Power of Integrated Cost & Schedule

Russ Stevens

Senior Solutions Consultant

Speaker Fun Facts

I live in Houston, Texas.

While I love where I
live, there are several
Deer Possum
friends and foes that
like to stop by. Some
causing more
commotion than
others!
Racoon Armadillo
AACE International

• Founded in 1956
• 7,000 members across the globe
• ARES PRISM has supported
AACE for 20+ Years
• Recommended Practices sharing
industry knowledge
Agenda

• Problems to Solve
• Integrated Cost & Schedule
• Key Benefits
• Case Study
• Recommended Practices
Problems to Solve
Polls

• Simply select an option

• Completely anonymous
• No wrong answers!
• Interactive way to see what
our attendees are
experiencing
Polls

Question: What percentage of projects do you think meet their original

goals or business intent?
a) 80-90%
b) 70-80%
c) 60-70%
d) 50-60%
The Problem to Solve

*Met Original 62% Experienced Scope Creep 45%

Goals/Business Intent
Completed within 53% Failed Project’s 32%
Original Budget Budget Lost
Completed on Time 49% Deemed Failure 16%
*Source: The High Cost of Low Performance – PMI’s 8th Global Project Management Survey – 2016.

67% more projects fail when Only 31% of organizations

Average 11.4% investment organizations undervalue have integrated project
wasted due to poor project management for management reporting
performance (PMI, 2020) driving change (PMI, 2020) systems (KPMG, 2019)
How Often Does Your Organization Use These?
Always Often Sometimes Rarely Never

Project Performance Measures 29% 36% 24% 8% 3%

Risk Management Practices 28% 35% 24% 10% 3%

Change Management Practices 27% 37% 24% 9% 3%

Program Management 25% 37% 23% 10% 6%

Resource Management 25% 38% 23% 10% 4%

Internal/Proprietary Methodologies 24% 38% 21% 8% 9%

Project Portfolio Management 21% 33% 25% 12% 9%

Earned Value Management 12% 21% 24% 22% 21%

*Source: The High Cost of Low Performance – PMI’s 8th Global Project Management Survey – 2016.
Integrated Cost & Schedule
Polls

Question: Do you know the difference between a cost-loaded schedule

and a time-phased budget?
a) Yes
b) No
c) Somewhat
d) Not sure
Cost Loaded Schedule Method
Involves the simultaneous development of a project estimate, using various estimating tools, and a project schedule
using the Critical Path Methodology. Some challenges are:

1. Loading of resources and estimated costs onto activities can be a tedious, manual process,
especially if the estimated costs have been developed using Excel.
2. Large effort required to translate the quantities, hours, and cost from the estimate to the
specific activities they represent
3. Matching the granularity of the schedule to the estimate. Estimators and schedulers work
at different levels of detail and it is not practical to force either discipline to adopt each
other’s approach.
4. Managing intangible and indirect costs like project management, freight, taxes, etc. for
which no activities exist in a schedule. These costs can represent up to 30% of a project’s
total cost.
5. Aligning and tracking multiple budgets (baseline, current, pending, accounting, and
funding). This is difficult to achieve on a schedule.
6. Handling changes to the costs (change requests, change orders etc.). Most scheduling
applications, including Primavera P6 and MS Project, do not provide a means to record
multiple change orders against activities. Instead, schedulers must edit the cost budgets
assigned to the activities.
7. Managing contingency, including drawdowns. This is not possible with a Cost-Loaded
Schedule.
Time-Phased Budget Method
This method enables the planning and tracking of the costs over time through a common control record. Rather than individually
assigning each estimated cost to specific activities, the control account allows for the roll-up of multiple activities and their associated
costs to a single record. Some benefits include:

1. Forming the basis for calculating Earned Value Management (EVM) metrics, which provide
the project performance status for cost and schedule.
2. Making maintenance of the schedule simpler by allowing it to focus on sequence and
timing of project execution.
3. Addressing changes to budgets and forecasts, while changes to the schedule are being
considered.
4. Managing performance of multiple budgets; approved and control budgets.

