Procedure

for
Cost Control
 Table of Contents

1. Purpose
2. General
3. Responsibilities
4. Procedure
5. Flowchart
6. References
7. Attachments
1. Purpose
To establish a system whereby developments which affect the
costs of the project are timely reported, thereby allowing for
corrective action when adverse trends are detected, and to
inform about funding requirements for the execution of the
project.
To establish a procedure to control flow of information which
affects anticipated final project cost.
This procedure shall be used in combination with the "Procedure
for Project Variations" [1], the "Planning Procedure" [2] and the
"Procedure for the Project execution Control system" [3].
2. General
At project start, generally a high level budget is available and in
many cases underlaying details about estimated costs are also
available. These documents, however, are in most cases not
adequate for effective cost control. Therefore, this procedure
requires that in an early stage of the project a control budget is
prepared, based on the available information and within the
boundaries of the high level (AS SOLD) budget.
Cost control within Company generally consists of the following
categories:
- Company Services (reimbursable Engineering, Procurement ,
Construction Management and outside services) also client cost
reporting.
- The investment cost reporting which includes all costs within the
scope of the project (e.g. direct supplied materials, subcontracts,
services including Company's services etc.).
- Company internal cost report which is limited to Company's
services, including non reimbursable costs.
The requirement for the first two categories largely depends on
the scope of work for the project and the contract type.
Regardless of the scope of work and the contract type, internal
cost reporting will always be required.
The cost reports shall as a minimum contain the following
information:
- Original budget.
- Current budget, being the sum of the original budget and the
approved change orders.
- Commitments to date.
- Anticipated final, being the sum of the current budget, pending
change orders and approved deviations from plan.
Approved change notices which have not yet been converted into
change orders are excluded from the anticipated final. They are
reported in a change Order Register, which is part of the cost
report.
Cost forecasts shall be made regularly through sampling, trend
analysis and bottoms up estimates to complete. Deviations from
plan shall be made where cost forecasts at cost report line item
level deviate from the current anticipated final.
2.1 Company Services
2.1.1 The Company services cost report includes manhours and
costs of manhours, computer application, reproduction,
communication, travel, outside services etc. The structure of the
report has to be defined at the start of the project. Requirements
for reporting in the client's code of account and grouping by
client's work packages have to be carefully examined to
determine the level of detail at which the costs are controlled.
2.1.2 In general the level at which costs are controlled should be
of sufficient detail to allow for consolidation in both Company's
project cost codes and the combination of client defined work
packages and code of accounts. The selected level of detail must
allow for reliable progress reporting in combination with reporting
of the expended manhours as required for trend analysis. Too
much detail generally results in reduced quality and is a waste of
effort.
2.1.3 An "end of project breakdown" should be considered when
the client requires to know the project cost in more detail than the
level at which effective cost control is done.
2.1.4 To ease time phased budgeting and forecasting at
discipline level, the cost control system should follow the work
breakdown structure of the planning and project execution
Control (PEC) system.
2.1.5 Based on the available information (budget, progress,
actuals, schedule etc.), the cost engineer makes a forecast on
final manhours and costs and reviews this forecast with the
parties involved. For line items where the forecast deviates from
the anticipated final a deviation of Plan is prepared. Only
deviations approved by the project manager are included in the
cost report.
2.2 Investment Cost
2.2.1 The Investment cost Report includes costs of Company's
services at a consolidated level, direct supplied materials,
subcontracts and any other costs which fall within the cost control
scope. The structure of the report has to be defined at the start of
the project. Requirements for reporting in the client's code of
account and grouping by client's work packages have to be
carefully examined to determine the level of detail at which the
cost details are maintained.
2.2.2 In general, the level at which the cost details are
maintained should be of sufficient detail, to allow for consolidation
in both Company's cost codes and the combination of client
defined work packages and code of accounts. The selected level
of detail must allow realistic allocation of commitments and
development of forecasted finals. Too much detail generally
results in reduced quality and is a waste of effort.
2.2.3 An "asset breakdown" at the end of the project should be
considered when the client requires to know the project cost in
more detail, than the level at which effective cost control is done.
2.2.4 To ease the development of commitment & expenditure
curves, the investment cost control system and the planning
system are preferably integrated to the extend that scheduled
and actual dates for commitments can be obtained from the
planning system at budget line item level. Therefore, the
investment cost control structure should largely follow the work
breakdown structure of the planning and project execution control
(PEC) system.
2.2.5 The design development allowances (DDA) for outstanding
commitments are to be reviewed periodically and shall be
reduced over time when it becomes more certain that there are
no further developments expected (e.g. vendor documents
approved, inspection reports received etc.). Grouping DDA for
budget line items of the same account group into one DDA line
item for that group, rather than including a DDA for each line
item, is recommended. The cost report should show the value of
the DDA or a back up report should be available.
 2.2.6 For main equipment and for bulk materials the cost code is
at least at requisition level. For subcontracts, the cost code is for
small subcontracts at subcontract level and for larger
subcontracts (e.g. mechanical subcontract) the cost code is at
main category (pay item) level.
2.3 Internal Cost Report
2.3.1 The internal cost report shall be limited to Company's
scope of work and will include for reimbursable type contracts the
non reimbursable costs. The level of detail for the internal cost
report shall be established at project start, taking internal
reporting requirements, such as the current cost outlook (CCO),
the monthly project status report (MPSR) and executive summary
report (ESR), into account.
2.4 Cost Engineering Scope Document
2.4.1 At job start the cost engineer issues the "cost engineering
scope" which contains at a minimum the following information:

