence of Activity Based Costing/Activity Based Management, even though many contractors don't even realize that is what they are doing.  (The same that many contractors don't realize they are using Earned Value Management as the basis to bill for their work in place)

BR,

Dr. PDG, Jakarta

Rafael Davila
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http://www.oracle.com/us/solutions/business-intelligence/fed-gov-manager...

Managerial cost accounting is the process of accumulating, measuring, analyzing, interpreting, and reporting cost information useful to both internal and external groups concerned with the way in which the organization uses, accounts for, safeguards, and controls its resources to meet its objectives. Managerial cost accounting is therefore the servant of budgeting, financial accounting, and reporting because it assists those functions in providing information. In addition, managerial cost accounting provides useful information directly to management.

There are a variety of acceptable costing methods, including:

• Standard Costing, where standard cost rates are established based upon historical data (or some other reasonable source). This costing methodology is most appropriate for repetitive type outputs (e.g., widgets delivered) and relies on on-going comparisons with actual costs to identify any material variances (which would lead to rate adjustments).
• Job Order Costing, where discrete units of work are  identified and used to accumulate the appropriate direct costs (via direct assignment) and indirect costs (based upon a causal beneficial relationship). This costing methodology is most appropriate for organizations that produce non-repetitive outputs (e.g., case management, engineering and construction, research and development).   
• Process Costing, where products are created by flowing through a series of organizations/steps, accumulating a unit cost as they flow from one step  to the next. This methodology is most appropriate for the production of homogeneous goods or services, where the same process is used in the production of each output (e.g., Medicare claims processed).   
• Activity Based Costing (ABC), where the cost of an output is determined by the activities required to produce the output and the resources consumed by these activities. This methodology is most appropriate for organizations that can clearly define their outputs, activities and cost drivers (used  to assign resource costs to activities). The major benefits of ABC are: 1) improved accuracy of cost assignments (by more accurately assigning both indirect and direct costs) and 2) identification of non-value added activities (those activities that do not directly or indirectly support an organization’s outputs).

Each organization must determine the optimal methodology to be used, based upon their specific situation. It is important to note that the methodologies are not mutually exclusive. It is appropriate to utilize more than one methodology in some circumstances.  

Oracle paper is right when it says it is appropriate to utilize more than one methodology in some circumstances. Oracle paper is right when it says Job Order Costing, is most appropriate for organizations that produce non-repetitive outputs but misses when it says Construction falls under this category. Perhaps biased because of their products offer.
 
After many decades of experience our local Construction Industry have adopted a combination of some of the described above, a combination some call "unit-cost-production".

http://www.foundationsoft.com/unit-cost-production-reporting/

  • The Costs are assigned to a Job Order.
  • Many of the Construction Activities are repetitive across different jobs and across multiple CPM activities.
  • Standard Costing is used as a tool for estimating and comparison.
  • Due to the amount of activities on construction CPM Schedules, ABC method is considered impractical.
Rafael Davila
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08.6.3.3 What is Activity Based Costing - Advantages in using activity-based detailed or unit cost estimating methods include: better ability to match the cost budget to the CPM schedule. Figure 4 - Listing of the Components Comprising Activity Based Costing (courtesy of Gary Cokins) - (1) Activity Based Costing (ABC) and Activity Based Management (ABM) is based on the horizontal work flow, which makes it ideally suited to use with CPM schedules.

For the reasons previously stated activity based costing tied to the CPM as described above does not happens and most probably will never be.

Imagine a 20,000 activities schedule being cost managed tracking labor, equipment, materials, subcontract and other costs (such as insurances) for every activity.

Contractors usually create a uniform Job Costing Chart of accounts they use along all jobs. My experience is that they use something near 100 such cost codes and within a few weeks an accounting clerk will memorize most of them.  At time of coding time cards, invoices, purchase orders etc. they will use these codes and add a job number to it.  The job costing module will then create the weekly reports.

Some of the referenced books to me are a joke from the Public Library of Utopia.

Rafael Davila
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Frequently Owners specify the CPM software to be used, at times Microsoft Project, at times Primavera P6, at times require CPM to be on their own computers such as the case of NY [NEW YORK] DTOP and CALTRANSP [CALIFORNIA], it is not a totalitarian system but it feels like it when you are not free to select your planning tool to take charge of your own means and methods.

