Chapter

17
Cost Control

CONTENTS
Leadership in Energy and Environmental Design Certification 300 17 1 Cost Control as a !anagement Tool 301 17 " #ro$ect Cost Control Systems 301 17 3 Cost %cco&nts 30" 17 ' Cost Coding Systems 30' 17 ( #ro$ect Cost Code Str&ct&re 30' 17 ) Cost %cco&nts for *ntegrated #ro$ect !anagement 30+

17 7 Earned ,al&e !ethod 310 17 + La-or Cost Data Collection 313 17 . Charges for *ndirect and Overhead E/pense 31) 17 10 #ro$ect *ndirect Costs 317 17 11 0i/ed Overhead 3"0 17 1" Considerations in Esta-lishing 0i/ed Overhead 3"1 1evie2 3&estions and E/ercises 3""

Leadership in Energy and Environmental Design Certification The Leadership in Energy and Environmental Design 4LEED5 certification program provides tangi-le recognition to pro$ect o2ners for their interest and investment in s&staina-ility *t is hosted -y the 6reen 7&ilding Co&ncil 48S67C5 and e/amines five aspects of s&staina-ility9 415 s&staina-le site development: 4"5 2ater &se efficiency: 435 energy and atmospheric impact: 4'5 choice of materials and reso&rces: and 4(5 indoor environmental ;&ality The achievements in each of these aspects are eval&ated -y a panel of e/perts chosen -y the 8S67C: and ;&antified in a point scale Depending on the total points achieved: the pro$ect is either certified or denied certification There are several possi-le levels of certification9 Certified: Silver: 6old: and #latin&m Each category is more stringent than the preceding one 4e g : 6old needs to f&lfill more re;&isites than Silver5 % LEED certified pro$ect receives a formal certificate of recognition and a pla;&e: is registered in an online directory of registered and certified pro$ects: and incl&ded in the 8 S Department of Energy <igh #erformance 7&ildings Data-ase #rofessional cons&ltants are fre;&ently &sed -y the o2ner to help attain LEED certification These cons&ltants are accredited -y the 6reen 7&ilding Certification *nstit&te: at the levels of associate: accredited professional 4%#5: and fello2 The prere;&isites: e/amination: and contin&ing professional ed&cation are similar to those of any licensed profession *n addition to the intrinsic importance of creating s&staina-le constr&ction: LEED certification can -e an e/cellent mar=eting tool for -oth o2ner occ&pants and developers 300

30" Chapter 17 Cost Control

Leed Data #rocesses

Leed Data Collection

This side of LEED is important -eca&se it helps the o2ner and design teams compare in financial terms the initial costs necessary to -&ild a high performance -&ilding 2ith a fre;&ently less e/pensive -&t less s&staina-le traditional design 17 1 COST CONT1OL %S % !%N%6E!ENT TOOL The early detection of act&al or potential cost overr&ns in field constr&ction activities is vital to management *t provides the opport&nity to initiate remedial action and increases the chance of eliminating s&ch overr&ns or minimi>ing their impact 7eca&se cost overr&ns increase pro$ect costs and diminish profits: it is easy to see 2hy -oth pro$ect management and &pper?level management m&st -ecome sensitive to the costs of all pro$ect activities %n important -yprod&ct of an effective cost reporting system is the information that it can generate for management on the general cost performance of field constr&ction activities This information can -e -ro&ght to -ear on pro-lems of great interest to pro$ect management The determination of c&rrent pro$ect stat&s: effectiveness of 2or= progress: and preparation of progress payment re;&ests re;&ire data generated -y -oth pro$ect planning and cost control reporting systems #ro$ect cost control data are important not only to pro$ect management in decision?ma=ing processes -&t also to the company@s estimating and planning departments

17 " #ro$ect Cost Control Systems

301

-eca&se these data provide feed-ac= information essential for effective estimates and -ids on ne2 pro$ects Th&s: a pro$ect control system sho&ld -oth serve c&rrent pro$ect management efforts and provide the field performance data-ase for estimating f&t&re pro$ects 17 " #1OAECT COST CONT1OL SBSTE!S The design: implementation: and maintenance of a pro$ect cost control system can -e considered a m&ltistep process The five steps: sho2n schematically in 0ig&re 17 1: form the -asis for esta-lishing and maintaining a cost control system The follo2ing ;&estions regarding each step in the implementation of the cost control system m&st -e addressed 1 Chart of Cost %cco&nts9 Chat 2ill -e the -asis adopted for developing estimated pro$ect e/pendit&res: and ho2 2ill this -asis -e related to the firm@s general acco&nts and acco&nting f&nctionsD Chat 2ill -e the level of detail adopted in defining the pro$ect cost acco&nts: and ho2 2ill they interface 2ith other financial acco&ntsD

30" Chapter 17 Cost Control

0ig&re 17 1 Steps in cost control

" #ro$ect Cost #lan9 <o2 2ill the cost acco&nts -e &sed to allo2 comparisons -et2een the pro$ect estimate and cost plan 2ith act&al costs as recorded in the fieldD <o2 2ill the pro$ect -&dget estimate -e related to the constr&ction plan and sched&le in the formation of a pro$ect cost control frame2or=D 3 Cost Data Collection9 <o2 2ill cost data -e collected and integrated into the cost reporting systemD ' #ro$ect Cost 1eporting9 Chat pro$ect cost reports are relevant and re;&ired -y pro$ect management in its cost management of the pro$ectD ( Cost Engineering9 Chat cost engineering proced&res sho&ld pro$ect management implement in its efforts to minimi>e costsD These are -asic ;&estions that management m&st address in setting &p the cost control system The str&ct&re of cost acco&nts 2ill -e disc&ssed in this chapter 17 3 COST %CCO8NTS The first step in esta-lishing a cost control system for a

30" Chapter 17 Cost Control

constr&ction $o- is the definition of pro$ect?level cost centers The primary f&nction of the cost acco&nt section of a chart of acco&nts is to divide the total pro$ect into significant control &nits: each consisting of a given type of 2or= that can -e meas&red in the field 4see 0ig&re 17 "5 Once $o- cost acco&nts are esta-lished: each acco&nt is then assigned an identifying code =no2n as a cost code Once segregated -y associated cost centers: all the elements of e/pense 4i e : direct la-or: indirect la-or: materials: s&pplies: e;&ipment costs: etc 5 constit&ting 2or= &nits can -e properly recorded -y cost code