 Scope of "work" to be covered by the project cost engineer.

 Cost engineering deliverables, together with their frequency and
timing.
 Report layouts and level of detail.
 Project reporting period cut off dates.
 Cost engineering staffing plan and cost engineering manhours.
 Computer programs and methods to be used.
 Anticipated involvement of estimating for the preparation of bottoms
up estimates to complete and for the development of the control
budget.
 Planned dates for the first issue of the control budgets.
 Distribution schedules.
 Currency exchange rates and reporting currency.

3. Responsibilities
3.1 Each project team member shall immediately respond when
their input is required for reporting physical progress and to
determine the anticipated finals as required for the cost report
preparation and shall work towards minimizing the duration for
execution of this procedure.
3.2 The Project Manager is Responsible for:
- Providing the cost engineer with information about the cost
engineering scope of work, specific client and project
requirements, "AS SOLD" budget and any underlaying estimate
details and any other information required by the cost engineer to
prepare the cost engineering scope document and the control
budget(s).
- Approving the cost engineering scope, control budget(s),
deviation from plans and cost reports(s).
3.3 Lead Discipline Engineers are Responsible for:
- Updating of material quantity forecasts after key engineering
documents have been issued and for timely reporting of changes,
in writing ("change alert"), to the project manager.
- Providing monthly updates on the physical progress of their
discipline(s) and to review together with the project cost Engineer
the manhour forecast.
3.4 The Cost Engineer is Responsible for:
- Maintaining the cost control system and for the timely
preparation of the Period cost Reports.
- Expediting the Lead Discipline Engineers to ensure that they
provide their timely input as required for cost control.
- Comparison of vendor and subcontractor quotations with the
control budget and underlaying detailed estimate and for
detection of unit rate trends based on quotation and purchase
order/subcontract unit rates.
- Development and maintenance of planned and actual
commitment versus expenditure reports from which the planned
and actual cost Progress Curves are generated.
3.5 The project buyer/subcontract engineer is responsible for
timely input to the cost engineer of vendor quotations and
purchase order/ subcontract Unit Rates.
3.6 The project Accountant is responsible for informing the
project cost Engineer about actual expenditures, currency
exchange costs and invoice status.
4. Procedure
4.1 Company Services
4.1.1 Provide Cost Engineer with the Required Information:
At the project start, the project manager provides the cost
engineer with information about the cost engineering scope of
work, specific client and project requirements, "AS SOLD" budget,
any underlaying estimate details and any other information
required by the cost engineer to prepare the cost engineering
scope document and the control budget(s).
4.1.2 Prepare Cost Engineering Scope Document
The cost engineer prepares a document which lists the project
requirements with respect to cost engineering and other relevant
information as mentioned under item 2.4.1.
4.1.3 Approved by Project Manager
The approved cost engineering scope document shall be the basis
for the work of the cost engineer for the remainder of the project.
4.1.4 Develop Control Budget(s) for Company Services
The project cost engineer converts with, when required, the
support of the estimating department the detailed estimate into a
control budget. The cost details are consolidated and amended as
required at a control level. The control level shall be at sufficient
detail to allow for meaningful control and shall allow for timely
and cost effective trending, progress measurement and collection
of actual costs. A general consensus with all parties involved
about the work breakdown structure should exist prior to the
actual conversion takes place.
4.1.5 Approved by Project Manager
The project Manager shall approve the control budget which than
becomes the "original budget" of the project.
4.1.6 Approved Change Order
Adjustments of the budget require an approved change order
once the control budget has been approved. Details of each
Approved change order are recorded separately at control budget
level, thereby maintaining a complete back-up of the approved
changes. The approved change orders together with the "original
budget" form the "current budget".
4.1.7 Company Services Expended Costs & Manhours and Invoice
Status
Following the monthly cut off, the project accountant shall provide
the cost engineer with information about all expended manhours,
manhours costs and other costs of Company services. Preferably
at control budget line item level, or at a more detailed level which
allows for consolidation at control budget line item level. For
reimbursable type projects, the project accountant shall not only
provide internal costs, but also the costs to the client at the same
level of detail. The project accountant shall inform the cost
