• Free for qualified executives and consultants to industry

  • Receive quarterly issues of Area Development Magazine and special market report and directory issues


Construction Project Planning: A Methodology for Effectively Managing Cost and Scheduling

Using the Work Breakdown Structure - or WBS - will help to safeguard construction's bottom line.

Winter 2012
(page 2 of 2)
An Example
Frequently, the elements necessary for an effective WBS are not only present, but are so commonplace as to be overlooked. Consider the following example, wherein "garden variety" preliminary design documents served as excellent WBS sources for a seemingly complicated situation:

An owner needed to relocate an entire manufacturing, research, and administrative operation due to an eminent domain ruling. The new location involved both adaptive reuse of an existing building, as well as several hundred thousand square feet of new buildings. Due to the terms of the legal proceedings, an accurate accounting had to be made of the expense (demolition and relocation) costs versus capital (new construction) costs.

The determination of "expense" and "capital" was spelled out in a court ruling and differed from the criteria applied to "expense" and `capital" for tax depreciation purposes. Furthermore, separate teams were focused on building/facilities and the manufacturing process. To afford maximum effectiveness, the WBS was devised at project inception. Since a preliminary design specification was written and ordered consistent with the Construction Specifications Institute chart of accounts, the facilities WBS was set.

Moreover, WBS codes were derived from the process flow diagrams and resulting manufacturing equipment list being created. Thus, the facilities and process teams quickly had an effective WBS to execute the work. Particular care was exercised to address the "expense versus capital cost" accounting matter. After a few meetings between the designer's project controls staff and the owner's accountant, that portion of the WBS was also established. And finally, the facilities, process, and accounting WBS codes were integrated into a cohesive set.

Incorporating enough detail in the equipment-based elements of the WBS will allow for better cost-control. For instance, instead of developing one WBS line item for "processing equipment," several lines developed for each of the major pieces of equipment (such as mix kettles, packaging equipment, or storage containers) would better control installation costs. With a more detailed approach, any increase in cost can be tracked to a specific type of equipment.

For owners unfamiliar with WBS, starting out at the higher level is most easily understood. As the project progresses into developing different cost estimates, owners can see the costs of various building components. A well-developed WBS can show the owner job sequences throughout the project with associated dependencies, risks, and assumptions. This information forces owners to more thoroughly consider the realistic impact of project cost and schedule.

Learning from History
Through the standard coding structure of a WBS, legacy per cost by division, function, or component can be tracked throughout the life cycle of the facility. Various aspects can be measured including work efficiencies, material price escalation, and labor. This helps expedite the turn-around of estimate requests for future projects. With historical cost information on hand, the bidding process is more streamlined, ultimately helping construction teams who use a WBS to provide owners with more accurate and cost-efficient estimates.

For example, an experienced project estimator can mine the data in a multi-level WBS for square-foot costs to determine an estimate for future facility expansion. When that cost is compiled with the cost of square footage in other similar projects, a "ball park" estimate can be derived at quickly.

The coded line items of a WBS serve as the linkages to other project documents, i.e., the estimate, planning documents, bid documents, schedules, and cost-control reports. So when a "scorecard" is used to compare buyout prices to the originally planned costs, the project estimator can review the pricing databases to improve the estimate accuracy for the next project.

This linkage is particularly beneficial for projects driven by multi-phased facility expansion. By analyzing the actual end cost of the first phase as compared to the estimate, cost can be more accurately refined for the next phase. This in turn enables more accurate development of project scope for the next phase, as well as the production of cost-control reports.

Advantages of a Well-Designed WBS
For any project, a WBS can help determine the best strategy for project execution and construction implementation. It also aides project scope re-evaluation to find and alleviate waste, leading to cost savings. In the case of a manufacturing plant, owners who embrace the extensive effort made for a well-executed WBS can discover needed changes to the very processes for which the project was developed, resulting in better ways to make or assemble the product.

Without the WBS as a road map, those in charge of a project run the risk of continuing through the design phase or even reaching the construction phase before realizing that significant - and costly - changes need to be made. Therefore, a WBS can be a powerful project management tool. However, if not created properly, more time could be spent managing the WBS than managing the project. The WBS then ceases being a helpful tool and instead becomes an unreasonable tyrant. The key is to capture the applicable project information, then organize that information through levels that can be used to summarize or expound on the necessary project costs and scheduled time. The challenge is finding the right balance and level of detail for the complexity of the project to effectively manage the project and achieve the desired outputs so that the WBS can be understood by both executive level reviewers and project team members who require detailed information.

Owners may sometimes find it difficult at first to grasp the value of the effort required to reach the level of detail into which a WBS delves. Yet, a WBS has proved to be a vital part of a project's planning, critical to effectively managing cost and scheduling. It drives conversations and thought processes about how to execute each project task, and provides a project team with a common language and road map to achieve its goals. It is the Dewey Decimal System that allows owners to quickly find the relevant data among the vast library of data available to them, and it is critical to checking and evaluating all the components of a project in order to understand fully and control cost, schedule, and scope.

Follow Area Development