Most contractors track costs through their financial and accounting systems using auxiliary Job-unit-Costing systems.  They select their accounting system based on many factors, frequently Best of Breed according to their needs, never CPM software determines which accounting and financial system they will use, by the same token never the financial and accounting system determines which scheduling software they will use, when free to do so.  

The Accounting software most used by my clients is Sage.

http://www.sage.com/us/erp/sage-300

http://www.sage.com/us/sage-construction-and-real-estate/sage-100-contractor

https://www.sage.com/na/~/media/site/sage-100-erp/assets/datasheets/Sage_100_ERP_Job_Cost_spec.pdf

I know of no single contractor that integrates Accounting software with CPM software, they just do not do it.

Usually Contractors do not prepare a detailed CPM before any project is awarded, estimating and bidding comes first. * Estimators prepare summary schedules in the hope that if they are awarded the job they will have no major scheduling issues.  * They do not know for every cost component how it will eventually fall along the final CPM activities. 

Contractors use the financial system to track unit costs the way they estimate their jobs, usually they follow time tested methods such as R.S.Means.  Take for example the installation of masonry units, they estimate by how drawings are divided, perhaps showing on a single page the required masonry on several areas that eventually will fall under different CPM activities.

If basic formal job costing is done by 50% or less of our contractors’ further subdivision by CPM activities is done by 0% +/- 0%.  Imagine segregating labor, equipment, materials, subcontracts and other costs for 50,000 masonry units, delivered in 20 truckloads to be installed under 80 CPM activities, IT IS NUTS!

At time of preparing a schedule they cost load the Billings as usually required in our contracts but keep confidential their costs.

There is a reason why some are also againts BOQ loading.

http://www.nflaace.org/index_files/john_orr_cost_loaded_schedule_updatin...

Rafael Davila
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Paul,

It makes sense and agree 100%+ common practice is not necessarily the best practice.  Best practice shall be not only feasible but also pragmatic.

Same as you we make use of the "Ghost Schedule".

http://www.fplotnick.com/constructioncpm/2016Presentations/MON37-PPR.pdf

We do not experience that much contractor failures, they do not go broke by the hundreds every year even when markup is a small percentage of total project cost.  The jobs rarely finish on time and contractor is usually not to blame.  It is on the management at the Owner's side where they mostly fail.  Usually they pay for it in the form of Change Orders.  I do not know of a single Owner that issue change orders as a give away.

http://ascpro0.ascweb.org/archives/cd/2012/paper/CPGT166002012.pdf

My experience has been that it is mostly government jobs that are mishandled by the agencies from the very beginning, prior to construction start.  Most of the problems I have seen start because the Owner do fail to get involved at the design phase, so it is not on the designers but on the Owner themselves.  Of course there are errors and omissions and unforeseen conditions but the statistics I got, and my own perception, is that they pale in relation to the management of the project by the Owner/Sponsor.

Our laws require contractors to submit Bid Bond and Payment and Performance Bonds by qualified Sureties.  There is not much room for an unqualified contractor to even make it into the bidding. 

If we keep looking for the needle exactly on the same place it will be very difficult to find it, impossible if we keep looking on the wrong haystack.  It does not helps much to tell everyone the problem is always on the contractor and never on the owner/agency when the statistics say otherwise, by doing so we are helping to perpetuate the problem.

Therefore I welcome very much the idea of this venture to give guidance to Owners, we pay the agencies with our taxes we need them to be better.

Best Regards,

Rafael

Dr. Paul D Giammalvo
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Rafael, For ~20 years I was a general contractor and our "project controllers" created OUR schedule (not the "official" one submitted to the owner,  as a contractual requirement) but our own "working schedule".   Why? Because as we were working in a cold climate, we had to know when we were going to place the concrete and get the building closed in as the costs of "outside" work in the cold months can easily double or triple costs.

Again you need to be clear that what we were/are trying to do with the GPC-BoK is to identify "BEST TESTED AND PROVEN PRACTICES" and not necessarily "common" practices" which helps to explain is why the contractor failure rate is so high and which is why we kept citing the KPMG research showing that OWNERS are not happy with the project management processes.

Explained another way, there are MANY "short-cuts" which are "common" that are not even "good" much less "BEST TESTED AND PROVEN" practices.

Hope you keep up the reviews but when doing so, please put it in the context that we are trying to REDUCE the high failure rate of contractors while INCREASING the "success rate" of projects.   Make sense to you?

