From cost controlling to an integrated management system

In practice, this meant investing significantly more Energy in early cost planning. The cost estimate was further developed in several iterations, initially on the basis of initial offers, benchmarks and empirical values. These iterations resulted in a structured cost estimate, on the basis of which a comprehensive budget structure was developed, in which the Total Project Cost (TPC) is managed as the central budget reference for the project. This is based on familiar cost structures such as DIN 276, but is expanded to include plant engineering components, provisions and expected cost developments.

As the planning progressed, this not only made the cost estimate more and more accurate, but also significantly increased the transparency of the economic development of the Projects.

The elements can be categorized into four areas:

Cost basis

• Cost Estimate
• Total Project Cost

Forecast of project costs

• Estimate at Completion
• Estimate to Complete
• Long Term Forecast

Project Controlling

• Resource planning (Manloader)
• Cost control tool
• Reporting

Process control

• Change management
• Order workflow
• Audit workflow

The interesting thing is that none of these tools are new in themselves. The vast majority of Projects work with cost estimates, forecasts or reports. The effect is only achieved through the interaction of these elements. Cost estimates are linked to resource planning.
Forecasts are based on real accounting data from ERP systems. Changes are integrated directly into budget and cost forecasts. This creates a consistent picture of economic Project Development.

Project Management can answer at any time:

• Where do we stand economically in the Projects?
• How will the costs develop until the end of the Projects?
• What impact do changes have on the budget and cash flow?

Although the approach was developed in the context of a large Pharmaceuticals investment project, the underlying structure is not industry-specific. CapEx projects in plant engineering quickly create a complex cost landscape. Cost estimates, awards, resource planning and cash flows develop in parallel, but must remain traceable and controllable at all times.

This is precisely where the cost control described here comes in. When cost planning, resource control, forecasting and change management are systematically combined, a consistent picture of economic Project Development is created. Cost control thus develops into an active control tool that shows project managers at all times where a project stands economically, what developments are to be expected and what decisions are required.