Article #145 Monitoring, Evaluating and Reporting Value of Work Done (VOWD) for Procuring Equipment in EPC Projects

The value of work done (VOWD) in EPC projects is a technique used to measure the value of goods and services progressed, regardless of whether they have been paid for or not. The primary purpose of determining VOWD is to get an accurate and comprehensive as possible estimate of the project cost at a point in time. The VOWD is measured against the project committed cost which includes contracts, subcontracts, and purchase orders.

As an example, for VOWD in EPC projects, the VOWD for procuring tagged and major equipment is usually calculated based on milestones for deliverables for which is usually set as a standard for all equipment to be procured on the project. For other types of project works that include bulk material, construction and others different methods will be used to calculate the VOWD.

Using a Project Management Information System (PMIS) like PMWeb, organizations can monitor, evaluate and report on the value of work done (VOWD) for all goods and services including those for procuring tagged and major equipment. PMWeb commitment module will be used to capture the details of all equipment to procured on the project. Although, it is possible to create a single commitment record for all equipment, nevertheless, it is highly recommended to create a commitment record for each piece of equipment. The commitment record will include the equipment details including the equipment name, type, vendor name any other needed details. In addition, it will include the equipment’s total value and the details of the weighted milestone deliverables. Since the weighted milestone deliverables will apply to all or most equipment, the same commitment will be copied for all equipment and only change the varying information. The total of weighted milestone deliverables will be always 100%.

In addition, the PMWeb commitment module allows defining when each line item, which is also the specific deliverable milestone, in the commitment is expected to be spent. The cost for each line item can be spread over multiple periods if needed along with the option to select how those funds will be spread. This emphasizes the importance of accrual accounting by enabling accurate reporting of committed cash, based on actual physical progress. This is very important as sometimes it is difficult to have that level of detail of anticipated expenses achieved in the project cost-loaded schedule.

As the project progresses, a progress invoice will be created to capture the progress when any of the weighted milestone deliverables for any equipment is achieved. The progress can be either updated manually or imported from the updated Primavera P6 or MSP project schedule which will be imported to PMWeb. To be able to do this, each weighted milestone deliverable needs to be linked to the relevant project schedule activity. PMWeb progress invoice allows attaching all supportive documents for each weighted milestone deliverables to be provided the needed proof of its successful completion. Those could be copies of the purchase order, equipment factor attended testing, shipping documents among many others. All those supportive documents will be uploaded and stored in their relevant PMWeb document management system folder.

Similar to all other PMWeb records, a workflow will be assigned to the progress invoice to ensure that each progress invoice is formally reviewed and approved by the accountable project stakeholders. In addition, the workflow could include conditions for enforcing the approval authority levels when it comes to reviewing and approving the progress invoice.

PMWeb progress invoice module also includes a payment tab to capture the details of the actual payment made for the approved value of work done. Those would include details such as actual payment amount, date, bank details among others.

In addition, all change orders that are issued on any equipment or any other type of good or service will be captured at each commitment. The approved cost associated with those change orders will be imported into the interim progress invoice where the value of work done will be calculated.

The information captured in the commitment, change orders, and progress invoices modules will become the basis for creating the Value of Work Done Status Report. The report will show the actual VOWD values as well as the anticipated VOWD values for the past periods and future periods, also known as an accrual. The report will be detailed to each piece of equipment that is included in the project with the option to roll it up to equipment type, equipment category, or project level.

About the Authorfounder

Bassam Samman, PMP, PSP, EVP, GPM is a Senior Project Management Consultant with more than 35-year service record providing project management and controls services to over 100 projects with a total value over the US $5 Billion. Those projects included Commercial, Residential, Education, and Healthcare Buildings and Infrastructure, Entertainment and Shopping Malls, Oil and Gas Plants and Refineries, Telecommunication, and Information Technology projects. He is thoroughly experienced in complete project management including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training, and business development.

Bassam is a frequent speaker on topics relating to Project Management, Strategic Project Management, and Project Management Personal Skills. Over the past 35 years, he has lectured at more than 350 events and courses at different locations in the Middle East, North Africa, Europe, and South America. He has written more than 250 articles on project management and project management information systems that were featured in international and regional magazines and newspapers. He is a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for more than 6 years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), a certified Planning and Scheduling Professional (PSP), and Earned Value Professional (EVP) from the American Association of Cost Engineers (AACE) and Green Project Management (GPM).

Bassam holds a Masters in Engineering Administration (Construction Management) with Faculty Commendation, George Washington University, Washington, D.C., USA, Bachelor in Civil Engineering – Kuwait University, Kuwait and has attended many executive management programs at Harvard Business School, Boston, USA, and London Business School, London, UK.


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