17 3 Cost %cco&nts

0ig&re 17 " List of typical pro$ect e/pense 4cost5 acco&nts

17 3 Cost %cco&nts

+ The design: str&ct&re: and development of a cost coding system and its associated set of e/pense acco&nts have a significant impact on the cost management of a company or pro$ect The $o- cost acco&nting system is essentially an acco&nting information system Therefore: management is free to esta-lish its o2n chart of acco&nts in any 2ay that helps it in reaching specific financial and cost control o-$ectives: 2hether these o-$ectives are related to general company performance: to the control of a specific pro$ect: or to specific contract re;&irements

17 ' COST COD*N6 SBSTE!S % variety of cost coding systems e/ist in practice: and standard charts of acco&nts are p&-lished -y organi>ations s&ch as the %merican 1oad 7&ilders %ssociation: %ssociated 6eneral Contractors: and the Constr&ction Specifications *nstit&te *n many ind&stries: cost codes have a company?2ide acco&nting foc&s emphasi>ing e/pense generation -ased on a departmental -rea=do2n of the firm *n some constr&ction firms: cost systems have a str&ct&red se;&ence corresponding to the order of appearance of the vario&s trades or types of constr&ction processes typical of the company@s constr&ction activity *n most con? str&ction companies: detailed pro$ect cost acco&nts s&ch as those sho2n in 0ig&re 17 " are &sed This method recogni>es the fact that constr&ction 2or= is pro$ect oriented and that to achieve the cost management goal of ma/imi>ing profit: pro$ects m&st -e acco&nted for individ&ally One pro$ect may -e a 2inner 2hile another is losing money S&ch sit&ations may -e mas=ed in the acco&nting system &nless $o- cost acco&nts are maintained on a pro$ect?-y?pro$ect -asis Therefore: -oth -illings 4reven&e5 and cost 42or= in progress5 acco&nts are typically maintained for each pro$ect The act&al acco&nt descriptions or designations vary in accordance 2ith the type of constr&ction and the technologies and placement processes pec&liar to that constr&ction 7&ilding contractors: for instance: are interested in acco&nts that descri-e the cost aspects of forming and casting str&ct&ral concrete as &sed in -&ilding frames <eavy constr&ction contractors: on the other hand: are interested in earth2or=?related acco&nts s&ch as grading: ditching: clearing and gr&--ing: and machine e/cavation Standard cost acco&nts p&-lished -y the %merican 1oad 7&ilders %ssociation emphasi>e these acco&nts: 2hereas the !aster0ormat classification: p&-? lished -y the Constr&ction Specifications *nstit&te: emphasi>es -&ilding?oriented acco&nts % -rea=do2n

17 3 Cost %cco&nts

. of the ma$or classifications 2ithin the !aster0ormat acco&nt system is sho2n in Ta-le 17 1 % portion of the second level of detail for classifications 0 to 3 is sho2n in 0ig&re 17 3

17 ( #1OAECT COST CODE ST18CT81E The !aster0ormat code as &sed -y the 1 S !eans 7&ilding Constr&ction Cost Data identifies fo&r levels of detail: an e/ample of 2hich is sho2n in 0ig&re 17 ' %t the highest level the ma$or 2or= classification as given in Ta-le 17 1 is defined *n 0ig&re 17 ': the first t2o digits 03 apply to all concrete items Level " identifies a ma$or s&-division 2ithin the 2or= of level 1 *n this case: 03 11 is assigned to concrete forming There are many types of concrete forms: and they are defined at the third level *n the case of 0ig&re 17 ': the item is str&ct&ral cast?in? place concrete forming This level adds t2o additional digits to the identifier: res&lting in 03 11 13 The fo&rth level adds a t2o? digit decimal to level 3 and gives even more specificity to the item *n this case: 03 11 13 "( refers to forms in place: col&mns !aster0ormat does not provide f&rther detail in its system: and it is left to each &ser to add more digits to the identifier 1 S !eans adds fo&r digits in a fifth level *n 0ig&re 17 ': the complete description of the item is 03 11 13 "( (000: for str&ct&ral cast?in place concrete forms made of ply2ood and &sed once for $o-?-&ilt +E +E col&mns This

17 ( #ro$ect Cost Code Str&ct&re 10 Chapter 17 Cost Control

10

0ig&re 17 3 Detailed codes for classification 2ithin 8niform Constr&ction *nde/

17 ( #ro$ect Cost Code Str&ct&re

11

0ig&re 17 ' 8C* cost 4line item5 str&ct&re in the master format code 41 S !eans 7&ilding Constr&ction Cost Data5 precise description re;&ires of 1" digits %t this level: the cost engineer and constr&ction manager have a great deal of fle/i-ility in reflecting &ni;&e aspects of the placement technology that lead to cost fl&ct&ations and th&s m&st -e considered in defining cost centers Large and comple/ pro$ects in ind&strial and energy?related constr&ction may re;&ire cost codes that reflect additional information: s&ch as the pro$ect designation: the year in 2hich the pro$ect 2as started: and the type of pro$ect Long and comple/ codes in e/cess of 10 digits can res&lt %n e/ample of s&ch a code is sho2n in 0ig&re 17 ( This code: consisting of 13 digits: specifically defines the follo2ing items9 1 " 3 ' ( ) 7 Bear in 2hich pro$ect 2as started 4"01'5 #ro$ect control n&m-er 41(5 #ro$ect type 4( for po2er station5 %rea code 41) for -oiler ho&se5 0&nctional division 4": indicating fo&ndation area5 6eneral 2or= classification 40"10: indicating site clearing5 Distri-&tion code 4): indicating constr&ction e;&ipment5

The distri-&tion code esta-lishes 2hat type of reso&rce is -eing costed to the 2or= process 4i e : clearing5: the physical s&-element 4i e : fo&ndations5 in 2hat area of 2hich pro$ect Typical distri-&tion codes might -e as follo2s9 1 " 3 ' La-or #ermanent materials Temporary materials *nstalled e;&ipment

17 ( #ro$ect Cost Code Str&ct&re

1" ( ) 7 + . E/penda-les Constr&ction e;&ipment S&pply S&-contract *ndirect

% high concentration of information can -e achieved -y proper design of the cost code S&ch codes are also ideally s&ited for data retrieval: sorting: and assem-ly of reports on the

