There is no cookie-cutter definition of an engineering-construction (E&C) company other than they are all project-oriented businesses that perform construction-related work for a client (often referred to as the owner – the entity paying for the job and for whom the work is performed). Some perform design-only work (engineering), construction-only work, or design-build work (a combination of both).
Engineering companies are essentially professional services organizations that provide engineering-design solutions to clients – often in specialized fields.
Construction companies can generally be classified as either (a) contractors who perform all or most of the work themselves or (b) subcontractors who perform specialized work such as electrical, mechanical, or masonry tasks. General contractors (GCs) are contractors who perform many different types of work (even engineering services), often manage overall aspects of large (sometimes global) projects – referred to as construction management (CM), and usually have access to large bonding resources.
Exceptional cases are owner-CM or owner-performed work. In the former, an owner (such as a large natural resources company, a government entity, or a specialty retailer) may act as a GC who subcontracts most or all of the work on a project to others but manages the overall work themselves (CM). In the latter case, owners may have the people and equipment resources to perform some of the work rather than contracting it to others.
This article discusses solutions for general contractors who use Oracle Project Management and Project Partners User Interface Applications in the execution of design-build projects. Future papers will focus on the other members of the E&C family.
Managing design projects is challenging, but design-build projects are especially so because of the combination of requirements to fulfill all phases of the project work. Managing large design-build projects requires tools in professional services organizations (PSOs) and the construction industry. The design phase of the project requires all the functionality of PSOs: such as budgeting – typically by job-based resources and planning fully burdened amounts by the time period over the life of all engineering activities and forecasting, which also requires planning by job-specific resources, the requirement to compare actuals and budget, and to enter Estimate-to-Complete amounts – typically revenue, over the remaining time-periods of the design phase.
Engineering work can be intensive in that, more often than not, issues are discovered that require a different approach from that which the client initially conceived. New forecasts must be created to incorporate these changes, often resulting in changes to the project work plan and financial plan. The ability to make these changes in real-time quickly and efficiently is required. Design review meetings, both onsite and offsite, require making changes from anywhere.
Project Partners User Interface Applications (UI-Apps) are the perfect solution to meet the specific requirements of a design-build type project. An Excel front-end, wholly integrated with Oracle Project Management, allows users to budget and forecast using a familiar tool – even if not connected to Oracle.
Planning for the construction phase of the project presents different challenges. For example, work and financial plans must be created and synchronized. Oracle Project Management allows for this. However, updates to a detailed plan (either work or financial) are tedious and time-consuming for casual users such as project managers. In addition, the HTML flow of Oracle Project Management is too complex without sufficient clarity about where one is in the flow of the project plan. Adding UI-Apps allows project managers to work in one worksheet with only the functions relevant to how they do business and provides nomenclature pertinent to how the organization does business.
In support of these construction industry requirements, UI-Apps provides the following options for financial plan preparation:
Workplan Management (WBS, task structure, dates, and resources) – Workplans can be created from scratch using UI-Apps, started from a workplan created in Oracle by another user, or made in another tool before transferring to Oracle. All options allow Workplan modification in Oracle-based upon the user submitting the plan.
Lump Sum Budgets and Forecasts (at-completion vs. time-phased) – Construction projects are typically planned with lump sum amounts. However, the option for time-phased planning is also available.
Cost Buildup (for both budgets and forecasts) – Rather than using fully burdened cost rates for a particular resource from Oracle rate tables – as is done in professional services, construction activity burdened costs can be built up from raw price based upon resources by using break-even multipliers which are factors derived from experience in a particular marketplace – varying based upon the type of work being performed as well as the resource to which is being applied. UI-Apps allow a choice of corporate multiplier values to be set as a starting point when planning and allow user overrides. Additionally, all kinds of resources can be planned for using this approach: job, named person, equipment, materials, etc.
Margin Percent – Revenue budgets and forecasts in PSOs usually derive from standard (or negotiated) bill rates applied to planned labor hours. In the construction industry, revenue is often backed by a margin percentage to ensure the built-up cost has been covered. Additionally, the actual margin percent for resources on a particular task or phase/type of work may be adjusted downward or upward based on the estimator’s perception of the feasibility of achieving the total margin for that task. The overall project margin, however, must still be achieved. UI-Apps allows the user to tweak the revenue margin for each resource on each task (if desired) while showing the overall project margin in real time.
Forecasting At-Completion – Financial forecasts, like budgets, for construction projects, are usually performed on an at-completion (EAC) basis. As projects evolve, several factors can be taken into consideration when creating periodic forecasts:
Review the actual cost and revenue amounts to date for each task compared with the budgeted amounts
Estimate the EAC cost of the project
Estimate the EAC revenue
Enter physical % complete for tasks
Enter progress status for tasks
Optionally modify the workplan as project conditions change
UI-Apps provide the ability to derive a project forecast by entering either Estimate-to-Complete (ETC) amounts, which, when added to the inception-to-date actuals, will yield EAC, or enter EAC amounts directly. These amounts are held in a new forecast plan.
Additionally, since UI-Apps allow for workplan integration, project managers can update each task’s physical percent complete and progress status. The task rows displayed in the UI-Apps Forecast Worksheet apply to work plans and financial plan lines. This option allows for modification of the work plan when it is necessary to change resources on originally planned tasks, to add entirely new functions to the work plan due to a change in project scope or approach, or to rearrange tasks by indenting or outdenting them simply.
All workplan attributes such as planned/scheduled dates, task status, task type, work type, or work quantity are seamlessly updateable via UI-Apps as necessary.
Of course, the key to creating accurate construction forecasts is to have reliable input from onsite inspections. UI-Apps’ disconnected operation allows cost engineers to collect accurate progress information on the job site and capture it right in the forecast worksheet, where it can be saved and later reviewed with the project manager as part of the forecast preparation. After final review, with one click, the week’s forecast is uploaded and submitted into the corporate workflow for approval. And in the event of a massive project (4,000+ tasks), UI-Apps allow the option of plan submission to occur as a background process rather than real-time, thereby assuring optimal performance.
In addition, UI-Apps have a built-in role or responsibility-based security along with data locking and software versioning capabilities to ensure project managers are constantly working on the latest plan, with the latest code, and not overwriting other plan changes. The option to download the project plan for review or update ensures data consistency throughout the organization.
The combination of UI-Apps and Oracle Project Management makes the project planning process of a design-build project easy, but what happens when it’s time to invoice for these different types of work performed? Invoicing for work performed in the design phase often differs from construction. Design billings are produced regularly based on billed hours, and construction billings may begin with advance payment and continue regularly or at prescribed dates. Since both phases of the project will overlap, multiple invoices will be generated for the client.
To meet the complex invoicing demands, Project Partners has designed a solution called Project Partners Invoicing – a flexible invoice consolidation and custom invoice formatting solution to address issues associated with multiple and complex invoices for one client.
Although design-build projects can present many challenges, UI-Apps alone or with Project Partners Invoicing offer solutions to meet these complex needs. As a result, project managers can move away from tedious data entry and get back to what they do best – managing projects.
Visit the Project Partners website or look for other blogs on UI-Apps, Invoice Consolidation, and Invoice Formatting to learn more about these solutions.
