There is an abysmal difference between cost accounts coding versus CPM activity coding, to say they are the same is misleading, the difference is on the sheer number of accounts and on the use of same codes when using cost accounts versus thousands of different activity codes per job that is not equal among different jobs.  CPM based costing is a theoretical illusion.

Most Construction Contractors do their cost control at the process level and not at the individual activities level.  For a construction Contractor a process might be tile installation, a single process across the duration of the job that spans many activities. The activity schedule assists in activity timing and resource planning.  In a single job there might be hundreds of activities for tile installation but a single cost code to track the unit cost for tile installation. It is almost universal in construction accounting software to break down each cost code into cost-types for labor, equipment, materials, subcontract and other.

There is a relevant difference between Job Cost Budgeting and Unit Costing, Budgeting uses only dollar amount, unit costing relates dollar amount to volume of work quantities.  Many of today Job Costing modules misses to link dollar amount to volume of work, they lack the weekly reports on unit costs and productivity, they simply do not provide for contractor to input the quantities, just dollar amounts.  As a result some contractors end up without these valuable reports because transferring the raw data to worksheets is too time consuming.

None of the contractors I know use RS Means Database, they use the paper book editions and use it to plug in those items they have no or little experience or cost records, and this happens very rarely.   After over 25 years of PM experience I make most of my living as estimator, CPM scheduling is the fun part.  What I am saying is not taken from foreign reference books but real life experience with my few former employers and many more as clients. Those who have formal unit costing, at time of costing the quantity take off use their Unit Cost records, those who have non formal unit costing use their imagination as well as reference cost books foreign to their company experience.  There is a consensus there is more reliability on estimates based on the actual experience of each particular company.

To say all contractors use EVM is misleading they do not use EV as a management tool but a few as a progress reporting tool.  They do not make use of the flawed part of EVM, the part that relates to schedule, they understand that EVM misses the link with critical path activities.  A few use it as another view that is far from perfect, a very few [rare birds around here] I believe might use it if doing non-fixed price work for the DOD.

http://www.oracle.com/us/solutions/business-intelligence/fed-gov-manager...

Managerial cost accounting is the process of accumulating, measuring, analyzing, interpreting, and reporting cost information useful to both internal and external groups concerned with the way in which the organization uses, accounts for, safeguards, and controls its resources to meet its objectives. Managerial cost accounting is therefore the servant of budgeting, financial accounting, and reporting because it assists those functions in providing information. In addition, managerial cost accounting provides useful information directly to management.

There are a variety of acceptable costing methods, including:

• Standard Costing, where standard cost rates are established based upon historical data (or some other reasonable source). This costing methodology is most appropriate for repetitive type outputs (e.g., widgets delivered) and relies on on-going comparisons with actual costs to identify any material variances (which would lead to rate adjustments).
• Job Order Costing, where discrete units of work are  identified and used to accumulate the appropriate direct costs (via direct assignment) and indirect costs (based upon a causal beneficial relationship). This costing methodology is most appropriate for organizations that produce non-repetitive outputs (e.g., case management, engineering and construction, research and development).   
• Process Costing, where products are created by flowing through a series of organizations/steps, accumulating a unit cost as they flow from one step  to the next. This methodology is most appropriate for the production of homogeneous goods or services, where the same process is used in the production of each output (e.g., Medicare claims processed).   
• Activity Based Costing (ABC), where the cost of an output is determined by the activities required to produce the output and the resources consumed by these activities. This methodology is most appropriate for organizations that can clearly define their outputs, activities and cost drivers (used  to assign resource costs to activities). The major benefits of ABC are: 1) improved accuracy of cost assignments (by more accurately assigning both indirect and direct costs) and 2) identification of non-value added activities (those activities that do not directly or indirectly support an organization’s outputs).

Each organization must determine the optimal methodology to be used, based upon their specific situation. It is important to note that the methodologies are not mutually exclusive. It is appropriate to utilize more than one methodology in some circumstances.  