17 ( #ro$ect Cost Code Str&ct&re

13

Ta-le 17 1 !a$or Divisions in CS*@s !aster0ormat 8niform Constr&ction *nde/ "00' #roc&rement ands Contracting s&-gro&p 00 F #roc&rement and Contracting 1e;&irements 6eneral 1e;&irements s&-gro&p 01 F 6eneral 1e;&irements 0acilities Constr&ction s&-gro&p 0" F E/isting Conditions 03 F Concrete 0' F !asonry 0( F !etals 0) F Cood: #lastics: and Composites 07 F Thermal and !oist&re #rotection 0+ F Openings 0. F 0inishes 10 F Specialties 11 F E;&ipment 1" F 0&rnishings 13 F Special Constr&ction 1' F Conveying E;&ipment 1( F 1eserved for f&t&re &se in !echanical 1) F 1eserved for f&t&re &se in Electrical 0acilities Services s&-gro&p "1 F 0ire S&ppression "" F #l&m-ing "3 F <eating ,eritilating and %ir Conditioning "( F *ntegrated %&tomation ") F Electrical "7 F Comm&nications "+ F Electronic Safety and Sec&rity Site and *nfrastr&ct&re s&-gro&p 31 F Earth2or= 3" F E/terior *mprovements 33 F 8tilities 3' F Transportation 3( F Cater2ay and !arine Constr&ction #rocess E;&ipment s&-gro&p '0 F #rocess *ntegration '1 F !aterial #rocessing and <andling E;&ipment '" F #rocess <eating: Cooling: and Drying E;&ipment '3 F #rocess 6as and Li;&id <andling: #&rification and Storage

17 ( #ro$ect Cost Code Str&ct&re

1'

E;&ipment '' F #oll&tion Control E;&ipment '( F *nd&stry?Specific !an&fact&ring E;&ipment '+ F Electrical #o2er 6eneration

0ig&re 17 ( Classification of acco&nts9 typical data str&ct&re for a comp&teri>ed cost code

17 ( #ro$ect Cost Code Str&ct&re

1(

-asis of selected parameters 4e g : all constr&ction e;&ipment costs for concrete forming on pro$ect 10 started in a given year5 The desire to cram too m&ch information into cost codes: ho2ever: can ma=e them so large and &n2ieldy that they are conf&sing to &pper?level management 17 ) COST %CCO8NTS 0O1 *NTE61%TED #1OAECT !%N%6E!ENT *n large and comple/ pro$ects: it is advantageo&s to -rea= the pro$ect into common -&ilding -loc=s for control -oth of cost and time The concept of a common &nit 2ithin the pro$ect that integrates -oth sched&ling and cost control has led to the development of the 2or= -rea=do2n approach The -asic common denominator in this scheme is the 2or= pac=age: 2hich is a s&-element of the pro$ect on 2hich -oth the cost and time data are collected for pro$ect stat&s reporting The collection of time and cost data -ased on 2or= pac=ages has led to the term integrated pro$ect management That is: the stat&s reporting f&nction has -een integrated at the level of the 2or= pac=age The set of 2or= pac=ages in a pro$ect constit&tes its 2or= -rea=do2n str&ct&re 4C7S5 The C7S and 2or= pac=ages for control of a pro$ect can -e defined -y developing a matri/ similar to the one sho2n in 0ig&re 17 ) The col&mns of this matri/ are defined -y -rea=ing the do2n pro$ect into physical s&-components Th&s: 2e have a hierarchy of levels that -egins 2ith the pro$ect as a 2hole and: at the lo2est level: s&-divides the pro$ect into physical end items s&ch as fo&ndations and areas %s sho2n in 0ig&re 17 ): the pro$ect is s&-divided into systems The individ&al systems are f&rther divided into disciplines 4e g : civil: mechanical: electrical5 The lo2est level of the hierarchy indicates physical end items 4fo&ndation 1: etc 5 Cor= pac=ages at this lo2est level of the hierarchy are called control acco&nts

17 ( #ro$ect Cost Code Str&ct&re

1)

0ig&re 17 ) #ro$ect control matri/

17 ) Cost %cco&nts for *ntegrated #ro$ect !anagement

17

0ig&re 17 7 Three? dimensional vis&al? i>ation of 2or=? pac=age? oriented cost acco&nts

The ro2s of the matri/ are defined -y technology and responsi-ility %t the lo2est level of this hierarchy: the responsi-ilities are sho2n in terms of tas=s: s&ch as concrete: framing: and earth2or= These tas=s imply vario&s craft specialties and technologies Typical 2or= pac=ages then are defined as concrete tas=s on fo&ndation 1 and earth2or= on fo&ndations 1 and " This approach can -e e/panded to a three?dimensional matri/ -y considering the reso&rces to -e &sed on each 2or= pac=age 4see 0ig&re

17 ) Cost %cco&nts for *ntegrated #ro$ect !anagement 1+ Chapter 17 Cost Control

1+

17 75 8sing this three?dimensional -rea=do2n: 2e can develop definition in terms of physical s&-element: tas=: and responsi-ility: as 2ell as reso&rce commitment % cost code str&ct&re to reflect this matri/ str&ct&re is given in 0ig&re 17 + This 1(?digit code defines &nits for collecting information in terms of 2or= pac=age and reso&rce type 1eso&rce &sage in terms of monetary &nits: ;&antities: man ho&rs: and e;&ipment ho&rs for a fo&ndation in the -oiler -&ilding 2o&ld -e collected &nder 2or= pac=age code 1"100" *f this 2or= relates to placement and vi-ration of concrete -y &sing a direct ch&te: the code is e/panded to incl&de the alphan&meric code

0ig&re 17 + 7asic cost code str&ct&re

17 ) Cost %cco&nts for *ntegrated #ro$ect !anagement

1.

0ig&re 17 . #ro$ect control matri/ 2ith sched&ling of s&-tas=s D0''1 The reso&rce code for the concrete is "1"1 Therefore: the complete code for concrete in the -oiler -&ilding fo&ndations placed -y &sing a ch&te 2o&ld -e 1"100"? D0''1?"1"1 This code allo2s collection of cost data at a fine level Sched&ling of this 2or= is also referenced to the 2or= pac=age code as sho2n in 0ig&re 17 . The sched&le activities are sho2n in this fig&re as s&-tas=s related to the 2or= pac=age 17 7 E%1NED ,%L8E !ET<OD One 2idely accepted 2ay of calc&lating progress on comple/ pro$ects &sing a 2or= or acco&nt -ased -rea=do2n system is the earned val&e approach This system of determining pro$ect progress addresses -oth sched&le stat&s 4i e : on sched&le: -ehind sched&le or ahead of sched&le 5 and cost stat&s 4i e : on -&dget: over -&dget or &nder -&dget5 This method of trac=ing cost and sched&le 2as originally implemented -y the Department of Defense in the late 1.70s to help -etter control comple/ pro$ects The system 2as called the Cost and Sched&le Control Systems Criteria or CGSCSC This method of monitoring contracts proved to -e so effective that other government agencies 4e g : Department of Energy: ,eterans %dministration5 adopted CGSCSC as a means of maintaining oversight on comple/ pro$ects s&ch as n&clear and conventional po2er plants

