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09.0 - MANAGING PROJECT PROGRESS

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Rafael Davila
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GPCCAR - 09.0 - MANAGING PROJECT PROGRESS looks like if a book from from Bobbys World, is surreal and misleading. It is not how it is done, it is not best way as it does not represent a practical approach.

The proposed approaches are not used by any contractor I know.  US Contractors are smarter and use more pragmatic approaches to managing projects, schedule updating and job costing.

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Rafael Davila
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  • You can use the financial/accounting database to display time phased data posted into the system. The time phased cost code data from the financial/accounting database is reliable because it discloses what really happened at a very detailed level. The reliable time phased data prior to data date is on the financial/accounting database not in the CPM updates because it is too time consuming to transfer the data distributed at the activity level. 
  • The time phased cost code data within the schedule will give you a forward looking time phased report. Here no detailed distribution is needed, the model make the estimates at the activity and cost code level as always. To get time phased data after data date you can use the schedule because as soon as you loaded the cost code quantities they became time phased. 
  • The job costing system gives you production reports that are usually not easy to be pulled down from the CPM, in some cases not available at all. 
  • vr01 photo vr01_zpsjemn2wum.jpg
  • http://www.aronsonllc.com/knowledge-center/resources/item/project-varian...
  • The two systems complement each other, adding much needed visibility. 
  • People within my hometown use different methodologies to track costs. As per a prior reference in the UK the distribution is as follows.

CCT01 photo CCT01_zpsapkug9kr.jpg

  • While I suppose we all understand that without production quantities there are no production rates only an 8% track unit costs [cost/unit], maybe less than 8% might be tracking unit production rates [effort/unit]. Not the ideal but a fact, not far from what I have observed at my location. 
  • Tracking unit costs is not the same as tracking unit production rates, both are relevant. It might be unit production ratess are as estimated but unit cost might be high if overtime is used. It is convenient to also report unit costs and production rates side by side.
  • Usually Earned Value and PERT/COST are used for Income/Billings but not to track all costs to contractor.
Tong Cong Tuan
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We are from different countries with different methodologies, and probably insists on that our own method is the best. Why we don't analysis the weak and strong of both to make the GPCCaR more comprehensive.

For general, I call method 1 is Activity Based with relevance to: Cost Loading & Resource Loading CPM Schedule, EVM/EVA, Performance Measurement Baseline, Time-phase cost/unit model,...

And method 2 is Work Class based with relevance to: type of activity, unit-cost code, productivity code,...

A1.The weak of Activity Based in progress monitoring:

   A1.1 lack of focus on productivity, unit-rate of each Work Class.

   A1.2 the stability of the model based on the stability of the nature of Engineering about work volume. Need to be revised the baseline model frequently if having huge changes on the work volume.

   A1.3 Very time consuming on gathering actual resource hours at Activities level. For gathering actual cost, if we are at side of Buyer (Client/General Contractor without major own resources), we still can record the actual cost at Activity level via physical % complete. However if we are at side of Seller (Contractor with major own resource), we can not record the actual cost at Activity level due to time consuming.

   A1.4,5,6...please to advise

A2. The strong of Activity Based in progress monitoring:

   A2.1 It's time-phase model, very powerful for forecasting (after data date)

   A2.2 can summarize any group of activities even they are different Work Class (type of activity), results in can summarize the progress at any dimension of any WBS, even for non-work volume activities such as IT, Engineering, Procurement work,...

   A2.3,4,5,6...please to advise 

B1.The weak of Work Class Based in progress monitoring:

   B1.1 It's non-time-phase model, can not use for forecasting (after data date)

   B1.2 only summarize the group of same type of Work Class

   B1.3 need to minimize the number of Work Class for resolving the issue of time consuming in gathering actual resource hours and actual cost (to minimize the number of job cost code under 100 codes).

   B1.4,5,6..please to advise

B2.The strong of Work Class Based in progress monitoring:   

   B2.1 focus on productivity, unit-cost

   B2.2 Independent with the change of work volume, or the nature of Engineering about work volume.

   B2.3 No time consuming in gathering actual resource hours and actual cost.

   B2.4,5,6..please to advise

 

Therefore, I promote the use of both methods for a comprehensive project control.

Rafael Davila
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I cannot understand how someone can claim is doing good cost control if volume of work is not measured. This issue for whatever reason seems to be forgotten on recent discussions about cost control and the Guild is no exception. 

