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Value of Work Done

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gary harvey
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I'm a consultant and recently been involved with an implementation of a cost control system for some Oil & Gas projects that involved heavy Value of Work Done (VOWD).

I'm very familiar with earned value and initially I thought VOWD was just another name for earned value but I've learnt that it isn't and the two techniques can both be applicable.

VOWD is Purchase Order and Commitment and based and would seem to be particularly suitable for projects with a large purchasing component.

There isn't much reference material that I can find about VOWD although I know it is used at a number of oil&gas owners and contractors.

Can anybody point to reference material for the management thoughts underlying VOWD? How do I look at a VOWD metric and determine whether it is good or bad?

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HERY MADA INDRA P...
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Would you mind share the VOWD Excel for me (herymadapaska@gmail.com). it was a nice tools

HERY MADA INDRA P...
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You may also use Primavera Software Schedule. Comparing your provious schedule with the updated progress schedule is VOWD. You should use the accurate information when updating your schedule suit to your construction progress in the field.

You may also copied the the completed primavera wbs updated, add with the bill of quantity, with material expense and etc. it should reflect the VOWD

Raymund de Laza
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Sample Cash Flow featuring the Commitments.

 

2653
cash_flow.jpg

Rafael Davila
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Manangerial records do not necesarily have to match accounting records.  Frequently you might have two set of accounts, a set for General Ledger entries and a set for Job Costing.  Job Costing records are valuable auxiliry records that have their purpose.

I suppose an accountant would look at the Job Costing accounts for information that will assist him to post accounting information and willl ask from time to time some clarifications from the cost control team.

Good Luck

Raymund de Laza
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Rafael,

Thanks for the valuable info.

 

Regards,

Rafael Davila
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For Materials on Site vs. Work Performed take a look at the following figure.

G703 photo G703contsheet_zpspcgbiuus.png

The following can give you an idea on how accounting for commitments is done.

It is controversial but even when expense is still not realized there is a binding contract to follow. In pharmaceutical jobs the pharmaceutical makes huge purchase commitments that eventually will impact the budget, they must follow detailed accounting procedures for such commitments.

For decades there have been available several auxiliary systems available to track Commitments, I would favor the traditional accounting and worksheet methods but if you like to do the same thing using an auxiliary system you shall look at the options.  At the end you will be fixing everything with your accountants using electronic worksheets.

You are a fan of Primavera products so the following might be of interest for you.

> http://www.drmcnatty.com/wordpress/wp-content/uploads/2015/07/TrackingProjectFundinginPCM.pdf

I would rather use something like Prolog.

> http://www.meridiansystems.com/getmedia/8145bba9-4efb-4462-9caf-eac276fb31df/Prolog-Manager-3_14.pdf/

 photo prolog_zpsxtuzib4f.png

Raymund de Laza
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Rafael,

You mentioned a very interesting input for me. As a Core member in Cost Control, I am very interested to see your Input in real Actions. I mean, if you have the Excel File (XLS) populated with the Formulas as you mentioned in your input, I am humbly requesting it. This is a very vital for Tracking the Cash Flow.

I am interested on the effects in Cash Flow of Commitments, the Suppliers Payment in advance, Payment upon Delivery, Installation Cost of Activity, Earned Value, and Receipt Payment from Client.

 

Regards,

Rafael Davila
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Conclusion:

The increased functionality of modern schedule database software provides management information far beyond that contemplated by the original proponents of CPM network scheduling for use in construction. These useful yet competing purposes can diminish the value of the schedule as a time management tool if the distinct purposes and functions are not understood and the status update information is not segregated accordingly. We have observed that the addition of cost loading and contractual requirements to base progress payments on the monthly schedule update can create inherent problems if the project management team focuses on the cost tracking purpose to the exclusion of the time management purpose. Schedule update percentage information may be added which distorts schedule projections if they are not based on time but instead linked to dollars/payment. Progress payment withholds that are linked to both cost and schedule status percentages will result in a schedule with many “out of sequence” activities. The fully progressed as built schedule will therefore have actual finish dates assigned that reflect completion of remedial or punch list type work, rather than the actual completion date of the original scope of the activity. This invalidates comparisons between the as planned and as built schedules.

Add to this the flaw inherent in EVM that does not distinguish between EV on critical vs critical activities that makes EVM with regard to time element so flawed to the point some EVM enthusiasts promote holding the baseline updates, inducing the team to follow a no longer valid plan.

  •  https://www.linkedin.com/grp/post/45942-5996581107871547394
  •  https://www.spiderproject.com/images/img/pdf/Project%20Control%20Methodologies.pdf

Earned Value Analysis 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 task 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 planed to be used in the future are not the same as in the past.
  • It does not allow for risks and uncertainties.

Best Regards,

Rafael

Rafael Davila
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Commitments and expenditures for work not yet performed are not part of the Earned Value of Work Performed until installed/earned but are equally important.

Payment applications in the construction industry keep under separate accounts commitments as well as expenses for materials not yet installed. As soon as the materials are installed they are transferred from an expense component labeled "Materials on Site" to the Earned Value of Work Performed. The total cost to date is the sum of the component cost of material on site plus the component cost of the installed.

A good cost system as well as any good payment breakdown will use some physical measure for each cost account rather than a total budget not associated to some physical unit of measure.

> http://www.foundationsoft.com/resources/articles/161-job-costing-101-hel...

I suggest taking a look at how the Material on Site is tracked on the Payment Application Worksheet.

> http://splitrockemployment.weebly.com/uploads/1/1/4/5/11457268/aia_702_-...

You might need at minimum 3 cost component columns to keep track of all expenditures including commitments;

  1. Work in Place: Labor/Equipment/Materials/Subcontracts/Other
  2. Stored Materials
  3. Commitments not yet stored or in place

Good Luck

Raymund de Laza
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Gary,

In Construction Company, either we call it a Cost Control or Earned Value Management, there are always three things involved, whatever they call it. First is the Planned Value or Budgeted Cost, Second is Performance Value or Earned Value and the Third is Actual Cost or Actual Expenses.

It is similar to VOW=Value of Work, VOWP=Value of Work Performed and VOWD=Value of Work Done.

 

Regards,

Mike Testro
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Hi Gary

I developed such a system back in the 80's for construction projects and it is very simple.

In one column of a spreadsheet you have the budget allowance for the package of work or material supply and in the next column you have the value of the pruchase orders.

The difference shows the profit and/or loss.

In adjacent sheets you write the percentage complete of the package or the volume of materials delivered using delivery notes.

In that way you have a rolling record of the value of work done - although I did not call it that.

Best regards

Mike Testro