17 ) Cost %cco&nts for *ntegrated #ro$ect !anagement

"0

#rivate o2ners s&ch as po2er companies implemented similar systems since reporting to vario&s government a&thorities enco&raged or re;&ired the &se of CGSCSC and earned val&e concepts 8ltimately: o2ners of comple/ ind&strial pro$ects -egan to &se the system as 2ell The idea of earned val&e is -ased &pon a rigoro&s development of percentage complete of the -&dgeted costs associated 2ith individ&al 2or= pac=ages or line items Each 2or= pac=age has an initial -&dget or estimate 2hich is defined as the -&dgeted cost at completion or 7C%C %s 2or= proceeds on an individ&al 2or= pac=age or acco&nt: assessment of the percentage complete is made at vario&s st&dy dates The initial sched&le

17 7 Earned ,al&e !ethod

"1

Cost/Prod. Units

Basel ine

BCAC

BCWS Schedule Variance

AC Co WP st BC Varia WP nce

Study Date

Time

0ig&re 17 10 Control ,al&es for Earned ,al&e %nalysis

esta-lishes an e/pected level of 2or= completion as of the st&dy date The level of e/pected prod&ction is often sho2n as an S?C&rve plotting the cost or &nits of prod&ction 4e g : &nits prod&ced: 2or= ho&rs e/pended: and so on5 against time This costGprod&ction c&rve is referred to as the -aseline %t any given time 4st&dy date5: the &nits of costGprod&ction indicated -y the -aseline are called the -&dgeted cost of 2or= sched&led 47CCS5 The trac=ing system re;&ires that field reports provide information a-o&t the act&al cost of 2or= performed 4%CC#5 and the act&al ;&antity of 2or= performed 4%3C#5 The earned val&e is the -&dgeted cost of 2or= performed 47CC#5 The relative val&es for a given 2or= pac=age or acco&nt at a given point in time 4see 0ig&re 17 105 provide information a-o&t the stat&s in terms of cost and sched&le variance The si/ parameters 2hich form the fo&ndation of the earned val&e concept are9 7CCS9 7&dgeted Cost of Cor= Sched&led H ,al&e of the -aseline at a given time %CC#9 %ct&al Cost of Cor= #erformed !eas&red in the field 7CC#9 7&dgeted Cost of Cor= #erformed H IJ CompleteK 7C%C 7C%C9 7&dgeted Cost %t Completion H Contracted total cost for the 2or= pac=age %3C#9 %ct&al 3&antity of Cor= #erformed !eas&red in the field 73%C9 7&dgeted 3&antity %t Completion ,al&e of the ;&antity -aseline as pro? $ected at a given point To p&t these terms into conte/t: consider the small pro$ect sho2n in 0ig&re

17 7 Earned ,al&e !ethod "" "" Chapter 17 Cost Control

17 11 The pro$ect consists of t2o control acco&ntsLMM%@@ and MM7 @@ % consists of t2o s&-acco&nts: % 1 and % " The information for these 2or= pac=ages depends on its c&toff date 4the

PROJ CT

A. ! A. "

0ig&re 17 11 % Simple #ro$ect <ierarchy

Ta-le 17 " St&dy Date Data for Simple #ro$ect

% %1 %" 7 TOT%L 7C% C 1 0( 0 ) "( 1 %CC # ' 0 3 ( 10 " 73% C 1 0 7 7 1 " L
Total 7C%C H 1"' 3

%3C # 3 ( ) 10 0 L
"1(

#C 4J5 3 3 7 + + 0 ( 7

7CC # 33 3 3. 0 (" 0 1"' 3

EC %C 1" 0 ' ( )" ( ""7 (

#ro$ect #C 4##C5 H Total 7CC# H (7 +J EC%Ci

H Estimated Cost at

Completion for Cor= #ac=age i H %CC#i #Ci MMno2@@ date F o-vio&sly: each date may have different val&es5: and for the e/ample it is given in Ta-le 17 " *n this e/ample: the -&dget is e/pressed in 2or=er ho&rs so the -aseline for control is in 2or=er ho&rs The estimated total n&m-er of 2or=er ho&rs for this scope of 2or= is "1( 4the s&m of the estimated 2or=er ho&rs for % 1: % ": and 75 The 7CC# or earned val&e for a given 2or= pac=age is given as9 7CC#i H #Ci 7C%Ci 2here i is the 2or= pac=age or acco&nt la-el: and #C is the percentage complete as of the st&dy date The percent complete 4#C5 for each pac=age is -ased on the ratio of the act&al ;&antities 4i e : its %3C#5 divided -y its 7&dgeted 3&antity at Completion 4i e : 73%C5 -ased on the latest ;&antity assessment *f 2e =no2 the original ;&antity estimate is 100 &nits -&t &pdated information indicates that a total of 1"0 &nits 2ill -e re;&ired to complete the 2or=: completion of (0 &nits 2o&ld not indicate (0 percentage complete The correct #C 2o&ld -e (0G1"0 4i e : %3C#G73%C5 7ased on the information in Ta-le 17 ": the #C for each 2or= pac=age in the small pro$ect 2o&ld -e9 #C N%91O 3(P10( H 09333 #CN%9"O Then )0P77 H 097+0 #CN7O H 100P1"( H 09+00 7CC# N#ro$ectO H 9333 N100OQ 97+ N(0OQ 9+ N)(O 3393

Q 3. Q (" H

1"'93 Therefore: the pro$ect percentage complete 4##C5 for the small pro$ect is9 ##C f1"'93P"1(g percent This simple e/ample ill&strates several points9 1 The #C for a given pac=age is -ased on the ratios of the %3C#G73%C " The ##C is calc&lated -y relating the total 7CC# 4i e : earned val&e5 to the total 7C%C for the pro$ect scope of 2or= 3 The total 2or= earned is compared to the 2or= re;&ired The val&es of &nits to -e earned are -ased on the originally -&dgeted &nits in an acco&ntG2or= pac=age and the percentage earned is -ased on the latest pro$ected ;&antity of &nits at completion Cor=er ho&rs are &sed here to demonstrate the development of the ##C <o2ever: other cost or control &nits may -e &sed according to the needs of management *t is important to =no2 that sched&le and cost o-$ectives are -eing achieved Sched&le and cost performance can -e characteri>ed -y cost and sched&le variances as 2ell as cost 100 H (79+