engineer in detail about any delayed cost bookings or provisional
bookings. Furthermore, the project accountant provides the
invoice status information as required for the executive summary
report.
4.1.8 Physical Progress at Control Budget Level
Following the monthly cut off, the planning engineer provides the
cost engineer with physical progress information (percentage
complete) at control budget line item level for engineering and
subcontract work. The progress information must have been
reviewed with the disciplines involved prior to passing it on to the
cost engineer. It is preferred that the engineering physical
progress is obtained from the "project execution control" system
(PEC).
4.1.9 Cost Forecast
Byanalyzing the available information about budget, actuals and
physical progress and using historical data, the cost engineer
makes a forecast about the final project costs at budget line item
level. When there are indications of major deviations from the
current anticipated finals, a bottoms up detailed estimate to
complete might be required to generate a reliable forecast.
Towards the end of the project the forecast should be based on
"punch list" items to be completed. The cost engineer shall review
these forecasts with the disciplines involved.
4.1.10 Approved Deviation from Plan
The cost engineer prepares a deviation from plan for budget line
items which forecasted costs deviate from the current anticipated
finals and for which the project manager expects that
management action will not result in maintaining the current
anticipated finals.
4.1.11 Update Anticipated Finals
The cost engineer updates the current anticipated finals only
based on approved deviations from plan, approved change orders
and pending change orders for which the client has already
approved the change notice.
4.1.12 Investment and Company Services Cost Report(s), Project
Cost Report and Cost Narratives
The cost engineer prepares following the period (monthly) cut off
the Company services cost reports (internal and client reports)
and the investment cost report, taking the latest information into
account. The combined reports, together with the commitment
versus expenditure report, the currency conversion table and any
other reports or curves that are required for the project from the
project cost report. Together with the report, the cost engineer
provides a narrative which describes the period highlights.
Furthermore, the narratives should include major developments
which have come to light during the last period, but for which
time did not allow for the preparation of a deviation from Plan.
These late developments are to be included in accordance with
the procedure in the next cost report.
4.1.13 Approved by Project Manager and Cost Reports Issued.
The project manager approves the project cost report after which
it is distributed by the cost Engineer in accordance with the
distribution schedule as defined in the cost engineering scope.
4.2 Investment Cost
4.2.1 Develop Control Budget for Investment Cost.
The project cost engineer converts with, when required, the
support of the Estimating department the detailed estimate into a
control budget. The cost details are consolidated and amended as
required at a control level. The control level shall be at sufficient
detail to allow for meaningful control and shall allow for timely
and cost effective trending, allocation of commitments and
assessment of estimates to complete. A general consensus with
all parties involved about the work breakdown structure should
exist prior to issuing the control budget for approval to the project
manager.
4.2.2 Approved by Project Manager.
The project Manager shall approve the control budget which than
becomes the "original budget" of the project.
4.2.3 Approved Change Order, Update Current Budget and
Anticipated Finals
Adjustments of the budget require an approved change order
once the control budget has been approved. Details of each
approved change Order are recorded separately at control budget
line item level, thereby maintaining a complete back-up of the
approved changes. The approved change orders together with the
"original budget" form the "current budget". The anticipated finals
are updated to reflect the effect of the change order. Note that
the anticipated finals may already have been updated at the time
that the change order was issued for approval.
4.2.4 Purchase Order/Subcontract Placed
Purchase Order and subcontract details at control budget level
shall be made available for the cost engineer by the project buyer
and the subcontracts manager. In particular information about
options and other relevant information which will influence the
final commitments is to be highlighted.
4.2.5 Update Commitment versus Expenditure Report and
Forecast Final
The cost Engineer shall regularly update the commitments versus
expenditure report with purchase order and subcontract details.
Furthermore, the project cost engineer shall evaluate the forecast
finals to reflect the effect of the commitments. A design
development allowance for outstanding commitments has to be
included in the forecast finals at the time of commitment and
subsequently reduced over time.