In recent decades I have been noticing a tendency of oversimplification of the traditional construction contractor cost control procedures to the extent some/many job costing software do not even mention volume of work, unit cost and production rates, and just report on cost budgets without relating these to volumes of work.  This might be good enough for IT jobs but not good enough for construction jobs.

By measuring volume of work, an easy task, everything makes more sense as cost alone without units does not provide enough information. 

Production reports go beyond basic job cost reporting to help owners and/or project managers understand the output of a measurable task, such as how many quantities have been completed per man hour (e.g., 10 SF/hour) or how much it is costing per unit of measure (e.g., $2/SF).Why is this information important? Actually, the benefits of production reporting are many:

  1.  it allows contractors to see how they are progressing from a production standpoint as a job unfolds,
  2.  it allows contractors to project their costs on a periodic basis, and
  3.  it provides precise historical data for more accurate estimating on future jobs with similar conditions.

The issue on production tracking and reporting is so intuitive it requires no formal training, its lack of mentioning at the Guild cost publication with enough emphasis and detail is a big disappointment.

How can you talk about efficient cost control without talking about production quantities ?

Well I am not surprised that globally the cost control procedures are as bad as that of the USA. Take a look at the following references and you will see that current practice in the UK is as poor as that of the US. I do not expect practice elsewhere to be better.

Interestingly despite the popularity of the application of control method to construction projects, construction cost and time Olawale and Ming 886 overrun were still frequently experienced by the companies surveyed.

That you try is not good enough, you got to do it right. 

I did not want to participate in this discussion because expected that cost control may be different in different countries.

In my country people plan and track volumes of work and costs for different types of work (concreting as an example). At the end of the month they compare planned and actual costs by types and report what amounts (volumes) were done and for what costs by activity types. It could be dozens of the schedule activities of the certain type done in a month.

Cost estimates are always based on unit costs. Planned and actual activity costs are calculated basing on planned and actual resource costs (people, machines, materials). Activity and resource costs consist of cost components (salary, machine costs, material costs, indirect costs, etc.).

Project has several budgets used by different participants. Contract budget is usually based on cost estimates (agreed unit costs), General Contractor budget is based on resource costs and unit costs agreed with subcontractors. Subcontractor also have its own contract budget and resource based budget. Planned and actual unit costs are used for job performance analysis and for future more reliable cost estimates.

I did not mention cost accounts because activities may be grouped any way and the costs may be grouped and sliced any way (cost centers and components).

Rafael Davila
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Mike,

I do not have access to the Guild, but I hope PP is not into any form of fornication with the AACE International Recommended Practice for Forensic Schedule Analysis. A document I consider among the worst ever. 

http://barbaconsulting.com/wp-content/uploads/2011/12/fall-2009-const-la...

Distortion of the facts is unacceptable, the following statement is one such distortion of the facts.

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...

  • Activity based costing capabilities in use by American construction contractors within their accounting/financial systems is not easily/widely available, and perhaps completely non-existent or not used.
    • Otherwise can anyone provide me with a published reference from reliable source showing the percentage distribution of the financial/accounting software having activity based costing capabilities and scheduling software used by construction contractors that integrates with the financial/accounting system to keep track of costs and that are widely used for this purpose? 
  • That it is ideal to implement activity based costing instead of traditional unit costing is far from true. Unit costing makes more sense as among many other reasons; it is not limited to individual activities, it does not ties financial/accounting to a specific scheduling software avoiding compatibility issues. Unit cost focuses management attention on relating total cost with work accomplished (output produced). Unit cost is so intuitive anyone without training understands it. 
    • http://www.foundationsoft.com/unit-cost-production-reporting/
  • Cost budgeting without quantities is not enough, it is the volume of work that gives meaning to costs. Keeping records that say 10% over budget on activity 10,000 does not tells me much, a lot of data keeping effort for such return. But if you say that within all realized activities that use cost code 100 for Ceramic Tile we got a unit cost of $5.00/sf ceramic tile this give us meaningful metric that can be understood by anyone without the need to look any further. The same goes with production rates.
    • Can anyone tell me why the Guild fails to mention on the need to keep track of volume of work?  Without quantities for volume of work we do not have unit costing and production rates. Unit costs and production rates are the foundation of estimates and calculation of activity duration.

Best Regards,

Rafael

Mike Testro
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Hi Rafael

I wholly support your campaign.

I have just finished setting up the Q&A test paper for section 12 Delay Analysis.

