PM World Journal Mapping ERP Chart of Accounts to BIM using

Vol. VII, Issue IV – April 2018 Omniclass coding & Activity Based Costing
www.pmworldjournal.net Featured Paper by Dr. Paul D. Giammalvo

Mapping ERP “Chart of Accounts” to Building Information Modeling Software Using

Omniclass Coding Structures and Activity Based Costing/Management-
A CONTRACTOR’S perspective

Dr. Paul D. Giammalvo, CDT, CCE, MScPM, MRICS

Introduction
As the world of construction becomes increasingly automated through the use of Building
Information Modeling (BIM), particularly during the early design phases, when the opportunity to
find errors/omissions is high and the cost to make corrections is low, it is apparent that those
responsible to execute the projects- the owners and contractors project managers, cost estimators,
schedulers, document controllers, project controllers et al have not yet caught up with our
architectural and engineering counterparts to ensure the work we do is consistent with,
complimentary to and supportive of the use of BIM and related evolving technological advances,
specifically, the use of Enterprise Resource Planning (ERP) systems.
The inherent problem with “flat file” or single dimension WBS/CBS structures lies with the fact that
not all stakeholders need to see the project deliverables shown in the same way. This led to the
evolution of multi-dimensional, “relational” or “object oriented” database coding structures.
The idea or concept of multi-dimensional Work Breakdown Structures (WBS) or Cost Breakdown
Structures (CBS) is not new. After World War II, building construction specifications began to
expand, as more advanced materials and choices became available.1 The Construction Specifications
Institute (CSI)2 was founded in 1948 and began to address the organization of specifications using a
numbering system like the Dewey Decimal System used by libraries. The purpose or objective of this
effort was to ensure that a specification appeared once and only once in any set of contract
documents, thus helping to eliminate redundancy or conflicting information in the contract
documents, and thus reducing claims and disputes.

1
Construction Specifications Institute History (n.d.) http://www.lacsi.org/index.php?option=com_content&view=article&id=52&Itemid=59
2
http://en.wikipedia.org/wiki/Construction_Specifications_Institute

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www.pmworldjournal.net Featured Paper by Dr. Paul D. Giammalvo

In 1963, CSI published a format for construction specifications, with 16 major divisions of work.
These 16 divisions were built around work packages normally and customarily sub-contracted by
prime contractors to specialty sub-contractors (e.g., Site work, Concrete, HVAC, Electrical) or prime
contractors would supply their own workforces (e.g., general building, masonry, finishes, doors, and
windows).

This need for multiple ways to sort or view work and their associated costs was reaffirmed by the
Norwegian government, who, back in 1992, initiated a project to STANDARDIZE the Cost Coding
structures coming from their production sharing contractors drilling for oil in the North Sea. The
STANDARIZED Cost Coding structure is known a “Norsok Z-014” 3 has withstood the test of time and
is still in use after 26+ years undergoing 2 revisions or updates.
In the early- to mid-1970’s, around the same period that MasterFormat was evolving within CSI, the
U.S. General Services Administration (GSA), in conjunction with the U.S.-based American Institute of
Architects (AIA), commissioned Hanscomb Associates, Inc. to create a standardized construction
cost-coding structure, originally named ‘Mastercosts.’ The GSA and AIA renamed this ‘UniFormat,
which enabled capture and summation of costs by building components. ASTM 4
International began developing a standard for classifying building elements (1989), based on
UNIFORMAT, and renamed to UNIFORMAT II.5
When CSI’s “Masterformat” and ASTM’s “Uniformat” were combined, this provided us with a two-
dimensional sort capability used to “view” or see our project deliverables.

The OmniClass Construction Classification System (known as OmniClass or OCCS) originated around
2000 as a product of the Construction Specifications Institute. (CSI) It incorporates other extant
systems currently in use as the basis of many of its Tables – MasterFormat™ for work results,
UniFormat for elements, and EPIC (Electronic Product Information Cooperation) for structuring
products6

The OmniClass Construction Classification System (OmniClass or OCCS) is a means of organizing and
retrieving information specifically designed for the construction industry. OmniClass is useful for
many applications for Building Information Modeling (BIM), from organizing reports and object
libraries to providing a way to roll up or drill down through data to get the information that meets
your needs. OmniClass draws from other extant systems in use to form the basis of its Tables

3
Norsok Z-014 (2002 version) http://www.standard.no/pagefiles/951/z-014.pdf
4
http://en.wikipedia.org/wiki/ASTM_International
5
Charette, R. P. Uniformat II, retrieved from: uniformat.com/index.php/using-uniformat-ii/building-design-management#astme1557
6
From “About Omniclass” (n.d.) http://www.omniclass.org/about/

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wherever possible — MasterFormat™ for work results, UniFormat™ for elements, and EPIC
(Electronic Product Information Cooperation) for products.

OmniClass is designed to provide a standardized basis for classifying information created and used
by the North American architectural, engineering and construction (AEC) industry, throughout the
full facility life cycle from conception to demolition or reuse, and encompassing all the different
types of construction that make up the built environment. OmniClass is intended to be the means
for organizing, sorting, and retrieving information and deriving relational computer applications.

OmniClass consists of 15 hierarchical tables, each of which represents a different facet of

construction information. Each table can be used independently to classify information, or entries
or it can be combined with entries on other tables to classify more complex subjects. This is the
basis for the use of multi-dimensional Work and Cost Breakdown Structures.

