If you are progressing a P6 cost plus contract then you may want to become aware of settings in Primavera P6 that may help in tracking this type of contract.
Two common contracts types are the fixed price contract and the cost plus contract. The latter of these is becoming less common. A fixed price contract is nice for the customer because the subcontractor bears the burden of risk, although they may pay for it. In the fixed price contract the price remains fixed throughout the contract, and ongoing expenses do not exceed at completion without agreed change orders.
Despite this customer friendly fixed price contract, the uncertainty of the work may require a cost plus contract. In the cost plus contract costs can exceed the planned cost of the project. Primavera P6 Professional can progress these two contracts differently.
Primavera P6 Cost Plus Contracts
This article introduces some guidelines on how to set up and progress a schedule for a P6 cost plus contract. This is not meant to be definitive or a firm recommendation at all, just think of it as some tips to consider.
Below in Figure 1 is our demonstration Primavera P6 project.
Figure 1
This is a short pipe repair and improvement project. The complexity of the repair work necessitates a cost plus contract. Cost can exceed the budgeted cost of the project.
Schedulers should note the units percent complete type in the activity table. Primavera P6 Professional provides three different percent complete types for measuring progress: duration, physical, and units. The units percent complete type can be more accurate in situations where you have multiple resources that do not necessarily work at the same pace. You can specify different burn rates when implementing the units percent complete type.
The most important setting for the cost plus project is to set the duration type to fixed duration and units/time. This fixes durations and effort, and makes the budget the variable. We also set the calculation settings to ‘add actual to remaining’, Figure 2.
Figure 2
In Figure 3 we begin entering status for the first week.
Figure 3
The common laborer was scheduled to work 8-hours on the drain piping system activity, Figure 3. And the common laborers actuals for this activity automatically compute to 8-hours. However, it took the common laborer 10-hours to drain the pipe. In Figure 4 we set the common laborers actual units for draining the pipe to 10-hours.
Figure 4
Note the updated $590 at completion labor cost.
We continue to enter the week’s status. The common laborer’s and pipe fitter’s actuals on the remove damaged piping activity are updated to 10-hours, Figure 5.
Figure 5
Again, note the increased at completion labor cost, $1,490.
The install piping & couplings effort was scheduled to take 3-days. The first week’s status only has the install piping & couplings activity progressing 2-days or units % 66.67, Figure 6.
Figure 6
In Figure 7, both the common laborer and pipe fitter worked 20-hours the first week.
Figure 7
It is also helpful to note that the pipe and pipe coupling material costs were incurred the first week of work.
We move the data date forward one week and recalculate the schedule, Figure 8.
Figure 8
The install piping and couplings units % 71.43 comes from the increased common laborer and pipe fitter actuals, 10-hours each instead of 8-hours. The units % value computes from $2,980 divided by $4,172. We find that the labor cost values held through the schedule recalculation.
The project labor cost budget was $31,704. After one week the actual labor cost was $8,100 and the remaining labor cost was $24,616. The ‘at completion’ cost is the variable and sum of the actual labor cost and remaining labor cost or $32,716. So the project currently is projected to cost more than planned.
Summary
It can be useful to set the duration type to fixed duration and units/time when progressing work on a P6 cost plus contract. You also may want to set the calculation to add actual to remaining. Primavera P6 Professional sums the actual and remaining values to compute the at completion cost. In this way cost incurred exceeded the planned budget are calculated.