General Scope
The procedures required to prepare and maintain a cost control system for Capital Projects.
Cost Control is required for all capital projects. This requires the setting up of a cost control spreadsheet, to record project commitments and expenditures, and estimate final forecast costs.
The procedures required to prepare and maintain a cost control system for Capital Projects.
Cost Control is required for all capital projects. This requires the setting up of a cost control spreadsheet, to record project commitments and expenditures, and estimate final forecast costs.
2.0 Cost Control Spreadsheet - Setup
Following approval of the CAR, a Cost Controller will be assigned by the Senior Supervisor Project Administration, to be responsible for cost control of the project. This will usually be the person who developed the initial cost estimate for the project.
Cost control shall be completed using the standard Excel spreadsheet template prepared for this purpose. This should be saved to the EWR# \ Budget \ Project Control directory. The file should be given an appropriate name eg Cost Control EWR ****. If the spreadsheet is superseded by a new revision, the files should be clearly identified with the revision number, and the old file should be preferably be saved in a different directory eg. EWR# \ Budget \ Project Control \ Cost Control Old Revisions.
The Cost Controller may elect to protect the spreadsheet from modification by other users. This should be limited to "read only" access.
The cost control spreadsheet is formed by a number of spreadsheets
Ø Estimate
Ø Report
Ø Workstructure
Ø Accounts
Ø Work Orders
Ø Material Requisitions
Ø Contracts
The principal worksheet is "Workstructure". Generally all information is collected in this worksheet from worksheets "Work Orders", "Accounts", "Contracts". The "Report" worksheet is a summary of the information in the "Workstructure". It is not possible to prepare a generic cost control template with all the links prepared, therefore modification is required to make each cost control spreadsheet applicable to the project. See below for details.
The "Workstructure" worksheet is divided into separate sections for each account. Each section has an area for the detailing of information relating to Work Orders, Contracts and Material Requisitions. It also has a single line item for the detailing of direct charges to the account not already detailed by the other categories.
2.1 Setup - Accounts
The approved CAR is made up of a number of accounts with corresponding budgets. This information is detailed in the Budget Book or CAR documentation. Each account must be recorded in the "Accounts" worksheet.
In addition to the entering of the account details, three "links" should be provided for each account, as follows.
Ø Sum of indirect costs
Ø Direct costs
Ø Error message for Account total
2.2 Setup - Work Orders
Generally at the beginning of a Capital Project, Work Orders (W/O's) are limited to the two opened to collect Engineering and Project Services costs. Each W/O must be recorded in the "Work Orders" worksheet.
In addition to the entering of the W/O details, a "link" should be provided from the Expenditure column in the "Workstructure" to the total value of the corresponding W/O in the "Work Orders" worksheet.
The W/O description and the number should be entered into the appropriate columns of the "Workstructure". It is important that the W/O details are recorded against the correct account number in the "Workstructure" worksheet.
All future W/O's opened, should be setup in the same manner.
2.3 Setup – Material Requisistions
Generally at the beginning of a Capital Project, Material Requisition's (MR's) will be limited to "inquiries" only. Each MR must be recorded in the "Material Requisition" worksheet, even if it is only for inquiry, and given a single summary line in the "Workstructure" worksheet.
Generally it is desirable to charge all material requisitions direct to the account, and not via a Work Order. If materials are purchased via a Work Order, a separate item should not be provided in the "Workstructure" as the expenditure will already be captured by the Work Order. The Material Requisition details (commitment, freight and actual expenditure) should still however be recorded in the "Material Requisition" worksheet, to record delivery and payment status.
A "link" should be provided from the "commitment" column in the "Workstructure" worksheet to the commitment total of the corresponding MR in the "Material Requisitions" worksheet
A "link" should also be provided from the "expenditure" column in the "Workstructure" worksheet to the expenditure total of the corresponding MR in the "Material Requisitions" worksheet.
All future MR's issued, should be setup in the same manner.