4.2.6 Issue of Key Engineering Documents

The lead discipline engineer shall review the material quantity
requirements when key engineering documents (e.g. P&ID's,
equipment summary sheets, MTO's, requisitions) are issued to
determine whether forecasts require to be updated. Generally it
will not be required to have documents which cover the complete
scope of work. Comparing samples with the detailed estimate will
generally be an adequate basis to determine trends in material
and installation requirements.
4.2.7 Revised Quantity Forecast/Prepare Change Alert
The lead discipline engineer prepares a change alert and issues it
to the project manager when he determines the need to revise
the current material and/or installation requirement forecast.
4.2.8 Vendor Quotations/Purchase Order Unit Rates
The project cost engineer shall compare the unit rates obtained
from vendor quotations and purchase orders with the unit rates in
the detailed estimate.
4.2.9 Revised Unit Rates/Prepare Change Alert
The project cost engineer shall prepare a change alert and issue it
to the project manager when he determines the need to change
the current forecast finals as a result of change in the unit rates.
4.2.10 Approved by Project Manager - Approved Deviation from
Plan
Upon approval of the change Alert by the project manager, the
cost engineer prepares a deviation from plan which reflects the
changed unit rates or the changed material and/or installation
requirements. This deviation from plan is approved by the project
manager prior to incorporating it into the cost report.
4.2.11 Invoice Paid? Update Commitments Versus Expenditure
Report.
The cost engineer updates the commitment versus expenditure
report with the expended amounts. Furthermore, the cost
engineer ensures that any design development allowances for the
corresponding budget line item is removed from the cost forecast
when final payments have been made. All parties involved, in
particular, the project manager, the construction manager, the
project buyer and the subcontracts manager, shall inform the cost
engineer about (potential) claims or other costs for which the cost
engineer might have to make reservations.
4.2.12 Cost Forecast
By analyzing the available information about budget,
commitments and forecasts to complete and using historical data,
the cost engineer makes a forecast about the final project costs at
budget line item level. When there are indications of major
deviations from the current anticipated finals, a bottoms up
detailed estimate to complete might be required to generate a
reliable forecast. Towards the end of the project the forecast
should be based on "punch list" items to be completed. The cost
engineer shall review these forecasts with the disciplines
involved.
4.2.13 Deviation form Anticipated Final?
The cost engineer prepares a deviation from plan for budget line
items which forecasted cost deviate from the current anticipated
finals and for which the project manager expects that
management action will not result in maintaining the current
anticipated finals.
4.2.14 Continuation
The Investment cost section of this procedure joins the Company
services section at item 4.1.12.
5. Flowchart
The Cost Control Flowchart consist of the following interlinked
sections:
6. References
 Document Number Description
6.1 CM-PE-313 Control of Project Variations 2
6.2 CM-PE-910 Planning Procedure 2
Procedure for the Project Execution
6.3
Control System (Later)
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1. You are here:
2. Home
3. General Procedures
4. CM-PE-900 Procedure for Cost Control