Oracle paper is right when it says it is appropriate to utilize more than one methodology in some circumstances. Oracle paper is right when it says Job Order Costing, is most appropriate for organizations that produce non-repetitive outputs but misses when it says Construction falls under this category. Perhaps biased because of their products offer.
 
After many decades of experience our local Construction Industry have adopted a combination of some of the described above, a combination some call "unit-cost-production".

http://www.foundationsoft.com/unit-cost-production-reporting/

• The Costs are assigned to a Job Order.
• Many of the Construction Activities are repetitive across different jobs and across multiple CPM activities.
• Standard Costing is used as a tool for estimating and comparison.
• Due to the amount of activities on construction CPM Schedules, ABC method is considered impractical.

Frequently Owners specify the CPM software to be used, at times Microsoft Project, at times Primavera P6, at times require CPM to be on their own computers such as the case of NY [NEW YORK] DTOP and CALTRANSP [CALIFORNIA], it is not a totalitarian system but it feels like it when you are not free to select your planning tool to take charge of your own means and methods.

Most contractors track costs through their financial and accounting systems using auxiliary Job-unit-Costing systems.  They select their accounting system based on many factors, frequently Best of Breed according to their needs, never CPM software determines which accounting and financial system they will use, by the same token never the financial and accounting system determines which scheduling software they will use, when free to do so.  

The Accounting software most used by my clients is Sage.

http://www.sage.com/us/erp/sage-300

http://www.sage.com/us/sage-construction-and-real-estate/sage-100-contractor

https://www.sage.com/na/~/media/site/sage-100-erp/assets/datasheets/Sage_100_ERP_Job_Cost_spec.pdf

I know of no single contractor that integrates Accounting software with CPM software, they just do not do it.

Usually Contractors do not prepare a detailed CPM before any project is awarded, estimating and bidding comes first. * Estimators prepare summary schedules in the hope that if they are awarded the job they will have no major scheduling issues.  * They do not know for every cost component how it will eventually fall along the final CPM activities. 

Contractors use the financial system to track unit costs the way they estimate their jobs, usually they follow time tested methods such as R.S.Means.  Take for example the installation of masonry units, they estimate by how drawings are divided, perhaps showing on a single page the required masonry on several areas that eventually will fall under different CPM activities.

If basic formal job costing is done by 50% or less of our contractors’ further subdivision by CPM activities is done by 0% +/- 0%.  Imagine segregating labor, equipment, materials, subcontracts and other costs for 50,000 masonry units, delivered in 20 truckloads to be installed under 80 CPM activities, IT IS NUTS!

At time of preparing a schedule they cost load the Billings as usually required in our contracts but keep confidential their costs.

There is a reason why some are also againts BOQ loading.

http://www.nflaace.org/index_files/john_orr_cost_loaded_schedule_updatin...

Rafael, For ~20 years I was a general contractor and our "project controllers" created OUR schedule (not the "official" one submitted to the owner,  as a contractual requirement) but our own "working schedule".   Why? Because as we were working in a cold climate, we had to know when we were going to place the concrete and get the building closed in as the costs of "outside" work in the cold months can easily double or triple costs.

Again you need to be clear that what we were/are trying to do with the GPC-BoK is to identify "BEST TESTED AND PROVEN PRACTICES" and not necessarily "common" practices" which helps to explain is why the contractor failure rate is so high and which is why we kept citing the KPMG research showing that OWNERS are not happy with the project management processes.

Explained another way, there are MANY "short-cuts" which are "common" that are not even "good" much less "BEST TESTED AND PROVEN" practices.

Hope you keep up the reviews but when doing so, please put it in the context that we are trying to REDUCE the high failure rate of contractors while INCREASING the "success rate" of projects.   Make sense to you?

BR,

Dr. PDG, Guangzhou, China

08.1.1.3.2 - CONTRACTOR’S PERSPECTIVE

(2) Creating a CPM Schedule- In most contractor organizations (at least in North America) both the CPM schedule and the Cost Estimate are done simultaneously, often by the same person or team of people.

The above statement is not true in America, maybe in a place called Utopia, an imaginary island described in Sir Thomas More's Utopia (1516) as enjoying perfection in law, politics, etc.

