Bridging the cost schedule divide - integrating primavera and cost systems white paper

COLLABORATE 12 Copyright ©2012 by Javier Sloninsky Page 1
Bridging the Cost/Schedule Divide: Integrating Primavera and Cost Systems
Javier Sloninsky
EcoSys
Introduction
For large projects (with budgets of hundreds of millions of dollars or more), dedicated cost control resources are
assigned to track project costs and performance and ideally prescribe corrective action when a project veers off
course according to either schedule or cost. For projects smaller in scale, a dedicated resource may not be
assigned but the cost control function must be implemented to drive successful outcomes.
The majority of organizations have the foundation in place for performing project controls - scheduling and cost
data. Oracle Primavera P6 is a critical tool to manage schedules and the myriad of details that drive project
success. However, despite the capabilities of P6, organizations often struggle to reconcile project data with costs,
commitments, and available resources. Attempting to manage both schedule and cost data within P6 forces
compromises that limit the strengths of the system. Even when managing schedule and cost separately, cost data
from ERP systems don’t truly align with the scheduling data from P6. As a result, those responsible for controlling
projects and driving success are left in a great divide between these two diverse data sets. While the next logical
step is to get more value from your project/program management controls to produce predictable and repeatable
program performance outcomes, this has traditionally been difficult to achieve due in large part to the data divide.
A key objective should be increasing an organization’s level of consistency and competency through
standardization, integration and automation of systems and processes – made possible by bridging the
cost/schedule divide. The implementation of a “best practice” cost controls system enforces process
standardization and increases the effectiveness of program personnel because they have procedures and tools to
reduce effort required to collect and enter data, reconcile data and produce reports. Its automation capabilities
will improve the timeliness and quality of data. Ultimately, this translates into better profit margins on projects
because of efficiency gains. That, in turn, can enable contractors to produce more competitive proposals and
create competitive advantage for winning new business.
A “best practice” cost controls system also creates perceptual improvements to project management.
Management teams and customers will have confidence in the system and the ability to meet project objectives
on time and within budget. It can also result in higher customer satisfaction because they are confident in your
ability to effectively manage the work – they want to do business with you because you can execute and deliver.
In the following sections, we will discuss the challenges currently facing cost controls practitioners, followed by the
components of “best practice” cost controls systems. Then, using recent case studies, we highlight how companies
create a single end-to-end process that manages costs, funds, budgets, forecasts, commitments, and earned value
via a secure enterprise database. The “best practices” solution integrates data which form the basis for powerful
project controls – performance measurement, earned value management, advanced forecasting of project costs
and resources, and more. Primavera users and internal and external stakeholders can realize greater transparency
into long-term and near-term plans and performance. Specific benefits include:
• Real time visibility into forecasts and spending performance with transactional drilldown
• Confidence in data by elimination of spreadsheets, formula errors, and manual processes for budgeting,
forecasting, and reporting
• Time savings by automating previously manual data collection tasks, freeing resources for performance
and trend analysis