CM-PE-900 Procedure
for Cost Control
Last Updated: 03 September 2013

Table of Contents

1. Purpose
2. General
3. Responsibilities
4. Procedure
5. Flowchart
6. References
7. Attachments

1. Purpose
To establish a system whereby developments which affect the
costs of the project are timely reported, thereby allowing for
corrective action when adverse trends are detected, and to
inform about funding requirements for the execution of the
project.
To establish a procedure to control flow of information which
affects anticipated final project cost.
This procedure shall be used in combination with the "Procedure
for Project Variations" [1], the "Planning Procedure" [2] and the
"Procedure for the Project execution Control system" [3].
2. General
At project start, generally a high level budget is available and in
many cases underlaying details about estimated costs are also
available. These documents, however, are in most cases not
adequate for effective cost control. Therefore, this procedure
requires that in an early stage of the project a control budget is
prepared, based on the available information and within the
boundaries of the high level (AS SOLD) budget.
Cost control within Company generally consists of the following
categories:
- Company Services (reimbursable Engineering, Procurement ,
Construction Management and outside services) also client cost
reporting.
- The investment cost reporting which includes all costs within the
scope of the project (e.g. direct supplied materials, subcontracts,
services including Company's services etc.).
- Company internal cost report which is limited to Company's
services, including non reimbursable costs.
The requirement for the first two categories largely depends on
the scope of work for the project and the contract type.
Regardless of the scope of work and the contract type, internal
cost reporting will always be required.
The cost reports shall as a minimum contain the following
information:
- Original budget.
- Current budget, being the sum of the original budget and the
approved change orders.
- Commitments to date.
- Anticipated final, being the sum of the current budget, pending
change orders and approved deviations from plan.
Approved change notices which have not yet been converted into
change orders are excluded from the anticipated final. They are
reported in a change Order Register, which is part of the cost
report.
Cost forecasts shall be made regularly through sampling, trend
analysis and bottoms up estimates to complete. Deviations from
plan shall be made where cost forecasts at cost report line item
level deviate from the current anticipated final.
2.1 Company Services
2.1.1 The Company services cost report includes manhours and
costs of manhours, computer application, reproduction,
communication, travel, outside services etc. The structure of the
report has to be defined at the start of the project. Requirements
for reporting in the client's code of account and grouping by
client's work packages have to be carefully examined to
determine the level of detail at which the costs are controlled.
2.1.2 In general the level at which costs are controlled should be
of sufficient detail to allow for consolidation in both Company's
project cost codes and the combination of client defined work
packages and code of accounts. The selected level of detail must
allow for reliable progress reporting in combination with reporting
of the expended manhours as required for trend analysis. Too
much detail generally results in reduced quality and is a waste of
effort.
2.1.3 An "end of project breakdown" should be considered when
the client requires to know the project cost in more detail than the
level at which effective cost control is done.
2.1.4 To ease time phased budgeting and forecasting at
discipline level, the cost control system should follow the work
breakdown structure of the planning and project execution
Control (PEC) system.
2.1.5 Based on the available information (budget, progress,
actuals, schedule etc.), the cost engineer makes a forecast on
final manhours and costs and reviews this forecast with the
parties involved. For line items where the forecast deviates from
the anticipated final a deviation of Plan is prepared. Only
deviations approved by the project manager are included in the
cost report.
2.2 Investment Cost
2.2.1 The Investment cost Report includes costs of Company's
services at a consolidated level, direct supplied materials,
subcontracts and any other costs which fall within the cost control
scope. The structure of the report has to be defined at the start of
the project. Requirements for reporting in the client's code of
account and grouping by client's work packages have to be
carefully examined to determine the level of detail at which the
cost details are maintained.
2.2.2 In general, the level at which the cost details are
maintained should be of sufficient detail, to allow for consolidation
in both Company's cost codes and the combination of client
defined work packages and code of accounts. The selected level
of detail must allow realistic allocation of commitments and
development of forecasted finals. Too much detail generally
results in reduced quality and is a waste of effort.
2.2.3 An "asset breakdown" at the end of the project should be
considered when the client requires to know the project cost in
more detail, than the level at which effective cost control is done.
2.2.4 To ease the development of commitment & expenditure
curves, the investment cost control system and the planning
system are preferably integrated to the extend that scheduled
and actual dates for commitments can be obtained from the
planning system at budget line item level. Therefore, the
investment cost control structure should largely follow the work
breakdown structure of the planning and project execution control
(PEC) system.
2.2.5 The design development allowances (DDA) for outstanding
commitments are to be reviewed periodically and shall be
reduced over time when it becomes more certain that there are
no further developments expected (e.g. vendor documents
approved, inspection reports received etc.). Grouping DDA for
budget line items of the same account group into one DDA line
item for that group, rather than including a DDA for each line
item, is recommended. The cost report should show the value of
the DDA or a back up report should be available.
2.2.6 For main equipment and for bulk materials the cost code is
at least at requisition level. For subcontracts, the cost code is for
small subcontracts at subcontract level and for larger
subcontracts (e.g. mechanical subcontract) the cost code is at
main category (pay item) level.
2.3 Internal Cost Report
2.3.1 The internal cost report shall be limited to Company's
scope of work and will include for reimbursable type contracts the
non reimbursable costs. The level of detail for the internal cost
report shall be established at project start, taking internal
reporting requirements, such as the current cost outlook (CCO),
the monthly project status report (MPSR) and executive summary
report (ESR), into account.
 2.4 Cost Engineering Scope Document
2.4.1 At job start the cost engineer issues the "cost engineering
scope" which contains at a minimum the following information:

