Embarking on a new construction project can be an exciting experience. However, this excitement can be short-lived as the date of execution draws nearer. As a stakeholder in the project, you’ve spent time putting together an idea of how it will be built, and you have a detailed idea of how much the project will cost. You’ve likely got reports that summarize costs by discipline, area or work breakdown structure values, and you understand how much of those costs will be consumed by cost types like labor, equipment, materials, subcontracts, etc. But understanding categorized budgetary totals is just one piece of the puzzle.
Experienced project personnel not only want to understand how much things will cost, but when those costs will be incurred. Because the nature of construction itself is time-phased, successful project teams plan for costs, revenues, escalation/risk windows and key resources via their phases of timing.
Answering the Big Questions
With any project, there are many cost questions that must be answered, some weighing more heavily than others. If revenues lag behind costs, how will the present-day cost of money be accounted for? Will that be a shared concern across engineering, procurement and construction teams? These are important because visibility into this type of cost provides a basis of conversation among interested parties to help align priorities.
Long-term projects create even more complexity as certain costs are likely to increase seasonally or on specific dates (think of a new set of union rates going into effect). When working at remote jobsites, logistics may become more complicated (read “expensive”) due to seasonality or spikes in demand for specific services. A good example of this is during planned outages on power plants in the fall and spring months.
As shown above, a time-phased view of the project’s costs reveals an “S” curve where the costs rise the fastest in a specific period.
Many maintenance projects, especially those performed during shutdowns, turnarounds or outages have defined “discovery” windows where the majority of changes for extra work will be considered. Certain questions must be answered. Have these dates been reviewed and discussed by the project team? Are any adjustments being made to the project staffing to accommodate this anticipated increase in change activity? Do we know when we can expect most of the technical discovery will be complete, allowing for some of the contingency account to be released?
Getting to the Finish Line Together
To ensure all parties share an interest in an agreed-upon finish date, liquidated damages may be used. This is the agreed-upon compensation owed to one party (most often the client) when the other party (frequently the contractor) doesn’t meet the timeline requirements and is based on a forecast of estimated real costs and losses the first party would likely incur. Now questions such as how likely any liquidated damages based on planned progress are must be answered. And what about actual progress and forecast progress? A time-phased approach to cost planning, tracking and forecasting will give all stakeholders visibility into anticipated finish dates, even as unexpected issues may threaten to delay progress.
Keeping Resources Flowing
When working in remote areas, accommodations for labor resources can be a challenge. More questions arise. Do we know when we’re expecting the maximum number of people due to the phasing of the project? Borrowing a page from inventory management, can we better leverage this information to ensure we have a “just in time” approach to manage to the peaks, without consuming excess capacity during the valleys? While typically labelled as indirect or support costs, these costs can be significant relative to the overall project value.
In the graphical analysis above, project team members can see when expected long lead items will be required on the project, allowing for proactive planning to ensure the items arrive on time.
The Ubiquitous Excel
Without a set of integrated, purpose-built software applications, how are project teams solving these problems today? A visit to any jobsite will probably turn up dozens, if not hundreds of individual Microsoft Excel® workbooks. Some may be used for time tracking and some may be used for resource utilization metrics and still others may be used to calculate and store derived quantities. Smart project teams don’t want to be blindsided by questions from project stakeholders and therefore gravitate toward whatever tools are available that they can leverage, with Excel at the top of most folks’ lists. But the very nature of those distributed spreadsheets often causes concern for the same people that rely on them. How is cost data, for instance, being updated as schedules change? How is data from enterprise resource management systems linked to and from these stand-alone files? What is the nature of security and data preservation for numerous individual files maintained on laptop and desktop machines? These are just some of the questions that will need to be answered.
Organizations can view project data independently or group projects together to view overall cost performance with respect to time.
By implementing today’s best purpose-built technology tools to enable time-phased standards for cost planning, tracking and forecasting, project teams now have increased visibility into how the timing of key operations affects costs, revenue, risk, resource management and much more. Let us know if you’d like to see a demo of InEight software today.