OmniClass provides a basic structure of information about construction grouped into three primary
categories composing the process model: construction resources, construction processes, and
construction results. These are then divided into 15 suggested Tables for organizing construction
information. The OmniClass Tables correspond to this arrangement of information:

 Tables 11-22 to organize construction results

 Tables 23, 33, 34, and 35, and to a lesser extent 36 and 41, to organize construction resources,
and
 Tables 31 and 32 to classify construction processes, including the phases of construction entity
life cycles.

The framework for object-oriented information implements the basic approach of ISO 12006-2, but
uses entries on these tables as defining points (or characteristics) for object-oriented information
organization. The ‘object-oriented’ approach describes the characteristics of things without
imparting a grouping preference or hierarchical order.

In the object-oriented approach, the object is central, acting as a basis for characteristics or
properties that describe it. An object thus described can then be grouped with similar objects using
a classification arrangement like OmniClass. The framework established by ISO/PAS 12006-3 will
enable computers to store and relate data in an object-oriented manner, while OmniClass Tables
provide humans with a variety of viewpoints of that data and is a useful approach to establishing
relationships between objects.

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Having provided a brief over-view of the history and evolution of multi-dimensional (relational or
object oriented) coding structures, this sets the stage for this paper which will attempt to provide
answers to the following question:
1) Is there a way to “map” the coding structures from the Omniclass Tables to today’s ERP
systems, specifically to the “Cost of Goods Sold” and “Revenue Recognition” sections?
The hypothesis being that by using Activity Based Costing at a minimum of Level 3 and preferably
Level 4 of the CPM schedule7 that it is not only possible but relatively easy to accomplish this
objective.

Definitions
Before starting, we need to ensure that everyone knows and understands the terminology used in
this paper.
Enterprise resource planning (ERP) 8 is a process by which a company (often a manufacturer)
manages and integrates the important parts of its business. An ERP management
information system integrates areas such as planning, purchasing, inventory, sales,
marketing, finance and human resources.
Direct Cost9- An expense that can be traced directly to (or identified with) a specific cost
center or cost object such as a department, process, product or ACTIVITY. Direct costs (such
as for labor, material, fuel or power) vary with the rate of output but are uniform for each
unit of production, and are usually under the control and responsibility of the department
manager. As a rule, most costs are fixed in the short run and variable in the long run. Also
called direct expense, on cost, variable cost, or variable expense, they are grouped under
variable costs.
Indirect Costs10-Overhead not directly associated (such as office expenses, telephone
expenses, R&D) with the production of goods or services. In the context of project
management, there are two types, Project Indirect (Overhead) Costs and Home Office
Overhead Costs.

7
To see more on the different levels of CPM schedule, refer to GPCCaR Module 7.1 Figure 8
http://www.planningplanet.com/guild/gpccar/introduction-to-managing-planning-and-scheduling
8
Enterprise Resource Planning (ERP) - Investopedia https://www.investopedia.com/terms/e/erp.asp
9
Direct Cost- http://www.businessdictionary.com/definition/direct-cost.html
10
Indirect Costs-: http://www.businessdictionary.com/definition/indirect-overhead-cost.html

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Activity Based Management (ABM)11- Approach to management that aims to maximize the
value adding activities while minimizing or eliminating non-value adding activities. The
overall objective of ABM is to improve efficiencies and effectiveness of an organization in
securing its markets. It draws on activity based-costing (ABC) as its major source of
information and focuses on (1) reducing costs, (2) creating performance measures, (3)
improving cashflow and quality and, (4) producing enhanced value products.
Activity Based Costing (ABC)12- Cost accounting approach concerned with matching costs
with activities (called cost drivers) that cause those costs. It is a more sophisticated kind of
absorption-costing and replaces labor based costing system. ABC states that (1) products
consume activities, (2) it is the activities (and not the products) that consume resources, (3)
activities are the cost drivers, and (4) that activities are not necessarily based on the volume
of production. Instead of allocating costs to cost centers (such as manufacturing, marketing,
finance), ABC allocates direct and indirect costs to activities such as processing an order,
attending to a customer complaint, setting up a machine or constructing a building.
A subset of activity based management (ABM), it enables management to better understand
(a) how and where the firm makes a profit, (b) indicates where money is being spent and (c)
which areas have the greatest potential for cost reduction. Developed by professors Robert
Kaplan and Robin Cooper of Harvard University in late 1980's. Most of the basis for APPLIED
ABM/ABC is based on the published work of Mr. Gary Cokins.
https://www.linkedin.com/in/garycokins/
Generally Accepted Accounting Principles (GAAP) 13- Authoritative rules, practices, and
conventions meant to provide both broad guidelines and detailed procedures for preparing
financial statements and handling specific accounting situations. Generally accepted
accounting principles (GAAP) provide objective standards for judging and comparing
financial data and its presentation, and limit the directors' freedom in showing an unrealistic
picture through creative accounting. An auditor must certify that the provisions of GAAP
have been followed in reporting an organization's financial data in order it to be accepted by
investors, lenders, and tax authorities.
Most developed countries (Canada, India, Japan, UK, US, etc.) have their own GAAP which
may differ from those of others in minor or major details.
A “Contractor” (or Sub-Contractor) organization14- A business entity that “initiates, plans,
executes, controls and closes” projects where the project itself is a PROFIT CENTER- that is, a

11
Activity Based Management: http://www.businessdictionary.com/definition/activity-based-management-ABM.html
12
Activity Based Costing: http://www.businessdictionary.com/definition/activity-based-costing-ABC.html
13
GAAP Standards: http://www.businessdictionary.com/definition/generally-accepted-accounting-principles-GAAP.html
14
By Author

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www.pmworldjournal.net Featured Paper by Dr. Paul D. Giammalvo

contractor or sub-contractor is in the business of assuming the risk of being able to “initiate,
plan, execute, control and close” the project in exchange for a known or committed cost, as
the organizations primary business objective. This is the target audience of this paper.

