“Project Cost is the matter of Market and Revenue is the matter of Reality” however “Project Margin is the matter of Project Control”
Recently I got the opportunity to present our SAP solutions to a big civil contractor in Dubai. I was having a discussion around project management with its CEO. He was giving the insight about Dubai construction market and was sharing the challenges to manage the projects. He mentioned and I still remember, “Project cost is the matter of market but the revenue is the matter of reality”. I started my presentation after this discussion and theme
of my presentation was “controlling the project control” using SAP solution “SAP CPM (Commercial Project Management)…interesting theme, isn’t it!
Project control is the most important aspect of any project cycle, be it for contractor or for owner itself. It all starts with fixing the profit margin during the estimation. While creating the project control structure, key is to define the clear boundary of project control structure in terms of WBS (work breakdown structure & CBS (cost breakdown structure). This is going to set the platform about project controlling. During creation of the baseline budget for project, marriage of BoQ world and Project control structure world is important. Using SAP CPM, below is the screenshot for linking these two.
During execution of project, actual spend or even the commitment has to be consistently checked against the project budget. No one can avoid variations in project, whether due to internal or external factors. SAP CPM provides very comprehensive platform to first register these variations
and then the whole variation management, approvals and tracking of these variations which could impact project budget in some or most cases. Using SAP CPM, below is the screenshot for variation on the project.
Due to all these variations, project budget would be amended. Periodic project reporting, forecasting, earned value need to be generated. For forecasting, important is to know where we started (baseline budget), where we stand (actuals, commitments and approved variations so far) and then
the future risk and other foreseen / unforeseen changes. These will be managed in SAP CPM. Below is the screenshot from the system.
So in the end I told Mr. CEO, though “Project cost is the matter of market and revenue is the matter of reality” however “Project Margin is the matter of Project Control” which can be achieved by SAP CPM.