Cost ,cost control in opx2

Sobhan Kumar panigrahy

The dotted line down the middle represents the split between the past and the future costs and therefore between the actual costs and the planned costs that are taken into consideration in the cost calculation. The line in OPX2 Pro is called the end of the accounting period and in the most simple case, it is the current date, separating the past from the future in the same way as the current date does for progress. Because it is the date that defines the date from which the cost data is taken into consideration, it can be changed in OPX2 Pro from the current date to another date in order to model the way your company organizes its cost data. The part to the left of the line is considered to be the past, where the progress and cost of the activities are known. The cost up to this point is called the actual cost. In OPX2 the actual cost is modeled by the "actual' objects. The part to the right of the line is considered to be the future, where the progress and cost of the activities are not known and are estimated. The cost after this point up to the end of the project is called the estimate to complete. In OPX2 Pro the estimate to complete is modeled by the "planned" objects. These are the objects created first in the scheduling phase of the project to create the estimates for both the time the project will take and its costs. They are described in Project Scheduling and Cost Estimation.

When tracking the costs, planned objects that are to the left of the line, and therefore in the past, are not deleted because they represent a record of the hours and expenditures as they were originally planned, but their costs are no longer taken into consideration in the calculation. The estimation of the total cost of the project (the estimation at completion) can be calculated at any point in the project by adding the actual cost and the estimate to complete. At the start of the project, before the time has progressed, there is only planned data and only an estimate to complete. In this case, estimate at completion (EAC) = estimate to complete (ETC). At the end of the project, when all the activities have been completed, there only actual data is taken into consideration and there is only an actual cost. In this case, estimate at completion (EAC) = actual cost. An explanation of cost estimation and how this is calculated depending on your project structure, is given in Cost Estimation Details. This is information you will need to know before setting out the initial estimation for your project. The costs mentioned above are all calculated automatically by OPX2 Pro from the existing object data. There are more types of calculated costs available in OPX2 Pro, which can be used to analyze several different aspects of the cost data. These will be introduced in the course of the guide but are also focused on in types of costs.
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Creating Cost Accounts (Constructing the CBS) Cost accounts are scheduling objects that you can use to model different categories of costs. They can be defined and structured in a cost breakdown structure in any way you want in order to model, for example, the costs linked to departments in your company, costs linked to different sites in your company, or costs linked to specific customers. The definition of a CBS is not necessary. However, it provides you with a different perspective from which you can view and analyze your cost data. In fact, the cost breakdown structure is specifically designed to help you create a personalized approach to cost analysis. The way costs can be viewed and consolidated according to the objects in the breakdown structures is introduced in Cost Estimation Details. The CBS is displayed via the main toolbar in Conception mode. The cost accounts themselves have a Cost account attribute, specifying their parent in the breakdown structure. Once created, you can allocate planned hours (or summary lines) representing resource usage, resources, cost units and activities to cost accounts via the Cost account attribute of these objects. The costs for each linked object is then consolidated in the costs for the cost account, giving you another perspective to analyze the costs of your projects. The following procedure describes the basic attributes of cost accounts. The following sections concentrate on the other parts of the attribute sheet, on the cost account breakdown structure and on how costs are displayed according to which cost account they are allocated to.
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Creating a Cost Unit Breakdown Structure Once you have set up your resources, you will need to set up the units you will measure your costs in. These cost units will be the ones displayed in the charts and tables in OPX2 Pro. The cost units can be visualized in the cost unit breakdown structure. The cost unit breakdown structure can be as simple or as complicated as you wish. It can be made up of units representing currencies and/or units representing the cost of using a certain category of resource, for example, the hourly rate for an engineer, an assistant, and so on, or the daily rate for renting a machine. The quick start example is useful to illustrate these two ideas; it contains a simple example of both. Cost units are then allocated to resources and the resource is "valorized" as explained in Valorizing your Resources. This means that any time a resource is allocated to a task, the cost of the resource usage, in terms of your cost units, is calculated. Cost units are also used to specify the cost of an expenditure.

An Example Cost Breakdown Structure: The cost breakdown structure contains cost accounts, objects that enable you to consolidate the costs in a different way to the other breakdown structures. They can be created to represent any breakdown you want of the project costs, into costs for different departments, cost for different sites, different types of costs, and so on. In our example, we create a cost breakdown structure classified by the type of work carried out. This will enable our company to analyze, at the end of the year, for example, how much money was spent on research, manufacturing, and so on. The cost breakdown structure is created in the CBS common file.

