• https://www.linkedin.com/groups/45942/45942-6140185233401667588?trk=hp-feed-group-discussion
  • http://www.spiderproject.com/images/img/pdf/Project%20Control%20Methodology.pdf
  • http://www.spiderproject.com/images/img/pdf/Tools%20and%20techniques%20of%20project%20and%20portfolio%20management%20with%20resource%20constraints.pdf
  • http://wbia.pollub.pl/files/83/attachment/1914_3_2.pdf
• EVA shall be applied carefully for the following reasons:
  
  • It does not distinguish between the works done on critical activities and activities with sufficient floats. A project could be late but EVA will not notice this problem if Earned Value exceeds Planned Value.
    
  • It motivates project managers to do expensive tasks first delaying cheaper activities that could have higher priorities,
    
  • It suggests to forecast future performance basing on past experience that may be wrong if resources that planned to be used in the future are not the same as in the past,
    
  • It does not allow for risks and uncertainties.
  • EVA is widely used but shall be applied very carefully and together with other methods because it may provide wrong motivation of project teams and does not consider activity network dependencies.
• Cost Loading is not exclusive of EVM and it provides more insight into the schedule when used with other methods such as Project Risk Analysis.
  • Cost Loading of the schedule happens at the resource and activity levels. This is not a monumental task, what is a monumental task is keeping track of every incurred cost at the activity level.
  • To say American Contractors usually keep track of incurred costs at the activity level is not true.
    • We cost load the schedule at the activity/resource level for prediction of future cost performance, easy.
    • We do not keep track of every realized cost at the CPM schedule, a monumental task that is better done if using financial system.
    • We keep track of costs at the Job Costing Module embedded on the financial/accounting system.
  • On construction jobs many things happens every day, every trade might have their own purchasing happening at the same day. Simple things such as the purchasing of a few sizes of conduits for electrical rough-in might be for many wall activities, for many column activities, for many elevated slab activities for many slabs on ground activities will happen every day. Distributing the cost of such single purchase into each individual activity is a nightmare. The PM or the supervisor will spend all day doing this distribution instead of managing the job. It makes no sense, when a couple of cost code accounts will be good enough to determine if purchasing of rough-in material is within budget. Imagine distributing the purchasing of nails among thousands of activities. 

Tong,

You got it right, I am talking about cost to the team that performs the schedule.

We use the CPM model for planning, scheduling and we include cost and income models into it but we do not go to the extreme of pasting millions of cost entries into the CPM model, nor we summarize the data using external worksheets. Just take a look at my estimate of cost entries and you will see how fast they add up, summarizing such amount of data that comes form different modules of our financial and accounting system is a monumental task not to be duplicated as the data from the financial/accounting system is more reliable, the transferring in addition can be error prone as it will lack the checks within the financial/accounting software.

We believe the sponsor has a right to look at his payments [cash flow] projections but this can get overly complicated if using this cost loading as a payment document. 

Tracking income at the activity level if used as a payment basis I am opposed to it as well as the vast majority of contractors I do know. Our preference is for a hands down approach of keeping billings separate from direct reference to scheduling. 

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

On the literature about CPM Scheduling practice in the US you will find that about 60% of schedules are cost loaded with regard to billings only, an even smaller percentage are resource loaded and almost none with regard to costs to contractor. If you dig further you will find many US contractors do not have any formal costing system in place.

• http://www.icoste.org/aace2005%20papers/cdr07.pdf 

- "Forty percent of those responding did not believe either manpower or cost loading was useful while 30 percent did believe resource loading was useful, and 15 percent did not have an opinion one way or another. The remaining respondents commented that it was considered extra work or depended on the specific project. Other comments made centered around lump sum contracting where it was noted it was not necessary in the respondent's opinion to track manpower or costs per activity."

I do not know of a single local contractor doing lump sum work that believes tracking costs at the activity level makes any sense. Here Cost Plus contracts are very rare and still there is no need to track costs at the activity level when at the cost account level is a practical approach embedded in many of the financial systems. Tracking costs through the financial system is more reliable, it follows generally accepted accounting principles. The financial systems keep track of every single data entry, of every correction entry.

Best Regards,

Rafael

It is not difficult to make some estimates on the number of cost entries required to track job costs, the numbers are quite high. 