BR,

Dr. PDG, Guangzhou, China

Rafael Davila
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Rafael Davila
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08.1.1.3.2 - CONTRACTOR’S PERSPECTIVE

(2) Creating a CPM Schedule- In most contractor organizations (at least in North America) both the CPM schedule and the Cost Estimate are done simultaneously, often by the same person or team of people.

The above statement is not true in America, maybe in a place called Utopia, an imaginary island described in Sir Thomas More's Utopia (1516) as enjoying perfection in law, politics, etc.

It is most likely the CPM will be prepared after contract award, current practice is that it is prepared during the initial construction days.  I do not see that after award American contractors will be given reasonable time to prepare the CPM before construction starts, current practice is a sensible approach but it is not simultaneous with the Cost Estimate.

https://www.cfxway.com/constructiondocs/ACPAM%20Files/3.0%20Preconstruction.htm

3.2.2 Contractor's Schedule Review

The Contractor submits his Preliminary Schedule during the Pre-Construction Conference.  The Preliminary Schedule details the contractor’s planned work for the first 120 days of the project and shows summary activities for the remainder of the work covering the entire scope of the project.  The Preliminary Schedule does not need to be CPM generated and does not need to show critical paths.  The CEI should review the schedule to check that all scope for the project is included and that the correct schedule milestone dates are shown.   

Within 90 days of the Notice to Proceed, the Contractor prepares a Baseline Schedule in accordance with contract documents. The Contractor's schedule is submitted to the Project Engineer. The Project Engineer, reviews the schedule, and if it meets contract requirements, submits a letter of acceptance to the contractor. If the schedule does not reflect a reasonable or feasible plan to construct the project in the authorized contract time or the schedule is not prepared according to the specifications, the schedule will be returned to the Contractor for modification.

http://www.long-intl.com/articles/Long_Intl_Contract_Scheduling_Provisio...

The contractor should not be expected to have its as-planned CPM schedule available on day one of the project. Normally, the contractor should expect to submit within 10 to 15 days after contract award a preliminary as-planned schedule that would cover the first 60 to 90 days of a project in detail and include a general outline or concept of the remaining work. Within the first 60 to 90 days, the contractor would develop it s detailed as-planned schedule and submit this schedule to the owner within that time frame.

http://www.renewnyc.com/content/rfps/cleaning_addendum3/vol1_2.pdf

The CPM Schedule for the entire duration of the Project, with full resource loading, is due 30 calendar days after AWARD of the Contract. LMDC may withhold all or a portion of the progress payments until the Contractor submits a complete CPM Schedule acceptable to LMDC.

https://www.dot.ny.gov/main/business-center/contractors/construction-div...

If in New York only after contract award the contractor is granted permission to use the DOT Agency computer.

If a VA job the contractor is prohibited from preparing a CPM schedule prior to Scheduler approval that have some meaning other than a Dummy CPM, this after contract award.  Unbelievable a contractor's Schedule by someone not tied to the Contractor, no wonder VA is notorious for poor contract performance.  

https://www.dot.ny.gov/main/business-center/contractors/construction-div...

It is not until contract award and after critical procurement is done that the American Contractor have a complete and real CPM Schedule, get real.

Rafael Davila
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The original Baseline can remain valid or it can change as soon as there is a slightest change in scope and be updated but actual performance is usually different to Baseline.  To say contractual changes, no matter how small, are not to be considered is wrong, a flawed premise.  Actual performance is not what you want it to be be but what it is. No matter if achievable actual performance can be better or worse than as originally planned, better or worse than as originally contracted, better or worse than current contract.

SCurves photo SCurves_zpsml6op3az.jpg

The following was CPM software generated, in the old times of P3 it was equally easy and everyone understood the difference between Baseline S curves and Current Schedule, at a single click of the mouse it would generate Current Actual single line and projected Early and Late plus two comparisons schedules Actual, Early and Late S curves.

S Curves photo SCurves.png

Progress S-curves indicate cumulative progress of all work, not just critical work. The project may be behind due to over-emphasis on non-critical work at the expense of the critical work and still show excellent S-curve progress up to DD. If the project is ahead or behind for whatever reasons the Current Schedule Forecast S-curves will tell.

We all know s single S-Curve is not enough, we all know there are Early and late S-Curves for the Baseline as well as for the Current Schedule. The Baseline tells us about a frozen target plan while the Current tells us the history at the left of the Data Date and the Projection at the right of the Data Date.