17 + La-or Cost Data Collection

"(

performance and sched&le performance indices These val&es in CGSCSC are defined as follo2s9 C,R Cost ,ariance H 7CC# %CC# S,R Sched&le ,ariance H 7CC# 7CCS C#*R Cost #erformance *nde/ H 7CC#P%CC# S#*R Sched&le #erformance *nde/ H 7CC#P7CCS 0ig&res 17 1" a: -: and c plot the val&es of 7CC#: %CC#: and 7CCS for the small pro$ect data given in Ta-le 17 " %t any given st&dy date: management 2ill 2ant to =no2 2hat are the cost and sched&le variance for each 2or= pac=ages The variances can -e calc&lated as follo2s9 C, N%91O H 7CC# N%91O %CC# N%91O H 3393 '0 H )97 C, N%9"O H 7CC# N%9"O %CC# N%9"O H 3. 3( H Q' C, N7O H 7CC# N7O %CC# N7O H (" (0 H Q" Since the C, val&es for % " and 7 are positive: those acco&nts are 2ithin -&dget 4i e : the -&dgeted cost earned is greater than the act&al cost5 *n other 2ords: less is -eing paid in the field than 2as originally -&dgeted The negative variance for % 1 indicates it is overr&nning -&dget That is: act&al cost is greater than the cost -&dgeted This is confirmed -y the val&es of the C#* for each pac=age C#* N%91O H 33P'0 S 190 % val&e less that 190 indicates cost overr&n of -&dget C#* N%9"O H 3.P3( T 190 C#* N7O H ("P(0 T 190 ,al&es greater than 190 indicate act&al cost less than -&dgeted cost The sched&le variances for each pac=age are as follo2s9 S, N%91O H 7CC# N%91O 7CCS N%91O H 3393 H 1)97 S, N%9"O H 7CC# N%9"O 7OCS N%9"O H 3. 3" H Q7 S, N7O H 7CC# N7O 7CCS N7O H (" '( H Q7 (0

The positive val&es for % " and 7 indicate that these items are ahead of sched&le The negative val&e for % 1 indicates a sched&ling pro-lem The calc&lation of the S#* val&es 2ill confirm this assessment Overall: it can -e stated that % " and 7 are ahead of sched&le and -elo2 cost 2hile % 1 is -ehind sched&le and over cost Si/ scenarios for perm&tations of %3C#: 7CC#: and 7CCS are possi-le as

17 + La-or Cost Data Collection ") Chapter 17 Cost Control

")

esta-lished -y Singh 41..15 The vario&s com-inations are sho2n in 0ig&re 17 13 and Ta-le 17 3 The reader is enco&raged to verify the information in this ta-le The earned val&e approach re;&ires a comprehensive =no2ledge of 2or= pac=aging: -&dgeting: and sched&ling *t is a data intensive proced&re and re;&ires the ac;&isition of c&rrent data on the %CC# and %3C# for each 2or= pac=age or acco&nt *t is a po2erf&l tool: ho2ever: 2hen management is confronted 2ith comple/ pro$ects consisting of h&ndreds of control acco&nts *n large pro$ects consisting of tho&sands of activities and control acco&nts: it is a necessity Citho&t it: pro$ects can ;&ic=ly spiral o&t of control % more detailed presentation of this topic is -eyond the scope of this chapter The interested reader sho&ld refer to c&rrent government p&-lications that descri-e the earned val&e management system 4E,!S5 and the inherent proced&res associated 2ith its implementation 17 + L%7O1 COST D%T% COLLECT*ON The p&rpose of the payroll system is to 4a5 determine the amo&nt of and dis-&rse 2ages to the la-or force: 4-5 provide for payroll ded&ctions: 4c5 maintain records for ta/ and other

17 + La-or Cost Data Collection

"7

W#/Cost

!$ $ W #

CV % BCWP&ACWP % U'.(
BCWP CP) % % **.* +!.$

,$ ACWP O-er Bud.et

/$ % BCWS ,$ % ACWP **.* % BCWP Ti m e

SV % BCWP&BCWS % U!'.(
BCWP SP) %

BCWS Behind Schedule

**.* % +!.$ /$

Study Date

0a1 Baseline 2or A.! W#/Cost CV % BCWP&ACWP % 3,.$

BCWP CP) %

ACWP Within Bud.et BCWP % *4

ACWP % */

*4 5!.$ % */

/$ W #

SV % BCWP&BCWS % 3(.$

*" % BCWS

Study Date

Ti m e

SP) BCWP % *"5!.$ % BC WS Ahead o2 Schedule

*4

061 Baseline 2or A." W#/Cost CV % BCWP&ACWP % 3".$

17 + La-or Cost Data Collection

"+
BCWP CP) %

BCWP % /" ACWP % /$

,/ % BCW S

'/ W #

ACWP Within Bud.e t

/" 5!.$ % /$

SV % BCWP& BCWS % 3(.$

BCWP SP) %

Study Date

Ti m e

BCWS Ahead o2 Schedule

/" 5!.$ % ,/

0c1 Baseli ne 2or B 0ig&re 17 1" States of Control %cco&nt for Single #ro$ect p&rposes: and 4d5 to provide information regarding la-or e/penses The so&rce doc&ment &sed to collect data for payroll is a daily or 2ee=ly time card for each ho&rly employee similar to that sho2n in 0ig&re 17 1' This card is &s&ally prepared -y foremen: chec=ed -y the s&perintendent or field office engineer: and transmitted via the pro$ect manager to the head office payroll section for processing The ma=e&p of the cards is s&ch that the foreman or time=eeper has positions ne/t to the name of each employee for the allocation of the

CAS )

CAS ))

ACWP BCWP

Cost O-errun
T&8OW

Delay

Schedule

BCWP ACWP T&8OW

Underrun

Cost

Schedule Delay

CAS ))) CAS )V

BCWP
Schedule Ad-anta.e Cost Underrun

ACWP
Schedule Cost

ACWP BCWP

Delay O-errun
T&8OW

T&8OW

CAS V

CAS V)

ACWP

7
BCWP

Cost O-errun Schedule Ad-anta.e

BCWP

ACWP

Cost Underrun Schedule Ad-anta.e

T&8OW

T&8OW

0ig&re 17 13 Scenarios for #erm&tations 7et2een %CC#: 7CC#: and 7CCS 4Singh: 1..15

time 2or=ed on appropriate cost s&-acco&nts The foreman in the distri-&tion made in 0ig&re 17 1' has charged ' ho&rs of % %pple@s time to an earth e/cavation acco&nt and ' ho&rs to roc= e/cavation %pple is a code 1( craft: indicating that he is an operating engineer 4e;&ipment operator5 %s noted: this distri-&tion of time allo2s the generation of management information aligning 2or= effort 2ith cost center *f no allocation is made: these management data are lost The flo2 of data from the field thro&gh preparation and generation of chec=s to cost acco&nts and earnings acc&m&lation records is sho2n in 0ig&re 17 1( This data str&ct&re esta-lishes the flo2 of ra2 data or information from the field to management 1a2 data enter the system as field entries and are processed to service -oth payroll and cost acco&nting f&nctions Temporary files are generated to calc&late and prod&ce chec=s and chec= register information Sim&ltaneo&sly: information is derived from the field entries to &pdate pro$ect cost acco&nts These ;&antity data are not re;&ired -y the financial acco&nting system and can -e tho&ght of as management data only