2.4 Setup – Contracts
Generally at the beginning of a Capital Project, it is unlikely that any contracts have been issued. As a project proceeds, various contracts may be issued. Each Contract must be recorded in a separate "Contracts" worksheet. Unlike other methods or charging costs, a Contract may be setup to have multiple summary lines in the "Workstructure" worksheet. The possible variations for a contract and the specific set-up requirements are detailed below.
Type
Description
Setup Requirements
1 Contract charging directly to multiple Capital accounts.
Ø Set up separate worksheet for Contact, with multiple accounts.
Ø Record commitments for each account.
Ø Setup line items in "Workstructure" worksheet for each account with commitments.
Ø Identify each line item with the contract #
Ø Link commitment and expenditure totals in "Contract" worksheet to each respective line item in "Workstructure" worksheet.
2 Contract charging directly to single Capital account.
Ø Set up separate worksheet for Contact with single account.
Ø Record contract commitment.
Ø Setup line item in "Workstructure" worksheet for applicable account.
Ø Identify line item with the contract #
Ø Link commitment and expenditure totals in "Contract" worksheet to line item in "Workstructure" worksheet.
Generally at the beginning of a Capital Project, Work Orders (W/O's) are limited to the two opened to collect Engineering and Project Services costs. Each W/O must be recorded in the "Work Orders" worksheet.
In addition to the entering of the W/O details, a "link" should be provided from the Expenditure column in the "Workstructure" to the total value of the corresponding W/O in the "Work Orders" worksheet.
The W/O description and the number should be entered into the appropriate columns of the "Workstructure". It is important that the W/O details are recorded against the correct account number in the "Workstructure" worksheet.
All future W/O's opened, should be setup in the same manner.
2.3 Setup – Material Requisistions
Generally at the beginning of a Capital Project, Material Requisition's (MR's) will be limited to "inquiries" only. Each MR must be recorded in the "Material Requisition" worksheet, even if it is only for inquiry, and given a single summary line in the "Workstructure" worksheet.
Generally it is desirable to charge all material requisitions direct to the account, and not via a Work Order. If materials are purchased via a Work Order, a separate item should not be provided in the "Workstructure" as the expenditure will already be captured by the Work Order. The Material Requisition details (commitment, freight and actual expenditure) should still however be recorded in the "Material Requisition" worksheet, to record delivery and payment status.
A "link" should be provided from the "commitment" column in the "Workstructure" worksheet to the commitment total of the corresponding MR in the "Material Requisitions" worksheet
A "link" should also be provided from the "expenditure" column in the "Workstructure" worksheet to the expenditure total of the corresponding MR in the "Material Requisitions" worksheet.
All future MR's issued, should be setup in the same manner.
2.4 Setup – Contracts
Generally at the beginning of a Capital Project, it is unlikely that any contracts have been issued. As a project proceeds, various contracts may be issued. Each Contract must be recorded in a separate "Contracts" worksheet. Unlike other methods or charging costs, a Contract may be setup to have multiple summary lines in the "Workstructure" worksheet. The possible variations for a contract and the specific set-up requirements are detailed below.
Type
Description
Setup Requirements
1 Contract charging directly to multiple Capital accounts.
Ø Set up separate worksheet for Contact, with multiple accounts.
Ø Record commitments for each account.
Ø Setup line items in "Workstructure" worksheet for each account with commitments.
Ø Identify each line item with the contract #
Ø Link commitment and expenditure totals in "Contract" worksheet to each respective line item in "Workstructure" worksheet.
2 Contract charging directly to single Capital account.
Ø Set up separate worksheet for Contact with single account.
Ø Record contract commitment.
Ø Setup line item in "Workstructure" worksheet for applicable account.
Ø Identify line item with the contract #
Ø Link commitment and expenditure totals in "Contract" worksheet to line item in "Workstructure" worksheet.
Type
Description
Setup Requirements
3 Contract charging to multiple accounts via multiple Work Orders. (Note – This option is not recommended)
Ø Set up separate worksheet for Contact with single account.
Ø Record contract commitments.
Ø Setup line item in "Workstructure" worksheet for applicable account.
