Website Upgrade Incoming - we're working on a new look (and speed!) standby while we deliver the project

Tips on using this forum..

(1) Explain your problem, don't simply post "This isn't working". What were you doing when you faced the problem? What have you tried to resolve - did you look for a solution using "Search" ? Has it happened just once or several times?

(2) It's also good to get feedback when a solution is found, return to the original post to explain how it was resolved so that more people can also use the results.

Cost of Resources in Primavera P6

18 replies [Last post]
Ali Murtaza
User offline. Last seen 8 years 12 weeks ago. Offline
Joined: 19 Aug 2015
Posts: 30
Groups: None

Dear Sirs,

Greeting!

My apology if my question is already discussed before.

Question:

My client require each activity of my schedule to be LOADED WITH COST OF RESOURCES. i.e.

A. Labor, Material & Equipment needs to be loaded with PRICE/UNIT

B. BUDGETED COST for each activity to be calculated as PRICE/UNIT * BUDGETED UNITS

C. Total budgeted cost of the project should be equal to BOQ cost (contract cost).

Can you please help me in this issue?

 

Background knowledge:

In my previous projects i was working as follows for assigning BOQ cost and resources to schedule activities

For Costing:

I used to define non-labor resouce "BOQ Cost" with price/unit=1 and assign budgeted units to the same.

For Manpower:

I used to define labor/nonlabor/material resouce  with price/unit=0 and assign budgeted units to each resource as per estimated manhours.

BUT NOW IN MY CURRENT PROJECT CLIENT REQUIRE EACH RESOURCE TO BE LOADED WITH ITS PRICE/UNIT. AND TOTAL BUDGETED COST SHOULD BE EQUAL TO BOQ COST (CONTRACT COST)

YOUR VALUABLE COMMENTS  TO SOLVE MY PROBLEM WILL BE HIGHLY APPRECIATED.

Replies

Zoltan Palffy
User offline. Last seen 28 weeks 3 days ago. Offline
Joined: 13 Jul 2009
Posts: 3089
Groups: None

glad we could help let us know what you have decided to do and if it works for you 

Ali Murtaza
User offline. Last seen 8 years 12 weeks ago. Offline
Joined: 19 Aug 2015
Posts: 30
Groups: None

Thank You Guys for your healthy discussion and reponse.

Thank you Zoltan,

I am glad that you agree with me.

We suggest to include in the project model only expensive materials and equipment, and those items that must be ordered well in advance. All low cost and always available materials can be grouped as Other materials with quantities measured in cost units.

In most projects the number of named materials and equipment does not exceed several hundreds.

But for these materials we enter unit costs and assign them as fixed (mostly for equipment) or per volume unit quantities.

Activity cost depends on its volume measured in physical units. So activity cost is the sum of required material costs (unit cost multiplied by activity volume), cost of equipment (usually fixed), cost of "other materials" (set as cost, never exceeds 10%), labor cost (may be fixed, or proportional to the number of hours or to volume of work depending on the way people are paid) and cost of machines (also depending on the hours and volume of work).

So project cost is calculated in accordance with the requirements described in the initial post.

This is the way the contractors create their internal budgets.

For customers most detailes are not required. They manage those materials and equipment that supply themselves, activity costs are defined by contract agreement and in most cases are set per volume units.

Zoltan Palffy
User offline. Last seen 28 weeks 3 days ago. Offline
Joined: 13 Jul 2009
Posts: 3089
Groups: None

Vald really counting nails is so far into the weeds you will lose yourself. Go ahead and do it that way you will have it fully reaource loaded with every nail and every item when the project is OVER. This is know as a dollar chasing a dime. Also know as a blivet.

Zoltan,

these requirements look natural to me with one exception: I would combine low cost and easy to obtain materials (like nails) in one artificial material that is called Others.

Zoltan Palffy
User offline. Last seen 28 weeks 3 days ago. Offline
Joined: 13 Jul 2009
Posts: 3089
Groups: None

VALD

it can do all of that and add unlimited resources. Just because it is listed as a requirement does not mean that it makes sense to do it that way. If the requirement was for you to jump off of a bridge would you do it ?