An “Owner” organization15- A business, governmental or other entity that “initiates, plans,

executes, controls and closes” projects where the project itself is a COST or INVESTMENT
CENTER- that is, for an “OWNER” the project is an EXPENSE and the value of undertaking any
project derives not from the project but from the PRODUCT the project was undertaken to
create. Usually this “product” takes the form of some type of ASSET. (Financial, Human,
Physical, Informational or Intangible) The model described in this paper is not appropriate
for most owners.

Problem Definition
The problem is straight forward to explain. We have two generally accepted STANDARDIZED sets of
coding structures, one of which has been tested and proven globally to work for the accounting
sector and the other which has been tested and proven to work for the “built environment” or the
architectural, engineering and construction (AEC) sectors using 4D BIM, using the Omniclass coding
structure to enable exchange of data to the CPM scheduling software, and 5D BIM, using the
Omniclass coding structure to enable exchange of data to the Cost Estimating software packages.
So how to get these two standard sets of codes to be able to exchange cost, resource, scheduling
and other important data? The hypothesis being that using Activity Based Management and Activity
Based Costing, is the simplest and most logical approach to enable data exchanges in both
directions- from the 3d, 4D and 5D BIM software to the ERP systems and then back again.

15
By Author

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Figure 1- Graphical Illustration of the Problem

What is “Activity Based Management”?

Activity Based Management is nothing more than an alternate way to filter, sort, organize and show
your cost data that makes sense to any/all stakeholders who are responsible to “initiate, plan,
execute, control and/or close” projects. Explained another way, it is exactly the same cost and
resource data that we find in most accounting software, but through the use of specific activity
coding structures, enables us to see the information presented in a way that makes the most sense
to those who have to make decisions about how the project is going to be run, or more importantly,
once the project has started, what changes or “course corrections” need to be made in order to
finish the project “on time, within budget, and in substantial conformance to the contractual
requirements defined by the Contractual Work Breakdown Structure (CWBS).

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Figure 2- Graphical Illustration of the ABM/ABC System works

As we can see from Figure 2 above, Activity Based Management is NOT a separate accounting
system from the one most organizations already use. All it requires are some additional fields and
the associated coding structures to be able to “filter” and “sort” the cost data in a way that enables
those responsible for projects to be able to make sound business decisions about their projects.
As an example, in Figure 3, we can see in Scenario 1, which is coming from the General Ledger view
of what is happening, that this project is in trouble. The planned costs to date were $41,000, and
the actual charged costs to date are $51,800 leaving us with a $10,300 cost OVER RUN. But while
we can clearly see that the project is in serious trouble running 25% over budget, what can we NOT
find out from Scenario 1?
While we see that “Salaries” with a $6,000 over-run make up close to 60% of the problem, what we
do not know is WHOSE salaries is it that is blowing the budget?

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Which is why we need to move to the second scenario. In Scenario 2 we can see the same values-
The planned costs to date were $41,000, and the actual charged costs to date are $51,800 leaving
us with a $10,300 cost OVER RUN. But by being able to sort the cost information not as the
accountants need to see it but as the project managers, project team and other key stakeholders
need to see the problem, only by switching to the Activity Based Management view can we now use
this data to make informed and rational decisions how to fix or otherwise address the problem.

Figure 3- Illustrating the differences between the General Ledger and Activity Based Management Views16

In this view, we can now see that installing the Feeder Lines, with a cost over-run of $3,000 and
Preparing the Site Design with a cost over-run of $2,500, represent those activities we need to focus
on to find out why the salaries or other expenses are so much higher than was originally estimated.

16
Adapted from “Implementing Activity Based Costing” n.d. IMA and Gary Cokins https://goo.gl/t39BzG

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But this not only shows us the BAD news, but also the good. We can see from this same data that
we are making money on Surveying the Site.

Brief Explanation of the GAAP Accounting “Chart of Account” Titles & Codes
In Figure 4, we are showing the typical titles and coding structures, known as the “Chart of Accounts”
that accountants all over the world have largely agreed to and tend to follow. 17

Figure 4- GAAP “Chart of Accounts” Showing Project Related Accounts18

17
For more on this topic go HERE http://www.investinganswers.com/financial-dictionary/financial-statement-
analysis/generally-accepted-accounting-principles-gaap-992
18
Adapted from “What is GAAP” (n.d.) http://www.accounting.com/resources/gaap/

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In the context of project management, at least from the perspective of the CONTRACTOR, the three
major Sections that projects impact are:
1) Account Level 4- Revenues: From a PROJECT perspective, Revenues are called Earned Value
or Budgeted Cost of Work Performed (BCWP) and are recognized on a project when the
work is physically completed. However, from an ACCOUNTING perspective, the Revenue is
not recognized until the work has been billed and the client has paid the bill. This results in
time lags between the time the work has physically been completed and the time that
accounting recognizes the Earned Value or BCWP as Revenue that need to be reconciled.

