Cost Planning for a Project
You can plan costs for a project using the following two techniques:
Manual cost planning in the WBS
Automatic cost planning using networks and assigned orders
Manual Cost Planning
Manual cost planning in the WBS involves four methods:
Overall planning (structure-oriented planning) in its most basic form, where you enter costs for each WBS element. You can break down figures by fiscal year, if required.
Detailed planning of primary costs and activity inputs (cost element planning), which is cost element based and period based.
Unit costing, where you use a profile to enter quantities (materials, internal activities, external services, and variable items) for each WBS element. This type of planning is cost element based.
Easy Cost Planning, which offers an easy-to-use tool to plan costs by cost element in a quantity structure. You can use Execution Services to enter commitment and actual data for planned costs.
When using networks and activities, planned costs are automatically calculated based on the resource requirements identified for activities and operations. Resources provide a type of quantity structure that can be dynamically valued by the system.
Automatic Cost Planning
Automatic cost planning has the following advantages:
The resulting plan data can be copied to new projects.
If parts of the project are rescheduled, cost planning is shifted automatically with activities.
Costs for network activities are planned by cost element and period.
Overall Planning (Hierarchical Planning)
Structure-oriented cost planning is the simplest type of cost planning. It is a cost element-independent type of planning where you enter and display the plan values hierarchically.
Structure planning is neither by cost element nor is it period-specific. It does not depend on specific dates (overall planning value); it can be planned by fiscal year (annual planning).
It is suitable for a simple, first (rough) estimate of the costs for the project and its work packages.
Structure-Oriented Planning
Views to Display Values in Structure-Oriented Planning
You can use various views to display the different values in structure-oriented planning.
- Planned total:
This view covers all the costs planned annually for a WBS element, including the plan values for appended orders assigned to it. It is often used as a template for budgeting, and it shows the costs aggregated in superior WBS elements.
- Distributed or distributable:
These views are used to check the distribution of costs in the project structure. Negative values in the distributed view show that more funds were distributed to subordinate WBS elements than are available in the superior elements. The system generates an error message if you copy this planning to budgeting.
- Order/network:
This view displays the planned costs of appended orders or network activities assigned to the WBS elements.
- Cumulative and remainder:
These views are used to check the distribution of costs to years. The overall values in each WBS element must be more or the same as the total for the years. If not, the system generates an error message when you copy these values to the budget.
Cost Element Planning (Activity Input Planning)
Use cost planning by cost element (detailed planning) when more precise information is available. Cost element planning covers primary costs, activity inputs, and statistical key figures.
Cost element planning is independent of project scheduling. If a project or individual work package is rescheduled, you must reschedule the cost plan manually.
Only use cost planning by cost element and period for projects that you will not need to postpone.
Unit Costing
If information on source of supply, quantities, and prices is available, you can use unit costing to produce a cost plan per WBS element. The costs are planned not only at the cost element level, but also for each material and each internal activity and external service. Enter planned quantities instead of planned costs. The system uses master data to determine costs.
Variable items for direct primary cost planning with cost elements are also possible. Plan values are displayed at the cost element level. Unit costing is not period dependent.
You can use cost-element-based cost planning on an overall or annual basis, which evaluates existing data from, for example, material masters, activity types, cost centers, and purchasing info records.