I can write a scheduling specification so stringent no software can meet it even SPIDER ! Does that make it right do what is sensible, best practice and manageable.  

Zoltan, everybody loves word KISS, but the question was on meeting certain requirements.

It looks like P6 cannot meet them SIMPLE. Bad luck!

Rafael Davila
User offline. Last seen 12 weeks 6 days ago. Offline
Joined: 1 Mar 2004
Posts: 5241

With good CPM software it is enough to update volume of work and remaining volume of work will take over future resource requirements. Just use your financial system to keep historical records while use the CPM model for future projections.

Too much granularity when updating actual data is a drag:

  • At home we use resource tracking embedded in our financial system to keep track of current resource usage and production rates.  There is no need for duplication of this effort.
  • We use the CPM model for planning of future work considering resource and financial constraints.  If resource and financial constraints are not considered then you risk having unfeasible schedules. 
  • We use Excel to prepare our billings.
  • We use Best of Breed approach:
Zoltan Palffy
User offline. Last seen 28 weeks 3 days ago. Offline
Joined: 13 Jul 2009
Posts: 3089
Groups: None

go ahead and create al lof those resources have fun updating this and controling this. Love the term KISS

Rafael Davila
User offline. Last seen 12 weeks 6 days ago. Offline
Joined: 1 Mar 2004
Posts: 5241
  • You cannot resource level "lumpsum" it got to have the details to account for the demand and availability of the individual resources.
  • While it makes sense to get into the details for resource loading it does not makes much sense to get into excessive details to model cost in a CPM. 
  • When funds are limited activities or whole jobs will be delayed until more funds become available, if your portfolio will be affected by funding constraints it makes sense to cost load the schedule but there is no need for extreme granularity.  If your software is incapable of resource leveling costs then the cost loading under cost constraints is not of much use other than giving a cost time distribution.
  • Using CPM as a billing tool is tricky and perhaps better not to use it for these purposes.
Zoltan Palffy
User offline. Last seen 28 weeks 3 days ago. Offline
Joined: 13 Jul 2009
Posts: 3089
Groups: None

thats why too many resources that why I suggest one resource called lumpsum 

Rafael Davila
User offline. Last seen 12 weeks 6 days ago. Offline
Joined: 1 Mar 2004
Posts: 5241

It is not enough to change cost if volume of work quantities change, activity duration shall also be adjusted accordingly. Modeling of cost by resource effort or hours is easily done with any software but working with different workloads on any given team and linking crew production rate to activity duration I doubt can be done if using MSP or P6.

In complex crews production rate belongs to the multi-resource not to individual resources. In the following example by changing the crew production rate the duration is adjusted per activity volume of work. Of course in some cases individual resources can independently contribute to the production rate.  This scenario is also easy to model if you have software capable enough to consider the relationship for activity duration to resource quantity, workloads, volume of work and production rates; if any one changes the activity duration will be adjusted accordingly.

Some costs are related to volume of work, others to resource effort hours while others are a fixed lump sum, each case shall be easy to model by any software except the cost per volume of work as it is absent in most software.  You can assign to activity and resources several cost codes summarized by a cost center and can do the same for parallel BOQ budget.  Just remember planned and actual costs are usually considered contractor confidential while BOQ is not, make sure you either password protect these costs on transfer to owner if possible within your software, otherwise contractor shall delete confidential costs from transfer file.

 photo Concrete_UCperCY02_zps9wehorie.jpg

Partial workloads is very common, usually equipment is shared among several activities at the same time, the classic example a tower crane on a building is shared among many activities but shall be resource leveled as to make sure it is not assigned to do more work per day it can handle.

Rafael Davila
User offline. Last seen 12 weeks 6 days ago. Offline
Joined: 1 Mar 2004
Posts: 5241

If BOQ cost is 35,000 and there are 500 CM of concrete the unit cost per CM including concrete&re.steel Labor+Material+Non-Labor+OH&P is 70/CM.

