How to Design the Best Cost Coding System for your Project

Project controls professionals can spend endless hours discussing, debating and tweaking the required codes for their project.  And for good reason; there are so many layers to consider in designing the ‘right’ cost coding system for any complex construction project.

How to Design the Best Cost Coding System for your Project

Find the Right Cost Coding System for You

We get many questions from companies about what cost coding system is ‘right’ or whether there is a standard cost coding system. Yet while there is no ‘one-size fits all’ solution, there are some guidelines that have been defined for a variety of industries published by the AACE and CSI, which can help you to start designing a system that best fits your project.

There is a catch; you’ll need to be a member to access this information. If you are not a member, you are left to define your own cost coding system. The challenge is in defining a cost code structure that will provide all parties involved with the correct reporting of information that they require.  

When a cost code is first developed, planning must be carefully done to understand just what level of detail is required for effective project controls and cost management, and how much is too much.  Cost codes commonly include elements or extensions that identify the specific project, phase of project and type of cost account, such as labor, equipment or materials.  Cost codes also include standard extensions that identify specific reporting needs, such as discipline or sub-discipline involved with the work package, material codes, accounting codes, purchase orders etc. for specific phases or work packages.

Your Software Should do the Heavy-Lifting for You

The right cost management software understands concepts like a cost breakdown structure, resource codes, discipline codes, material codes, etc., and can do a tremendous amount of the heavy-lifting for you and deliver you with more in-depth reporting. In other words: less work and better results.

The advantage of using a cost management software is that all your cost coding can be configured ahead of time and then it is automated. For example, you can setup:

  • material codes
  • discipline codes
  • activity codes
  • project codes
  • vendor codes

Once you have setup these initial codes, all your budgets, tracking, procurement and reporting pull from this data, so for example, the activity code is connected with the material code, and the project code, and the phase code, and the tag number, and location identifier, and the budget code, and the vendor document number etc. There is so much data collected for every single action enabling richer reporting and powerful planning and execution on your projects.  

Share this post