5. Addressing the issue of how indirect costs are time-phased.

6. Addressing the issue of time-phasing contingency.
7. Making changes in the cost forecasts easier.
8. Recording purchase order and contract committed costs from the financial systems.
9. Providing the ability to forecast costs based on earned value indices compared to only
using remaining budget to complete methods.
10. Applying different expenditure curves for different Time-Phased Budgets and forecast.
Polls

Question: Does your organization currently integrate its project cost,

estimating, and schedule data?
a) Yes
b) No
c) Somewhat
d) Not sure
Polls

Question: How is integration currently achieved?

a) Spreadsheets/Excel
b) In-house system
c) Project controls system
d) Ad-hoc at best
e) Not applicable
Integrating Cost & Schedule
Integrate cost and schedule to create a time-phased budget instead of a cost-loaded schedule

• Roll up and categorize relevant project metrics

• Shows an auditable and time phased decision process
• Manage budgets, track changes, and track trends
• Manage contingency
• See change and understand the overall enterprise
impact
• Forecast future expenditures and financial trends
• Report project progress based upon industry standard
earned value practices (Thank you AACE!)
• Flexible cost spreading based upon project function
Time-Phased Budget Method
A Time-Phased Budget is a budget that is not only defined in terms of magnitude but also indicates the planned
expenditure of that budget over time. The Time-Phased Budget method also begins with an estimate and a schedule,
but instead of incorporating one within the other, it uses “control accounts” to link them together.
Integrated Coding Structures

DEFINE SINGLE INTEGRATED

STRUCTURE
Cost & Progress
* Provides integration &
traceability from
Original Baseline
Estimate and our
operating Budget /Cost
data, which is then time
Estimate Schedule phased with the
Schedule start & finish
dates

Contracts
Creation of Integrated Coding Structure
Estimate Cost & Reporting Schedule Contracts

Estimate Activity Items

Cost Level 1
Level 1 Level 1
Level 1

Estimate Estimate Estimate Plan Plan Plan Items Items Items

Level 2 Level 2 Level 2 Cost Cost Cost Level 2 Level 2 Level 2
Level 2 Level 2 Level 2
Level 2 Level 2 Level 2

Estimate Estimate Estimate Plan Plan Plan Items Items Items

Cost Cost Cost Etc… Etc… Etc…
Etc… Etc… Etc… Etc… Etc… Etc…
Etc… Etc… Etc…

PRISM
Level 1

Identify Common PRISM Control

Integration Point PRISM PRISM PRISM Accounts
Level 2 Level 2 Level 2

PRISM PRISM
* Backbone of a Program
Etc… Etc…
Intelligent Control Account Coding
Control Account:
2CE-P043-C248-030-002 : C248 - Diaphragm Wall North

L01– Area :
2CE
2CE - Central
Masked Group Codes

L1 – Project :
P043
P043 – Portals & Shafts
Or Attributes

L2 – Contract :
C248 C248 – Pudding Mill Lane Contract

L3 – Activity Group:
C248-030 C248-030 – Cut & Cover Tunnel Sections

L4 – Activity :
C248-030-002 C248-030-002 : Diaphragm Wall North
Cost Schedule Integration
TOTAL CONTRACT VALUE

ARES PRISM

Program Plan (Schedule)

Time Phased Budget Baseline

21
Key Benefits
Key Benefits
Successful integration of Estimate, Schedule and Cost using proper PM procedures can lower project costs by 5-15%.
On a $1B program, savings can be $50-150 million!

• More accurate Reporting (and faster Period close)

• Real-time Project Feedback
• Faster Response to Project Issues
• Efficiency Improvements (e.g., fewer FTEs, faster communications across
controls teams)
• Improved Change Management & Accuracy of Change Orders
• Lower Project Risk (e.g., reduced exposure to claims)
• Better control of Cashflow
• Increased Time on Tools with better Field Management & Supply Chain
planning
Recommended Practices
ARES PRISM Meets AACE Recommended Practices

55R-09 Analyzing 86R-14 Variance Analysis & 82R-13 Earned Value Management
S-Curves Reporting
Questions & Answers
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