Ø Identify line items with the Contract #, and Work Order # (same line)
Ø Link commitment and expenditure totals in "Contract" worksheet to each respective line item in "Workstructure" worksheet. Note – The Work Orders are not linked to the "Work structure" worksheet. The W/Os should only be used to confirm the expenditure value is equal or lees than the value recorded in the Contracts worksheet.
4 Contract charging via Work Order to a single Capital account. (Note – It is important that the Work Order is only for contract payments, and does not collect miscellaneous costs that are not identified in the "Contract" worksheet)
Ø Set up separate worksheet for Contact with single account.
Ø Record contract commitment.
Ø Setup line item in "Workstructure" worksheet for applicable account.
Ø Identify line item with the Contract #, and Work Order # (same line)
Ø Link commitment and expenditure totals in "Contract" worksheet to line item in "Workstructure" worksheet. Note – The Work Order is not linked to the "Work structure" worksheet. The W/O should only be used to confirm the expenditure value is equal or lees than the value recorded in the Contracts worksheet.
The method of cost control used for contracts will depend on the method of pricing and billing requirements detailed in the contract. The project Cost Controller should confirm with the Project Manager the method to be used for recording contract costs.
3.0 Cost Control Spreadsheet - Commitments
The key to the successfulness of the cost control system is to ensure that all project commitments are accurately recorded. Commitments can be in the form of the following.
Ø Work Order estimated value or reallocation value, in the case of a reallocation work order.
Ø Accepted contract price
Ø Contract instruction or variation
Ø Field work instruction
Ø Material requisition (for purchase only)
Ø Etc
It should be noted that the commitment value for a line item can never be less than the expenditure value, and never greater than the forecast ie. Forecast value > Commitment value > Expenditure value.
3.1 Commitments - Accounts
The commitment of costs charging directly to accounts is difficult to identify and manage, unless it is via a contract or material requisition. Generally however, these costs tend to be minor and do not impact significantly on the accuracy of the cost control system. Commitment of costs should therefore be maintained and monitored based on actual expenditure. Any major expenditures should be investigated and identified.
3.2 Commitments – Work Orders
The commitment value of a of Work Order should be defined as the estimated value of the Work Order or the Quoted Value (for reallocation Work Orders). The commitment value of a Work Order should be entered directly into the "Workstructure" worksheet.
The Project Manager should be advised when the Work Order expenditure value exceeds the commitment value. ie. the commitment value must be increased, and asked to confirm the new commitment value to be used.
The commitment value of a work order should be reduced to match expenditure value when the Work Order has been closed or finalised. This will also allow the forecast value to be reduced accordingly.
3.3 Commitments – Material Requistions
The commitment value of a of Material Requisition is defined in the "Material Requisition" worksheet, and is a combination of the quotation value and an estimate of the freight costs. The commitment value total from the "Material Requisition" worksheet should be linked to the corresponding line item in the "Workstructure" worksheet.
As materials are supplied and the actual costs identified, the commitment cost (purchase and freight) should be adjusted to show actual costs. Following supply of all materials under the MR, the commitment cost and actual costs should be the same. Significant variation between actual and committed cost should be investigated to determine the cause of the variance.
3.4 Commitments – Contracts
The specific requirements related to commitment of cost for contracts will depend on the method of cost control adopted. In all cases however, the "Contracts" worksheet identifies the commitments and this should be linked to the commitment column in the "Workstructure" worksheet. Subsequent changes to the contract eg. Field work Instructions (FWI's), Contract Instructions, etc, are added as commitments in the "Contracts" worksheet. As this is linked to the commitment column in the "Workstructure" worksheet, the total value is automatically updated.
4.0 Cost Control Spreadsheet - Expenditure
The cost control spreadsheet summarises expenditure as recorded in MIMS. MIMS records the expenditure details, therefore the cost control system only needs to record a summary of the cost. If further information is required, this can be established from the details in MIMS.
MIMS appears to have two levels of expenditure – "Posted" and "Non Posted". "Posted" is the final level of transaction and "Non Posted" is an interim level. Some items are entered as "Non Posted", and require approval before the transaction is recorded as "Posted". It also appears that some summaries limit totals to "Posted" and others to both. This is generally not a problem, however it can sometimes result in an imbalance in totals, when two independent totals are being compared.