Anyone from the rest of the world would have a problem because it is entirely USA focused.

For instance in the section on alternative dispute procedures Adjudication is ignored even though it is common in UK and many other countries.

Also no mention of a DAB.

It is very strong on What to do but not How to do it.

Even if someone does tick all the "correct" boxes they will not have aclue as to how to present a delay analysis.

Best regards

Mike Testro

Rafael Davila
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How can you convince the Subcontractor follow your Job Cost Coding system under lump sum Contract, assume you are doing at side of Client/General Contractor to manage the Work of many Subcontractors/Vendors?

  • Easy, we never require our subcontractors to submit their costs, this is considered confidential information. We do not even require them to submit their billings [their income, our cost] within the CPM schedule.
  • We find no relevant benefit on doing so, then it follows everyone is happy and concentrated on what matter the most rather than being hooked on a tedious and unnecessary clerical exercise. 
  • Don't do to others what you don't want done to you.
Tong Cong Tuan
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Yes Mr Rafael,

Maybe I wrote what I don't want to mention, what I focus here is Cost loading CPM Schedule, not EVA/EVM. All the weak of EVA/EVM in your attachments are correct. In my regular jobs, sometimes I need to convince my Client that they should forget about EVA/EVM, I have the better for them is Cost Loading & Resource Loading CPM Schedule. From this, I can generate a full-set of S-Curves (early baseline, late baseline, earned, actual, early forecast, late forecast for both resources and cost), and it can export at any WBS/Code/Trade/Work Class/Area or activity level.

You also right about cost derived from the assignment of resource to activity, not derived directly from task. However, as point#1 and point#2 in my previous post, How can you convince the Subcontractor follow your Job Cost Coding system under lumpsum Contract, assume you are doing at side of Client/General Contractor to manage the Work of many Subcontractors/Vendors?

 

Mr Mike,

We should use both cost and manhours for tracking summary progress. Eg. for Heavy lifting work, cost weigtage will be better than manhours weigtage. I use the word "summary" due to the purpose to have an overall view at WBS/Trade due to the different unit of measurement of each activity.

 

In addition, there is a link between Cost Loading CPM Schedule and Job Cost Coding. It similar to Rubix Cube concept. For instance, have 40 work class codes (or cost of account code), when multiple with additional information like: Work Class X Zone  X Area X Level X Floor X Room (eg. 40x3x4x5x6x7 = 100,800 activities...wow it's a mega project), you can see from just 40 work class, and results in 100,800 activities in CPM Schedule

Mike Testro
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I agree with Rafael.

Using cost to track progress is not good practice. I call it the gold tap problem. A pair of gold taps takes about 30 minutes longer to fix than a pair of chrome ones but cost ten time more.

Expended resource hours will keep track of the difference between planned and actual progress. And you can filter it on the critical path.

Best regards

Mike Testro

Rafael Davila
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  • 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 Cong Tuan
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Hi Mr Rafael,

Both methods Cost Loading CPM schedule (EVM/ABC) and Job Cost Coding are still have their value in specific circumstances. Can not diminish any one. It depends in some factors following

1. Client/Contractor standing and strategy: manage the work but not perform the work and don't have own resources vs. perform the work with their own resource.

2. Contract type: lumpsum vs. cost-plus vs. unit rate.

3. The nature of scope definition, or nature of Design: always have huge change vs. major changes can anticipate.

Why Cost Loading CPM Schedule still be used very popular:

- many Organizations in the world don't want to manage many own resource, they focus on profit more than quality of work. So they're happy with subcontracting approach. Correspondingly, lot of companies become coordination company more than real builders. Some big bosses confuse between both strategy, then they chose become the coordinator, but to minimize the risk of low quality, they deploy some experts to manage the subcontractors. It happens everywhere, do you agree with me. So no wondering that EVM is so popular. Cause they need a power tool to push their subcontractors to increase resource when the progress below the early or sometime late S-Curve. And due to the contract type, they can not "open the book" of the subcontractors to see the real current actual productivity and unit-cost of some work/cost codes.

Why Job Cost Coding still be valuable:

- As result of above, many coordination company (A sub to B+C+D, D sub to E, ...Z). Sadly, the truth that always need a real builder company ("Z" company). The "Z" need to know the baseline productivity, baseline unit-cost to manage their production and profit. So they need the Job Cost Coding system, less than 100 codes linked with LEMSO, to challenge the bottom workforce. And solve the issue of time consuming when collecting actual data. We can see it in many Shipyards, this Job Cost Coding with the database of productivity and unit-cost are their heart of monitoring the work.