30

Chapter 17 Cost Control

Ta-le 17 3 ,al&es of C#*: C,: and S#*: S, for the Si/ Scenarios 4Singh: 1..15

CP) + ! CV + $ SP) + !

o-errunnin. cost SV 6ehind +$ schedule CAS )

CP) 5 ! CV 5 $ SP) + ! SV + $ schedule CAS CP) + ! CV + $ SP) + ! SV + $ CAS )V CP) 5 ! CV 5 $ SP) 5 ! SV 5 $ CAS V)

9ithin 6ud.et 6ehind

CP) 5 ! CV 5 $ SP) 5 ! SV 5 $

9ithin 6ud.et ahead o2 schedule CAS ))) CP) + !

o-errunnin. cost 6ehind schedule

CV + $ cost SP) 5 ! SV 5 $

o-errunnin.

9ithin 6ud.et ahead o2 schedule

ahead o2 schedule CAS V

0rom the time card: the 2or=er@s *D 4-adge n&m-er5: pay rate: and ho&rs in each cost acco&nt are fed to processing ro&tines that cross chec= them against the 2or=er data 4permanent5 file and &se them to calc&late gross earnings: ded&ctions: and net earnings S&mmations of gross earnings: ded&ctions: and net earnings are carried to service the legal reporting re;&irements placed on the contractor -y ins&rance carriers 4p&-lic lia-ility and property damage: 2or=men@s compensation5: the &nions: and government agencies 4e g : Social Sec&rity and 8nemployment Compensation5

17 . C<%16ES 0O1 *ND*1ECT %ND O,E1<E%D EV#ENSE

Contractor?inc&rred e/penses associated 2ith the constr&ction of a given facility relate to9 1 Direct cost cons&med in the reali>ation of a physical s&-element of the pro$ect 4e g : la-or and material costs involved in po&ring a sla-5 " #rod&ction s&pport costs inc&rred -y the pro$ect?related s&pport reso&rces or re;&ired -y the contractor 4e g : s&perintendent@s salary: site office costs: vario&s pro$ect related ins&rances5 costs associated 2ith the operation and management of the company as a via-le -&siness entity 4e g : home office overhead: s&ch as the costs associated 2ith preparation of payroll in the home office: preparation of the estimate: mar=eting: salaries of company officers5 The prod&ction s&pport costs are typically referred to as pro$ect indirect costs The home office charges are normally referred to as home office overhead %ll of these costs m&st -e recovered -efore income to the firm is

17 10 #ro$ect *ndirect Costs

31
generated The home office overhead: or general and administrative 46 W %5 e/pense: can -e treated as a period cost and charged

17 10 #ro$ect *ndirect Costs

3"

XX

0ig&re 17 1' 0oreman@s daily la-or distri-&tion report separately from the pro$ect 4direct costing5 On the other hand: they may -e prorated to the $o- and charged to the $o- cost overhead acco&nts and the 2or=?in?progress e/pense ledger acco&nts 4a-sorption costing5 17 10 #1OAECT *ND*1ECT COSTS Ao-?related indirect costs s&ch as those listed in the la-or cost report of 0ig&re 17 1) 4e g : ha&l trash5 are typically inc&rred as part of the on?site related cost associated 2ith reali>ing the pro$ect %s s&ch: they are charged to appropriate acco&nts 2ithin the $o- cost system The level and amo&nt of these costs sho&ld -e pro$ected d&ring the estimating phase and incl&ded in the -id as individ&al estimate line items %ltho&gh it is

17 10 #ro$ect *ndirect Costs

33 recommended that $o- indirect -e precisely defined d&ring estimate development: many contractors prefer to

17 10 #ro$ect *ndirect Costs

3'

0ig&re 17 1( #ayroll data str&ct&re handle these charges -y adding a flat rate amo&nt to cover them 8nder this approach: the contractor calc&lates the direct costs 4as defined previo&sly5 and m&ltiplies these charges -y a percentage factor to cover -oth pro$ect indirects and home office fi/ed overhead To ill&strate: ass&me that the direct costs for a given pro$ect are determined to -e X"00:000 *f the contractor applies a fi/ed factor of "0J to cover field indirects and home office overhead: the re;&ired flat charge 2o&ld -e X'0:000 *f he adds 10J for profit: his total -id amo&nt 2o&ld -e X")':000 The estimate s&mmary sho2n in 0ig&re 1) 3 esta-lishes line items for indirect charges and calc&lates them on an ?item?-y?item -asis 4rather than applying a flat rate5 Typical items of $o-?related indirect cost that sho&ld -e estimated for recovery in the -id are those listed in 0ig&re 17 " as pro$ect overhead acco&nts 4700?...5

17 10 #ro$ect *ndirect Costs

3( This is the recommended proced&re -eca&se it is felt that s&fficient information is availa-le to the contractor at the time of -id to allo2 relatively precise definition of these $o-?related indirect costs The 1 S !eans method of developing overhead and profit 4ill&strated in 0ig&re 1) 75 represents a percentage rate approach that incorporates a charge into the estimate to cover overhead on a

31.

0ig&re 17 1) La-or cost report 4some typical line items5

37

Chapter 17 Cost Control

line item?-y?item -asis This is essentially a variation of the flat rate application descri-ed previo&sly 17 11 0*VED O,E1<E%D Chereas the pro$ect indirect charges are &ni;&e to the $o- and sho&ld -e estimated on a $o-? -y?$o-asis: home office overhead is a more or less fi/ed e/pense that maintains a constant level not directly tied to individ&al pro$ects *n this case: the application of a percentage rate to prorate or allocate home office e/pense to each pro$ect is accepted practice: since it is not reasona-le to try to estimate the precise allocation of home office to a given pro$ect 1ather: a percentage prorate or allocation factor is &sed to incorporate s&pport of home office charges into the -id The calc&lation of this home office overhead allocation factor is -ased on9 1 The 6 W % 4home office5 e/penses inc&rred in the past year " The estimated sales 4contract5 vol&me for the coming year 3 The estimated gross margin 4i e : mar=&p5 for the coming year This proced&re is ill&strated in the follo2ing e/ample 4%drian: 1..+5 Step 19 Estimate of %nn&al Overhead 46 W % E/pense5
Last year@s 6 W % 10J inflation 0irm gro2th Estimated 6 W % X"70:0 00"7:0 00 "3:000 X3"0:0 00