Expenditure should be updated at least once every week.
4.1 Expenditure - Accounts
The MIMSVu report ????? provides a summary of monthly expenditure for each account of the project defined. The Cost Controller should run this report and update the expenditure value for the current month, for each account in the "Account" worksheet. These are linked the "Workstructure" worksheet, so the total values are automatically updated.
Previous month totals should not require adjustment, however the Cost Controller should confirm each account total is matches the totals recorded in the cost control system. If the totals do not match, the Cost Controller should review previous months to establish if any changes have occurred. This can occur if a previously Non Posted item has been Posted.
4.2 Expenditure – Work Orders
The MIMSVu report ????? provides a summary of monthly expenditure for each Work Order of the project defined. The Cost Controller should run this report and update the expenditure value for the current month, for each W/O in the "Work Order" worksheet. Each W/O is linked the "Workstructure" worksheet, so the total value is automatically updated.
4.3 Expenditure – Material Requistions
The MIMSVu report ????? provides a summary of items received for each MR of the project defined. The Cost Controller should run this report and update the expenditure value, and freight cost, for each MR in the "Material Requisition" worksheet.
In addition to updating the expenditure, the Cost Controller should amend the commitment value to match the expenditure value. Any major variation between the commitment value and the expenditure value should be investigated before the changes are made.
Each MR is linked the "Workstructure" worksheet, so the total values (expenditure and commitment) are automatically updated.
4.4 Expenditure – Contracts
Contract expenditures are the only expenditures that are recorded in the Cost Control system before the cost is recorded in MIMS. These are based on each contract invoice, and are recorded as part of the invoice routing procedure. As part of the invoice approval routing system, the Cost Controller should enter the invoiced value corresponding to the commitment item. Some items will have several progress claims and each claim should be detailed separately, with details of the invoice period.
The commitment value should not be adjusted without the prior consent and knowledge of the Project Manager. The Cost Controller should advise the Project Manager if the total value invoiced exceeds the commitment value. The Project Manger is required to resolve the issue.
5.0 Cost Control Spreadsheet – Forecast Costs
The Project Manager is responsible to update the project forecast costs. On completion of the updating of commitment and expenditure information, the Cost Controller should supply the Project Manager with a copy of the "Workstructure" worksheet, and request review and adjustment of the forecast expenditures for each line item.
The information supplied by the Project Manager should be transferred to the Cost Control spreadsheet by the Cost Controller.
6.0 Cost Control Spreadsheet – Error Messages
The cost control spreadsheet has been set up with a number of "error" messages if information detailed does not match the certain criteria. These are detailed on the right side of the "Workstructure" worksheet. There should be no error messages for active accounts. All error messages should be reviewed and resolved by the Cost Controller. All error messages must be eliminated before the report can be issued as current and correct.
1. "Expenditure greater than Commitment" – the commitment value must be greater than the expenditure value.
Possible causes :-
Work Orders
a) The estimated value of the Work Order has been exceeded. The Project Manager should advise the new commitment value to be used.
Material Requisitions
a) The commitment value has not been updated to reflect actual cost (purchase and freight). Significant variations should be investigated before the commitment value is adjusted.
Note – the commitment values should be rounded up to nearest $ to ensure that commitment total is always slightly greater than the actual cost.
Contracts
a) The invoiced value exceeds the approved value.
b) Work has been invoiced without a corresponding commitment. eg. Contract Instruction or FWI not issued to Cost controller for commitment.
Note – The Project Manager should be advised of these issues before the invoice is approved for payment.
2. "Commitment greater than Forecast" – the forecast value must be greater than the commitment value.
The Project Manager shall advise new forecast values to be used.
3. "Budget does not match approved value" – the sum of all the budget values in the budget column does not match the approved total budget value for that account.
Review totals and with respect to approved budget for the column and identify location of error.
Description
Setup Requirements
3 Contract charging to multiple accounts via multiple Work Orders. (Note – This option is not recommended)
Ø Set up separate worksheet for Contact with single account.
Ø Record contract commitments.