 Scope of "work" to be covered by the project cost engineer.

 Cost engineering deliverables, together with their frequency and
timing.
 Report layouts and level of detail.
 Project reporting period cut off dates.
 Cost engineering staffing plan and cost engineering manhours.
 Computer programs and methods to be used.
 Anticipated involvement of estimating for the preparation of bottoms
up estimates to complete and for the development of the control
budget.
 Planned dates for the first issue of the control budgets.
 Distribution schedules.
 Currency exchange rates and reporting currency.

3. Responsibilities
3.1 Each project team member shall immediately respond when
their input is required for reporting physical progress and to
determine the anticipated finals as required for the cost report
preparation and shall work towards minimizing the duration for
execution of this procedure.
3.2 The Project Manager is Responsible for:
- Providing the cost engineer with information about the cost
engineering scope of work, specific client and project
requirements, "AS SOLD" budget and any underlaying estimate
details and any other information required by the cost engineer to
prepare the cost engineering scope document and the control
budget(s).
- Approving the cost engineering scope, control budget(s),
deviation from plans and cost reports(s).
3.3 Lead Discipline Engineers are Responsible for:
- Updating of material quantity forecasts after key engineering
documents have been issued and for timely reporting of changes,
in writing ("change alert"), to the project manager.
- Providing monthly updates on the physical progress of their
discipline(s) and to review together with the project cost Engineer
the manhour forecast.
3.4 The Cost Engineer is Responsible for:
- Maintaining the cost control system and for the timely
preparation of the Period cost Reports.
- Expediting the Lead Discipline Engineers to ensure that they
provide their timely input as required for cost control.
- Comparison of vendor and subcontractor quotations with the
control budget and underlaying detailed estimate and for
detection of unit rate trends based on quotation and purchase
order/subcontract unit rates.
- Development and maintenance of planned and actual
commitment versus expenditure reports from which the planned
and actual cost Progress Curves are generated.
3.5 The project buyer/subcontract engineer is responsible for
timely input to the cost engineer of vendor quotations and
purchase order/ subcontract Unit Rates.
3.6 The project Accountant is responsible for informing the
project cost Engineer about actual expenditures, currency
exchange costs and invoice status.
4. Procedure
4.1 Company Services
4.1.1 Provide Cost Engineer with the Required Information:
At the project start, the project manager provides the cost
engineer with information about the cost engineering scope of
work, specific client and project requirements, "AS SOLD" budget,
any underlaying estimate details and any other information
required by the cost engineer to prepare the cost engineering
scope document and the control budget(s).
4.1.2 Prepare Cost Engineering Scope Document
The cost engineer prepares a document which lists the project
requirements with respect to cost engineering and other relevant
information as mentioned under item 2.4.1.
4.1.3 Approved by Project Manager
The approved cost engineering scope document shall be the basis
for the work of the cost engineer for the remainder of the project.
4.1.4 Develop Control Budget(s) for Company Services
The project cost engineer converts with, when required, the
support of the estimating department the detailed estimate into a
control budget. The cost details are consolidated and amended as
required at a control level. The control level shall be at sufficient
detail to allow for meaningful control and shall allow for timely
and cost effective trending, progress measurement and collection
of actual costs. A general consensus with all parties involved
about the work breakdown structure should exist prior to the
actual conversion takes place.
4.1.5 Approved by Project Manager
The project Manager shall approve the control budget which than
becomes the "original budget" of the project.
4.1.6 Approved Change Order
Adjustments of the budget require an approved change order
once the control budget has been approved. Details of each
Approved change order are recorded separately at control budget
level, thereby maintaining a complete back-up of the approved
changes. The approved change orders together with the "original
budget" form the "current budget".
4.1.7 Company Services Expended Costs & Manhours and Invoice
Status
Following the monthly cut off, the project accountant shall provide
the cost engineer with information about all expended manhours,
manhours costs and other costs of Company services. Preferably
at control budget line item level, or at a more detailed level which
allows for consolidation at control budget line item level. For
reimbursable type projects, the project accountant shall not only
provide internal costs, but also the costs to the client at the same
level of detail. The project accountant shall inform the cost