Previously I debated the fact that AACE RP-59R-09 completely missed to mention the most important S Curve component, the Current Schedule Projection.  They never realized the importance of schedule projections and to my knowledge their document have never been revised as to include it.   I can see the same people taking over this Cost Standard because I know the names. 

Standards are intended for regulatory purposes contrary to Recommended Practice which is optional, still some people insist on adopting by reference any Recommended Practice as a Standard, at times first time releases of a new RP.

I do not believe how you cost shall be standardized.  Just the single topic on whether to use unit production costing or activity costing can be of much controversy, and each advocate will swear their method is the ultimate truth.

Dr. Paul D Giammalvo
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Hmmmm......  It is not "wrong" provided we have a realistic and achievable schedule to begin with.    Thus IF we are using our resources at some OPTIMUM and the resource leveling has NOT pushed out the completion dates, then the original baseline should remain valid.

To see more on this look further down to Paragraph 01.1.2.10, Figure 13 and you can see another graphic which illustrates the importance of optimizal utilization of resources understanding that UNLESS we have a realistic schedule to start with and not some "pie in the sky" dream then the graphic I showed with the leveled (optimized) resource utilization should be valid.

But a great discussion and look forward to seeing what proposed changes you would like to see to the GPCCAR, PROVIDED they meet these 4 requirements:

1.       They must be “open source” meaning they need to be available under creative commons license OR permission must have been granted the original author to be included in the GPCCAR

2.       They must be FREE of any cost to the Guild of Project Controls member

3.       They must be accessible by mobile or computer devices via the internet

4.       They must represent “best tested and proven” practices and not “common” practices which may be commonly used but do not represent what we should be doing as opposed to what is commonly done,

Dr. PDG, Guangzhou, China

Dr. Paul D Giammalvo
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Mike, as I too am a life-long contractor, (practitioner with a Phd and not a PhD with no hands on field experience!!) I can appreciate your perspective and comments.

Having said that, as the GPCCAR was written for use by BOTH contractor and owner organizations, we had to take into consideration ALL the stakeholders needs, wants and expectations which is why we STARTED with the GAO's "Best Practices in Scheduling" and "Best Practices in Cost Estimating and Budgeting" as being representative of the latest "best in class" references which met these 4 criteria, 

1.       They must be “open source” meaning they need to be available under creative commons license OR permission must have been granted the original author to be included in the GPCCAR

2.       They must be FREE of any cost to the Guild of Project Controls member

3.       They must be accessible by mobile or computer devices via the internet

4.       They must represent “best tested and proven” practices and not “common” practices which may be commonly used but do not represent what we should be doing as opposed to what is commonly done

with the understanding that as this is a "living document, we are now free to improve upon it in anyway we collectively deem appropriate.

And while you may be correct about the activity level of detail being the responsbility of the second or third tier subbie, we covered that level of detail in Module 4- Resources, Module 7- Planning & Scheduling and again in Module 8- Cost Estimating and Budgeting.

Bottom line- It wouldn't hurt contractors to know and understand how owners use the schedule and cost information and it wouldn't hurt owners to understand more clearly how contractors prepare for and create schedules and cost estimates, which is one of the reasons the GPC made a very special effort to look at project controls from BOTH perspectives, which very few professional organizations have taken the time and effort to do.

BR,
Dr. PDG, Guangzhou, China

Rafael Davila
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Paul,

To say but that the actual ("leveled") progress should fall someplace in between is wrong.

If there is actual progress then to the left of the DD the curve that represents progress is a single line and to the right another pair [Remaining Early & Remaining Late] that will not necessarily end at the same point as the Resource Leveled Baseline Pair.  Usually two sets of resource leveled curves are overlaid.

If the schedule is way ahead or way late from the beginning the actual line at left to the DD might fall outside the Baseline boundaries.

http://www.mediafire.com/view/femao5y54ba2nm2/SCurves.jpg

Rafael

Dr. Paul D Giammalvo
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Chris, I don't agree with John's assessment.  If you look at Module 1, paragraph 01.1.1, Figure 1 http://www.planningplanet.com/guild/gpccar/introduction-to-managing-project-controls you can see clearly that we have covered not only the entire PROJECT life span but the ASSET life span as well.

This graphic is an adaptation of what Chevron is doing combined with the TCMF.

