Cost Control and Reporting
5.3 ESTABLISHING BASELINES FOR CONTROL
5.5.2 Variance Analysis
Variance reporting is a system that emphasizes cost and schedule control during all stages of design, construction, manufacturing, or operations. The purpose is to report to the client and the company all deviations from the budget. Every cost report should include an explanation of overruns and underruns since the last report. Furthermore, the cost engineer should be able to account for all changes made to the initial forecast at project inception. 5.5.3 Report Distribution
The best guide for the distribution of cost reports is to decide if the reports are needed for general information only or if they are actually used for decision making, and at what level those decisions are made. Depending on the intended distribution of the report, cost control reports can be grouped into the following categories:
Multilevel Cost Reporting. Not everyone in a company needs access to all
of the information contained in the project control system. Multilevel reporting systems allow for different levels of objective determination and reporting. Examples of these include:
• Cost summary • Labor rate
• Quantity and workhour • Variance reporting.
Combined Cost/Schedule Reporting. These reports are generated by
extrapolating information from both the cost and the schedule systems. Examples of these reports include:
• Cash flow report
• Cost/schedule performance curves • Productivity profile
• Productivity trend chart • Bulk quantity curves
Chapter 5
Figure 5.8 Control account for service water piping. (From Neil, J.M. (1988). Skills and Knowledge of Cost Engineering, 2nd
ed., J.M. Neil, ed., AACE International, Morgantown, WV, p. 100.)
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3
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Figure 5.9 Monthly quantity report. (From Neil, J.M. (1988). Skills and Knowledge of Cost Engineering, 2nd ed., J.M.Neil, ed.,
AACE International, Morgantown, WV, p. 100.)
Miscellaneous Reports. A number of other reports may be products of a cost
control system. Examples of these may include: • Material requisition status
• Subcontractor status • Vendor drawing status • Fabrication status • Critical items report • Quality trends
Every project is a unique situation, each with its own specific reporting requirements. Some samples of common cost control reports are shown in
Figs. 5.8 through 5.13.
To illustrate how a planner moves from the control to the detailed level, reference is made to Fig. 5.8. This figure is called a control account baseline. It is a document that takes a control schedule work package (in this case service water piping) and plans it out in detail. Note how the piping system is broken down into the work tasks required for its completion (large pipe, valves, etc). These are then scheduled in bar chart format. As is so often the case, these tasks are overlapping and there is some flexibility in their sequencing (soft logic). Use of the bar chart format with float shown for each bar gives the field the flexibility they need for accomplishing the work. Also note from the other information included on the baseline that the document provides the basis for earned value control and progress payments.
Figure 5.9 is a representation of a reporting format using the service water piping of Fig. 5.8 as an example. The many control accounts, in turn, can be summarized at various levels or for the whole project using earned value.
Figure 5.10 Productivity profile. (From Neil, J.M. (1988). Skills and Knowledge of Cost Engineering, 2nd ed., J.M.Neil, ed., AACE International, Morgantown, WV, p.
Figure 5.10 is an example graph for tracking productivity indexes. Note on this graph the use of a “projected” curve which does not coincide with the 1.0 datum line. This curve recognizes that productivity can usually be expected to be lower during the early stages of a project, reach a peak about midway in the project, and then decrease toward closeout. Keeping this in mind, the actual productivity plot can be more meaningfully evaluated. As shown on the example chart, a productivity index of 1.06, which one normally assumes is favorable, is actually low compared to what it should be for that point in time.
Figure 5.11 is an interesting variation of Fig. 5.10. Note how the vertical axis is workhours per percent complete. On this graph the cumulative plan curve is an upside-down image of the projected curve in Fig. 5.10 because of the different choice of units on the vertical axis. This graph also includes the plan for period and actual period plots to give it more usability. Note how the point identified as “(1)” shows that actual period performance equals that of planned performance. But, when you look at the actual cumulative performance, it shows that the project still has a problem because of the poor performance of prior periods and performance must become better than planned if the project is to recover.
Figure 5.11 Workhour productivity trend chart. (From Neil, J.M. (1988). Skills and Knowledge of Cost Engineering, 2nd ed., J.M.Neil, ed., AACE International,
Figure 5.13 Unit wage rate. (From Neil, J.M. (1988). Skills and Knowledge of Cost Engineering, 2nd ed., J.M.Neil, ed., AACE International, Morgantown, WV, p. 103.)
Figures 5.12 and 5.13 track building steel erection workhour rates and unit wage rates, respectively, on a project and are self-explanatory.
Figure 5.12 Building structural steel erection. (From Neil, J.M. (1988). Skills and Knowledge of Cost Engineering, 2nd ed., J.M.Neil, ed., AACE International,
Morgantown, WV, p. 103.)
REFERENCES
Ahuja, H.N. (1980). Successful Construction Cost Control. New York: John Wiley & Sons.
Clark, F.D., Lorenzoni, A.B. (1997). Applied Cost Engineering. 3rd ed. New York: Marcel Dekker, Inc.
CII Cost/Schedule Task Force (1987). Project Control for Construction. Austin, TX: Construction Industry Institute.
CII Cost/Schedule Task Force (1988). Work Packaging for Project Control. Austin, TX: Construction Industry Institute.
Crean, W.R. (1982). Applications of cost and schedule integration. AACE Transactions. Morgantown, WV: AACE International.
Mukho, S. (1982). Application of earned value for small project control. AACE
Transactions. Morgantown, WV: AACE International.
Neil, J.M., ed. (1988). Skills and Knowledge of Cost Engineering. 2nd ed. Morgantown, WV: AACE International.
Patrascu, A. (1988). Construction Cost Engineering Handbook. New York: Marcel Dekker, Inc.
Stevens, W.M. (1983). Cost Control: Integrated Cost/Schedule Performance. Lockwood: Andrews & Newnam, Inc.
Stevenson, J.J. (1989). Cost control program to meet your needs. AACE Transactions. Morgantown, WV: AACE International, Paper F.1.
RECOMMENDED READING
AACE International. (2003). Standard Cost Engineering Terminology. AACE Standard No. 10S–90. Morgantown, WV: AACE International.
Bent, J.A. (1996). Humphreys, K.K., ed. Effective Project Management through Applied
Cost and Schedule Control. New York: Marcel Dekker.
Hackney, J.W. (1997). Humphreys, K.K., ed. Control and Management of Capital
Projects. 2nd ed. Morgantown, WV: AACE International.
Hermes, R.H. (1982). Cost-schedule integration: alternatives. AACE Transactions. Morgantown, WV: AACE International.
Humphreys, K.K., Wellman, P. (1996). Basic Cost Engineering. 3rd ed. New York: Marcel Dekker, Inc.
Nguyen, N.M. (1989). Cases impairing C/SCSC application in program management.
AACE Transactions. Morgantown, WV: AACE International.
Riggs, L.S. (1988). Cost control: the industrial owner’s view. Cost Engineering, 30(8). Yates, J.K., Rahbar, F.F. (1990). Executive summary status report. AACE Transactions.