not for distribution outside of mbp1 april 11, 2012
DESCRIPTION
Purpose of Training To increase team member awareness of what makes a project financially successful for MBP. To provide working definitions of terms normally encountered when discussing management of a project. To discuss how projects are priced. To discuss tips and indicators that can be monitored during a project to help make decisions to improve its performance. Not for Distribution Outside of MBP3TRANSCRIPT
Not for Distribution Outside of MBP 1
FISCAL MANAGEMENT OF A PROJECT
April 11, 2012
Fiscal Management of a Project
Purpose of Training Vocabulary Types of Projects Three Key Elements How Projects are Priced Performance Indicators
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Purpose of Training
To increase team member awareness of what makes a project financially successful for MBP.
To provide working definitions of terms normally encountered when discussing management of a project.
To discuss how projects are priced. To discuss tips and indicators that can be monitored during a
project to help make decisions to improve its performance.
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Vocabulary
Project Task Scope Budget Schedule Direct Labor Multiplier Scope creep
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Types of Projects
MBP Office vs. Client SiteDriven by where work is performedGenerally, MBP Site needs higher rates
Fixed Fee vs. T&M vs. T&M Not-To-ExceedFixed Fee = Lump Sum; Payment for the deliverable not the hoursT&M = Time and Materials T&M Not-To-Exceed; Favors client more than MBP
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Types of Projects
Fixed FeeUsed with clearly defined and manageable scope Increased risk for MBP relative to T&M More difficult to manage with longer term projects ○ Increased potential for scope creep
Increased potential reward for MBP relative to T&M○ Efficiency○ Labor Mix
Examples: Cost Estimate, Constructibility Review, Cx, Monthly QA services
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Types of Projects
T&M Profit is limited by ratesCost Plus is a subset of T&M Least risk for MBPUsed with less defined scopeUsed with level of effort tasksShould still have defined budgetExamples: CM, CPM Scheduling
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Types of Projects
T&M Not-To-ExceedWorst type of contract for MBPCaps revenues but not expensesNeeds clearly defined and manageable scopeRequires good communication with clientExamples: Claims, CM where client has strictly limited funding
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Three Key Elements
Scope Schedule Budget
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Three Key Elements
Scope – the services that MBP will performDefined in contract – refer to contract oftenCan be hard to manage Scope creep○ Client requests○ Internal MBP scope creep
Needs to be closely monitoredPromptly ask for change orders when scope changesDifferent types of projects have different issues○ Fixed Fee – direct impact on profitability of project○ T&M – scope creep may increase profitability○ T&M Not-To-Exceed – characteristics of both
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Three Key Elements
Schedule – when MBP’s services are deliveredDefined in contract – refer to contract oftenDeliverable driven vs. level of effortCan greatly impact project profitabilityDifferent types of projects have different issues○ Fixed Fee – hard and soft deadlines for deliverables; reduced schedule
may mean greater efficiency/profit○ T&M – usually level of effort or “pacing”; extended schedule may mean
greater revenue/profit; reduced schedule may mean lower profit○ T&M Not-To-Exceed – characteristics of both
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Three Key Elements
Budget – how MBP is paidMay be defined in contract or may need additional information○ T&M vs. Fixed Fee (similar to schedule of values)
MBP’s accounting based on hours and direct ratesGenerally managed by hoursHours available can change based on labor mix Impact of non-labor expensesDifferent types of projects have different issues○ Fixed Fee – efficiencies; labor mix; challenges of long term projects○ T&M – need to monitor client’s budgets along with MBP’s○ T&M Not-To-Exceed – characteristics of both
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How Projects are Priced
MBP Rate Build-upDirect Labor rate x multiplier to get billable rateEstimated hours for scope for each positionEstimated non-labor costsCompare build-up to market based analysis – is the value of our
services greater? Market Based
Rates dictated by client○ Determine if MBP can provide services for those rates
Overall budget available○ Develop scope using MBP build-up information
Based on past experience/competitive information
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Performance Indicators
Scope No one easy indicator for scope – must compare contract requirements to
services performed Small changes can add up quickly
Schedule Formal schedule tracking Milestones
Budget Hours expended vs. hours budgeted Amount of work left vs. amount of hours left Target direct labor multiplier vs. actual direct labor multiplier Target non-labor expenses vs. actual non-labor expenses Gross profit (does not consider indirects)
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QUESTIONS???
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