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SAP Solutions for Engineering, Construction and Operation industry

Michael RagozinNoveco Systems Pty Ltd

Michael Ragozin: SAP Solutions for Engineering and Construction

Construction: Key Business challenges

Preparation of accurate cost estimates and theirintegration with planning and budgeting at aproject structure level.

Provide clear visibility of project costs, revenuesand cash position

Accurate forecasting of Cost To Complete

Measurement and Reporting of ProjectProgress, including Earned Value and otherProductivity measures

Management of project variations and customerescalations, and their seamless integration withproject cost forecasting and revenue planning

Integration of subcontractors into projectexecution, monitoring of work performed andthe incorporation of this work into progressreporting.

Accurate customer billing

Project Profitability forecasting


ESTIMATE BUILD OPERATE

SAP for Construction Business

Engineering and Design

Cost Estimation

Budget Planning

Profitability planning

Contract Management

Cost Forecasting

Variation Management

Procurement

Labour costing

Customer Billing

Reporting

Maintenance and Service Agreements

Service Planning and Execution

Do & Charge Billing

Warranty management

Project Portfolio Management

Integrated Financial reporting

Human Capital Management

SAP Enterprise Solutions


Project Structure in SAP

Network structure:

Present Project tasks to be performed on the project

Network activities represent process flow on lowest level of detail, and can be grouped under WBS element

Activities /operations are used for:

Scheduling of dates, planning of resources

Collecting of actual costs through material procurement and labour time allocation

Confirming progress, etc.

WBS structure:

WBS elements represent project organizational structure “as‐built”

WBS is a project element that define

project activity, e.g. Engineering , Design, Construction

product structure, e.g. Electrical, Cooling System

project phase, e.g. Commissioning, Testing

WBS control project budget, actual costs, material stock, project progress etc

The following objects can be allocated to WBS elements:

Costs and Resources, e.g. labour, materials, plant

Network activities, Work Orders

Estimate Build

Project structure

Budget Estimate ProcurementProject

structureCost Forecasting

ProjectVariations

ePMProject

StructureCustomerBilling


Contract: Sales and Construction view

Bill Of ServicesProject Structure “How Estimated and Sold”“How Built”

BOS

Contract



ProjectVariations

BudgetEstimate

CustomerBilling

Estimate Build

ePM

Presenter

Presentation Notes

A bill of services can consist of any amount of service lines. To display it more clearly, you can use the outline layout. This is a hierarchy with outline levels. You assign the service lines to the outline levels, for example, according to construction stages or maintenance groups. A unique path identifies each hierarchical outline level. This path provides information on the localization of the outline level in the hierarchy. A service line describes an individual service item, for example “Laying cables”. A service index is a unique identifier in a bill of services. The service index is composed of the path and the line number. Various data fields are available for the quantitative and qualitative description. The unit price can be determined from the service master (see slide Service Description), by performing cost estimation and purchasing subcontractor services. You can find further information in part 2 of the e-learning series for bills of services.


Bill of Services Structure

Power Generator

Cable Laying

Electrical Work

100 m $213/m

$31,300

CE 60100 „Cable“ 100 m $200/m

CE 70100 „ Locknuts“ 20 pc $15/pc

CE 90003 „Electrician“ 10 H $100/H

$20,000

$300

$1,000

$21,300

Transformer 11Kv 1 AU 10,000 $10,000

... ... ... ...

Mechanical $50,000

... ... ... ...



ProjectVariations

BudgetEstimate

CustomerBilling

Estimate Build

ePM

Presenter

Presentation Notes



Transfer Estimate to Budget

BOS

Contract



ProjectVariations

BudgetEstimate

CustomerBilling

Transfer Cost Estimation

To Project Budget

Estimate Build

ePM

Presenter

Presentation Notes



ePM: Project Budget from Estimates

100 m $200/m

20 hr $150/hr

10 hr $40/hr

$20,000

$300.0

$400.0

Costing lines

Project Budget Estimate can be created on project elements such as WBS

Different cost codes (SAP term: Cost Elements) represent different types of costs to be planned on a project;

Value of costs is calculated from quantities, labour rates, material prices, subcontracted services etc.

Original Budget created from Estimates can be locked and protected from any changes;

Comparison reports can be made to compare Actual vs Estimate

Original Budget will serve the basis for initial planning of Cost Estimated At Completion (EAC) and profitability planning

MaterialsLabourPlantServicesAdministrationFeesEtc.

