1. Capital Insight Pty Limited ABN 76 056 297 100 77 Berry Street North Sydney NSW 2060 t02 9955 2300 f02 9955 5574 www.capitalinsight.com.au Project Budget, Commitment and Cost Management Robert Hickson Erik Maasepp

2. Overview BackgroundTerminology and Requirements Detailed Template Presentation and Workshop

3. Background

4. A number of presentations on requirements for budget and cost management: – at 2008 conference – Liz Wallace at 2013 Conference The requirement: – Budget, Commitment, Cost and Cashflow management is fundamental to our role as Project Managers – cannot rely on QS cost reports Our template is not being utilised by all staff Requirement that we better manage this aspect of our projects

5. Background THIS MEANS YOU

6. Background QS reports do not include or may not detail all project costs: – Preopening costs – Client costs – IT/comms – FF&FE Some clients do not have the systems available, and projects require proper management Standardised system across the company

7. Background

8. Terminology and Requirements

9. Standardisation of Reports quality Common understanding of budget management approach Simplifying processes for monthly report preparation – ensure timely submission of reports Not relying on Cost Planners for ‘financial information’ Using cost planners time efficiently and effectively

10. Terminology and Requirements Budget Commitments Cost

11. Terminology and Requirements Original Budget – is the originally approved ‘bucket’ of money e.g. PDP Budget Transfers – can only be approved by the Client Additional Funds – for either client supplied funded scope changes or externally supplied funds (reimbursement) Current Approved Budget – the total of the above

12. Terminology and Requirements Contract value – the ‘as let’ contract amount Approved Variations – changes that have been approved by the client Adjusted Contract Value = sum of the above

13. Terminology and Requirements Unapproved Variations = a claim that has been submitted but is not yet approved Anticipated Variation = a claim that is not yet submitted but is something you anticipate coming in

14. Terminology and Requirements Future Commitments = a pending commitment for something you know you will need or anticipate that you may need to successfully deliver the project At commencement Approved Budget = Future Commitments

15. Terminology and Requirements Forecast Final Cost = sum of: – Approved Contract Sum + – Unapproved variations + – Anticipated Variations + – Future Commitments At commencement Approved Budget = Forecast Final Cost

16. Terminology and Requirements Project Cost Variance = Forecast Final Cost less Current Approved Budget If negative – it is a good thing If positive – it is a bad thing Whatever the outcome – you need to report it Once a project ‘starts’ FFC should not necessarily equal Current Approved Budget

17. Terminology and Requirements Commitment management – to manage the project (and the budget) you must know when you need commit costs – reflective of the program – setting up the cash flow makes you think about (plan) when activities need to happen – it also helps you think about the cost to complete (future commitments)

18. Terminology and Requirements Commitment management – Commitment Register – an integral part of budget management – must reflect budget allocation, be reconcilable – financial allocation/details must be easily extracted – facilitates client approval of the commitment approval form – individual submission and approval for every commitment Variations in FFC that occur in a month are also an important part of project budget/cost reporting

19. Terminology and Requirements Payment management – payments to be reconciled against every commitment – need to adjust future cash flow against payments made – if a payment on month is different to cash flow (and it invariably is) then cash flow update needed – need easy access to “paid to date” details for each commitment

20. Terminology and Requirements Cash Flow – client expectations that we manage cash flow – funding provisions – cash flow is a good barometer of how the project is going, and areas for focus of extra effort needed – cash flow management also forces you to understand what else may be needed i.e. variations and additional commitments

21. Terminology and Requirements Total Cost/Expenditure = cash out the door Certified Payments: – is not necessarily the same thing as cost – is typically what we as PD or PM have certified for payment Accrued Expense: – a claim that is received (by us) but not yet certified/paid – sometimes referred to as ‘cost to date’ Paid to date can be less than Cost to Date, but never the other way round

22. Terminology and Requirements Cannot reply on the QS – we must manage the budget – QS typically reports what we tell them – preparing a Cost Report(er) (QS) is completely different to Project Manage(ing) the budget and project cost CI staff MUST use our template where client doesn’t have a system, and it is likely to be of assistance even if the client does, and we need to enter information into it

23. Template Presentation and Workshop

24. Questions?