Explained another way, much of the GPCCAR is based on the TCMF but modified to "fix" or expand upon real or perceived weaknesses in the TCMF, especially on the "soft" or "people" side.

And as noted in previous responses, the GPC-BoK was intended to be a STARTING POINT only.  It is expected that now that we have a complete process driven project controls compendium in place, that practitioners will begin to update and IMPROVE upon it.  This intent can be seen at the bottom of each and every page where we encourage and solicit constructive improvements and have provided a process and a template which to do so.

BR,
Dr. PDG, Guangzhou, China

Dr. Paul D Giammalvo
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Chris, I don't agree with John's assessment.  If you look at Module 1, paragraph 01.1.1, Figure 1 http://www.planningplanet.com/guild/gpccar/introduction-to-managing-project-controls you can see clearly that we have covered not only the entire PROJECT life span but the ASSET life span as well.

This graphic is an adaptation of what Chevron is doing combined with the TCMF.

Explained another way, much of the GPCCAR is based on the TCMF but modified to "fix" or expand upon real or perceived weaknesses in the TCMF, especially on the "soft" or "people" side.

And as noted in previous responses, the GPCCAR was intended to be a STARTING POINT only.  It is expected that now that we have a complete process driven project controls body of knowledge in place, that practitioners will begin to update and IMPROVE upon it.  This intent can be seen at the bottom of each and every page where we encourage and solicit constructive improvements and have provided a process and a template which to do so.

BR,
Dr. PDG, Guangzhou, China

Dr. Paul D Giammalvo
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Fair points, Rafael.   This graphic was CONCEPTUAL in nature, intended to illustrate that not only should we have BOTH an early and late date curve, but that the actual ("leveled") progress should fall someplace in between.  Nothing more, nothing less.

What we have been trying to avoid (at least up until now) is relying on a single proprietary reference (i.e. Spider software) as the basis for the GPCCAR.   To my knowledge, your software is by far the most sophisticated, especially in terms of resource management, but as a STARTING point, we tried to use software which most practitioners would be familiar with (either MSP or P3/P6).

However, as the GPCCAR was designed to incorporate "best tested and proven" practices, we have opened the door for Spider (and other innovators) to propose changes which DO represent "best tested and proven" practices.

Bottom line- IF you think this remains an important issue, then at the bottom of each and every page of the GPCCAR we have provided the instructions on how to propose modifications/updates to the GPCCar.  We eagerly encourage proactive participation in this process as the GPCcar was designed to be a "living document"- written BY practitioners FOR practitioners.

BR,

Dr. PDG

Guangzhou, China

 

 

 

Dr. Paul D Giammalvo
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Fair points, Rafael.   This graphic was CONCEPTUAL in nature, intended to illustrate that not only should we have BOTH an early and late date curve, but that the actual ("leveled") progress should fall someplace in between.  Nothing more, nothing less.

What we have been trying to avoid (at least up until now) is relying on a single proprietary reference (i.e. Spider software) as the basis for the GPCcar.   To my knowledge, your software is by far the most sophisticated, especially in terms of resource management, but as a STARTING point, we tried to use software which most practitioners would be familiar with (either MSP or P3/P6).

However, as the GPCCAR was designed to incorporate "best tested and proven" practices, we have opened the door for Spider (and other innovators) to propose changes which DO represent "best tested and proven" practices.

Bottom line- IF you think this remains an important issue, then at the bottom of each and every page of the GPCCAR we have provided the instructions on how to propose modifications/updates to the GPCCAR.  We eagerly encourage proactive participation in this process as the GPCCAR was designed to be a "living document"- written BY practitioners FOR practitioners.

BR,

Dr. PDG

Guangzhou, China

 

 

 

 

Dr. Paul D Giammalvo
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Hi Rafael,

I was on the development committee of the GAO's "Best Practices in Scheduling" and like you, I too do not agree with everything.  However, given the "committee" consisted of several hundred people, to get the consensus we did is nothing short of a miracle.

