Cost Breakdown Structure Facilitation (Electrical Utility)

Cost breakdown structure facilitation for electrical utility organization.

Cost breakdown structures are extremely important for organizations that manage projects, but they are not terribly sexy. Our customer, an organization responsible for the engineering, construction, operation and maintenance of high-capacity electrical infrastructure, had a requirement to update its cost breakdown structure in order to more accurately reflect the types of costs associated with the projects that it conducts. The objective was to make the cost breakdown structure simpler, more relevant, more usable and more meaningful.

Interthink Consulting worked with the organization to conduct a comprehensive series of consultations and workshops to revise the cost breakdown structure. With projects that are routinely in the tens and hundreds of millions of dollars in size, and involving several dozen disciplines and trades, the existing structure was expansive, complex and convoluted. During the workshops, we facilitated discussions with the relevant stakeholder groups in order to understand the current structure, how it had evolved, the problems that were being encountered and how the cost breakdown structure could be made more effective.

Based upon the input we received, we went to work with a core team to review the feedback and identify the retired changes. This resulted in the development of a straw model, which served as the basis of a subsequent series of consultations. In this next round of workshops, we reviewed the proposed changes with affected stakeholders to understand how the proposed changes would impact them. Throughout this process, we kept a clear eye on the principles and criteria for success that had been established at the outset. We negotiated resolutions to differing views, identified when changes would violate the established principles and ultimately guided the organization to a solution that would work for everyone, and meet the organization’s overall requirements for managing project and operational costs in a way that was still usable and understandable.

As a result of Interthink Consulting’s work with the organization, they have been able to realize a number of significant and valuable outcomes, including:

Development of a complex structure that was accepted and agreed upon by all stakeholders. One of the significant challenges going into the project was ensuring that the requirements of all stakeholders could be met. The cost breakdown structure is used for regulatory reporting, project cost tracking, operational and maintenance tracking, as well as for asset management and depreciation. This resulted in a number of conflicting demands and expectations for revisions which were ultimately successfully integrated into a single, acceptable solution.

Development of a cost breakdown structure that is understood and accepted by project managers and teams, and reflects how they do their work. Accomplishment of this was essential, as how projects are planned and ultimately tracked by the project team have a direct impact on how resulting costs are reflected in the accounting system. Where costs are coded incorrectly, grouped together inappropriately or not managed at the required level of detail, project costs are inappropriately attributed. As a direct result of the project, the organization has been able to significantly improve the accuracy of regulatory reporting and ensure appropriate depreciation of constructed assets.

Establishment of a transition strategy to support migration to the new cost breakdown structure. Because of the multi-year nature of many of the projects conducted by the organization, it was not possible to do a direct cutover from one reporting structure to another. Existing projects, established using the current structure, needed to be able to be completed based upon their current plans while new projects began using the new structure for planning and management. We worked with information technology, accounting, asset management and project management stakeholders to develop an agreed-upon strategy that would enable transition to progressively occur as new projects were identified, while in-progress projects would complete using their original approach.