One of the questions I get asked a lot is: What is the advantage to a cost-loaded schedule for my project? In particular, if a scheduling specification does not ask for a cost-loaded schedule, what is the benefit?
A cost-loaded project schedule
The answer is tied to perspective. A contractor’s need is definitely different than an owner’s. The advantage to a cost-loaded schedule is simple: It provides a cash flow forecast that indicates how cash will be spent over time on a project. It can give weight to schedule components and help gauge project status.
For instance: if a project plan is based on hard money and a cost-loaded schedule is developed, an actual data field exists for billings and expected revenue associated with the project. As a result, the project owner has a perspective on how much money to forecast and has the ability to watch project dollars.
The problem is, and this is for any industry, that a cost-loaded schedule needs to match accounting records. This is the biggest problem. If a project is even $10 off on a cost-loaded schedule, you can be doomed to spend 10 hours trying to track it down. The odd twist is if the project is 1000 hours off, some accountants think this is just a mistake. Obviously the 1,000-hour discrepancy has a greater impact, but accounting may focus only on immediate impact…and accounting cannot reconcile $10.
Communicating the project schedule
A second issue with a cost-loaded schedule is how the schedule is communicated. Who has access to the financial information? One ignorant consultant on a project actually told one of the world’s top three general contractors that they couldn’t make money unless they had a cost-loaded schedule. This was news to the contractor, who was profitable on virtually every project. Ignorant messengers like this hurt the profession and should not be allowed near a project.
Why should anyone use a cost-loaded schedule? In the end, it weights project components and provides cash flow forecasting. It provides a method for earned value management, and creates an auditable method for payment. An owner should specify a cost-loaded schedule with parameters on how to create the schedule. A project schedule should also always tie back to details on the invoice for progress payments on a project.
How do you decide what kind of project schedule to use for a project?