Step "9 Estimate of X of Cost 7asis for %llocation

Estimated vol&me 6ross margin La-or and material X':000:000 "0J H X+00:000 X3:"00:000

Step 39 Calc&late Overhead #ercentage Overhead costs estimated 46 W %5GLa-or and material estimate H 3"0R 000P3R "00R 000 H 10J Step '9 Cost to %pply to a Specific #ro$ect
Estimated la-or and material costs Overhead to apply 4Y 10 percent5 X(00:0 00 (0:000

3+

Chapter 17 Cost Control X((0:0 00

*n the e/ample: the anticipated vol&me for the coming year is X':000:000 The 6 W % e/pense for home office operation in the previo&s year 2as X"70:000 This val&e is ad$&sted for inflation effects and e/pected e/pansion of home office operations The ass&mption is that the overhead allocation factor 2ill -e applied to the direct la-or and materials costs These direct costs are calc&lated -y factoring o&t the "0J gross margin 6ross margin: in this case: refers to the amo&nt of overhead and profit anticipated Direct costs amo&nt to X3:"00:000 The X3"0:000 in 6 W % costs to -e recovered indicate a 10J prorate to -e applied against the X3:"00:000 of direct costs This means that an overhead amo&nt of X(0:000 2o&ld -e added to a contract -id -ased on X(00:000 of direct cost to provide for 6 W % cost recovery The profit 2o&ld -e added to the X((0:000 -ase recovery amo&nt

17 1" Considerations in Esta-lishing 0i/ed Overhead

3"1

17 1" CONS*DE1%T*ONS *N EST%7L*S<*N6 0*VED O,E1<E%D

*n considering costs from a -&siness point of vie2: it is common to categori>e them either as varia-le costs or fi/ed costs ,aria-le costs are costs directly associated 2ith the prod&ction process *n constr&ction they are the direct costs for la-or: machines: and materials as 2ell as the field indirect costs 4i e : prod&ction s&pport costs5 These costs are considered varia-le since they vary as a f&nction of the vol&me of 2or= &nder2ay 0i/ed costs are inc&rred at a more or less constant rate independent of the vol&me of 2or= in progress To -e in -&siness: a certain minim&m of staff in the home office: space for home office operations: telephones: s&pplies: and the li=e m&st -e maintained: and costs for these items are inc&rred These central administrative costs are generally constant over a given range of salesGconstr&ction vol&me *f vol&me e/pands drastically: home office s&pport may have to -e e/panded also 0or p&rposes of analysis: ho2ever: these costs are considered fi/ed or constant over the year 0i/ed costs are essentially the general and administrative costs referred to previo&sly %s descri-ed in Section: 17 11: the level of 6 W % 4fi/ed5 costs can -e estimated -y referring to the act&al costs inc&rred d&ring the previo&s year@s operation The method of pro$ecting fi/ed overhead as a percentage of the estimated total direct costs pro$ected for the coming year is 2idely &sed Since the fi/ed overhead inc&rred in the previo&s year is typically availa-le as a percentage of the previo&s year@s total sales vol&me: a simple conversion m&st -e made to reflect it as a percentage of the total direct cost The form&la for this conversion is #C H #S PN100 #S O 2here

#C H percentage applied to the pro$ect@s total direct cost for the coming year #S H percentage of total vol&me in the reference year inc&rred as fi/ed or 6 W % e/pense *f: for instance: X+00:000 is inc&rred as home office 6 W % e/pense in a reference year in 2hich the total vol&me -illed 2as X':000:000: the # val&e 2o&ld -e "0J 4X+00:000G X':000:000 1005 The calc&lated percentage to -e added to direct costs estimates for the coming year to cover 6 W % fi/ed overhead 2o&ld -e #C H "0PN100 "0O H "(J *f the direct cost estimate 4e g : la-or: materials: e;&ipment: and field indirects5 for a $o- is X1 million: X"(0:000 2o&ld -e added to cover fi/ed overhead #rofit 2o&ld -e added to the total of field direct and indirects pl&s fi/ed overhead The field 4varia-le5 costs pl&s the fi/ed overhead 46 W %5 charge pl&s profit yield the -id price *n this e/ample: if profit is incl&ded at 10J: the total -id 2o&ld -e X1:37( 000 *t is o-vio&s that coverage of the field overhead is dependent on generating eno&gh -illings to offset -oth fi/ed and varia-le costs Certain companies prefer to incl&de a charge for fi/ed overhead that is more responsive to the so&rce of overhead s&pport The ass&mption here is that home office s&pport for management of certain reso&rces is greater or smaller: and this effect sho&ld -e incl&ded in charging for overhead 0or instance: the cost of preparing payroll and s&pport for la-or in the field may-e considera-ly higher than the s&pport

needed in administering materials proc&rement and s&-contracts Therefore: a "(J rate for fi/ed overhead is applied to la-or and e;&ipment direct cost: 2hile a 1(J rate on materials and s&-contract costs is &sed *f differing fi/ed overhead rates are &sed on vario&s s&-components of the field 4varia-le5 costs in the -id: the fi/ed overhead charge 2ill reflect the mi/ of reso&rces &sed This is sho2n in Ta-le 17 ' in 2hich a fi/ed rate of "0J on the total direct costs for

'1

Chapter 17 Cost Control

Ta-le 17 ' Comparison of 0i/ed Overhead 1ate Str&ct&res "0J on Total Direct
La-or and e;&ipment !aterials and s&-contracts La-or and e;&ipment !aterials and s&-contracts La-or and e;&ipment !aterials and s&-contracts X X1:"00:00 +00:000 0 "00:00 0 ":000:00 0 700:00 0 700:00 0 X1)0:000 "'0:000 X'00:000 X '0:000 '00:000 X''0:000 X1'0:000 1'0:000 X"+0:000 X"00:000 1+0:000 X3+0:000 X (0:000 300:000 X3(0:000 X17(:000 10(:000 X"+0:000

"(J on La-or and E;&ipmentR 1(J on !aterial and S&-contracts

Ao- 101

Ao- 10"