Accounting at the activity level requires: 

1. An additional field for Activity Code and the distribution of the cost entries among different activities instead of using a consolidated entry per cost code. The distribution of cost entries among different activities in most cases will be many times more consuming than the remaining effort to populate the cost database. 
2. Sponsors frequently choose their preferred scheduling software, at time P6, at times MSP at times they allow Contractor to use their preferred software. Therefore it follows that integrating Financial System with Scheduling Software is out of the question as this is not already available for every Scheduling and Financial Software combo. The option for software monopolies should be also out of the question, that would be bad medicine.
3. Manual transferring of the Financial Data into the Scheduling software does not make any sense. 

The cost coding structure is usually modeled in the way the work is managed.

We had the following Crews and their supervisors.

• An elevated Slabs Crew and Foreman
• An Earth Moving Subcontractor.
• A Site Crew and Foreman who would supervise Slabs on Ground and misc. site work such as curbs, sidewalks, finish grading.
• A Walls and Columns Crew and Foreman.
• A Reinforcing Steel Crew and Foreman.
• A Plumbing Crew [Subcontractor] and Foreman.
• An Electrical [Subcontractor] Crew and Foreman.
• A Concrete Pouring Crew and Foreman.
• A Masonry Crew and Foreman.
• A Cement Plaster Crew and Foreman.

Each would have a crew of about 6 to 12 persons, each would prepare his time card and distribute hours for each employee per day based on what was done, some had a few job costing accounts, others only one, very easy. At the end of the day the project engineer [not the PM] would codify the supervisors time card.  Next day the job clerk would transfer the data into a data entry form, one per employee. At the end of the week the project engineer would revise the data entry forms and both the job clerk and project engineer would stamp their signatures on every card and sent them to the main office for processing.

Every week all invoices would be cost distributed into several cost codes, approved, and signed by the project engineer.  The PM would double check and sign the invoices pre-approved by the project engineer.

I recall major subcontractors keeping job costs using exactly the same data entry cards provided by same software vendor.  Perhaps ACCPAC Accounting or Great Plains. I recall one contractor using Great Plains for the Mac.  That was 20 to 30 years ago. These software were what contractors were asking. 

But times have changed now contractors are dumb and everyone got to educate them.  I have seen how good products such as Great Plains Job Costing were bough by software companies and made them no good any longer.  Sometimes it is the Surety who tells them what software to use just because the software gives them some reports they like but do not give the contractor unit costing, just costing without quantities, only budgeting numbers that lack meaning.  Well I believe the dumbs are those who insist on forcing the contractor to do it the wrong way, forcing unnecessarily intricate theories and methodologies. 

As a result many have been forced to reoccur to do what those intricate theories and methodologies cannot do.  More often than not the PM must use worksheets for resource planning because their software is very poor at it.  More often than not project managers are asked to track some unit costs using worksheets because their enterprise resource planning software do not handle quantities, just dollar amount, they must complement their dummy Job Costing that lacks the quantities.

I know of no single construction contractor that uses SAP but software specifically designed for Construction. The need in manufacturing is for unit production costing.  I have often seen manufacturing managers when using SAP attempting to track their unit production costs by using Excel worksheets even when they work with a handful of products, not several jobs at the same time each with thousands of CPM activities.  Not all costing needs are equal and can be very different for different industries.

GPC Admin Team,

I propose a complete re-write that is based on facts about current practice. It is not true all American contractors use CPM activity costing.  The practice is so bad that only a few do apply true unit costing, a few apply job costing different to unit costing and many dot not have a formal job-costing and some attempt to mimic job costing by breaking down the General Ledger accounts into sub-accounts.  None that I know uses Activity Costing.

When contractors make their estimates they do not have a CPM on hand, not even a cost coded budget.  After getting the job, if they do, then they prepare the CPM and independently prepare a cost coded budget based on a fixed set of accounts that fit their business and way of estimating their jobs taking into consideration how the data is to be collected.

Perhaps the best way to see how they do it is by taking a look at a few cost coded budget. Most use a combination of CSI Division Codes and add their own numbering.

A simplified breakdown for Construction Cost Accounts would be:

• 300M Concrete Materials - all structural elements
• 310M Form work Materials -  on 311M Footings - 312M Walls - 313M Columns - 314M SOG - 315M Elevated Slabs ...
• 320 Reinforcing Steel- all structural elements - 320L Reinforcing Steel labor - 320M  Reinforcing Steel Materials
• 330E Concrete-work Equipment - 331E Crane, 332E Concrete Pumps ...
• 340L Concrete-work Labor - 341L Footings - 342L Walls - 343L Columns - 344L SOG - 345L Elevated Slabs ...

