Knowing the best way to manage rate changes in Deltek Cobra during the project period of performance often presents a challenge to the EVM team. I’m frequently asked about this issue and how best to handle it. So, what should you do when finance publishes a new set of rates for the coming years that render your baseline rates obsolete?
Here we look at some of the options Deltek Cobra has to offer in support of rate changes, along with some best practice guidelines to consider when faced with this challenge.
My first comment concerning this question is that, in the spirit of good EV practice, you should only update the rates used by your forecast cost classes in Deltek Cobra. The baseline should not be changed unless a formal process of approval to do so has been agreed. Because rates are typically a contractual item, this process will likely involve customer agreement.
When new scope is being added, these baseline items can typically include the new rate structure and can be modeled in Deltek Cobra using alternative Budget classes; but more about that to follow.
Cobra Support for Alternate Rate Files
The good news is that Deltek Cobra has functionality that makes it possible to easily handle changes to rates for specific cost classes. The following example shows how to deal with a major rate change during your project period of performance.
Let’s say that finance have just announced a major increase in the General and Administrative (GANDA) rates as of October 1, 2013. Because the GANDA rate is shared by all labor resources in the project, this increase is going to impact the entire project and threatens to cause cost variances across the board. While you cannot ordinarily do anything about the current baseline rates without contract re-negotiations, you will certainly need to understand the impact this will have to your Estimate At Completion (EAC) figures. Such understanding will allow you to pre-emptively manage the impact and hopefully find ways to mitigate the unexpected increase in project cost.
Looking at an example of a rate table, we see that the rate for GANDA in our original rate file was pegged at 25.87% for October 1. 2013. Finance has revised this figure upwards to 31.35%, increasing by a further 4% for each of the remaining years of the period of performance.
The first step is to create a copy of the original rate file and make the rate adjustments in there. To do this, follow these steps:
Open the original rate file.
Go to the File menu and choose Save As…
In the Save As… dialog, enter a Name and Description for the new rate file and click OK.
In the new copy of the rate file, enter the new G&A rates in the Value column and then save the file.
The next step in this process is to assign this new rate file to the Cost Class that is currently being used to generate your EAC values.
This is done in the Project Information dialog’s Classes tab. The Forecast class is selected and the new rate file is entered in the Rate File field in the General tab at the bottom of the dialog. To do this just click on the ellipse button of the Rate File field and select the alternate rate file from the resulting dialog.
The Rate File field is normally blank before the alternative rate is entered: the class is using the Project Rate file until this field is populated. The Project Rate File is of course that which you selected in the Files tab of the Project Information dialog during project setup.
Also, to double check which forecast class is being used for your EACs, click on the Cost Sets tab and then select the EAC cost set to verify the included class.
Once you apply this new rate file to the Forecast class, you will need to perform a recalculation of the class using the Project | Recalc… option. This will cause the Estimate to Complete (ETCs) to recalculate for the Forecast class and update their values to reflect the new rates. Interestingly performing a Calculate Forecast doesn’t cause the EAC figure to change, you must do a Recalc.
In our example, the Titan II project suffered a nearly $1.9M increase to its EAC due to these G&A rate increases. Good thing this isn’t a real project. 🙂
The ability to assign an alternative rate file to any of Cobra’s cost classes is a powerful feature. It provides enormous flexibility for predicting and reporting the effects of rate changes as well as a host of other possibilities.
This article has focused mostly on the mechanics of Cobra to support a solution. As always, if you have any gems of wisdom to share about the issue of changing rates, either about the general process or procedure, feel free to drop us a line using the Contact Us box on this page. We’re always looking for ways to share the experiences of other EVM practitioners out in the field.
To read more Deltek Cobra articles click here