It is most likely the CPM will be prepared after contract award, current practice is that it is prepared during the initial construction days.  I do not see that after award American contractors will be given reasonable time to prepare the CPM before construction starts, current practice is a sensible approach but it is not simultaneous with the Cost Estimate.

https://www.cfxway.com/constructiondocs/ACPAM%20Files/3.0%20Preconstruction.htm

3.2.2 Contractor's Schedule Review

The Contractor submits his Preliminary Schedule during the Pre-Construction Conference.  The Preliminary Schedule details the contractor’s planned work for the first 120 days of the project and shows summary activities for the remainder of the work covering the entire scope of the project.  The Preliminary Schedule does not need to be CPM generated and does not need to show critical paths.  The CEI should review the schedule to check that all scope for the project is included and that the correct schedule milestone dates are shown.   

Within 90 days of the Notice to Proceed, the Contractor prepares a Baseline Schedule in accordance with contract documents. The Contractor's schedule is submitted to the Project Engineer. The Project Engineer, reviews the schedule, and if it meets contract requirements, submits a letter of acceptance to the contractor. If the schedule does not reflect a reasonable or feasible plan to construct the project in the authorized contract time or the schedule is not prepared according to the specifications, the schedule will be returned to the Contractor for modification.

http://www.long-intl.com/articles/Long_Intl_Contract_Scheduling_Provisio...

The contractor should not be expected to have its as-planned CPM schedule available on day one of the project. Normally, the contractor should expect to submit within 10 to 15 days after contract award a preliminary as-planned schedule that would cover the first 60 to 90 days of a project in detail and include a general outline or concept of the remaining work. Within the first 60 to 90 days, the contractor would develop it s detailed as-planned schedule and submit this schedule to the owner within that time frame.

http://www.renewnyc.com/content/rfps/cleaning_addendum3/vol1_2.pdf

The CPM Schedule for the entire duration of the Project, with full resource loading, is due 30 calendar days after AWARD of the Contract. LMDC may withhold all or a portion of the progress payments until the Contractor submits a complete CPM Schedule acceptable to LMDC.

https://www.dot.ny.gov/main/business-center/contractors/construction-div...

If in New York only after contract award the contractor is granted permission to use the DOT Agency computer.

If a VA job the contractor is prohibited from preparing a CPM schedule prior to Scheduler approval that have some meaning other than a Dummy CPM, this after contract award.  Unbelievable a contractor's Schedule by someone not tied to the Contractor, no wonder VA is notorious for poor contract performance.  

https://www.dot.ny.gov/main/business-center/contractors/construction-div...

It is not until contract award and after critical procurement is done that the American Contractor have a complete and real CPM Schedule, get real.

Hmmmm......  It is not "wrong" provided we have a realistic and achievable schedule to begin with.    Thus IF we are using our resources at some OPTIMUM and the resource leveling has NOT pushed out the completion dates, then the original baseline should remain valid.

To see more on this look further down to Paragraph 01.1.2.10, Figure 13 and you can see another graphic which illustrates the importance of optimizal utilization of resources understanding that UNLESS we have a realistic schedule to start with and not some "pie in the sky" dream then the graphic I showed with the leveled (optimized) resource utilization should be valid.

But a great discussion and look forward to seeing what proposed changes you would like to see to the GPCCAR, PROVIDED they meet these 4 requirements:

1.       They must be “open source” meaning they need to be available under creative commons license OR permission must have been granted the original author to be included in the GPCCAR

2.       They must be FREE of any cost to the Guild of Project Controls member

3.       They must be accessible by mobile or computer devices via the internet

4.       They must represent “best tested and proven” practices and not “common” practices which may be commonly used but do not represent what we should be doing as opposed to what is commonly done,

Dr. PDG, Guangzhou, China

Paul,

To say but that the actual ("leveled") progress should fall someplace in between is wrong.

If there is actual progress then to the left of the DD the curve that represents progress is a single line and to the right another pair [Remaining Early & Remaining Late] that will not necessarily end at the same point as the Resource Leveled Baseline Pair.  Usually two sets of resource leveled curves are overlaid.

