When it comes to project controls, budgeting and cost tracking, the Cost Breakdown Structure (CBS) plays an integral role in the management of construction projects. For many organizations, designing a standardized CBS can present a number of challenges as there aren’t a lot of models and standards out there to draw ideas from. The reality is, you’re kind-of on your own to define how you want to break down your project’s costs into logical buckets for careful management of its finances.
Often the finance group will have a Standard Code of Accounts which can provide a starting point in designing the CBS and other coding structures (such as resource codes for labor, equipment, materials). Accounting, however, typically doesn’t break down the coding to the level of granularity needed for managing projects – especially big projects – so it’s up to the project controls team to design what those code structures look like.
One of the major differences between cost code design for accounting versus cost code design for major projects, is that projects are driven by work and the completion of the tasks & activities required to successfully complete the project. It makes sense therefore, to design cost code buckets in alignment with that work and those tasks. Clearly there’s a natural fit to assign a cost code to a task, since the task is measurable in terms of the hours, materials and equipment needed to complete the task – and can therefore have an associated budget, costs, progress, etc. Given that, it is inherent to map the hierarchy of the work breakdown structure (WBS) to a hierarchical CBS. When well designed, the WBS can serve a dual purpose of representing not only how work is organized, but also how cost and progress are broken down and organized.
Synchronizing the WBS with the Schedule
While it might seem quite obvious to sync all these things together, there are a number of elements to consider when aligning cost codes with the WBS. First, the WBS on larger projects is typically designed by the planners and schedulers (in P6 or MS Project) and often includes activities and milestones that are not relevant in the cost management of the project. As a result, the WBS you’ll see in the cost management system will be a fraction of the size of the WBS seen in the scheduling system. Project Controls professionals in this situation will often take one of two approaches:
- Design a unique WBS to be a fit for cost management. This means that the schedule WBS and cost controls WBS will not be synchronized and will vary independently.
- Sync the schedule WBS with the cost controls WBS, but mark the unneeded activities and WBS levels in the schedule to not be sync’d
Mapping the CBS to the Accounting Code of Accounts
The second consideration is that the CBS will normally need to have one or more code elements that can map to the accounting system’s code of accounts. These ‘mapping’ code elements will often have little connection to the WBS and only serve the purpose of synchronizing data between project cost controls and accounting.
How to Align the CBS with the WBS in 4castplus
The following video provides a snapshot into how to codify the WBS so that it can be aligned with the CBS at all levels.