Ø Setup line item in "Workstructure" worksheet for applicable account.
Ø Identify line items with the Contract #, and Work Order # (same line)
Ø Link commitment and expenditure totals in "Contract" worksheet to each respective line item in "Workstructure" worksheet. Note – The Work Orders are not linked to the "Work structure" worksheet. The W/Os should only be used to confirm the expenditure value is equal or lees than the value recorded in the Contracts worksheet.
4 Contract charging via Work Order to a single Capital account. (Note – It is important that the Work Order is only for contract payments, and does not collect miscellaneous costs that are not identified in the "Contract" worksheet)
Ø Set up separate worksheet for Contact with single account.
Ø Record contract commitment.
Ø Setup line item in "Workstructure" worksheet for applicable account.
Ø Identify line item with the Contract #, and Work Order # (same line)
Ø Link commitment and expenditure totals in "Contract" worksheet to line item in "Workstructure" worksheet. Note – The Work Order is not linked to the "Work structure" worksheet. The W/O should only be used to confirm the expenditure value is equal or lees than the value recorded in the Contracts worksheet.
The method of cost control used for contracts will depend on the method of pricing and billing requirements detailed in the contract. The project Cost Controller should confirm with the Project Manager the method to be used for recording contract costs.
3.0 Cost Control Spreadsheet - Commitments
The key to the successfulness of the cost control system is to ensure that all project commitments are accurately recorded. Commitments can be in the form of the following.
Ø Work Order estimated value or reallocation value, in the case of a reallocation work order.
Ø Accepted contract price
Ø Contract instruction or variation
Ø Field work instruction
Ø Material requisition (for purchase only)
Ø Etc
It should be noted that the commitment value for a line item can never be less than the expenditure value, and never greater than the forecast ie. Forecast value > Commitment value > Expenditure value.
3.1 Commitments - Accounts
The commitment of costs charging directly to accounts is difficult to identify and manage, unless it is via a contract or material requisition. Generally however, these costs tend to be minor and do not impact significantly on the accuracy of the cost control system. Commitment of costs should therefore be maintained and monitored based on actual expenditure. Any major expenditures should be investigated and identified.
3.2 Commitments – Work Orders
The commitment value of a of Work Order should be defined as the estimated value of the Work Order or the Quoted Value (for reallocation Work Orders). The commitment value of a Work Order should be entered directly into the "Workstructure" worksheet.
The Project Manager should be advised when the Work Order expenditure value exceeds the commitment value. ie. the commitment value must be increased, and asked to confirm the new commitment value to be used.
The commitment value of a work order should be reduced to match expenditure value when the Work Order has been closed or finalised. This will also allow the forecast value to be reduced accordingly.
3.3 Commitments – Material Requistions
The commitment value of a of Material Requisition is defined in the "Material Requisition" worksheet, and is a combination of the quotation value and an estimate of the freight costs. The commitment value total from the "Material Requisition" worksheet should be linked to the corresponding line item in the "Workstructure" worksheet.
As materials are supplied and the actual costs identified, the commitment cost (purchase and freight) should be adjusted to show actual costs. Following supply of all materials under the MR, the commitment cost and actual costs should be the same. Significant variation between actual and committed cost should be investigated to determine the cause of the variance.
3.4 Commitments – Contracts
The specific requirements related to commitment of cost for contracts will depend on the method of cost control adopted. In all cases however, the "Contracts" worksheet identifies the commitments and this should be linked to the commitment column in the "Workstructure" worksheet. Subsequent changes to the contract eg. Field work Instructions (FWI's), Contract Instructions, etc, are added as commitments in the "Contracts" worksheet. As this is linked to the commitment column in the "Workstructure" worksheet, the total value is automatically updated.
4.0 Cost Control Spreadsheet - Expenditure
The cost control spreadsheet summarises expenditure as recorded in MIMS. MIMS records the expenditure details, therefore the cost control system only needs to record a summary of the cost. If further information is required, this can be established from the details in MIMS.