engineer in detail about any delayed cost bookings or provisional
bookings. Furthermore, the project accountant provides the
invoice status information as required for the executive summary
report.
4.1.8 Physical Progress at Control Budget Level
Following the monthly cut off, the planning engineer provides the
cost engineer with physical progress information (percentage
complete) at control budget line item level for engineering and
subcontract work. The progress information must have been
reviewed with the disciplines involved prior to passing it on to the
cost engineer. It is preferred that the engineering physical
progress is obtained from the "project execution control" system
(PEC).
4.1.9 Cost Forecast
Byanalyzing the available information about budget, actuals and
physical progress and using historical data, the cost engineer
makes a forecast about the final project costs at budget line item
level. When there are indications of major deviations from the
current anticipated finals, a bottoms up detailed estimate to
complete might be required to generate a reliable forecast.
Towards the end of the project the forecast should be based on
"punch list" items to be completed. The cost engineer shall review
these forecasts with the disciplines involved.
4.1.10 Approved Deviation from Plan
The cost engineer prepares a deviation from plan for budget line
items which forecasted costs deviate from the current anticipated
finals and for which the project manager expects that
management action will not result in maintaining the current
anticipated finals.
4.1.11 Update Anticipated Finals
The cost engineer updates the current anticipated finals only
based on approved deviations from plan, approved change orders
and pending change orders for which the client has already
approved the change notice.
4.1.12 Investment and Company Services Cost Report(s), Project
Cost Report and Cost Narratives
The cost engineer prepares following the period (monthly) cut off
the Company services cost reports (internal and client reports)
and the investment cost report, taking the latest information into
account. The combined reports, together with the commitment
versus expenditure report, the currency conversion table and any
other reports or curves that are required for the project from the
project cost report. Together with the report, the cost engineer
provides a narrative which describes the period highlights.
Furthermore, the narratives should include major developments
which have come to light during the last period, but for which
time did not allow for the preparation of a deviation from Plan.
These late developments are to be included in accordance with
the procedure in the next cost report.
4.1.13 Approved by Project Manager and Cost Reports Issued.
The project manager approves the project cost report after which
it is distributed by the cost Engineer in accordance with the
distribution schedule as defined in the cost engineering scope.
4.2 Investment Cost
4.2.1 Develop Control Budget for Investment Cost.
The project cost engineer converts with, when required, the
support of the Estimating department the detailed estimate into a
control budget. The cost details are consolidated and amended as
required at a control level. The control level shall be at sufficient
detail to allow for meaningful control and shall allow for timely
and cost effective trending, allocation of commitments and
assessment of estimates to complete. A general consensus with
all parties involved about the work breakdown structure should
exist prior to issuing the control budget for approval to the project
manager.
4.2.2 Approved by Project Manager.
The project Manager shall approve the control budget which than
becomes the "original budget" of the project.
4.2.3 Approved Change Order, Update Current Budget and
Anticipated Finals
Adjustments of the budget require an approved change order
once the control budget has been approved. Details of each
approved change Order are recorded separately at control budget
line item level, thereby maintaining a complete back-up of the
approved changes. The approved change orders together with the
"original budget" form the "current budget". The anticipated finals
are updated to reflect the effect of the change order. Note that
the anticipated finals may already have been updated at the time
that the change order was issued for approval.
4.2.4 Purchase Order/Subcontract Placed
Purchase Order and subcontract details at control budget level
shall be made available for the cost engineer by the project buyer
and the subcontracts manager. In particular information about
options and other relevant information which will influence the
final commitments is to be highlighted.
4.2.5 Update Commitment versus Expenditure Report and
Forecast Final
The cost Engineer shall regularly update the commitments versus
expenditure report with purchase order and subcontract details.
Furthermore, the project cost engineer shall evaluate the forecast
finals to reflect the effect of the commitments. A design
development allowance for outstanding commitments has to be
included in the forecast finals at the time of commitment and
subsequently reduced over time.

