For many decades, schedule and cost structuration methods have been used extensively on major construction projects. These methods have improved over time with the evolution of tools and lessons learned from the field. Nevertheless, every time I try to make schedule and cost really work together, I encounter problems that are generally unsolvable, particularly how to judiciously correlate a work breakdown structure (WBS) supporting a schedule and a cost breakdown structure (CBS) supporting a budget.
So many times I have seen customers struggling with either trying to find a compromise in a single structure – leading to poor efficiency on both schedule and cost management – or keeping both disconnected – leading to inconsistencies and a low level of trust in the data!
In this blog, I review the current practices in integrating schedule and cost management. I also look at the solutions Hexagon has to help customers improve the way schedules and costs can efficiently be managed together, and provide some examples that have been implemented in our Enterprise Project Performance solution.
Smooth and efficient integration – is it just a dream?
Let’s suppose you have dreamed of smoothly and efficiently integrating your schedules and costs. In that case, you might already know that improving enterprise project management processes and tools is needed to enable the best–in–class in project predictability and performance.
Project schedulers and cost controllers are key players in improving enterprise project performance – not only on their own, by helping to shorten the duration of projects and to reduce costs, but also when used together to provide the most accurate time-phased curve of planned forecast costs. These forecasts are needed to optimize enterprise cash flow by accurately predicting ‘when’ the money is needed. By improving the way you integrate schedule and cost, you will make better use of your capital investments and increase the financial return of your capital projects.
To ensure that a smooth integration is more than just a daydream, the most important thing is not to make the schedule structure (WBS) your cost structure (CBS). Also, be careful not to make the cost structure the basis for the schedule structure. Otherwise, you introduce undesired data that will dim the clarity of the reporting and increase the effort needed to manage the unrequired data volume overhead.
What’s the problem with this approach? Trying to have all the costs in a schedule structure leads to the creation of dummy WBS nodes that are used to collect all the data related to project management costs, overheads, general and administration, contingencies, and more. This will then be split into all the engineering, procurement, and construction costs for many detailed activities, with no real distribution rules. This results in a lot of cost details that are useless for the schedule and a lot of schedule details that are useless for the cost. With a huge effort and pointless frustration, you end up managing schedule and cost data – with no real useful or actionable information.
How can we do better?
The solution is simple: separate schedule and cost management as much as possible. Make sure both have their own roles, processes and breakdown structures. Not confusing it with something else that doesn’t share the same purpose is the best way to make each discipline as efficient as possible. However, to make this approach deliver the benefits of both, you need a strong integration as the backbone of the system. For this, you need a project management software enabled with advanced scheduling and cost management capabilities, working separately but being natively integrated into the same database without any interface.
The schedule and cost integration has to be flexible enough to allow each project to apply the best mapping method between schedule and cost data, corresponding to these three possible situations:
- The entire WBS and the CBS are the same: this is recommended as an intermediate step when you already have identical structures and want to move to dedicated structures for schedule and cost. It works as if you had a single structure: all activities contain time-phased cost data using the scheduled dates.
- The WBS, except for its last level – the so-called task or activity level – is the same: this is recommended when you have already succeeded in harmonizing the highest levels of the WBS with the CBS. It ensures you are not burdened in the cost structure by scheduling details that aren’t necessary to manage costs. The activity or task level doesn’t exist in the CBS, but is rolled up in each CBS element based on the WBS owning the activities. The cost controller can use the cost time-phased by the schedule without managing that schedule.
- Each WBS node can be mapped with a CBS node in significantly different structures. This is the best option if you already have separate WBS and CBS, roles and processes in place, or if you are implementing a completely new organization. WBS and CBS are linked together through a mapping table managed either by the scheduler, the cost control, or the project administrator. Activity data are rolled up to the appropriate CBS node based on the mapping. Costs coming from the schedule are by default time-phased using the scheduled dates. Other costs entered directly in the CBS are time-phased manually or by using a start date, an end date and a distribution profile.
In order to achieve the full benefits of such an integration, it is essential to have a single system to manage both the schedule and the costs. This is a fundamental prerequisite to ensure flexible integration and to share roles while using one database with a unique user interface.
Such flexibility in mapping the WBS and the CBS and keeping the activity level in the schedule enables significant benefits. First, you can structure just the WBS to include schedule data, and second, the CBS to only focus on costs. You can then have separate roles and processes for scheduling and cost control, while using the live schedule dates to spread the costs through time and generate the S-curves of the project for cash flow analysis.
Jean-Luc Ozoux is currently in charge of EcoSys Business Development at Hexagon PPM, a company that supports its customers in their digital transformation by offering innovative solutions to adopt new technologies applied to the management of large industrial projects.
He is an MBA graduate of Paris University in Information Systems and Management. He has been helping organizations implement their Capital Project Management solutions for 30 years. His experience with major project management software, as well as the advice he provides to major companies in France and Europe, allows him to take a critical look at the very rapid evolution of tools and technologies that are transforming the working methods, culture and tools that need to be mastered today.
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