Which is why the GPCCAR was designed to be a "living document"-  If you or anyone else disagrees with what has been written then we have developed a process to follow and a template with which you can propose changes- terms_of_reference_for_gpcbok_editors_appendix_a_-_rev_1.01.  Theis process can be found at the BOTTOM of each and every page in the GPCCAR

There are only three requirements:

1) There must be some PUBLISHED REFERENCE to back up or support any proposed changes (Why? Because as publishing papers are a part of the certification process, if there are contentious or competing tools/techniques or methodologies then we want to see our members publishing papers on those topics)

2) The reference must be "Open Source" (non-proprietary) available under some form of Creative Commons License. (Why? Because we don't want to run afoul of copyright laws by using proprietary materials.  We also do not want those who are preparing for any of the Guild Certifications to have to go out and purchase expensive books- hence the use of the GAO, and DoE documents)

3) The reference must be accessible via the internet/mobile device. (Why? Because we believe the real need for the GPC Compendium and References (CAR) and the certifications will be coming from the developing/newly emerging nations where "hard copy" books are not only expensive but often unobtainable.

Explained another way, the GPCCAR was designed to be a STARTING POINT only and we expect it will evolve over time which is why we are encouraging constructive and robust debates here on the forum, recognizing that this is OUR document and if it means we have to include or incorporate opposing or differing views then so be it.

Hope this makes sense?

Rafael Davila
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In the following link you will find a couple of reasons why I do not agree with GAO new schedule assessment guide.

 

http://www.linkedin.com/groups/45942/45942-6088481665007501315?trk=hp-fe...

I was called anti-American, hope you do not call me anti-British.

Rafael Davila
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I do not find the meaning of the following figure.

 photo Leveled Curve_zpscvpjsb4o.jpg

We all know there is an Early and Late S curve for the unleveled schedule as well as an usually shifted Early and Late S curve set for the leveled schedule. As the project progress each update will have its own set of "Banana Curves" that will usually move up and to the right.

 photo Baseline Cost S Curves_zpsbnlqn6ph.jpg

If you see a twisted banana, just run!

http://www.planningplanet.com/forums/planning-scheduling-programming-dis...

Tom Reichner
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Chris,

The Module 8.2 above related to Standard Operating Procedures (for cost estimating prior to execution of the project) will likely impact the risk analysis of the project during execution. That viewpoint is becoming more important in the eyes of project risk analysts. Please visit my Linkedin website "Schedule and Cost Risk Analysis" to read some of those views.

 

Tom Reichner

Mike Testro
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When I started my career as a builder (1962) I was an assistant estimator for a Main Contractor.

The company employed its own labour and the estimators were responsible for building up unit rates from first principles for all trades.

ie: 4.5 inch standard stretcher bond = 40 bricks per hour for a good brickie in a 2:1 gang.

ie: 1 sq yard of 9 inch brick wall in english bond took 98 bricks = 100 bricks plus waste.

This is where I got my grounding in construction economics which is of immense use in my current practice.

In todays construction world Main Contractors do not carry out an estimating function for their tenders.

They are merely an agency for collecting sub contractor's quotes and putting together a tender.

The real task of calculating labour resource costs and taking the risk of converting time related costs into measured value usually falls on the 3rd tier sub contractor.

At this level they have no interest in the suggested GBOK processes such as Validating Horizontal and Vertical Integration.

Best regards

Mike Testro

GPC Admin
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Hello,

I thought I might try to add some value by posting this here as it relates to the Cost Management table of contents.  I have pasted below the current taxonomy / index for this Module...

08 MANAGING PROJECT COST ESTIMATING & BUDGETING

Module 08.1 - Introduction to Managing Cost Estimating & Budgeting

  • Challenges Facing Both Owner and Contractor Cost Estimators
  • Types of Cost Estimates and Their Uses
  • Cost Estimating Processes (Owners and Contractors)
  • Cost Estimating & Budgeting Process Map
Rev 1.01

Module 08.2 - Develop Cost Estimating & Budgeting Policies & Procedures Manual

  • Formatting Your Standard Operating Procedure
  • Writing your Standard Operating Procedure
  • Maintaining and Updating your Standard Operating Procedure 
Rev 1.01

Module 08.3 - Define The Estimates Purpose And Scope Of Work (Owner)

  • Team Cost and Scheduling Meetings
  • Determine Level of Detail, Project Phasing, Weather & Other Constraints
  • Finalise Work Breakdown Structure & Control Accounts & Responsibility Assignment
  • Cost Estimating Templates, Activity Codes & Additional Schedule Coding Structures
Rev 1.01

Module 08.4 - Creating The Owners Cost Estimate (Top Down)