2) Account Level 5.1.1.1- Cost of Goods Sold (CoGS). Sometimes referred to as “Above the
Line” costs. This includes not only the project DIRECT COSTS, such as concrete, steel, wood
etc. PLUS the labor to install or fabricate the required deliverables for each activity PLUS
both the small hand tools like drills and electric saws or jackhammers which are normally
EXPENSED but also the large pieces of equipment like Bull Dozers, Excavators and Cranes,
which, because their useful lives are normally longer than the project life, are depreciated
and only the operating, maintenance and depreciated costs are charged against the project,
along with the INDIRECT COSTS which cover those cost items like the Project Manager and
Project Engineer’s salaries, Safety, QA/QC, On Site Trailers, Trucks, Telephone, Electricity etc.
that are required for the project under the General Condition. Items that are necessary for
the project but are not chargeable to any single activity.

3) Account Level 5.1.2- General, Sales and Administration Expenses. These items are a “cost of
doing business” which accrue regardless of how many projects the company has or doesn’t
have. This cost category are also known as “Home Office Overhead” or “Below the Line”
costs and consists of the home office facilities, salaries and bonuses for the CEO, Secretaries,
Accounting and Finance departments, Cost Estimators bidding on new work etc. This
amount is normally charged against the project as a flat or pro rata percentage based on the
monetary value. While this is a common practice it probably is not the most accurate way to
allocate home office overhead as not all projects require the same level of home office
support.

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Brief Explanation of the Most Relevant and Useful Omniclass Codes for
Contractors

As shown in Figure 5, there are 4 Omniclass tables which are relevant for use by the Contractors and
Sub-Contractors on the site.
1) Table 22- Work Results. This table defines the DELIVERABLES required under or by the
contract documents. This is normally known as the Contractual Work Breakdown Structure
and defines what the Contractor must deliver or create to have successfully completed the
project. While the WBS defines WHAT needs to be done, it is the next level deeper, the Cost
and Resource Loaded CPM schedule, which tells us HOW (what is the sequence of activities
or the work flow) as well as WHEN the work will be done, which is established by the early
and late start and finish dates, calculated by the forward and backwards pass.

2) Table 23- Products. This table contains almost 7,000 “products” used in the
construction process. These can be broken down into a more refined set of codes:

a. Products are those “commercial off the shelf” items that you can purchase at Home
Depot or Ludlow’s or your local Ace Hardware store. Paints, lumber, insulation,
plumbing pipes, electrical wire etc.
Fabricated Products are a somewhat unique class of product. These are NOT
“commercial off the shelf” items but items that have been designed specifically for a
single project and then fabricated either on or off site. Examples include laminated
panels and structural beams, cabinetry, digesters, switch gear and pre-fabricated
structures like pre-engineered building or communications or power transmission
towers.

b. Consumable products. Consumables are usually commercial off the shelf products
and can be expensed either as DIRECT COSTS (if they are going to stay with the
project when completed) or INDIRECT COSTS if they are consumed for General
Conditions activities. Examples of direct consumables include nails, screws and
fasteners, caulking and other sealing compounds, joint tape, fittings, elbows and
couplers. Examples of INDIRECT CONSUMABLE costs are paper for the office
photocopy machine, gloves and personal safety equipment, coffee for the office
coffee machine etc. What makes these a separate class is these items are not usually
charged to any activity but just purchased and then consumed as required and
replenished when they run low. When doing the cost estimate, these items are

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usually budgeted using a percentage of the total cost or some other factored
estimating model.

c. Fixtures are a unique class of product used in construction because in many

contracts, the actual fixture (i.e. lights or bathroom) are not specified but the
contractor has to provide an ALLOWANCE that the owner can use to select specific
lighting or bathroom fixtures at the time they are to be installed.

d. Bulk Products. While these are primarily covered in Table 41 Materials, there are
some such as Loam or Topsoil which are purchased by the truckload and may be
allocated

Figure 5- Showing the 15 Omniclass Tables and the 4 Used by Contractor’s and Sub-Contractors19

19
Adapted from Omniclass Tables (n.d.) http://www.omniclass.org/

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3) Table 35- Tools. While this table may appear to be self-explanatory, there are two types of
tools to consider:

a. Expensed Tools- these are tools like drills, electric jackhammers, circular saws,
grinders and other hand tools. Normally these are charged to the project and are
considered to have no residual value at the end of the project. The cost of these
tools is normally included in cost of the standard crews who will be using them. Any
tool, regardless of size that is LEASED or RENTED is always an EXPENSE, either Direct
or Indirect

b. Depreciated Tools- these are tools whose useful life extends beyond any single
project and that are owned by the company. (Not leased or rented) Examples of
these tools are Bull Dozers, Cranes, Excavators, Large Welding machines. As the
depreciation expense can have a major impact for any company who owns their own
“heavy equipment” it is best to carry the depreciation as a below the line cost and
have an internal lease or rental rate to the projects that includes the depreciation
expense.

