Project Cost Forecast 

Purpose

During the execution phase of the project, variances arise time and again between the original cost and process planning and the actual project. A shift in activity dates within the buffer times is sufficient to change project costs. Once the first actual costs have been incurred, you have to check the residual costs for accuracy and update them. This is the only for you, as the project manager, to get a basis for a realistic cost forecast for the overall project duration.

The cost forecast allows you to adjust cost planning to changing conditions. To get the current residual costs (estimate to completion), the system determines and valuates the residual activities based on the planned, forecast, and actual values in the network. The updated total costs (estimate at completion) result from the total of the costs that have already been incurred on the project (actual and commitment) and the updated residual costs.

The determined values are proposals that act as the basis for your cost forecast. 

You can carry out the cost forecast at any time for one or more projects. If required, you can also have several forecast versions at the same time in the system. You usually carry out the cost forecast at period-end closing.

Prerequisites

The system determines the updated residual costs only for activity-assigned networks, which are both additive and for planning purposes only. Preliminary planning networks are not taken into account.

The activity is assigned to a WBS element.

Process Flow

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       1.      Before accessing the cost forecast, you need to do the following:

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                            a.      Reschedule

No scheduling of activities takes place in the cost forecast. To take account of schedule variances when determining the updated residual costs, you have to carry out scheduling.

                            b.      Calculate overhead on actual and commitment values

To calculate the updated total costs, you have to separately carry out the overhead calculation on actual and commitment values. The system determines the planned overheads of the updated residual costs for activities in the cost forecast.

       2.      In the Project Execution area menu, choose Period-end Closing ®Forecast/Progress to access the cost forecast. You can carry out the cost forecast in individual or collective processing.

       3.      Based on planned, actual, and commitment values, the system determines the remaining activities in the network activities. The system takes into account:

¡        All the actual and commitment values in the project

¡        The planned values for network activities in CO version 0

¡        Forecast values from confirmations

It does not consider:

¡        Planned values for the WBS element

¡        Planned values for the preliminary planning networks

¡        Planned costs for material components in valuated project stock (planned for a later release)

The updated residual costs cannot be determined for simulation versions.

       4.      Based on the planned, commitment, and actual costs, the system determines the work that is still to be performed in the network activities and recalculates it. The system updates the determined value as updated residual costs on an accrual basis in a forecast version for:

¡        Internally processed activities

¡        Externally processed activities

¡        General cost activities

¡        Material components in collective stock

Value determination usually takes place at period-end closing on the first day of the current period. However, you can also specify a cutoff date for the cost forecast. The system uses the cutoff date to determine the cost distribution.

The determination of the residual costs takes place at the same time as the calculation of the planned values. The basis for the calculation of the residual costs is the valuation variant defined in the planned costing variant of the activity.

If an activity has been completely confirmed or has a final confirmation, the system sets the updated residual costs to zero.

       5.      In addition to the updated residual costs, the system copies the current actual and commitment values for the project from the database to the cost forecast. The system updates the commitment values from periods that are prior to the cutoff date period of the cost forecast to the cutoff date period in the forecast version. The default is the current period.

You can use forecast version 110 in the standard system. Forecast versions are CO versions with the exclusive use Forecast Costs. In the Implementation Guide (IMG) of the Project System, you can create other forecast versions.

The figure shows the values that the system updates to the forecast version.

Result

You can use the following values in the forecast version to evaluate data in the Project Information System:

·        Residual costs (estimate to completion)

·        Actual values at the time of the cost forecast

·        Commitment values at the time of the cost forecast

You can use the hierarchy reports and cost element reports in the Information System to evaluate the data.