Project Budget can be changed via Variations, where approved variations are included as budget variations and/or adjustments



ProjectVariations

BudgetEstimate

CustomerBilling

Estimate Build

CE 60100 „Cable“

CE 80100 „Excavator“

CE 90100 „Electrician“

ePM


Original Budget , EAC and CTC creation

Excel Spreadsheets

Estimation packages

Estimate TransferBudget

Transfer

Orig

. Bud

get

EAC CTC

Project Structure

Bill of ServicesStructure

Estimated Cost at Completion (EAC)initially created from Original Budget (or Cost Estimation)

Updated:Budget Variations (positive or negative)Actual Costs and Commitment (when exceed CTC amount)manually via ePM workbench (cost forecasting)

Cost To Complete (CTC)initially created from EAC

Updated:automatically reduced by Actual Costs and Commitmentmanually via ePM workbench (cost forecasting)automatically by Budget Variations (positive or negative)



ProjectVariations

BudgetEstimate

CustomerBilling

Estimate Build

ePM


Procurement Management

materials

Services

Procurement of Materials or sub‐contacted services directly to project

Project progress affected by procurement process

Procurement of materials to project stock

Automatic adjustments of Cost to Complete from raising commitments or actual costs (ePM workbench)

PurchaseRequisition

PurchaseOrder

Invoice

Good receiptor

Service Entry

EAC Actual Cost Commitments Cost To Complete

$1,000.0 $0.0 $0.0 $1000.0


$1,000.0 $0.0 $800.0 $200.0


$1,000.0 $500.0 $300.0 $200.0



ProjectVariationsProcurement Customer

Billing

BuildEstimate

ePM


Cost Forecasting: EAC and CTC

Cost Element EAC Actual Cost Commitments Cost To Complete

60000 Concrete work $3,000.0 $3,000.0 $0.0 $0.0

90100 Electrical labour $2,500.0 $1,000.0 $0.0 $1500.0

80100 Equipment installation

$8,000.0 $4,500.0 $2,500.0 $1,000.0

Total $13,500.0 $8,500.0 $2,500.0 $2500.0

EAC CTC EACCTC

EAC

CTC

January’09 February’09 March’09

ACAC

Automatically calculatedand manually adjustable in ePM workbench

Recalculated from Actual Costs, Commitments and manually adjusted CTC



ProjectVariations

CostForecasting

CustomerBilling

BuildEstimate

ePM


ePM: Cost To Complete Management

Automatic adjustment (reduction) of CTC from actual costs and commitments

Automatic adjustments of Estimated at Completion Costs from non‐planned actual costs and/or commitments

Manual Planning of Cost To Complete on Project Elements: WBS and/or Network activity in ePM workbench

Resource based CTC planning on Cost Elements on WBS or NWA

Operation based of CTC on Network activity based on quantity of work remained to complete

Period Sensitive CTC recalculation

Full history of EAC and CTC throughout project lifetime

Automatic Integration with Project Result Analysis



ProjectVariations

CostForecasting

CustomerBilling

BuildEstimate

Cost To Complete Forecasting using ePM workbench:

ePM


ePM: Project Variations: Costs and Revenue

Rev

enue

Status:CREATED

Cur

r. B

udge

t

EACCTC

Rev

enue

Cur

r. B

udge

t

EAC CTC

Rev

enue

Cur

r. B

udge

t

EAC CTC

Status:APPROVED

Status:ACCEPTED

Variationdocuments



ProjectVariationsProject

VariationsCustomerBilling

BuildEstimate

ePM


Project Variations: summary

Different types of variations

Cost and revenue planning within variation document

Cost assignment to various WBS or Network Activities within one variation document

Automatic update of project Current Budget , Cost To Complete and Estimate at Completion

Sales Document update with revenue adjustment from variation document

Variation status control, e.g. Pending, Approved

Full Integration with Project reporting



ProjectVariationsProject

VariationsCustomerBilling

BuildEstimate

ePM


Customer Billing

Progress billing on percentage basis

Billing plan can be created from projects milestones

materials

Services

Billing based on cost incurred on a project

Margins set for different cost types

Billing based on services performed

Actual services completed are billed based on quantity and rate agreed in a contract

