Primavera P6 has a standard process for creating and assigning labor, material, and equipment resources to compute activity cost. What if the activity is performed at a fixed price? Yes, there is a way to specify a fixed price activity cost in Primavera P6 Professional.
A popular procurement contract type is the fixed price contract. In this type of agreement the subcontractor agrees to perform an activity at a fixed price, regardless, of the actual labor, material, and/or equipment costs. In this way your company procurement department transfers the risk of exceeding the budget onto the subcontractor. Any unforeseen activity expenses must be paid by the subcontractor. Great! Well, how do we specify a fixed price activity cost in Primavera P6?
This article describes the process in Primavera P6 Professional of assigning a fixed price cost to an activity.
In our demonstration pipe repair and improvement project, Figure 1, we have assigned and computed the activity labor and material costs for most, but not all, activities.
Note, in particular, that we have no resource assignments for the Insulate Piping activity. Our procurement department has negotiated with a pipe insulation subcontractor to install the pipe insulation for a fixed price of $4000. This includes labor, material, and equipment costs. So we want to somehow specify the $4000 fixed price cost for the Insulate Piping activity.
Let’s first attempt to enter the cost of the Insulate Piping fixed price contract directly in the Budgeted Labor Cost column, Figure 2.
When we enter the $4000 cost of Insulate Piping we get the following message: cannot set cost because there is no price, Figure 3.
What’s the problem? Well, we have to specify a default price/unit for activities without resource assignments. This is done in the project tab, and the bottom details the calculations tab, Figure 4.
Set the default price/unit for activities without resource assignments to $1.00/h. Now let’s go back to our Insulate Piping activity and enter the $4000 fixed price cost in the Budgeted Labor Cost column. This time the $4000 cost value we enter sticks, Figure 5.
Well, now that we have entered a fixed price cost in the Budgeted Labor Cost column it would be appropriate to change the column heading. We want stakeholders viewing the schedule to know that the Budgeted Labor Cost column also includes fixed price costs. We use the columns feature to change the column heading to something more descriptive. Select the columns tool in the top layout tool group or choose View and Columns from the top drop down menu. This brings up the columns dialog, Figure 6.
Click the Edit Column button, Figure 6. In the appearing Edit Column dialog enter the following in the New Title field: “Budgeted Labor or Fixed Price Cost”, Figure 7.
Enter OK twice, and the resulting schedule displays as in Figure 8.
Note the column heading “Budgeted Labor or Fixed Price Cost”. Also, note that we added the additional Budgeted Total Cost column in Figure 8.
In addition to the normal process of creating and assigning resources to tasks you can specify a fixed price cost for an activity. The trick to accomplishing this is to set the project’s calculations default price per unit for activities without resource assignments to $1.00/h. Having done this it is normal practice to enter the fixed price activity cost directly into the Budgeted Labor Cost column and change the column heading, accordingly.
Another unique budgeted cost type is the Budgeted Expense Cost for project specific material costs. Here you want to assign a material expense to an activity without creating a global resource. Refer to the following blog for details on Assigning Expenses In Primavera P6