Therefore, instead of diminish the value of EVM method, I think your advise should be treated as an Addition more than a Replacement for EVM for GPCCAR.

Rafael Davila
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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. 

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.

- "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

Tong Cong Tuan
User offline. Last seen 46 weeks 6 days ago. Offline

Perhaps both Sirs talk about same topic but go far to different stories. So it maybe make some miscommunication here, and extend the debate.

For tracking cost in the point of project control not accounting, as I know there are at least 4 cases below.

Case#1: for out-source and lumpsum work and in the view of general contractor (maybe not suitable for subcontractors), they devise the main contract into many sub-contracts with lumpsum budgets for each packages. Then the EVM/ABC are used appropriately, this method was emphasized many times in GPCCAR. The point that both Sirs forget to remind that this method can track actual cost of thousand activities via activity %complete, actual cost of general contractor (not subcontractor) in this case equal to= price budget (written in sub-contracts) X physical % complete, . When having huge changes in scope/time, the time-phase cost model (performance measurement baseline) should be revised also.--> Is Mr Paul talking about this.

Case#2: for in-source work, in the view of subcontractor, or main contractor use their own resources, they establish some cost code combined with LEMSO to track actual cost,  they focus on productivity and unit cost of each cost code, and may be separated with CPM Schedule, result in don't have time-phase cost model. But after completiong of project we can have a historical database for productivity and uni-cost, very valuable --> Is Mr Rafael talking about this.

Case#3: for in-source or out-source work, the contractor adds some summary activities in CPM schedule and track actual cost on those summary activities (or level-effort). they have time-phase cost model, maybe not precise but enough accurate

Case#4: combine some cases above.

 

Best Regards,

Tuan

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

DER01 photo DER01_zpsjowcvmlk.jpg

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. 
Rafael Davila
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Paul,
  • The claim that contractors are as a general rule doing poor work is an insult to the American Contractor because it is just the opposite under the circumstances of how poor the other participants do their work. I find the cartoon appropriate to highlight how wrong your statements are. 
  • I will keep my ground with regard to GPCCAR - 09.0 - MANAGING PROJECT PROGRESS looks like if a book from from Bobbys World, is surreal and misleading. It is not how it is done, it is not best way as it does not represent a practical approach.
  • The proposed approaches are not used by any contractor I know. US Contractors are smarter and use more pragmatic approaches to managing projects, schedule updating and job costing.
  • When working on single digit EBIT margins as usual in the USA Competitive Bidding Jobs there is no room for much error, therefore it follows that the claim that estimates and schedules are widely off the bulls eye is by any definition wrong.
  • American Contractors make it almost always on the center of a small bulls-eye otherwise there would not exist a contractor with experience of more than a few jobs before going bankrupt. Contractors know their business very well but it is usually at the sponsor side that management fails, especially when sponsor is a government agency. I do not believe sponsors are so naive as to pay for change orders that are due to the contractor mishandling of the job, in government sponsored jobs such missuses of funds would be illegal. Sponsors pay Contractors for change orders because they are not because of the fault of the Contractor and change orders must proceed. 
  • To say that the general rule for the American Contractor is to track costs at the activity level is not true, we keep track of unit production costs using cost codes that might be used in many similar activities. We track unit of output across multiple activities, keeping it within the boundaries of single activities makes no sense.
  • http://www.foundationsoft.com/unit-cost-production-reporting/ 
  • http://my.nps.edu/documents/103424423/106950814/Unit+Cost+Handbook-web.p...
  • Say we have 10,000 activities schedule, for us it does not make sense keeping track of the individual cost per activity. We do not create a chart of account of 10,000 items in our financial system for every job we do so we can code every expense if using such approach.  If we buy some material for the same cost code [process] that is spread under 3,000 activities we charge it all to the same cost code [process]. We use the same cost code dictionary for all jobs and we compare unit costs among different jobs.
  • Current Project Management practice will improve when the myopic vision of those who insist to educate the contractor stops because the real problem is not there. If you and your advocates continue insisting the problem is at the contractor court, nothing will change.
  • We must look at project and program sponsorship if we want to get real improvement. 
  • I do not believe Planning Planet should be part of spreading such misleading statements about how cost control is/should be performed by using such micro-management practices while avoiding to spell the truth about the origins of so many change orders and project delays. 
  • http://ascpro0.ascweb.org/archives/cd/2012/paper/CPGT166002012.pdf
Dr. Paul D Giammalvo
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BTW, Rafael, I find the cartoon postings to be offensive and highly unprofessional and would appreciate it if you removed them.  