Service Based Billing for Schedule of Rate projects

Resource Related Billing for Cost‐Plus project

Milestone Billing for Lump‐Sum project

Sales Contract

Sales Contract

Billing Request

Rev

enue



ProjectVariations

CustomerBilling

CustomerBilling

Invoice

BuildEstimate

ePM


ePM workbench



ProjectVariations

ePM workbench

CustomerBilling ePM


ePM: KPIs Management and Reporting



ProjectVariations

ePM workbench

CustomerBilling ePM

Consolidated Project KPIs

One stop‐shop for Project Managers to view project KPIs, perform cost forecasting, run drill down reports and more

Integrated visual exceptions in form of traffic lights

Powerful Reporting

Cost Forecasting : change tracking

Full history of project Costs Estimated at Completion, Cost to Complete, Commitments, Actual costs, Budget, Variation of costs and revenue values. See how your project was evolving during its lifecycle.

Report Project Variations and Budget changes

Report Original Project Estimation vs. Project Actual Costs at its completion


ePM: Cost Forecasting



ProjectVariations

ePM workbench

CustomerBilling ePM

Cost Forecasting

Perform manual forecast of Cost to Complete on project elements: WBS, Network Activities or PM/SC orders

Multi‐level Cost To Complete management utilizing “planning level” concept for multi‐tier project structures allowing integration of work orders (SC/PM and PP) into project cost forecasting

Enter Cost Forecast on Cost Elements or adjust network activity forecast work quantity;

Enter forecast cost to complete as a value only or enter as quantity multiplied by rates;

View your project financial position immediately after forecast is entered

Automatic reduction of CTC from actual costs and commitments.

Instant Integration of forecast results with Project Result Analysis


ePM: Variation Management



ProjectVariations

ePM workbench

CustomerBilling ePM

Variation Management

Plan Costs and Revenue within one variation document. Assign variation cost to multiple project elements (WBS, Network Activities and orders) within one variation document

Variation status control, e.g. Pending, Approved with automatic cost allocation to assigned Project elements: update project current budget and Cost To Complete depending on variation status

Sales Document update with revenue adjustment from variation document

Full Integration with Project cost forecasting and reporting


ePM – Extended Project Management

ePM highlights:

ePM is set of applications fully integrated with standard SAP ECC

ePM enhances SAP standard functionality providing cutting edge planning and reporting capabilities specific for Engineering and Construction industry

Enables Management of Project Estimates, Budgets, Cost To Complete, Estimated At Completion, Variations of Costs and Revenue

Present information in one easy to read screen for project managers to review their project KPIs, perform forecasting, execute drill down reports etc.

Provides data layout for comprehensive reporting and analysis

e‐PM is an add‐on that does not modify SAP standard core components and is fully integrated with BW, RPM for strategic planning and reporting.



ProjectVariations

ePM workbench

CustomerBilling ePM


SAP: Other Capabilities directly related to Construction

Full and real time integration with Financials and Cost Controlling

Detailed Project scheduling

Progress and Earned Value analysis

Capacity Planning and Workforce planning (planning of people on individual level)

Integrated Time sheets: integration with Human Resources, Payroll, Project Systems, Procurement and Service Management

Project Cash flow management

Powerful reporting tools on integrated data structure

…and more

ProjectVariations

CustomerBilling

CostForecasting

ProcurementBudget

EstimateProject

Structure


Facts about SAP for E&C

More then 350 SAP E&C customers worldwide (where more then 70% of customers under 1bn US turnover a year)

SAP is fully integrated system that covers most of your company key areas and processes providing best platform for your company development and growth

SAP software solutions present industry best practice developed by thousands of implementations and continues software improvement and industry specific enhancements

SAP has been developing its core ERP system and ECO software application add-on together with the world leading construction companies in the past 30 years.

SAP has the broadest fully integrated solution coverage based on the most advanced technological platform

SAP ECO customers increase revenue, reduce costs, improve operating income margin, reduce overhead expenses

SAP solutions bring the experiences of the world’s best operating companies and will help you integrate and streamline your company key business processes.

Presenter

Presentation Notes

Slide instruction for adjustment/localization: Region and country to localize


Thank you!

For more information visit Noveco Systems on

web: www.noveco.com.au

email: [email protected]

http://www.noveco.com.au/

mailto:[email protected]

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