4) Table 41- Materials. This table contains a list of bulk materials, which are normally
purchased by the truck, trailer, tank or rail car volumes. These would most likely be used if a
contractor has set up their own concrete batch plant or asphalt plant rather than being used
for most construction sites.

What does the Matrix between the WBS and CBS look like?
The matrix formed when we match the WBS and the CBS looks no different than when we combine
the WBS and the OBS to form the Work Packages or Control Accounts. The WBS (Table 22) is listed
on the Y Axis and the Table 23, Products, Table 35, Tools and Table 41, Materials are shown on the
X Axis, resulting in a matrix that looks like what is shown in Figure 6.

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Figure 6- Conceptual Illustration showing the relationship between Activities from Table 22 and Costs from
Tables 23, 35 and 41 PLUS Labor coming from the Cost Estimating Database (Commercial or In-House)

Just as with the Work Package or Control Account process, (for more on this, see Guild of Project
Controls Module 3.5 http://www.planningplanet.com/guild/gpccar/creating-control-accounts) the
intersection between the Activities and the Products, Tools and Materials give us a PARTIALLY cost
loaded Activity, which is essential for use in Earned Value. But what about the LABOR component?
To find that information we need to look to either an in-house or commercial cost estimating
database, which has adopted CSI Uniformat (Omniclass Table 21) and/or CSI Masterformat
(Omniclass Table 22) as the cost estimating coding structure.
To see a more realistic explanation of this process, let us take an example to “Form, Pour and Strip”
4 25’ long, 5 KIP Cast In Place Concrete Beams, one on each of the North, East, South and West walls.
This is an example of a composite estimate that can easily be applied to any repetitive process.
To explain what we are looking at in Figure 7, this data was taken from the 2018 RS Means
“Facilities Construction Costs” pages 1400 and 99.

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1) The LABOR component of the activity is based on STANDARDIZED CREWS. In this example we
are using Crew C-14A, which consists of 5 Construction Workers and 1 Foreman, two pieces
of equipment, one Expensed and one Depreciable.
2) This is the total number of people on this crew (25 people) X 8 hours per day = 200-person
hours
3) This column provides the base pay hourly rate for a single worker.
4) This column shows us the extended value calculated by multiplying the # of each trades
people X 8-hour day X the hourly rate for that trade giving us a DAILY cost of each trade.
5) In Column 5, we have the total BARE COSTS for Labor and Equipment SUMMED
6) While in Column 6, we have the MARKED-UP HOURLY rate as shown in Column 4, to cover
the additional costs of both Project and Home Office Overhead plus a Profit.
7) Column 7 contains the Marked-Up hourly rate shown in Column 6 for each tradesman X 8
hour day, gives us the daily fee that the contractor has to charge if he/she expects to cover
the project and home office overhead and make a profit on his/her direct or indirect labor.

Figure 7- RS Means Table showing how the costs of STANDARDIZED CREWS are calculated.20

8) In Column 8, we can see the SUM of both Labor and Equipment including the Mark-Ups. This
is the daily BILLING RATE for this crew the Contractor would use when creating the cost
estimate.

20
RS Means 2018 Facilities Cost Data https://www.rsmeans.com/products/books/2018-cost-data-books/2018-facilities-
construction-costs-book.aspx Page 1400

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9) Item 9 is calculated by taking the 200 total labor hours shown in Item 2, and divide it into the
Total Daily BARE COST shown in 5, it tells us that the BARE COST of this crew is $50.54 per
hour.
10) Item 10 shows us the total BARE COSTS of ONLY the equipment ($25.60 + $881.60) divided
by 200 crew hours (2) which gives us an hourly BARE COST for the equipment of $4.54.
11) This is the sum of both labor and equipment BARE COSTS per hour worked for Column 9.
12) When we take the 200 total labor hours shown in 2 and divide it into the Total Daily Marked
Up Costs shown in 8, it tells us that the Marked-Up BILLING RATE of this crew is $81.64 per
hour worked.
13) Item 13 shows us the total MARKED UP COSTS of ONLY the equipment ($28.16 + $969.76)
divided by 200 crew hours (2) which gives us an hourly MARKED UP COST for the equipment
of $4.99.
14) Lastly, the value shown under 14 is the Marked-Up cost of both Labor and Equipment per
crew hour worked
With single digit EBIT profit margins for most contractors, capturing this information in real time
not only gives us a competitive advantage over other bidders as we are able to use today’s
productivity as the basis to bid tomorrows work, more importantly, in the event of a CLAIM or
DISPUTE, these records showing both per unit and per hour costs become indispensable when
preparing for arbitration or litigation.

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How do we INTEGRATE the Labor, Materials & Equipment into each ACTIVITY?

Figure 8- Explanation of the Combined/Integrated Omniclass Table 22 with the RS Means Database Codes

Before we get into any real examples, we need to fully understand the development of the
Standardized Coding Structures.