You don't agree with what I've written then fine, I recognize that there are many ways to "skin a cat" so if you have something better to offer, then write it up and we can run it through the peer review process and if in fact what you are proposing does represent a "best tested and proven" practice then the GPCCAR was designed to be a living document.

HOWEVER, having explained that many of the practices we are currently using while COMMON are not exactly what you would call "best tested and proven" practices, which is what we are striving for.

How do I know this??  If you look at the research from KPMG, Glenn Butts, Ed Merrow and Bent Flyvbjerg as well as look at how many of the ENR Top 400 Contractors remain in business after 5 years should tell you that SOMETHING is radically wrong- that OWNERS are not happy and surely the success rate of CONTRACTORS is not something we should be proud of either.

And what is the root cause of dissatisfaction?  Far too many owners and contractors alike are using SHORT CUT approaches and because of this, their projects run late, over budget, with all kinds of claims and counterclaims and not only are the PROJECTS failing but the PRODUCTS the projects were undertaken to create are not delivering the value to the OWNERS.

Bottom line- I am challenging you and other senior folks not to try to justify "what we've always done" but try to come up with what we SHOULD BE DOING.  That is the least we owe to future generations of Project Control Professionals, don't you think?

BR,
Dr. PDG, Jakarta, Indonesia

Dr. Paul D Giammalvo
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Raf, not sure what part of the world you come from but having been a small to medium sized construction contractor for most of my working life, and since the late 1960's until today, I have always based my cost estimates and my schedules on activity based costing and when we bill, we bill off the schedule ACTIVITIES and not just the milestones, using earned value management.  Why? Because by billing of the ACTIVITIES rather than the MILESTONES we can enhance our cash flows plus by focusing everyone's attention on the ACTIVITIES rather than the MILESTONES we can figure out ways to make the schedule more efficient.

What weve found as CONSULTANTS is that many contractors who don't THINK they use ABC/EVM do in fact use it or at least some form of it.  We've also found out that the contractors who are SUCCESSFUL and stay in business for longer periods tend to use ABC/EVM more than those who don't.

Why? Because when you are working on single digit EBIT margins, failure to pay attention to the DETAILS will eat your profit margins alive quicker than anything.   What we have found out is when working on small margins is it not the big items that kill you.  It the half a percent here, half a percent there which eats your margins.......   "Death by a thousand cuts"........

Anyway, IF you have an alternative approach by all means propose it and let people look to see which is "better"...... And if we find out that there are more than one school of thought as to which one is "better" then we can amend the GPCCAR to show that depending on the context or circumstances that there is more than one approach.

BR,
Dr. PDG, Jakarta, Indonesia

 

Rafael Davila
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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.

Rafael Davila
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http://www.foundationsoft.com/financial-reporting-construction-accounting/

a contractor’s job-costing system should have the capability of running reports the way each contractor—or project manager—wants to see them.

....capable of showing cost breakdowns on many levels—from total job costs to labor costs per task, to costs per cost category and costs per units of measure, etc. And while it is certainly possible to create and maintain a manual job-costing system (and then dump this information into spreadsheets for project-level reports), it would not be easy, efficient or wise for a contractor to do so.

....Numbers are virtually useless unless they can be placed in a format, or report, that explains and extrapolates their meaning.

EVM Jargon is Chinese to the people at the job-site they speak unit costs such as $5.00 per SF and production rates such as a crew of a mason and helper can install 800 bricks per day.  EVM does not provides the reports the way each contractor—or project manager—wants to see them.  EVM fails in many other things, so many there is no room here to list how limited EVM is.

The following is a white paper I never finished that you can use as a reference, but please improve on it, try to get several sample reports from different software providers for Construction Unit Cost Systems that include units, not the cheap ones that only report mere budgets without quantities of work; physical quantities give meaning to the bare costs and production rates.

http://www.mediafire.com/view/i7pvca8e62kbnop/Job_Costing.pdf

Rafael Davila
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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

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Hello Rafael,

It is great to make comments like this (but I assume some senior guys might have a different opinion) - but what would you propose the text be changed with if you think it is not what a best tested and proven practice IS or SHOULD be?  

GPC Admin Team

Rafael Davila
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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.