  • Standardized WBS Structures, Source of the Cost Data, Assumptions/Constraints
  • Major Changes, Project Information, Cost Estimating Software
  • Conceptual Screening - (GPC Level 1 Cost Estimate)
  • Capacity Factored Method, Parametric Modelling or Parametric Estimate
  • Analogy or Cost Estimate Relationship (CER) or Cost Estimating Model (CEM)
  • Expert Opinion Technique
  • Study or Feasibility- (GPC Level 2 Cost Estimate)
  • Life Cycle Cost/Costing, Calculating the Total Life Cycle Cost (LCC)
  • Equipment Factored Cost Estimating, Percentage or Ratio Factored Cost Estimate
  • Value Analysis/Value Engineering
  • Budget, Authorization or Control (GPC Level 3 Cost Estimate)
  • Owner Baseline, Owner Estimate, Bid or Tender Estimate (GPC Level 4 Cost Estimate)
Rev 1.01
Module 08.5 - Define The Estimates Purpose & Interpret The Scope Of Work (Contractor)
  • Team Cost and Scheduling Meetings
  • Value Analysis/Value Engineering
  • Determine Level of Detail, Project Phasing, Weather & Other Constraints
  • Finalise Work Breakdown Structure & Control Accounts
  • Standardized WBS Structures, Responsibility Assignment Matrix (RAM)
  • Cost Estimating Templates (Contractors)
  • Source of the Cost Data, Assumptions/Constraints
  • Major Changes
Rev 1.01
Module 08.6 - Developing The Contractors Cost Estimate (Bottom Up)
  • Bill of Quantities / Bill of Materials
  • Contractor Cost Baseline, Bid or Tender- (GPC Level 5 Cost Estimate)
  • What is Activity Based Costing, Components of Activity Based Costing, Case Study
  • Producing the “S-Curve”
  • Level of Effort
  • Using Activity Based Management
  • Using the Cost Estimate and Actual Costs of Work Performed (Cost Variance)
Rev 1.01
Module 08.7 - Validate The Time & Cost Trade-Offs
  • Assumption Testing & Sensitivity Analysis
  • Monte Carlo Simulation, PERT Analysis  & Cost vs Time Trade Offs (Optimization)
Rev 1.00
Module 08.8 - Validating Horizontal And Vertical Integration
  • Schedule & Cost Interfaces & Horizontal Traceability
  • Summarising, Rolling Up / Down & Vertical Traceability
Rev 1.01
Module 08.9 - Conducting A Cost Risk Analysis
  • Dealing with Risks and Uncertainties
  • Duration Risk & Uncertainty
  • Monte Carlo Simulation
  • Network Logic Risk & Uncertainty
  • Merge Bias or Merge Points
  • Schedule Cost Contingency Approaches
  • Prioritizing Risks
  • Probabilistic Branching
Rev 1.01
Module 08.10 - Baselining And Communicating The Cost Estimate/Cost Budget
  • Communicate the Cost Estimate/Cost Budget
  • Develop Written Basis and Cost Estimate/Cost Budget Narrative
  • Benchmark & Freeze the Schedule & Cost  Performance Measurement Baseline
Rev 1.01

As you can appreciate it needs to be read in conjunction with other Modules / aspects of Project Controls such as building your schedule, manging progress or managing risks and opportunities etc.

There is a growing team of junior and senior practitioners helping to provide comment and ideas on how to improve the GPCCAR as well as how to propose your own additions or changes to the Modules.  

You can read about (and help improve) the team and the GPCCAR change process here.  You can also join that team :)

envision global
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It was the first time i have gone through such an informational post really enjoyed it very much

Mike Testro
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Hi Chris

As a basic principle the industry needs to understand its unique position in the worlds market place.

In every other market place you buy your product as cheaply as you can and then try to sell it for as much as you can - thus creating a profit.

In the construction industry we sell it as cheap as we can and then try to buy it a bit cheaper - a complete inverse of normal commercial practice.

The problem lies in the situation that the people who are buying have no idea of the true sold price.

In my seminars I often ask the delegates what they were doing yesterday - and not one has ever given the true answer - which is "making money". If we can change that mindset then we are well on the way to real cost control.

Best regards

Mike Testro

PS

Please don't make it a total American document - there is the rest of the world to consider.

I have built a school in the middle of a West African jungle where the aggregate came from a blown up granite out crop - the sand from a beach by the lake - and the cement by bribing the local Sultan. How do you cost that?