As you can see under 320X there is a column for labor and a column for materials, in a similar way some cost codes would include all LEMSO. Were to include labor burden was not equal among different contractors.

LEMSO was a local mnemonic for Labor, Equipment, Materials, Subcontracts and Others. The traditional detailed cost report would include LEMSO+Subtotal for; Budget Quantity, Budget $ value, Previous, This Week and To Date. A report for dollar value and a report for unit cost. Each software would fit all these data in different ways but the report at maximum had 100 lines and not 10,000 lines [one per CPM activity].

Activity costing at CPM level we do not consider practical.  A document that illustrates how some [a few, yes a few] of our contractors do unit costing would take several pages as to show how data is collected and how data is reported.

Once I prepared a draft and did go as far as including the option to include Activity Coding in addition to Cost Account Coding because for a very few it can make sense to use a combination or even just Activity Coding.

If I find the reference I will provide it for free in the hope someone else will make it better and let everyone else there is not a one solution that fits all.  Still if we are to say which is most common [current practice], I would say in my neighborhood none, if to say which is most practical best practice for the majority of construction contractors I would say the traditional construction specific unit costing.

I want this document to be useful and provide practical guidance, if we do not do this I fear some will insist on pushing for impractical methodologies because they read it on a book.

Rafael

09.3.3.1.4 Capturing & Recording Men, Machines & Quantities

09.3.3.1.4.1 Manpower

This information traditionally comes from the daily time sheets each person has to fill in and submit as the basis to get paid.  Ideally, if the project controls team is working collaboratively with accounting/finance, and accounting/finance has Activity Based Costing capabilities, then each workers time would be charged against a specific activity which forms the basis for calculating part of the ACWP as discussed in 9.4.2.2 below.

09.3.3.1.4.2 Machines

Alternatively a simple / standard proforma can be issued to the site team which allows them to document the days site activities along with the numbers of machines utilized on site.

09.3.3.1.4.3 Materials

However, as with equipment above, if material is clearly identifiable with an activity, then it too should be charged against that activity.

09.3.3.2.1 Interfaces between ERP and CPM Scheduling Software

1. It is not uncommon for Client to insist on a different scheduling software, hijacking an important management tool out of the Contractors hand as if a totalitarian state. A different totalitarian state from the point of view of some clients, each mandating their own choice. Some go as far as requiring the CPM to reside on their own computer such as NY-DOT and CALTRANS. The more progressive do not interfere and qualify Bidders based on their performance records. Under these circumstances it makes no sense to integrate ERP and CPM.  Like it or not this is what happens in the US.

2. CPM schedules can have thousands of activities some as much as 10,000 activities and in more complex jobs the count can be above 100,000 activities, each with it own code.  A portfolio of jobs will consist of the previous numbers many times. Imagine an accounting clerk coding Payroll, Purchase Orders, Receipt and invoices with a 10,000 activities book for each job.  Insane, not real.  Activity costing is a rare bird I have never seen in the construction business.  Local construction contractors [~50%]use a unit costing using a limited number of cost accounts, perhaps 100, but not an new book of 10,000 activities for every job, the remaining do not have any formal job costing at all.

3. With Machines/Equipment a similar approach is taken, the Equipment division issue monthly transfer cost document to be coded and approved by the PM of each job. The same goes with equipment rental suppliers, instead of using transfer costing they issue invoices.

Do you believe each concrete delivery is coded against an activity(es) for which these materials might be used?  
Do you believe each truckload of wood to be used as form material is cost coded against a few hundred activities for which these materials might be used?
Do you believe each truckload of reinforcing steel is cost coded against a few hundred activities for which these materials might be used?
Do you believe each truckload of cement bags is cost coded against a few hundred activities for which these materials might be used?
Do you believe each truckload of sand is cost coded against a few hundred activities for which these materials might be used?
Do you believe each truckload of ceramic tile is cost coded against a few hundred activities for which these materials might be used?
Do you believe each truckload of kitchen cabinets is cost coded against a few hundred activities for which these materials might be used?
Do you believe each truckload of bath accessories is cost coded against a few hundred activities for which these materials might be used?
Do you believe each day pick up truck deliveries, each of multiple items is cost coded against a few hundred activities for which these materials might be used?

Only a small percentage of construction contractors have some formal job costing in place, if we insist on costing at the activity level very few will take seriously GPCCAR and nothing positive will come out of it.