1) This refers to Omniclass Table 22 which is Work Results. This is the basis for the
Standardized WBS.
2) This is Level 1 of Omniclass Table 22 WBS. 03 is always Concrete.
3) This is Level 2 of Omniclass Table 22 WBS. 03 30 is always Cast in Place Concrete
4) This is Level 3 of the Omniclass Table22 WBS. 03 30 53 is always Miscellaneous Cast in Place
Concrete
5) This is Level 4 of the WBS that marks the END of Omniclass Table 22 and indicates where the
commercial or in-house coding structure takes over going to a greater level of detail. Level 4
is unique to RS Means. Level 4- 03 30 53.40 is always Concrete in Place

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6) This is Level 5 of the WBS 03 30 53.40.350 is always Form Pour & Strip 5 KIP Beams, 25”. By
adding in the Unique Activity ID we can now go even one level deeper, Level 6 where we can
differentiate between the identical beams for each of the 4 walls- N, S, E and W.
7) This indicates a complete WORK PACKAGE consisting of 4 identical activities, located in
different parts of the structure.
If we take the same breakdown structure shown above and now add real numbers to the example
this is what it looks like-

Figure 9- RS Means Table showing how to calculate the Cost of each of the 4 activities.21

To explain what is shown in Figure 8, below is a brief explanation of each column and number used
in the cost estimate.

1) This is Level 1 of Omniclass Table 22 WBS. 03 is always Concrete.

2) This is Level 2 of Omniclass Table 22 WBS. 03 30 is always Cast in Place Concrete
3) This is Level 3 of the Omniclass Table22 WBS. 03 30 53 is always Miscellaneous Cast in Place
Concrete
4) This is Level 4 showing the Omniclass Table 22 Codes plus the RS Means Line Items. 03 30
53.40 is always Concrete in Place
5) This is Level 5 showing the combination of Omniclass Table 22 PLUS the RS Means Line Item
03 30 53.40.350 is always Form Pour & Strip 5 KIP Beams, 25”. By adding in the Unique

21
RS Means 2018 Facilities Cost Data https://www.rsmeans.com/products/books/2018-cost-data-books/2018-facilities-
construction-costs-book.aspx Page 99

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Activity ID we can now go one level deeper, Level 6 where we can differentiate between the
identical beams for each of the 4 walls- N, S, E and W.
6) STANDARDIZED Crew C-14A (see Figure 7 to see what this Crew is comprised of)
7) Daily Output (average) that Crew C-14A produces for this type of activity per Cubic Yard of
Concrete.
8) Average number of crew-hours per cubic yard of concrete for this type of activity.
(Productivity)
9) Unit of Measure- In this case, Cubic Yards of Concrete in place including the forming,
placement of reinforcing steel, placing and finishing of the concrete and stripping of the
forms.
10) Direct Material Costs per Unit of Measure (CY)
11) Direct Labor Costs per Unit of Measure (CY)
12) Direct Equipment Costs per Unit of Measure (CY)
13) Summation of the Direct Material, Labor and Equipment costs
14) Marked-Up costs of the Direct Costs for Material, Labor and Equipment, including Project
and Home Office Indirect (Overhead) costs and Profit.

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What does this cost data look like using Activity Based Costing (ABC)?

Figure 10- Adapting the Information from the Cost Estimating Database into Activity Based Costing Format22

When we convert the information contained in the Cost Estimating Database (in this example, using
the cost data from RS Means as shown in Figures 7 and 9 above) into the Activity Based Costing
format, this is what it looks like:

22
Adapted from “Implementing Activity Based Costing” (n.d.) IMA and Gary Cokins https://goo.gl/t39BzG plus RS Means
2018 Facilities Construction Costs https://www.rsmeans.com/products/books/2018-cost-data-books/2018-facilities-
construction-costs-book.aspx Page 99

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1) Activity Name and Unique ID- As the name implies, Activity Based Costing (ABC) and
ultimately, Activity Based Management (ABM) everything starts with the Activity. In this
example, from the Bill of Materials (BoM) or Bill of Quantities (BoQ), we know that this
activity requires 200 Cubic Yards (CY) of concrete. Dividing the 200 CY by the PRODUCTIVITY
of 18.55 CY per day for Crew C-14A, indicates that this activity will take 10.78 days, rounded
to 11 days duration. This is an AVERAGE or P50 value meaning it does not have any risk
contingency or buffer built in. (For more information on this topic, reference Guild of Project
Controls Compendium and Reference, Modules 7
http://www.planningplanet.com/guild/gpccar/introduction-to-managing-planning-and-
scheduling and 8 http://www.planningplanet.com/guild/gpccar/introduction-to-managing-
cost-estimating-budgeting .
2) Resource Drivers- This tells us what we need for resources to execute this activity and how
we are going to do it.
3) In this case, it is Labor, (Crew C-14A), Materials (From either Omniclass Table 23 or 41) and
Equipment (From Omniclass Table 35)
4) We now break the costs into more detailed categories, whether they are DIRECT costs or
PROJECT or HOME OFFICE INDIRECT or OVERHEAD costs. This is the level of detail that is
necessary for the ERP systems to properly and appropriately categorize the costs using
the GAAP Chart of Accounts for tax accounting and financial reporting purposes.
5) We now break the costs into more detailed categories, whether they are DIRECT costs or
PROJECT or HOME OFFICE INDIRECT or OVERHEAD costs. This is the level of detail that is
necessary for the ERP systems to properly and appropriately categorize the costs using
the GAAP Chart of Accounts for tax accounting and financial reporting purposes.
6) By multiplying the estimated quantities from the BoM/BoQ X the DIRECT costs yield the
CONTRACTORS COSTS. This is the number provided to the Project Manager that he/she is
expected to meet or beat. When using Earned Value Management, performance against this
target is measured by Schedule Variance (SV), Cost Variance (CV), Cost Performance Index
(CPI) and Schedule Performance Index (SPI) (For more on this topic, reference Guild of
Project Controls Compendium and Reference, Module 9
http://www.planningplanet.com/guild/gpccar/introduction-to-managing-project-progress )
7) Once the work has started, by capturing then dividing the ACTUAL UNITS IN PLACE into the
ACTUAL COSTS of WORK PERFORMED (Actual Units/ACWP) provides the CONTRACTOR
with the means to continuously update the cost estimating database, using todays
productivity and cost data as the basis to bid tomorrows work.
8) From the contractor’s perspective, the “Trigger” to each activity is either the start or
completion of the predecessor activity, depending on the logic chosen.
9) One of the most important tenets of project management from the CONTRACTORS
perspective is “You cannot manage a project by managing the money”. To effectively

