The correct Cost Control Philosophy: Work Breakdown Structures (WBS)

This blog looks deeper into increasing project performance through ‘Adopting the correct Cost Control Philosophy’. In the first blog, we discussed how the usual project KPI’s, such as CPI and SPI, are related to the Triple Constraint Triangle and the importance of the correct cost management tool in applying the correct cost control philosophy, together with an introduction to Work Breakdown Structures. In this blog, we dig more into the WBS to understand how it helps in applying the correct cost control philosophy. If you want to read the first blog, please click here.

A well-defined work breakdown structure (WBS) is the foundation of every high performing cost control department. However, due to the terminology, WBSs are often confused with other breakdown structures like Resource Breakdown Structures or Cost Breakdown Structures. This results in poorly defined Work Breakdown Structures, having far-reaching project consequences as the entire project execution is effected.

A WBS is a hierarchical structure in which the total scope of work is decomposed in such a way that it represents the deliverables as work packages. After creation, the structure is agreed upon by all stakeholders and serves as the backbone for scheduling and cost management of the project.



Work Breakdown Structure: The backbone of scheduling and cost control 

The advantages of Work Breakdown Structures

The advantages of a strong WBS become obvious when it is combined with other breakdown structures, like the Organizational Breakdown Structure (OBS). Together they allow for assigning the work-packages / deliverables to the responsible body via a Responsibility Assignment Matrix (RAM). RAM has shown to be an important tool as it helps increase project communications and track work progress (Earned Value Management). Both communication and EVM have proven to be strong influencers of KPIs like the CPI and SPI.

Additionally, a work breakdown structure may serve as an overview of the required resources per work-package, which is extremely useful in providing insight on resource allocation. Through high end resource allocation it is possible to reduce resource waste and improve project efficiency.

How do I create a well-defined WBS?

To ensure a high-quality WBS, it helps to follow a consistent work procedure. Doing so helps greatly with recognizing mistakes and justifying specific choices made. An approach in defining the WBS could be as follows:

  1. Decompose project scope of work into deliverables
  2. Specify the desired hierarchy (process, organization or product)
  3. Represent the entire project by a specific “project block”
  4. Specify the appropriate level of detail the WBS should contain
  5. Branch out beneath the project block into several levels and components which are equal to the total project scope when combined
  6. Review and refine

It is important to use a proper coding and labeling for the WBS so that others are aware of how to use the breakdown structure, which activities to expect at the project completion, as well as to recognize where to allocate resources during scheduling. A cost control software may simplify this process by automating the assignment of cost accounts to breakdown structures.

In short

A project is most properly executed when a solid basis is formed for cost controlling through a work breakdown structure. When the WBS is defined as work-package units by following a consistent creation approach, it may serve as the backbone of scheduling and cost management. Looking forward on the work that remains to be done and applying the correct cost control philosophy, it is possible to reduce resource waste to a minimum and optimize the efficiency of your next project.

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About Cleopatra Enterprise

Cleopatra Enterprise is the innovative and industry-leading Project Cost Management Software for industries such as oil & gas, chemical, mining, pharmaceutical, infrastructure, and construction industries. With a mission to help companies complete projects within time and budget, Cleopatra integrates cost estimating, scheduling, cost control, and project benchmarking.

For more than 20 years, Cleopatra Enterprise has been used by more than 500 industry-leading companies in 75 countries to control technical projects and turnarounds and improve project performance. If you'd like to talk to an expert about our software Cleopatra Enterprise, please request a demo now.

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