Article #583 Cost Breakdown Structure (CBS) for Capital Construction Project Revenues

For most of the those involved in delivering capital construction projects, the cost breakdown structure (CBS) or cost accounts would mainly focus on the cost for delivering the project’s real estate investment. The cost breakdown structure will detail all soft and hard costs required to deliver the project including the costs associated with the land acquisition. Nevertheless, very few project owners include the cost breakdown structure (CBS) for revenue and operation cost in their projects. The revenue and other benefits associated with the capital construction project were the basis for selecting the project for execution. Therefore, the cost breakdown structure (CBS) should include all levels associated with the project revenue or benefits.

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Using a Project Management Information System (PMIS) like PMWeb not only the cost breakdown structure (CBS) can be configured to capture the revenue and benefits items as well as manage the business processes associated with those items. For example, a cost estimate for revenue or benefits can be created for which it will become the basis for defining the baseline for the revenue and the projected revenue or income plan. In addition, income contract agreement can be created to capture the revenue from all sale and lease contracts. Further, PMWeb commitment module will be used to capture the contracts for maintaining and operating the completed facilities as well as sales commissions and purchasers’ cost.

PMWeb estimate module will be used to capture the details of the estimated revenues and benefits associated with each project. Usually, this will be a unit price estimate to enable defining the revenue or benefit from each residential unit sold or leased as well as space areas in square meter sold or leased. The estimated revenues or benefits will be one of the criteria for which the project investment was selected.

The approved estimate for revenues and benefits will become the basis for generating the revenue budget. PMWeb budget module allows creating the earning projection for each revenue or benefit item. It should be noted the revenue budget will summarize the estimate for revenues to the cost breakdown structure (CBS) levels they are associated with. Therefore, it is very important that the cost breakdown structure (CBS) levels are defined to incorporate the control level that the project owner wants to have.

The approved estimate for revenues and benefits will also become the basis for generating the revenue contracts for sales and short-term and long-term lease agreements. Those agreements which will be specific to each buyer or tenant will become the basis for managing any changes that might occur to those agreements as well as the issued invoices as per the payment terms and conditions and actual payments received against those invoices.

Further, the approved estimate for revenues and benefits will be used to generate the commitment contracts associated with the maintenance and operations scope of work of the completed assets. In addition, commitment contracts will be used to capture other contracts associated with sales commissions and purchasers’ costs. As a rule, all possible sources of revenues as well as costs need be captured in a contract to enforce the policy of “No Contract, No Pay”.

Of course, for any expenses that were not accounted for in any of the commitment contracts, PMWeb miscellaneous invoices module will be used to capture those expenses. Those expenses will be categorized as non-commitment expenses.

On the other hand, revenues that are part of a revenue contract such as internet earned or received among others, PMWeb journal entries will be used to capture those details and post as income or revenue. PMWeb journal entries can be also used to capture expenses that were not associated with either a commitment contract or miscellaneous invoice. For revenue or expense entries, PMWeb allows posting those revenues as income, non-commitment cost, tenant revenue or tenant cost.

Although the template for each business process should be comprehensive in the extent of the data fields needed to capture the required information, nevertheless, it is also very common that each transaction of each business process could include supportive documents associated with that transaction. PMWeb allows attaching those documents to each transaction of each business process template. 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 transactions or records of other business processes managed in PMWeb can be also added.

It is 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.

To enforce transparency and accountability in reporting the performance of the different cost management business processes, a workflow needs to be added to the contract, periodical reporting and changes templates to map the submit, review and approve tasks, role or roles assigned to each task, task duration, task type and actions available for task. In addition, the workflow could be designed to include conditions to enforce the approval authority levels as defined in the Delegation of Authority (DoA) matrix.

When any of the cost management business processes’ transaction is initiated, the workflow tab available on the relevant template will 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 will include the actual action data and time, done by who, action taken, comments made and whether team input was requested.

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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