What causes the cost/schedule divide?
Disparate Systems
The most obvious hurdle is that the project lifecycle is typically handled by different, independent systems that do
not share information. An organization may have invested in good project scheduling techniques and tools like
Primavera, but they work independent of cost. Commitments may originate in a financial system or be stored in a
contract management system, but the ability to automatically track how commitments compare against budgets
and forecasts is missing. Departmental budgeting exists independently from project budgets.
Disparate Philosophies
Compounding the issue of separate systems is the different philosophical approach to each data type. P6 is a
dynamic activity-driven system ideal for the fluidity of managing schedules. By contrast, cost forecasts require
greater structure and control. To manage costs in P6 requires activities to reflect every single cost on the project,
and this is not appropriate for things like overheads, G&A, maintenance contracts, certain ODC costs, etc. As
activities are easily changed or deleted, the cost data associated with them can be lost or corrupted. To attempt
this approach of managing costs is to forfeit the strengths of Primavera in lieu of an artificial activity structure.
This is also difficult and time consuming to maintain in practice. Effective management of costs requires, instead, a
transaction-based system ideal for building and reconciling budgets, as well as development of “what if” scenarios,
cash flow, and forecasts.
Excel doesn’t excel
More often than not, all roads then lead to Excel. This practice seems an easy and expedient solution: manually
extract data from the disparate systems and compile the necessary information in Excel. However, problems
emerge with this approach.
In order to create the necessary reports, data undergoes so many manipulations that mistakes are often made.
This often results in a lack of confidence in the data and undermines the credibility of cost controls personnel with
other departments like Finance.
Different spreadsheets are created to track budgets, forecasts and costs for each individual project. It is hard to
track changes; incorrect formulas become buried in spreadsheets; summary spreadsheets provide no direct access
to the data that informs the numbers. Status quo operating procedure is to manage multiple spreadsheets to
determine where projects stand. With a lack of version control and auditability, navigating the maze of
spreadsheets is often contingent upon the knowledge of a select few (or even one individual).
Stemming from the fractured systems landscape and reliance upon Excel, the necessary data for everything from
generating updated forecasts to variance analysis is compiled manually. The reality of this process is a lot of
painful, manual number crunching to simply generate reports, leaving little time to actually perform analysis and
improve performance.
Being unable to resolve these challenges negatively impacts cost, productivity and the value of the data itself.
Organizations are left with:
• Teams of people consolidating data in spreadsheets
• Double entry of data
• Spreadsheet errors
• Performance reports available too late to address issues
• Problems with version control – no change history; hard to identify what is the right spreadsheet.
The results of an internal survey conducted by an EcoSys customer illustrate these points. A new project controls
manager joined the organization and wanted to assess the current capability for efficiently managing cost controls.

A detailed analysis on where cost analysts/cost controllers spent their time revealed that 61% of time was spent on
“wasteful” activities, e.g. fixing information, correcting codes, compiling reports and manually downloading
information to be populated into reports (Figure 1). Only one-third of time remained for real cost controls and
monitoring of status and progress, with very little time for actual forecasting, scenario analysis or devising
alternatives.
By contrast, the cost analyst target utilization (Figure 2) which would be achieved by implementing a “best
practices” cost controls system provides for greater value added activities. 65% of time would be spent on analysis
of data, with the remaining time allocated for more sophisticated scenario analysis, (i.e. trends, predicting results,
and prescribing corrective action). Relatively little time would be necessary for running automated reports.
Figure 1 – Cost Analyst Actual Time Spent
Figure 2 – Cost Analyst Target Utilization
Successful “Best Practice” Cost Controls Systems
A successful cost controls system will incorporate these properties that address the challenges that organizations
face:

Centralized repository for all project costs
Here, data can be viewed and edited if necessary. However, the goal is to get past individual files being circulated
through an organization, and the difficulty in getting a picture of all budgets and forecasts for relevant projects.
Establish a “single version of the truth.” Leverage the best sources of available data to get true picture of cost
controls situation for each project and program.
Standardized cost control structures with project-specific flexibility
Where it makes sense, create standards that cut across projects disciplines, accounts, resources, etc. Use the
standards across projects for consistency (e.g. cost accounts, cost codes, work breakdown structures), however
you must acknowledge that projects are unique and require flexibility. Begin with standards and then get into very
specific methods of tracking costs. Of course, large scale projects costing millions to billions of dollars may dictate
their own processes.
It is a balance between flexibility and business rule enforcement. It is best to codify project and organizational
structures whether for reporting, organizing work, costs or organizational responsibility. However, the system
should allow for unlimited breakdown structures. The best solutions easily allow you to spin structure of
information into a new view based upon customer requirements that may differ from internal need. Additionally,
tailoring of terminology to fit with industry and organization norms is an important component of system
flexibility.
At the same time, data must be available to reconcile against the general ledger, and therefore the ability to map
to Finance’s coding scheme is essential. Also, why not take advantage of what planners are doing with schedules
and resource loading, and use that data to compare against cost forecasts and identify variance? Standardized
structures aid in these endeavors.
Single integrated process and system throughout the project lifecycle
Organizations must evolve from individual systems performing a slice of cost management (often very well), to a
singular system driving the entire project cost management lifecycle, encompassing long-range planning to
detailed budgeting and forecasting. A single system can deliver a holistic view, pulling together data and
comparing them side-by-side, outside of traditional silos. Otherwise, patterns are missed. The full lifecycle (Figure
3) encompasses:
• Capital Planning – long range and big picture, here we forecast funding needs and make decisions on
funding allocation
• Budgeting and forecasting – From a project controls perspective, an organization should be able to very
quickly generate project budgets, forecasts and compare them. This spans department and cost center
budgets, workforce planning resource forecasts and tying these to detailed project budgets and forecasts.
• Commitments – delivering visibility into commitments versus planned
• Change Management – Establishing a change workflow process, given the need to understand how
budgets and forecasts evolve over time. Change orders must be tracked carefully and once approved,
track back to view the impact on budgets and forecasts.
• Actuals & Closeouts – forming agreement with finance, this covers payments, cash flow and invoices
received. Actuals must be compared against all controllers’ planning work and reconciled.
• Performance Reporting and Earned Value – The system should provide the ability to analyze in a variety of
ways including historical snapshots, trends, and variances.