MIMS appears to have two levels of expenditure – "Posted" and "Non Posted". "Posted" is the final level of transaction and "Non Posted" is an interim level. Some items are entered as "Non Posted", and require approval before the transaction is recorded as "Posted". It also appears that some summaries limit totals to "Posted" and others to both. This is generally not a problem, however it can sometimes result in an imbalance in totals, when two independent totals are being compared.
Expenditure should be updated at least once every week.
4.1 Expenditure - Accounts
The MIMSVu report ????? provides a summary of monthly expenditure for each account of the project defined. The Cost Controller should run this report and update the expenditure value for the current month, for each account in the "Account" worksheet. These are linked the "Workstructure" worksheet, so the total values are automatically updated.
Previous month totals should not require adjustment, however the Cost Controller should confirm each account total is matches the totals recorded in the cost control system. If the totals do not match, the Cost Controller should review previous months to establish if any changes have occurred. This can occur if a previously Non Posted item has been Posted.
4.2 Expenditure – Work Orders
The MIMSVu report ????? provides a summary of monthly expenditure for each Work Order of the project defined. The Cost Controller should run this report and update the expenditure value for the current month, for each W/O in the "Work Order" worksheet. Each W/O is linked the "Workstructure" worksheet, so the total value is automatically updated.
4.3 Expenditure – Material Requistions
The MIMSVu report ????? provides a summary of items received for each MR of the project defined. The Cost Controller should run this report and update the expenditure value, and freight cost, for each MR in the "Material Requisition" worksheet.
In addition to updating the expenditure, the Cost Controller should amend the commitment value to match the expenditure value. Any major variation between the commitment value and the expenditure value should be investigated before the changes are made.
Each MR is linked the "Workstructure" worksheet, so the total values (expenditure and commitment) are automatically updated.
4.4 Expenditure – Contracts
Contract expenditures are the only expenditures that are recorded in the Cost Control system before the cost is recorded in MIMS. These are based on each contract invoice, and are recorded as part of the invoice routing procedure. As part of the invoice approval routing system, the Cost Controller should enter the invoiced value corresponding to the commitment item. Some items will have several progress claims and each claim should be detailed separately, with details of the invoice period.
The commitment value should not be adjusted without the prior consent and knowledge of the Project Manager. The Cost Controller should advise the Project Manager if the total value invoiced exceeds the commitment value. The Project Manger is required to resolve the issue.
5.0 Cost Control Spreadsheet – Forecast Costs
The Project Manager is responsible to update the project forecast costs. On completion of the updating of commitment and expenditure information, the Cost Controller should supply the Project Manager with a copy of the "Workstructure" worksheet, and request review and adjustment of the forecast expenditures for each line item.
The information supplied by the Project Manager should be transferred to the Cost Control spreadsheet by the Cost Controller.
6.0 Cost Control Spreadsheet – Error Messages
The cost control spreadsheet has been set up with a number of "error" messages if information detailed does not match the certain criteria. These are detailed on the right side of the "Workstructure" worksheet. There should be no error messages for active accounts. All error messages should be reviewed and resolved by the Cost Controller. All error messages must be eliminated before the report can be issued as current and correct.
1. "Expenditure greater than Commitment" – the commitment value must be greater than the expenditure value.
Possible causes :-
Work Orders
a) The estimated value of the Work Order has been exceeded. The Project Manager should advise the new commitment value to be used.
Material Requisitions
a) The commitment value has not been updated to reflect actual cost (purchase and freight). Significant variations should be investigated before the commitment value is adjusted.
Note – the commitment values should be rounded up to nearest $ to ensure that commitment total is always slightly greater than the actual cost.
Contracts
a) The invoiced value exceeds the approved value.
b) Work has been invoiced without a corresponding commitment. eg. Contract Instruction or FWI not issued to Cost controller for commitment.
Note – The Project Manager should be advised of these issues before the invoice is approved for payment.
2. "Commitment greater than Forecast" – the forecast value must be greater than the commitment value.
The Project Manager shall advise new forecast values to be used.
3. "Budget does not match approved value" – the sum of all the budget values in the budget column does not match the approved total budget value for that account.
Review totals and with respect to approved budget for the column and identify location of error.