Keep costs on track

At first glance, $1.13 billion would seem to go a long way. But when you're working on a 20-mile rail segment connecting north central Phoenix, Tempe and Mesa, Ariz., USA—the first phase of a regional system—control over your budget can dash away faster than a speeding train.

Funded by the federal government and those three cities, the Central Phoenix/East Valley Light Rail Transit (CP/EV LRT) system is scheduled for completion in August 2007, but parts of the line will open in December 2006 and April 2007. To monitor costs and schedules along the way, a Valley Metro Rail project team customized a work breakdown structure (WBS) and developed an integrated reporting system.

Management is meeting specific cost- and schedule-tracking requirements with a customized project reporting plan. Take a look at the CP/EV LRT team's customized application to determine how you can manage costs better.

Keeping Tabs

Before the project kicked off, Valley Metro managers had to implement a project control system, which was integral to budget, schedule and quality objectives. The application allowed management to identify and analyze variances from the baseline plan through regular performance measurement.

Some commercially available software packages are tailored to an industry's specific requirements, such as project management software for the construction or information technology industries, but off-the-shelf software can't always meet all the challenges of managing large, complex capital projects. As a result, organizations either outsource the development of a customized project control system or assign internal project resources to develop it—if they possess the necessary expertise.

Because outsourcing a system can be lengthy, costly and the end result may not live up to expectations, executives for the CP/EV LRT project decided to employ internal resources. Implemented over two phases, the cost- and schedule-control system included development of:

• A. A WBS and cost accounts serving as the system's foundation
• An integrated database system combining two widely used off-the-shelf databases: Primavera Project Planner (P3) and Microsoft (MS) Access.

Because project staff already was familiar with both databases, the integrated system eliminated training requirements. In addition, the custom solution allowed the system developer to tailor and automate the MS Access database to handle the project's cost management needs.

Phase One: Task Master

The rail project's WBS subdivided the major work elements, such as the civil/track work, into smaller packages, or contract units. For example, the civil/ track work is subdivided into five line sections, while the systems work is split into light rail vehicles, the traction power/overhead contact system, fare-collection machines, and light rail transit signals and communications. Other work elements, such as the station finishes, are treated as whole contract units.

The WBS also accommodates sponsor requirements, such as cost segregation and reporting. In this case, costs were allocated to the participating cities and segregated per the Activity Line Item (ALI) codes used by the Federal Transit Administration (FTA). For more information on the ALI codes, visit www.fta.dot.gov/library/program/ali/index.html.

Contractors developed the lower tiers of the WBS hierarchy. This practice allows contractors the flexibility to reflect their management approach and gives them full control over their responsibilities.

The CP/EV LRT team used five levels of WBS hierarchy to manage the program scope:

• WBS Level 1: Program. Allows the identification of local and federal programs and preserves the ability to identify work on future expansion
• WBS Levels 2, 3 and 4. Mirror FTA's ALI code structure to ensure adequate cost reporting capabilities
• WBS Level 5: Contract Unit. Breaks the work into major contracts. Pseudo contract units also are established to identify level of effort work, such as engineering and project management.

Using cost accounts, each contractor reports expenditures and other cost-related data.

Phase Two: Budget Control

To furnish senior management with timely, accurate cost reports, the program control team needed a comprehensive system that would integrate cost and schedule, provide reporting capabilities consistent with the project requirements and improve operating efficiency. The system had to be capable of processing and analyzing a vast amount of incoming monthly cost data quickly and accurately. Further, the team could use integrated systems to perform risk and schedule simulation analysis where the relationship between the schedule and cost is not always clear.

To meet their specific needs, the team incorporated the P3 and an in-house database called the Cost Compilation System (CCS), an MS Access database developed with MS Visual Basic. The CCS compiles the actual costs provided by the project organizations performing the work, along with any other accrued cost for efforts expended but not yet reflected in any organization's financial system. In addition, the system analyzes data and calculates the estimate at completion (EAC) on selected level-of-effort activities and monitors the consistent quality of the EAC across the organization.

CCS complements P3, which can't perform some of the specific, customized cost functions needed on this project, such as compiling actual costs, breaking down regional costs and calculating EAC on selected level-of-effort activities.

How It Works

Each month, the stakeholder provides an MS Excel file that organizes data by cost account, including expended cost, percent complete and EAC. Certain project organizations lack the support of an internal project control function, so they are capable of providing only actual cost. However, because their work could be categorized as level-of-effort, the program control team used CCS to calculate EAC based on its to-date performance (EAC = Cost-to-Date/Percent Complete).

After the actual cost data is fed into the system, CCS automatically adds the period actual cost to an MS Access table, which contains cost data from all prior months. At this phase, CCS also identifies the regional cost items through the cost account code and calculates each city's share based on a mileage-weighted formula. Last, CCS updates the compiled data in P3.

Work in Progress

Although the technology has simplified data collection and scheduling, professionals must carefully study and analyze the system output to provide a logical, meaningful explanation of the causes of any cost and schedule variances. In this way, sound project control methodologies reduce cost overruns, control cost growth, help meet project schedule objectives and ultimately satisfy the client's expectations.

With the CP/EV LRT project integrated cost control system, the program control team successfully can manage the project budget by accurately pointing to potential problems ahead of time, allowing it to rely on a mitigation strategy instead of recovery plans.

Future system developments will focus on improving the reporting capabilities of the system. One possibility is specialized reporting software that can be integrated with the databases.

Ultimately, it's not the data, but what you do with it that makes a difference. As the project continues, the superior cost reporting provided by the integrated system justifies senior management's investment. Based on timely, accurate information, executives can make the important decisions that will decide the project's success. PM

Ahmed H. Chilmeran, PMP, is a Phoenix, Ariz., USA-based principal project control engineer with Parsons. He is serving as the senior program control engineer for Valley Metro Rail.