4.2.6 Issue of Key Engineering Documents

The lead discipline engineer shall review the material quantity
requirements when key engineering documents (e.g. P&ID's,
equipment summary sheets, MTO's, requisitions) are issued to
determine whether forecasts require to be updated. Generally it
will not be required to have documents which cover the complete
scope of work. Comparing samples with the detailed estimate will
generally be an adequate basis to determine trends in material
and installation requirements.
4.2.7 Revised Quantity Forecast/Prepare Change Alert
The lead discipline engineer prepares a change alert and issues it
to the project manager when he determines the need to revise
the current material and/or installation requirement forecast.
4.2.8 Vendor Quotations/Purchase Order Unit Rates
The project cost engineer shall compare the unit rates obtained
from vendor quotations and purchase orders with the unit rates in
the detailed estimate.
4.2.9 Revised Unit Rates/Prepare Change Alert
The project cost engineer shall prepare a change alert and issue it
to the project manager when he determines the need to change
the current forecast finals as a result of change in the unit rates.
4.2.10 Approved by Project Manager - Approved Deviation from
Plan
Upon approval of the change Alert by the project manager, the
cost engineer prepares a deviation from plan which reflects the
changed unit rates or the changed material and/or installation
requirements. This deviation from plan is approved by the project
manager prior to incorporating it into the cost report.
4.2.11 Invoice Paid? Update Commitments Versus Expenditure
Report.
The cost engineer updates the commitment versus expenditure
report with the expended amounts. Furthermore, the cost
engineer ensures that any design development allowances for the
corresponding budget line item is removed from the cost forecast
when final payments have been made. All parties involved, in
particular, the project manager, the construction manager, the
project buyer and the subcontracts manager, shall inform the cost
engineer about (potential) claims or other costs for which the cost
engineer might have to make reservations.
4.2.12 Cost Forecast
By analyzing the available information about budget,
commitments and forecasts to complete and using historical data,
the cost engineer makes a forecast about the final project costs at
budget line item level. When there are indications of major
deviations from the current anticipated finals, a bottoms up
detailed estimate to complete might be required to generate a
reliable forecast. Towards the end of the project the forecast
should be based on "punch list" items to be completed. The cost
engineer shall review these forecasts with the disciplines
involved.
4.2.13 Deviation form Anticipated Final?
The cost engineer prepares a deviation from plan for budget line
items which forecasted cost deviate from the current anticipated
finals and for which the project manager expects that
management action will not result in maintaining the current
anticipated finals.
4.2.14 Continuation
The Investment cost section of this procedure joins the Company
services section at item 4.1.12.
5. Flowchart
The Cost Control Flowchart consist of the following interlinked
sections:
6. References
 Document Number Description
6.1 CM-PE-313 Control of Project Variations 2
6.2 CM-PE-910 Planning Procedure 2
Procedure for the Project Execution
6.3
Control System (Later)
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