Article #577 The Digitization, Digitalization and Digital Transformation of Cost Management on Capital Construction Projects?

Regardless of a capital construction project type, size, complexity, delivery method, location or managed by who, managing, monitoring, evaluating and reporting the project’s cost is always one a must requirement. This requires as a minimum to have a real-time report that provides a single version of the truth of the project’s current cost status by consolidating the project budget, budget adjustments, revised budget, original commitments, commitment change orders, forecast to complete, anticipated cost at completion, variance and actual cost values.

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The accuracy, quality and value of the cost management report depends if an organization is either adopting digitization, digitalization or digital transformation of the cost management processes and other related processes. For example, cost management digitization is when an organization creates standard templates to capture the data associated with the different cost management processes like those of change orders, interim progress invoices, etc. In addition, digitization also includes the scanning of documents associated with those cost management processes. On the other hand, cost management digitalization is when those business processes templates get automated by adding workflows for submitting, reviewing and approving those processes. The workflow should include authority approval levels to enforce the requirements set in the delegation of authority (DoA) matrix. In addition, the scanned documents will be attached to the different transactions of those cost management processes.

Digital transformation of cost management goes beyond the automation of cost management processes achieved by digitalization. It includes integrating those processes to become fully aligned with the project cost management policies and procedures. This might also require integrating cost management processes with other project processes that could impact cost management. For example, integrating cost management processes with the processes associated with risk analysis, schedule, procurement, quality, communication, etc.

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The chart above details more than 30 cost management and others processes that are needed for digital transformation of cost management on capital construction projects. Those processes will become the basis to automatically produce the required cost management report. Of course, there are many other processes that were excluded from this chart.

Using a Project Management Information System (PMIS) solution like PMWeb, all those processes including their integration comes ready by default in PMWeb. In addition, many out of the box form templates, reports and dashboards also come along with those processes.

For example, the built-in integration within PMWeb allows to automatically convert the approved cost estimate into a baseline budget as well as it allows importing the project schedule and associate budget line items with their relevant schedule activities to define the budget spending plan. In addition, the risk analysis module allows establishing a traceable and unbiased contingency reserve quantification by using the Expected Value Method. The same risk register is also integrated with potential change orders module which is in turn integrated with the change order module to streamline the change management process from beginning to end.

Further, the procurement module used to streamline the procurement of contracts will ensure that the awarded commitment contracts are in line with the approved cost estimates. PMWeb cost estimating database will be even automatically updated with the purchase history for items included in the awarded contracts. In addition, PMWeb revenue contracts will be used to ensure that the income generated of executing the project is captured to enable the organization to have real-time single version of the truth insight on whether they making or losing money on a project, a program of projects or across their complete projects’ portfolio.

In other words, PMWeb gives an organization the option to either digitize, digitalize or digital transform their project cost management. For example, the digitization of cost management will be achieved by taking advantage of the ready-to-use templates for all processes required to manage the project cost. Those could include the templates for cost database, cost accounts, estimate, budget, budget adjustments, commitments, potential change orders, change orders, change events, progress invoices, payment made, forecast, funding sources, funding requests, funding authorizations, revenue contracts, revenue change orders, requisitions, payment received, joint measurement reports, miscellaneous invoices, journal entries and timesheets. In addition, digitization of cost management can be further improved by using the ready to use templates for risk register, prequalification, bid packages, online bids, procurement, inspection, Request for Information (RFI), submittals, meeting minutes, daily reports, schedules and many others.

In addition, all digitized documents that are associated with each transaction of the cost management processes and other processes will be attached to their relevant templates. It is highly recommended to add details to each attached document to better explain to the reader what is being attached and viewed. In addition, links to other relevant records of other business processes managed in PMWeb can be also linked to the records of those change order related business processes.

It is also highly recommended that all those supportive documents, regardless of their type or source, get uploaded and stored on PMWeb document management repository. PMWeb allows creating folders and subfolders to match the physical filing structure used to store hardcopies of those documents. Permission rights can be set to those folders to restrict access to only those users who have access to do so. In addition, PMWeb users can subscribe to each folder so they can be notified when new documents are uploaded or downloaded.

If the organization has decided to move from digitizing to digitalizing cost management, PMWeb allows creating workflows to map the submit, review and approve tasks that could be specific to each process. For each review or approve task, PMWeb allows defining the individual role or roles assigned to each task, task duration, task type and actions available to be taken for each task. The workflow can be also deigned to include the conditions for approval authority levels as set in the project’s delegation of authority (DoA) matrix.

This will ensure that for each initiated transaction of any the cost management processes or other implemented project process, to capture the planned review and approve workflow tasks for each transaction as well as the actual history of those review and approval tasks. The captured workflow data that will be displayed on the workflow tab of each those templates will include the actual action data and time, done by who, action taken, comments made and whether team input was requested.

Finally, the integration that is readily available between the different cost management processes as well as with other processes including any additional customized integration will ensure that the cost management processes are aligned with the cost management policies and procedures set for each project. This will enable the organization to facilitate the digital transformation of cost management on their capital construction projects’ portfolio. Digital transformation will help the organization to extract knowledge and learn from the cost management data captured by digitization and processed via digitalization. It will provide the organization with the insight to make better and faster informed decisions.

Similarly, the organization can implement digital transformation on other project management aspects of capital construction projects to maximize their benefits and knowledge while enforcing the best practices of transparency, accountability and governance. Nevertheless, it is a known fact that unlike digitization and to certain extent digitalization, digital transformation will be always opposed by many individuals who might feel that digital transformation might cause the threat of having less control on information that they are usually responsible for. For them, this represents diluting the power of control that they are used to have on this information. Therefore, it is of great importance to carefully manage those individuals so they can endorse this change which will benefit them and the organization as an overall.

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About the Authorfounder

Bassam Samman, PMP, PSP, EVP, GPM is a Senior Project Management Consultant with 40-year service record providing project management, project controls services and project management information system to over than 200 projects with a total value in excess of US $100 Billion. Those projects included Commercial, Residential, Education and Healthcare Buildings and Infrastructure, Entertainment, Hospitality 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 in topics relating to Project Management, Strategic Project Management and Project Management Personal Skills. Over the past 40 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 550 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 Association for the Advancement of Cost Engineering (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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