If the schedule is way ahead or way late from the beginning the actual line at left to the DD might fall outside the Baseline boundaries.

http://www.mediafire.com/view/femao5y54ba2nm2/SCurves.jpg

Rafael

Chris, I don't agree with John's assessment.  If you look at Module 1, paragraph 01.1.1, Figure 1 http://www.planningplanet.com/guild/gpccar/introduction-to-managing-project-controls you can see clearly that we have covered not only the entire PROJECT life span but the ASSET life span as well.

This graphic is an adaptation of what Chevron is doing combined with the TCMF.

Explained another way, much of the GPCCAR is based on the TCMF but modified to "fix" or expand upon real or perceived weaknesses in the TCMF, especially on the "soft" or "people" side.

And as noted in previous responses, the GPCCAR was intended to be a STARTING POINT only.  It is expected that now that we have a complete process driven project controls body of knowledge in place, that practitioners will begin to update and IMPROVE upon it.  This intent can be seen at the bottom of each and every page where we encourage and solicit constructive improvements and have provided a process and a template which to do so.

BR,
Dr. PDG, Guangzhou, China

Fair points, Rafael.   This graphic was CONCEPTUAL in nature, intended to illustrate that not only should we have BOTH an early and late date curve, but that the actual ("leveled") progress should fall someplace in between.  Nothing more, nothing less.

What we have been trying to avoid (at least up until now) is relying on a single proprietary reference (i.e. Spider software) as the basis for the GPCcar.   To my knowledge, your software is by far the most sophisticated, especially in terms of resource management, but as a STARTING point, we tried to use software which most practitioners would be familiar with (either MSP or P3/P6).

However, as the GPCCAR was designed to incorporate "best tested and proven" practices, we have opened the door for Spider (and other innovators) to propose changes which DO represent "best tested and proven" practices.

Bottom line- IF you think this remains an important issue, then at the bottom of each and every page of the GPCCAR we have provided the instructions on how to propose modifications/updates to the GPCCAR.  We eagerly encourage proactive participation in this process as the GPCCAR was designed to be a "living document"- written BY practitioners FOR practitioners.

BR,

Dr. PDG

Guangzhou, China

In the following link you will find a couple of reasons why I do not agree with GAO new schedule assessment guide.

http://www.linkedin.com/groups/45942/45942-6088481665007501315?trk=hp-fe...

I was called anti-American, hope you do not call me anti-British.

Chris,

The Module 8.2 above related to Standard Operating Procedures (for cost estimating prior to execution of the project) will likely impact the risk analysis of the project during execution. That viewpoint is becoming more important in the eyes of project risk analysts. Please visit my Linkedin website "Schedule and Cost Risk Analysis" to read some of those views.

Tom Reichner

Hello,

I thought I might try to add some value by posting this here as it relates to the Cost Management table of contents.  I have pasted below the current taxonomy / index for this Module...

As you can appreciate it needs to be read in conjunction with other Modules / aspects of Project Controls such as building your schedule, manging progress or managing risks and opportunities etc.

There is a growing team of junior and senior practitioners helping to provide comment and ideas on how to improve the GPCCAR as well as how to propose your own additions or changes to the Modules.  

You can read about (and help improve) the team and the GPCCAR change process here.  You can also join that team :)

Hi Chris

As a basic principle the industry needs to understand its unique position in the worlds market place.

In every other market place you buy your product as cheaply as you can and then try to sell it for as much as you can - thus creating a profit.

In the construction industry we sell it as cheap as we can and then try to buy it a bit cheaper - a complete inverse of normal commercial practice.

The problem lies in the situation that the people who are buying have no idea of the true sold price.

In my seminars I often ask the delegates what they were doing yesterday - and not one has ever given the true answer - which is "making money". If we can change that mindset then we are well on the way to real cost control.

Best regards

Mike Testro

PS

Please don't make it a total American document - there is the rest of the world to consider.

I have built a school in the middle of a West African jungle where the aggregate came from a blown up granite out crop - the sand from a beach by the lake - and the cement by bribing the local Sultan. How do you cost that?