Weighted Milestones

Hi Raviraj,



In my company we usually adapt a similar approach as yours.



In the tender phase:

1- The tender department creates the project file (includes the rates of items, profit, etc...) .

2- The cost control department creates the cost estimate and the cost budget for the project based on the project file and broken down to BOQ items (which includes the dry cost detailed to the 4M’s for each item (literality means Money, Manpower, Machine, Material).

In the construction phase:

1- The site cost controller gets the actual data from all of the site teams (eg. actual hours for labor and equipment from site time office, salaries from site accountant, actual quantities from the site technical office, follow-up subcontractors & variations, etc...).

2- After collecting the actual data, the cost controller prepares a cost report comparing the 2 cases (which shows the current budget and the current profit).



Now for the original question "The weighted milestones", P5 calculates the EV (BCWP) according to the following equation:

EV = BC * Performance Percent Complete



Performance Percent Complete can be calculated by 5 methods:

1- Activity percent complete

2- 50/50 % complete

3- 0/100 % complete

4- WBS Milestones

5- Custom %



WBS Milestones means that u assign a "weight" for each WBS in the schedule, later on while updating u updates the % complete for this weight.

The updated % complete is rolled back up to the activities (meaning that each activity under this WBS will get the same updated performance % complete), after that the EV is calculated as mentioned before.



Regards,

Karim

Hi Raviraj



Your approach for me seems excellent. In Germany for my experience it is a little different - maybe similiar to UAE: Mostly there is a strong separation between cost and time control. Most companies use SAP and scheduling doesn’t get actual cost-data - without input, no earned value.

For cash flow P3e has the approach with expenses and priced roles. So cash out is clear.

Cash-in with UDF + global changes.

Both are full of assumptions, of course, so we put the assumptions onto a cover sheet. If the management isn’t satisfied, they may ask for changes and will receive a modified cash flow.

%-complete: I tried WBS-milestones already but found as a big opportunity the different percent complete types. So, we use them + global changes.



Your approach I’ll try in the next future. Thanks Raviraj.



Best regards from Germany



Dieter

Yaa, What u r saying is absolutely true if u r working in UAE, where d actual cost is controlled by different team / departments. It is very difficult to be controlled by us.



But, in an integrated approach (PRACTICE V USED TO FOLLOW IN INDIA), you need to quantify all the activities as stated in the BOQ (to determine activity resource requirements) and then need to submit a Pre-Start Estimate (PSE) to the management to confirm the planned cost for the project and based on this profit margin was committed.



Once the PSE got approved, need to submit the Cash flow statement for the PROJECT FUNDING REQUIREMENTS and get it approved from the Management.





For ACTUAL COSTS, For each item in the BOQ, need to get feedback from the STORES, SITE TEAM, Vendors, P&V (plant & Vehicle dept) and labour contractors. Need to allocate each item into the respective activity.



e.g. Activity --> Slab Concreting



- Shuttering cost from Regional Office (Based on the no. of days used)

- Concrete Qty. is confirmed from drawings and confirmation is done with payments claimed by the RMC Vendor

- labour (Fitting and concreting gang) cost from the labour contractors

- Steel Cosumed and in stock with the Stores

- Equipments used (From Depreciation cost model - as stated by P&V department)

- Accessories cost supplied by the Vendors



The cumulative value earned should be comapared with the Qty. claimed from the CLIENT for performance Measurement.



This difference need to be positive and if its negative, that means u r making loss and responsible to give justification.



Now, the question of WEIGHTAGES. For percent complete, your organisation has standards and if it is not take expert’s help i.e. your PM or Construction Manager.



I Hope, this is clear.





This is what I perceived as the best construction management practices to be followed in construction industry (What v practiced). May be Karim and Dieter can add few more inputs.



Cheers,



Raviraj

Hi Raviraj,



That is a logical explanation for the mathematical

calculation of EV based on weightages assigned to

the various WBS levels or Work groups as the case

of detailing may be. And I presume you mean the

weightage %s are based on cost.



But the key problem is how do we arrive at these

percentages ? Surely we need to assimilate cost

values to arrive them for which we need the cost

values to be established systematially and in a

manner that will have to be incorporated in the

schedule.



However, unfortunately, at the beginning of a new

project, we may have only the Priced Bill available

for any kind of value analysis. I presume that when

you mean cost, its different from the Priced Bill

value. The cost will be lower that the Bill value

by a differential amount which is the notional

"profit" ! Now how do we decide as planners on this ?

I do understand that it will have to be ’Cost’ if

EV has to be done properly as otherwise, the

calculation of Cost variance would not be possible.

Schedule variance could still be calculated if Bill

value is used as weightage instead of cost.

Moreover, the real challenge is : ’How do we get the

figures of actual costs incurred ?’ As far as I know,

these actual costs are not figures that are directly

handled by planners or even QS because even QSs are

confined to Bill values. They will be more so found

in a scattered manner with accounts, stores, concrete

controllers, rebar controllers, etc. Who do you suggest

should be the central point for assimilation of actual

costs ?



Happy planning....



Regards,

Ramesh

Hi All,



In preparing S-Curve for cost controlling, normally we use different weigtages for WBS levels and assign them as CONTROL ACCOUNTS. Say, for a pipeline project,



Engineering - 12%

procurement - 15%

installation - 10%

joining - 8% ...... and so on totalling 100%



% complete for each WBS Level are updated every month and then EV is calculated.



I assume, this is what Karim wants to say and we practice.



Cheers,



Raviraj

Hi Oliver,



Weighted Milestones are used in calculating of Performance % Complete which is used in the calculation of Earned Value.



U can assign weights for your WBS and update their % complete (which will roll back up to all activities under this WBS).



Then P5 use these updated figures to calculate the EV as follows:

EV = BC x Performance % complete



Regards,

Karim

Hi Oliver,



I never used them either. but I heard from users that it is used in construction area if progress is taken from the status of a project, e.g. the basement of a house is ready: 10% payment, the roof: 15% and so on.

In earlier versions of P3e it was not included and there was a big demand for these WBS from customers.

Just recently I tried to use them, but unfortunately this %-complete is not summarized and I didn’t want to use global change.



Regards and a nice weekend to all



Dieter