Ao- 103

three $o-s is compared to the &se of a "(J rate on la-or and e;&ipment and a 1(J rate on materials and s&-contracts *t can -e seen that the fi/ed overhead amo&nts &sing the "(G1(J approach are smaller on $o-s 101 and 10" than the flat "0J rate This reflects the fact that the amo&nt of la-or and e;&ipment direct cost on these pro$ects is smaller than the materials and s&-contract costs The ass&mption is that s&pport re;&irements on la-or and e;&ipment 2ill also -e proportionately smaller On $o- 10": for instance: it appears that most of the $o- is s&-contracted 2ith only X"00:000 of la-or and e;&ipment in ho&se Therefore: the s&pport costs for la-or and e;&ipment 2ill -e minimal: and the -&l= of the s&pport cost 2ill relate to management of materials proc&rement and s&-contract administration This leads to a significant difference in fi/ed overhead charge 2hen the "0J flat rate is &sed: as opposed to the "(G1(J modified rates 4i e : X''0:000 vs X3(0:0005 On $o- 103: the fi/ed overhead charge is the same 2ith either of the rate str&ct&res -eca&se the amo&nt of la-or and e;&ipment cost is the same as the amo&nt of the materials and s&-contract cost *t sho&ld -e o-vio&s that in tight -idding sit&ations &se of the styli>ed rate system: 2hich attempts to -etter lin= overhead costs to the types of s&pport re;&ired: might give the -idder an edge in red&cing his -id Of co&rse: in the e/ample given 4i e : the "(G1(J rate vs "0J5 the "0J flat rate 2o&ld yield a lo2er overall charge for fi/ed overhead on la-or? and e;&ipment?intensive $o-s The main point is that the charge for fi/ed overhead sho&ld -e reflective of the s&pport re;&ired 7eca&se the m&ltiple rate str&ct&re tends to reflect this -etter: some firms no2 arrive at fi/ed overhead charges -y &sing this approach rather than the flat rate applied to total direct cost

'"

Chapter 17 Cost Control 17 " Chat are the ma$or f&nctions of a pro$ect coding systemD 17 3 List advantages and disadvantages of the 8niform Con? str&ction *nde/ 48C*5 coding system 17 ' %ss&me yo& are the cost engineer on a ne2 X1" million commercial -&ilding pro$ect Starting 2ith yo&r company@s standard cost code: e/plain ho2 yo& 2o&ld develop a pro$ect

1E,*EC 38EST*ONS %ND EVE1C*SES

17 1 %s a constr&ction pro$ect manager: 2hat general catego? ries of information 2o&ld yo& 2ant to have on a cost control report to properly eval&ate 2hat yo& thin= is a developing overr&n on an operation: MMplace fo&ndation concrete:@@ that is no2 &nder 2ay and has at least ( 2ee=s to go -efore it is completedD

1evie2 3&estions and E/ercises cost code for this $o- 7e s&re the differences in p&rpose and content -et2een these t2o types of cost codes are clear in yo&r e/planation Specify any additional information that may -e needed to dra2 &p the pro$ect cost code 17 ( Develop a cost code system that gives information regarding9 a c d e f Chen pro$ect started #ro$ect n&m-er #hysical area on pro$ect 2here cost accr&ed Division in 8C* S&-division 1eso&rce classification 4la-or: e;&ipment5

3"3

17 7 Categori>e the follo2ing costs as 4a5 direct: 4-5 pro$ect indirect: or 4c5 fi/ed overhead9 La-or !aterials !ain office rental Tools and minor e;&ipment 0ield office #erformance -ond Sales ta/ !ain office &tilities Salaries of managers: clerical personnel: and estimators 17 + The follo2ing data are availa-le on Del 0a--ro *nter? national: *nc The fi/ed 4home office5 overhead for the past year 2as X3)(:"00 Total vol&me 2as X(:'00:000 *t is ass&med that 6 W % costs 2ill acco&nt for X1:0+0:000 of this vol&me Del 0a--ro &ses a profit mar=&p of 10J The estimating department has indicated that the direct and field indirects for a renovation $o- 2ill -e X+00:000 Chat -id price sho&ld -e s&-mitted to ens&re proper coverage of fi/ed over? headD %ss&me a (J inflation factor and a 1"J gro2th factor in the calc&lation 17 . Calc&late the cost and sched&ling variances for each of the 2or= pac=ages sho2n Chat is the percentage complete for the entire pac=ageD

17 ) The follo2ing planned fig&res for a trenching $o- are availa-le9 3&antity E/cavationLsecond ha&ling 100:000 c&-ic yard 1eso&rces 4ho&rs5 Cost !achines 1000 X100:000 La-or (000 X100:000 Tr&c=s "000 X )":(00

%t a partic&lar time d&ring the constr&ction: the site manager reali>es that the act&al e/cavation 2ill -e in the range of 110:000 c&-ic yards 7ased on the ne2 ;&antity: he fig&res that he 2ill have 30:000 c&-ic yards left 1eso&rce s !achines La-or Tr&c=s Cost +.( ho&rs )011 2or= ho&rsho&rs 1)+' +(000 7.000 (01'0 % 7 C 1(0 "0 00 ( 0 +.'0 1"') 3() 1((0 1.) 0(1 0 EST

CO1Z <O81S %CT 0O1EC%ST EST

38%NT*T*ES %CT 0O1EC%ST

0rom the main office: the follo2ing $o- information is availa-le9

Chat 2o&ld concern yo& as manager of this $o-D

17 10 Dra2 a hierarchical diagram of the 2or= pac=ages given: &sing the C7S code val&es Calc&late the 7CC# and percent complete for all codes and 2or= pac=ages to incl&de % 00 and 7 00 0inally: comp&te the total percentage complete of the pro$ect

CO1Z <O81S CODE % 00 % 10 % "0 7 00 7 10 7 "0 DESC1*#T*ON EGC D&ct #artitions <angers NGC D&ct #artitions <angers ES T '' 0 "3 0 "1 0 )' ( 37 0 "7 ( %C T 1( 0 13 0 7 ( + ( 0O1EC% ST ""( ""0 3.0 ")0 ES T "( 3 (0 1)

38%NT*T*ES %C T 1' " " 1" ' ( 0O1EC% ST " (3 + ' + 1 )

'(

Chapter 17 Cost Control

17 11 6iven the follo2ing diagrams of progress on individ&al 2or= pac=ages of a pro$ect ans2er the follo2ing ;&estions9

Cost

Cost

BCW S Cost Cost

BC WP

BCW S

AC WP

')

Chapter 17 Cost Control a c d e 0or Case 1: is the pro$ect ahead or -ehind sched&leD 0or Case ": is the pro$ect over or &nder -&dgetD 0or Case 3: is the C#* greater than 1D 0or Case 1: is the S#* greater than 1D E/plain -y calc&lation 0or Case ': is the pro$ect on sched&le and -&dgetD E/plain 17 1" % pro$ect 2ith an S#* S 1 is: according to the disc&s? sions in this chapter: -ehind sched&le <o2 2o&ld the critical path in its critical path method sched&le loo=D *s there any possi-ility that the S#* leads to an erroneo&s concl&sion a-o&t the pro$ect@s sched&leD