This CBS is designed to have activities allocated to it, based on their nature. It is particularly designed for a multi-project scenario, because it is placed in a common file and will consolidate costs from several different projects. The level 2 cost accounts, INTERNAL and EXTERNAL enable us to split the cost further depending on whether the work was carried out by resources in the company of by external resources. Cost accounts can be created in a project file; however, this will not allow you the same power of consolidation as a cost breakdown structure in a common file.
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Cost units have other more advanced features that enable you to plan their values through time. For the moment, we will concentrate on getting familiar with how the cost unit breakdown structure works and how cost units are defined. These advanced features are explained in Advanced Cost Control Features. The cost unit breakdown structure has a very important function, which differs slightly from the others, because it defines the value of one cost unit in terms of another. The cost unit breakdown structure can be set up like the other breakdown structures. For example, you can create parent cost units describing the characteristics of its child units, in order to group different types of cost units. In our quick start example we have two cost units called CURRENCIES and RES_RATES, for example. All monetary units are grouped below CURRENCIES and all cost units that define a specified resource working rate are grouped below RES_RATES. However, the parent and child relationships define also the rate of exchange between the units; the child cost unit is worth X amount of its parent unit where X is defined by the Default value attribute. This is explained further in Conversion Rule. The following procedure introduces the basic attributes needed to define your cost units.

Cost Estimation Details When you create your resource usage and expenditures in OPX2 Pro, you always have the choice at which level in your WBS hierarchy you create them at. You could define them:

At the most detailed level, by specifying costs for each task

At a macroscopic level, for WBS elements higher up in the breakdown structure. Such costs are called blanket costs. A WBS element can therefore have both consolidated costs and blankets costs. Entering costs at the higher level is often referred to as the top down cost estimation method. It is useful to model costs for each WBS element in very long projects, as temporary cost estimation for WBS elements that will be planned in more detail later. Entering costs at the detailed level is often referred to as the bottom up estimation method. It is useful for cost visibility at all levels of the work breakdown structure and is the method that will return the most accurate cost data in the tracking phase.

Specifying the Cost Account for a Cost Unit For each cost unit, you are able to specify a default cost account. This is the default cost account in which all costs expressed in the selected cost unit are aggregated. However, the default cost account for a cost unit may be overridden individually for each cost expressed in the particular cost unit (expenditures, or planned hours of the resource). You are able to define the default cost account for a cost unit directly in the CBS, if required. To do this you specify that the cost units are displayed in the CBS, and then drag each cost unit to the required cost account as though it were its child object. Note: If you specify a default cost account for a cost unit then its child cost units will automatically be assigned the same default, with the exception of any child resources that have already been assigned another cost account.

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The actual cost (or ACWP), which is the total cost of the actual hours, the actual expenditures, and the expenditure commitments (if the parameter Take into account commitments in actual cost computation is selected) until the end of the accounting period. This figure is effectively the actual cost of work performed. The parameter mentioned above is found in Data > Parameters sets > Other parameters, under the grouping Cost computation.

The estimate to complete which is the estimation of the cost left to be incurred in order to accomplish an activity. This is the sum of any expenditures and costs associated with planned hours that are scheduled after the end of the accounting period. The estimate at completion (or EAC) that is the sum of the actual cost and the estimate to complete. The formula for calculating this is: EAC = S actual cost + S estimate to complete
Budget at completion: Estimate at completion of the budget reference. The planned value (or BCWS), which is the fraction of the budget that corresponds to the work that should have been carried out by the date in question, if everything had gone according to plan. This figure is only calculated if the budget reference is defined (i.e., if the budget at completion has been calculated). The planned value is also referred to as the budgeted cost of work scheduled.

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Budget at completion: Estimate at completion of the budget reference. The planned value (or BCWS), which is the fraction of the budget that corresponds to the work that should have been carried out by the date in question, if everything had gone according to plan. This figure is only calculated if the budget reference is defined (i.e., if the budget at completion has been calculated). The planned value is also referred to as the budgeted cost of work scheduled. The Earned Value or BCWP: Budgeted cost of work performed. Archived estimate at completion: Total Sum of the planned expenditures and hours, regardless of the end of the accounting period. This is the same calculation as for the Estimates to complete except that the Estimates to complete only takes into account planned expenditures and planned hours after the end of the accounting period. It represents the estimate at completion as it was when there was only planned data (plus any modifications made in the re-estimation phases of the tracking.) The cost variance (CV) at a given time t, is the difference between the actual cost (ACWP) and the earned value (BCWP). It represents the project drift in terms of cost. CV = ACWP - BCWP = actual cost - earned value The schedule variance (SV) at a given time t, is the time difference between the earned value (BCWP), and the planned value (BCWS). It represents the project drift in terms of time lag. 14