Time-phasing the project budget is a core element to project controls on construction projects. Time-phasing is so central to project controls, that in 4castplus there are five different time-phasing plans that can be setup on a single project. Actually, there are 10 – but in this article we’re mostly going to talk about one really important one.
It’s only when you time-phase your project budget that you can visualize and report on your forecasted spend and cash-flow over a timeline. To get a sense why that’s important, have a read of this article.
As mentioned, in 4castplus there are five different time-phasing plans that can be setup on a project (there are in fact 10, since you can time-phase the cost budget separately from the revenue budget; but we’ll tackle the meaning of that in another article).
Why five you might ask? 4castplus maintains four distinct cost budgets: Baseline, Current, Pending and Forecast. The Current is the baseline plus any approved change orders; and the Pending is the Current plus any proposed change orders. All these budgets are of course connected: the current, pending and forecast all inherit the properties of the baseline (including the baseline time-phasing). Nevertheless, each of these budgets are uniquely managed by the system. The Forecast Budget is a bit different in that it is built up as the baseline plus any forecasts. For more on forecasting, please have a look at this article.
Each of those four budgets have their own time-phasing plan that can vary uniquely from each other. As mentioned, they each inherit the baseline time-phase plan; but the budget additions and subtractions included in the change orders or forecasts are time-phased uniquely from the baseline.
Remaining Budget and Variance
This brings us to the main topic of this article: The Remaining Budget. This is the fifth time-phase plan, and by far the most complex of the five. Time phasing the remaining budget is tricky because you have to factor in historical variances. To get an idea of what that means, have a look at Figure 1 below.
Figure 1 – Understanding the Allocation of Variance
The example in Figure 1 shows the time-phasing of an activity over 6 monthly periods, February-July. At the time this snapshot was taken, it was April, so February and March were considered historical periods. As you can see in this example, the Actual Cost for both February and March differed from the time-phased plan for both those periods. Using March as an example: according to the time-phased plan, $15,000.00 was meant to be spent during that period, however only $14,000.00 was actually spent (see #1 and #2 arrows). This left an extra $1,000.00 in March alone that is now unaccounted for in the time-phasing (see #3 arrow). Collectively, March and April accumulated a variance of $1,666.67. A key element to time-phasing the remaining budget is to determine what to do with that variance. Where does it go? How do you reallocate it into future periods?
In the example in Figure 1, we used the Reallocate function to let the system auto-redistribute the variance into all future open periods. Of course, you don’t have to reallocate like that, you can also manually enter the exact period(s) you want to allocate the variance into. The Reallocate function divides the variance evenly among the open periods. Had this been a negative variance – i.e. previous periods over-spent – then the reallocate function would have evenly deducted the variance from future periods.
It Doesn't Stop There
Of course, redistributing variance isn’t the only thing you can do with time-phasing the remaining budget. You can also take the opportunity to make any other changes to the baseline/current time-phasing to update with current information.
4castplus provides several specialized reports out-of-the-box that show Remaining Budget time-phased over a timeline curve as it compares to other key curves like Current Budget, Baseline Budget and Forecast. There is also time-phase tabular reports that compare month-over-month cash flow of remaining budget alongside current and also actual costs.