Figure 3 – Full Lifecycle Project Controls
Integrated, automated and timely data
Hand-in-hand with the integrated process throughout the project lifecycle is the need to integrate data via
software to eliminate the majority of the manual data processing that costs time and accuracy. When possible, the
cost controls platform will leverage existing solutions already in place, pulling scheduling or actuals data from the
project management software or general ledger (Figure 4).
This integration blends information in an automated, repeatable way paving the way for faster, more efficient and
accurate planning, budgeting, forecasting, and reporting. Further, by automating this data exchange, the system
should version and lock data for confidence and to understand how it changes over time.
Figure 4 – Integrating Data from multiple systems for Project Cost Controls

Easy to use software
The software being used for cost controls should be tailored for the organization. Each will work their own way
and use specific terminology across industries. Further, the software should be optimized for each role within
organization, driving users straight to those important tasks without wading through irrelevant information.
When dealing with cost, the software should provide web-based, Excel-like spreadsheets, providing both the
familiarity and flexibility to drive user adoption. This provides a flexible environment for planning, budgeting and
forecasting, and provides the ability to develop templates from trusted, long-used “offline” processes and
spreadsheets as a starting point. The system will enforce rules important for data integrity, but be familiar to end-
users.
Scalable for large enterprises and capital programs
While small projects are easier to manage and Excel may be an acceptable solution, multi-billion dollar programs
or organizations with multiple business units will need a more robust solution. The cost controls platform should
handle high volumes of data, and be scalable to support enterprise or organizational perspectives.
Powerful Reporting
Reporting is the heart of cost controls and a system must provide a powerful reporting mechanism to analysts to
be worthwhile. Reports should easily output to a variety of formats (for use by contractors, customers, or for
internal consumption). Non-technical (Non-IT, non-programmer) end users should be able to easily create their
own reporting. Reporting will provide visibility into costs by Work Breakdown Structure (WBS)/work package and
Cost Breakdown Structure (CBS)/cost category and look at projects and costs according to terms used in Project
Management and Project Controls, not just from the perspective of finance (although that is needed as well).
Reporting capabilities should also go beyond tracking actual costs and perform time-phased forecasting based on
past performance, generate cash-flow estimates and perform predictive analysis. This will be more accurate and
help prevent surprises.
Standardized project performance measures
Each organization has its own flavors of metrics for measuring performance and productivity (earned value, key
performance indicators, milestones). They can be tailored for a specific job, project type, but they should be
standardized to allow for consistent comparison. Standards will, however, need to change as an organization’s
maturity changes. The system should allow for this evolution.
Dynamic re-planning and analysis from different perspectives
As the cost controls function takes on a greater role in organizations, value will be delivered by presenting
different alternatives and ways to respond very quickly to changes on the ground. The system must easily allow
for “what-if” scenario analysis and showing how changes impact the overall project.
Top down, long range for capital/organization planning
When looking beyond one project at a time, and looking at how we plan across an organization, ties to annual
budgeting are essential, and need to account for both top-down and long-range.
Bottom up, rich, transactional data for projects
You need very rich information within your cost controls platform to provide the answers you’re looking for --
granular data to generate costs from quantities and hours spent; accounting for multiple ways to calculate rates,
prices, and currencies.

