X

Insights and best practices for construction management technology and project delivery

Still Looking Backward to Forecast Construction Project Costs? Look Ahead for a Clearer Picture

Frank Malangone
Senior Director, Product and Industry Strategy

Cost analysis is a core component of every construction and engineering project. It is also one of the most frustrating. Understanding cost is critical to evaluating the true state of a project.

A fundamental disconnect

Most project control solutions provide a point-in-time snapshot; in other words, a backward-looking view that can hide the true status of the project. Project schedules and plans, conversely, look to the future.

This fundamental disconnect ultimately precludes project management teams from reaping the full value of cost analysis, the forward-looking forecast. Think of it this way: Project owners and managers cannot adapt if they never see a problem coming.

Cost analysis is traditionally viewed across two independent dimensions:

•    Cost categories: What is budgeted and actually spent in specific categories, such as material, labor, equipment, etc.?
•    Time: When are costs budgeted to be incurred, and how does that map to how they are really being incurred and will be incurred?

To gain a more accurate picture of costs, both at present and project completion, project managers must integrate these dimensions to enable time-phased cost, cash-flow projections, and, if desired, earned value.

Integrating cost, scheduling, and project controls

Achieving this goal, however, requires integration between cost, scheduling, and project control functions. Integration enables teams to accurately forecast, understanding the cost of work performed and milestones reached to date and how that will factor into future spend.

Understanding cost versus budget

This multi-dimensional perspective helps project managers understand cost versus budget across time by synching the budgeted cost curve with the incoming cost, and the forward-looking forecast predicting the overall project financial performance.

_____________________________________________________________________________________________________

The ability to accurately forecast cost remains elusive for many organizations due to the siloed nature of their financial, planning, and project control systems.

_____________________________________________________________________________________________________

Integrating data from financial, planning, and project controls

Oracle Construction and Engineering solutions help project managers to definitively bridge that gap by integrating data from these three sources—financial, planning, and project controls—and delivering powerful forecasting capabilities.

Our solutions enable time-phased analysis that allows users to determine key performance indicators for the current period, to-date, and to completion.

Users are empowered to answer definitively the age-old questions of:

•    How are we performing in the current reporting period and to-date?
•    What risks are ahead?
•    Where will we end up?

____________________________________________________________________________________________________

Forecasting also needs to be tailored to specific projects and organizations, because one size does not fit all. Oracle solutions offer flexibility to mix and match methodologies within the same project.

____________________________________________________________________________________________________

When evaluating cost analysis capabilities, consider the following:   

•    How well connected is your cost control system with your project schedule and your project costing system?
•    How flexible is your cost breakdown system? Does it align with how you do business and change when it is needed?
•    Can you align project period data with your financial period data?

The most important question, however, is: Can I accurately predict (and, thereby, avoid or mitigate) future obstacles and potholes? If the answer to this question is no, you need to consider the root cause for this inability and correct it for the health of your organization.

Breaking down the barriers

Construction and engineering projects are complex. Understanding the true, and complete cost is essential to project success and profitability. In the quest for insight, project managers must break down the barriers between their financial, planning, and project control environments.

Oracle Construction and Engineering solutions bridges this gap to deliver an unobstructed view into the past and new levels of clarity for the future.  

Learn more about our unique approach to cost analysis by visiting here.

Explore how you can deliver project success with Oracle Construction and Engineering.

Related posts:

Be the first to comment

Comments ( 0 )
Please enter your name.Please provide a valid email address.Please enter a comment.CAPTCHA challenge response provided was incorrect. Please try again.