No way we are talking US dollars, it should be a currency worth about 10 times the US dollar, what currency are you using?

What do you mean by BOQ Cost = 35,000 units?

 photo Concrete_UCperCY_zpsfporixtv.jpg

Ali Murtaza
User offline. Last seen 8 years 12 weeks ago. Offline
Joined: 19 Aug 2015
Posts: 30
Groups: None

Thank you Zoltan and Vladimir for your comments.

Dear Zoltan,

I really appreciate your comment,  if you could elaborate a little more please.

For example take the case of following activity:

Activity ID: A1000

Activity Name: Cast in Place, with forms, steel & finishing, Beams

My strategy of works is as follows:

Point#01 Define resources as mentioned in below table

Point#02 Price/unit for labor,mat,equip = 0

Point# 03 Price/unit =1 for BOQ lumpsump cost for activity

Resources for A1000

Type

Price/unit

Budgeted Units to complete works

Unit

Foreman

Labor

0

185

 

Carpenter

Labor

0

400

 

Steel fixer

Labor

0

250

 

Labor

Labor

0

600

 

Equipment operator

Labor

0

185

 

Slab Concrete qty

Material

0

500

CM

Steel qty

Material

0

50

TON

Concrete pump

Non-Labor

0

185

 

Vibrator

Non-Labor

0

600

 

BOQ Cost

Non-Labor

1

35000

 

 

In this way I generate histograms for manpower and equipment and S-Curve for cost.

Now the client requirement is Price/Unit for every resource item

Please clarify the following:

1.       You are suggesting defining the resources, in addition to abovementioned resources, as Lablumpsump, matlumpsump and equiplumpsump, right?

2.       Also according to you, average rate for lab, mat and equipment coming from tendering department right?

3.       What is your point regarding material activities and equipment activities for assigning equiplumpsump and matlumpsump?

I have all work activities in my schedule e.g Cast in place concrete.

Your response will be highly apprecuiated.

Zoltan,

I understood the requirement following way:

A. Each resource, material and equipment shall be loaded with price/unit. 

Do you suggest to create separate new resource for each resource that is used in the project?

B. BUDGETED COST for each activity to be calculated as PRICE/UNIT * BUDGETED UNITS

So the total cost shall change with the change of budgeted units. Why lumpsum?

I did not understand what do you mean by matlumpsum pieces. Different materials may be measured in cubic meters, tons, gallons, etc. What is the piece of matlumpsum resource?

Zoltan Palffy
User offline. Last seen 28 weeks 3 days ago. Offline
Joined: 13 Jul 2009
Posts: 3089
Groups: None

go to resources create a new resource call it laborlumpsum and make it a labor type of resource for the price per unit put in whatever your average unit price per manhour is lets say it is $50 this includes overhead,profit etc. ALL inclusive

then create another resource called matlumpsum and make it a material type of resource for the price per unit put in whatever your average unit price per material is lets say it is $500

then create another resource called equiplumpsum and make it a nonlabor type of resource for the price per unit put in whatever your average unit price for each piece of equipment is lets say it is $20000

then assign each activity one of the resources for the your average unit price per material is lets say it is $500

then assign all of the work activities the laborlumpsum resource and then under the units assign the manhours to do this work

then assign all of the material activities the matlumpsum resource and then under the units assign number of pieces for each of these activities

then assign all of the equipment activities the equiplumpsum resource and then under the units assign the number of pieces of equipment for this activity

Ali Murtaza
User offline. Last seen 8 years 12 weeks ago. Offline
Joined: 19 Aug 2015
Posts: 30
Groups: None

Hi Vladimir Liberzon,

Thank you for your response.

I am still waiting for someone who can help me out by listing down the steps to solve my problem.

Ali

Ali,

your customer requirements look natural. With unit pricing project budget will be easily adjusted in case of any changes of work volumes. Understanding cost structure (cost of labor, cost of materials, cost of equipment, etc.) is also useful.

I hope that some P6 expert will answer to your question. I use different software and am also interested if P6 can solve such simple problem.