Blend Finance, cost, schedule and risk perspectives
This is where many current systems fail in delivering good cost reporting. Stakeholders have different needs.
Finance has a perspective from the general ledger, Fiscal years, and accounting rules. Project Cost Controls is not
finance & accounting, but Finance needs to see credibility in Cost Control reporting. The system must also tie into
schedules and risk. Project Management is great at planning, scheduling & resourcing but struggles to put more
financial and costing data into those perspectives. Best practices platforms tie these together.
Role-Based Dashboards
To provide the most relevant information for a particular type of user (cost controller, finance manager,
organization executive), a customizable dashboard provides the best access to information with the opportunity to
drill-down to deeper levels of detail as desired.
Audit Trail
In moving away from the freeform world of Excel, an audit trail within your cost controls system is essential from
tracking all changes that are made such as who logged in/ran which report or how financial or cost info has
changed. This provides an added level of security and confidence in the data being used for critical decision
making.
Case Studies
The following organizations provide examples of project cost controls success through the implementation of best
practices cost controls systems.
Babcock & Wilcox
B&W is a nuclear power generation and operations company. Recently, they have led the development of
modular nuclear reactors that give utilities (investor owned or public) options in how to build new nuclear power
plants – from 100 to 1000 MW – in a much more cost effective and efficient manner than in the past. A key
differentiator is their ability to provide customers a level of cost and schedule certainty about building the modular
reactors per project. As a result, it was critical for B&W to measure cost and schedule accurately (and safely) but
as quickly as possible.
The company had standardized on Oracle Primavera P6 and SAP’s Enterprise Resource Planning (ERP) financial
system. Their goal was not just to integrate these two systems, but also to create a centralized platform for
reporting and cost controls.

Figure 5 – Systems Integration
Figure 5 describes how the integrated system was created, with EcoSys EPC as the software that bridged their two
other systems. Actuals from SAP and schedule and progress data from P6 were used to generate earned value (EV)
metrics and dashboards and forecast metrics in an automated way. The system would provide both internal and
client reporting and deliver very detailed EV metrics – both periodic (specific project) and cumulatively lifecycle of
the entire program. EV summaries and forecasts in very specific way (combined SPI and CPI metrics) were created
that allowed for drill down into any variances.
Technip
Technip is a global oil & gas contractor headquartered in Paris, France. Following a successful deployment of their
cost controls solution in North America in 2010, they implemented it as their standard cost controls solution
globally in 2011.
Technip’s focus was on setting good standards for Budgets, Forecasts, Change Management, and Managing
Commitments. They standardized reporting for internal status reviews, client reporting, and Joint Venture
reporting. Engaging in many global projects, they introduced multi-currency forecasting analysis based on spot
and fixed rates. They were also able to achieve visibility across multiple projects through divisions.
Technip could look at different budget versions side-by-side according to different aspects of the cost breakdown
structure (CBS). They could also compare revenues against cost forecasts to perform gross margin analysis and
track multiple currencies with project-specific exchange rates.
They pulled data into EcoSys EPC from Oracle P6, as well as financial information from Oracle and IFS, different
ERPs used in different geographies.
Technip presented a “value add” to their customers by showing a sophistication in project cost controls. An
additional benefit to the company was the addition of some interchangeability in their cost analysts. Previously,
their analysts were experts at upstream or downstream projects, but couldn’t be easily switched from project to
project because knowledge was in their head and nowhere else. In the creation of a standard system including
well documented, automated processes, it became easier to move resources to areas of need driven by economic
cycles or corporate strategy.

Conclusion
A well-formed cost controls process and system is essential for delivering the best project performance inclusive of
delivering on-time and on-budget. Most organizations rely on immature or ad-hoc methodologies that ultimately
rely on Excel for planning budgets, tracking costs and other cost control functions. While flexible, this loose
process costs time in the creation of reports and makes it difficult to prescribe corrective actions in a timely
manner.
By implementing a more structured, standardized cost controls process that includes integrating P6 with other
systems, automated reporting and flexibility for project-specific requirements, an organization can dramatically
increase the productivity of its cost controls staff and ultimately provide better information to take corrective
action for projects in the short-run, and for decision making by management in the long-run.

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