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manage any project, manage the WORK FLOW (the activities) and using ABC/ABM, the
“money will follow the work” (both on the cost and the revenue side of the equation)
10) Lastly, the risks from the CONTRACTORS perspective is that his/her Actual Cost of Work
Performed (ACWP) is HIGHER than what was estimated and/or that the PRODUCTIVITY was
lower, resulting in the activity taking longer than planned and/or costing more than was
estimated. However, by managing both in real time, it is possible to know well in advance of
potential problems, thus enabling the project manager to make appropriate corrective or
remedial actions.

Connecting the Dots on Capturing & Exchanging Cost and Revenue Data
As the purpose of this paper was to explain and demonstrate HOW the STANDARDIZED Codes of
Accounts from Omniclass could be mapped to the STANDARDIZED Chart of Accounts recommended
by GAAP, Figures 10 and 11 have been created to illustrate exactly how this happens using Activity
Based Costing (ABC) and Activity Based Management (ABM) as the “Integrator” or “go between”.

Figure 11- Illustrating how using ABC/ABM can tie the Omniclass Coding Structure to the GAAP Coding
Structure23

23
Adapted from “Implementing Activity Based Costing” n.d. IMA and Gary Cokins https://goo.gl/t39BzG and from “What is
GAAP” (n.d.) http://www.accounting.com/resources/gaap/

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Figure 10 shows very clearly how, using ABC/ABM which was based on the Omniclass Tables 22-
Work Results, matrixed against Tables 23, Products, Table 35, Equipment and Table 41 Materials,
can aggregate and categorize the costs in a way which is readily transferable to the GAAP coding
structure.

In Figure 10, we can see how on the PROJECT DIRECT and INDIRECT cost side, the values would be
exported into the Cost of Goods Sold (CoGS) accounts for each project. As nearly all projects are
also required to carry some percentage of HOME OFFICE OVERHEAD costs, to address this
requirement consistent with ABC/ABM, one or more activities called “Home Office Overhead”
should be created and those costs loaded into the project not on a pro-rata or percentage basis as is
commonly done now, but as a separate standalone activity (or activities). By isolating the HOME
OFFICE OVERHEAD from the Project Direct/Indirect costs, enables the contractor to manage the
HOME OFFICE OVERHEAD costs as aggressively as they try to manage the project DIRECT and
INDIRECT PROJECT COSTS.
Obviously enough, the data from the Home Office Overhead costs would not be expensed under the
heading of “Cost of Goods Sold” but under the heading of the “below the line” costs, General, Sales
and Administrative costs.
As an example, the Cost Estimators/Quantity Surveyors responsible for preparing a bid are normally
based in the home office. If a bid is submitted and the project is won, then their time preparing that
bid would be appropriately charged against the project as a “Cost of Goods Sold” (GAAP 5.1.1.1).
However, for all the projects that are bid and LOST, the time spent preparing those bids would be
charged against GAAP 5.1.2.1 “Selling and Marketing” expense.
On the REVENUE side, Figure 11 illustrates how the data generated by using Earned Value
Management, once billed to the client and paid for, will accrue to GAAP account 4.1.1.1, by
renaming “Products” as “Projects”.

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Figure 12- Showing how the Revenue Generated Using Earned Value Management flows into the ERP
Software24

There are 3 steps in using Activity Based Management combined with Earned Value to capture real
time status on any project for entry into the ERP Accounting Module.
1) For work that has been PHYSICALLY COMPLETED but has NOT yet been BILLED is recorded as
“Work in Progress” (GAAP Chart of Accounts #1.3.2) At the end of the month or other agreed
to milestones or time frames, the accumulated Earned Value (BCWP) is transferred from
Work in Progress to Accounts Payable. To learn the various methods to measure physical
progress see Guild of Project Controls Module 9.3.3.1-
http://www.planningplanet.com/guild/gpccar/capturing-progress-updating-schedule
2) Once the accumulated Earned Value (BCWP) of the work in place has been billed to the
client, then it moves from Work in Progress to Accounts Receivable (GAAP #1.2.3)
3) As soon as the bill (based on the accumulated Earned Value from each activity) has been
paid by the client, the payment is recorded as revenue against each project. (GAAP 4.1.1.1)
To find a template showing how to bill using Activities Based Management, see the Guild of

24
Adapted from “Implementing Activity Based Costing” n.d. IMA and Gary Cokins https://goo.gl/t39BzG and from “What is
GAAP” (n.d.) http://www.accounting.com/resources/gaap/

