Primavera P6 Enterprise Project Portfolio Management (EPPM) Release 16.1 has a systematic approach to describing and assigning activity labor, equipment, and material resources. What if the activity labor, equipment, and material costs are included in a lump sum expense? Yes, Primavera P6 EPPM R16.1 is able to define fixed price lump sum expenses.
A fixed price contract is a type of contract where payment for work done does not depend on resources used or time expended. The price is fixed regardless of effort expended. In this way the customer transfers the risk of cost overruns to the subcontractor; any expense above the specified fixed price is paid for by the subcontractor. In Primavera P6 EPPM it is possible to define fixed price costs for activities.
This article demonstrates the process in Primavera P6 EPPM Release 16.1 of assigning a firm fixed price (lump sum) costs to activities.
We have in Figure 1 our demonstration pipe and repair project.
The subcontractor has agreed to provide the labor, equipment, and material resources for each activity at a fixed price cost. So we want to assign each respective activity a lump sum cost.
The best way to do this in Primavera P6 EPPM is to define a cost data type activity User Defined Field (UDF), ‘fixed price cost’. This works well. Costs are summed at the Work Breakdown Structure (WBS) element level and for the entire project. The main negative of this approach is that the UDF fixed price cost value does not sum in the planned total cost calculation. The planned total cost field includes the planned labor cost, planned non-labor cost, planned material cost, and planned expense cost. A cost data type UDF is not included in the planned total cost summation.
What this means is that we will not be able to mix activity resource costs with activity fixed price costs. This is fine as long as all activities on the project are fixed price costs.
Let’s assume our entire project if fixed price and proceed by defining the fixed price UDF. Select Administer | Enterprise Data, Figure 2.
In the Enterprise Data dialog select Activities > Activity UDFs, Figure 3.
Select + Add. Type in the name ‘fixed price cost’, and set the data type to cost, Figure 4.
Now we have created our fixed price cost UDF.
Return to the projects tab activities page. Select customize view, and then columns. In the available columns find ‘fixed price cost’ in the Activity User Defined category, Figure 5.
We then have our schedule and fixed price cost column. To assign a cost to an activity simply select the respective cell and type in the amount, Figure 6.
It is possible in Primavera P6 EPPM to define a fixed price cost UDF and assign all respective activities a fixed price cost value. The main drawback to this cost loading approach is that the fixed price cost UDF is not included in the planned total cost field computation.
This is not an issue provided all activity costs in the schedule are fixed price (lump sum) values. And the fixed price UDF values rather nicely rollup to the WBS element and project levels to provide the planned fixed price cost for all deliverables and the entire project.