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Project Controls, Module 9.3 Figure 23

http://www.planningplanet.com/guild/gpccar/capturing-progress-updating-schedule
Worth noting is that if “advanced payments” or “earnest money” is paid by the owner to the
contractor upon signing the contract (which is a common practice in the Middle East and Asia) that
deposit would be recorded as a “prepaid” account receivable (negative balance for that account)
and be offset either with the first actual progress billing based on physical progress (EVM) or
amortized over more than one billing. Also, worth nothing is, consistent with earned value as being
a “pay for performance” model, advance payments are not a “best tested and proven” practice, any
more than giving your pet a “doggy biscuit” BEFORE they perform the trick would be. Earned value
is based on “PROMPT” payment for work done in substantial conformance to the technical
requirements and in fulfillment of the contractual terms and conditions- the “shall” clauses in the
contract.

Conclusion, Recommendations and Follow Up Actions

In the Introduction to this paper, the purpose of this paper was identified to answer the following
question:
1) Is there a way to “map” the coding structures from the Omniclass Tables to today’s ERP
systems, specifically to the “Cost of Goods Sold” and “Revenue Recognition” sections?
And the hypothesis was that by using Activity Based Costing at a minimum of Level 3 and preferably
Level 4 of the CPM schedule that it is not only possible but relatively easy to accomplish this
objective.
Based on the explanations above showing WHAT to do and HOW to do it, the use of Activity Based
Costing combined with Activity Based Management serves as a relatively simple yet reliable way to
enable data exchanges in both directions between the Activities from Table 22, having been cost
and resource loaded using Tables 23, 35 and 41 combined with data from an in house or
commercial database, through the Activities into the appropriate General Ledger accounts. Going in
the other direction, the Actual Costs for Labor, Materials and Equipment, flow from the ERP system
back into the Cost Estimating System, ensuring that when a bid is submitted, it is using the most
recent cost and productivity information.
As a disclaimer, while this system has been used by the author for over 40 years and has proven to
work based on his first-hand experiences as a general contractor, where his own money is on the
line if the project “succeeds” or “fails”, “past performance is no guarantee of future results”.

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For those wishing to adopt/adapt this system for their organization, the author HIGHLY
RECOMMENDS that you do so on a PILOT PROJECT rather than trying to “roll it out” top to bottom”
across the entire organization before testing to see if the system works with your specific ERP, Cost
Estimating and CPM Scheduling software packages. “God (or the devil if you prefer) lies in the
details” and you can almost be guaranteed that some customization may be required to get the
systems to accurately, reliably and precisely exchange data. Or to paraphrase the disclaimers used
in the reality TV shows “"This process was developed by trained professionals," "Do not attempt this
on your own."

For more detailed information on how to use this system, the Author urges you to subscribe to the
~650 page Guild of Project Controls Compendium and Reference (GPCCaR)
http://www.planningplanet.com/guild/GPCCAR-modules Access if free of charge, however it does
require that those wishing to gain access fill in a profile (which is also free of charge) but will take
you 10 – 15 minutes of your time.

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About the Author

Dr. Paul D. Giammalvo, CDT, CCE, MScPM, MRICS

Jakarta, Indonesia

Dr. Paul D. Giammalvo, CDT, CCE (#1240), MScPM, MRICS, is Senior

Technical Advisor (Project Management) to PT Mitratata Citragraha.
(PTMC), Jakarta, Indonesia. www.build-project-management-competency.com.

For 25+ years, he has been providing Project Management training and consulting throughout South
and Eastern Asia, the Middle East and Europe. He is also active in the Global Project Management
Community, serving as an Advocate for and on behalf of the global practitioner. He does so by
playing an active professional role in the Association for the Advancement of Cost Engineering
International, (AACE); Construction Specifications Institute (CSI) and the Construction Management
Association of America, (CMAA). He previously served on the Board of Directors of the American
Society for the Advancement of Project Management (asapm) http://www.asapm.org/ and served
previously as the Chair of the Certification Board of the Green Project Management organization.
http://www.greenprojectmanagement.org/ He is active as a regional leader and a compensated
consultant to the Planning Planet’s Guild of Project Controls. http://www.planningplanet.com/guild

He has spent 18 of the last 45 years working on large, highly complex international projects,
including such prestigious projects as the Alyeska Pipeline and the Distant Early Warning Site (DEW
Line) upgrades in Alaska. Most recently, he worked as a Senior Project Cost and Scheduling
Consultant for Caltex Minas Field in Sumatra and Project Manager for the Taman Rasuna Apartment
Complex for Bakrie Brothers in Jakarta. His current client list includes AT&T, Ericsson, Nokia, Lucent,
General Motors, Siemens, Chevron, Conoco-Philips, BP, Dames and Moore, SNC Lavalin, Freeport
McMoran, Petronas, Pertamina, UN Projects Office, World Bank Institute and many other Fortune
500 companies and NGO organizations.

Dr. Giammalvo holds an undergraduate degree in Construction Management, a Master of Science in

Project Management through the George Washington University and a PhD in Project and Program
Management through the Institute Superieur De Gestion Industrielle (ISGI) and Ecole Superieure De
Commerce De Lille (ESC-Lille- now SKEMA School of Management) under the supervision of Dr.
Christophe Bredillet, CCE, IPMA A Level. “Dr. PDG” can be contacted at [email protected].

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