C O S T CONTROL: INTEGRATED C O S T / S C H E D U L E

PERFORMANCE

By Wayne M. Stevens, 1 M. ASCE

AISTHACT: An integrated cost/schedule performance curve provides a visual

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summation of costs, performance and time. Its graphical construction is re-

viewed together with illustrations from a particular project application. Data
provided by such integrations can be used to detect trends and forecast future
conditions.

INTRODUCTION

There are many different views on the subject of cost control. To ac-
countants, designers or managers cost control can be boring, irritating
or fascinating. Opinions are naturally influenced by individual respon-
sibilities.
To a manager, the key to a project's success lies in establishing effec-
tive control parameters for the variables of cost, time, a n d performance.
In doing this, the process of the routine collection, verification a n d quan-
tification of data with which we are all familiar is needed only for his-
torical reference and has little other purpose. Something else is required
for the control to be effective.
One cost control tool used by project managers at Lockwood, An-
drews & N e w n a m , Inc., has been found to be very powerful in its ap-
plication, yet fairly simple to develop a n d easy to understand. It is the
Integrated Cost/Schedule Performance Curve—a visual summation of
costs, performance, and time. Fig. 1 shows a typical curve a n d its gen-
eral plots.
It is not n e w or dramatic; it has been widely used. Yet as a cost control
tool, it can be of great value to the manager interested in the effective
monitoring and control of a project.

BACKGROUND

Managers and designers are familiar with the problems generated by

using only a total project budget figure supplemented by periodic prog-
ress estimates on h o w the work is going. Whether or not any m o n e y
was made is determined after the job is done (maybe on schedule, maybe
behind schedule), all of which is history by that time.
An Integrated Cost/Schedule Performance is a device which can pro-
vide meaningful feedback during the project rather than afterwards, a n d
makes it easier to prepare forecasts on where the project is headed. With
'Proj. Mgr., Lockwood, Andrews & Newnam, Inc., 1500 City West Blvd.,
Houston, TX 77042.
Note.—Discussion open until December 1, 1986. To extend the closing date
one month, a written request must be filed with the ASCE Manager of Journals.
The manuscript for this paper was submitted for review and possible publication
on February 28, 1984. This paper is part of the Journal of Management in En-
gineering, Vol. 2, No. 3, July, 1986. ©ASCE, ISSN 0742-597X/86/0003-0157/$01.00.
Paper No. 20744.

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FIG. 1 .—Integrated Cost/Schedule Report

this type of information, corrective actions can be taken at a time when

they can still do some good.
The degree and sophistication with which an Integrated Cost/Sched-
ule is applied will vary with the size and scope of a specific project. Both
single and multiple curves can be developed depending on the com-
plexity of the project and the needs of the manager. The examples used
in this paper were taken from a multi-million dollar engineering design
job covering a time-frame of about a year and a half.

COST CONTROL FUNDAMENTALS

Before proceeding, it would be helpful to review the more important

fundamentals of cost control.
An effective cost control system requires the continuous recording,
reporting, and forecasting of both obligations and expenditures. It in-
cludes the periodic comparison of incremental costs and/or forecasts
against previous estimates or schedules.
The critical components required to carry out such systems are: (1)
Some type of cost baseline; (2) a system for making performance mea-
surements; and (3) a recognition of their interrelationship with time con-
trol—a schedule. These factors are inherent in any good program of project
management, but they are vital to a sound, effective cost control system.
One must know how actual costs are doing compared to scheduled costs,
what value or benefits are being generated or received for those costs,
and what the time variables are which may affect those costs. These
topics are briefly reviewed and summarized in Fig. 2.

INTEGRATED COST/SCHEDULE PERFORMANCE

As stated before, the key to a project's success lies in establishing ef-

fective control parameters for cost, time, and performance. It is impor-
tant to track cost, time and accomplishment during the entire life cycle
of a project and to provide, in simple and understandable form, mea-
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J. Manage. Eng., 1986, 2(3): 157-164

 1. Cost Baseline
The baseline or reference guideline against which cost comparisons are
made can be organized by either the total project or by individual areas or
classifications. For example, a total project could be divided into the cat-
egories of: direct labor charges, other direct costs (expenses), and sub-
contractor or consultant charges. In turn, each of these classifications could
be further subdivided into several different activity codes.
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Implementation of a cost control system normally requires:

(a) A series of cost accounts established for every significant part of the
budget.
(b) A budget, based on data developed from cost estimates, for each of
the accounts.
(c) A distribution of the budget over the time duration of the project or
activity; i.e., a schedule for the expenditures.
2. Performance Measurements
During a project, both the scheduled and actual costs and accomplish-
ments need to be reported by individual accounting. This information, ac-
cumulated as a function of time (such as by pay period), can be processed
and printed in a project cost ledger.
A system of measuring performance or accomplishment is required in
order to generate the progress part of these periodic reports (sometimes
referred to as "earned value"). This measurement of performance can present
a difficult task since it requires the exercise of human judgment; however,
if the organization of the individual activities is detailed enough, the overall
measurement or summation becomes more realistic.
3. Schedule Control
Closely related to the control of cost expenditures and future obligations is
the control of the time frame in which these activities take place. The con-
trol of the schedule affects both the rate of accumulating job costs and the
timing of the final job completion.

FIG. 2.—Control Parameters

sured variances from the planned and identifiable control guides.

It is equally important that these parameters be integrated in such a
way that their interaction is readily apparent to management control.
(To have spent half of the available money at the scheduled halfway
point is not an achievement if only 25% of the work has been done.)
An effective monitoring tool to help provide this management control
is the Integrated Cost/ Schedule Performance Curve which combines all
three guides on the same data base. A sample curve is shown in Fig. 3.
The same data base materials can be generated in tabular form, but their
graphical representation provides a more effective means of communi-
cation.
The Integrated Cost/Schedule Performance Curve provides: (1) Actual
cost in relation to the scheduled budget; (2) actual accomplishment as
compared to scheduled performance; (3) cost performance in relation to
work accomplished; and (4) measurement (or illustration) of various slip-
pages in the key parameters.
Referring to Fig. 3, Point A (actual accomplishment) is plotted below

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 Cumulative
Budget
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FIG. 3.—-Integrated Cost/Schedule System—Example 1

Cumulative
Budget

FIG. 4.—Integrated Cost/Schedule System—Example 2

the scheduled curve indicating that the project is behind schedule. The
actual amount can be determined by extending a horizontal line from
Point A back to Point B on the schedule and measuring the "schedule
slippage."
Similarly, the plotted cost, Point E, is located above the scheduled
budget, but the amount of variation present in this parameter is not
immediately apparent. The scheduled cost of the actual accomplishment
must be determined rather than the cost listed for the current time frame.
By extending a line vertically from Point B on the scheduled accomplish-
ment until it hits the cumulative budget at Point C, what the cost for
that accomplishment should have been can be determined. Continuing
a horizontal line from that point over to point D on the current time
frame shows us what the actual cost situation is—in this case, a cost
overrun (the vertical difference between D and E).
A more positive result is shown in Fig. 4. Following the same pro-
cedures as before, this sample project is ahead of schedule and under
budget. Other combinations are also possible.

ILLUSTRATIONS

Two examples of Integrated Cost/Schedule Curves from an actual

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FIG. 5.—Integrated Cost/Schedule Report—Total Project

project are shown in Figs. 5 and 6. To make it easier to trace the plots,
the pertinent data from a date time line of 14 months (through the month
of June) has been magnified. Fig. 5 is for the total project, and Fig. 6 is
for direct labor charges only.

*>.«,
Actual
Accomplishment

FIG. 6.—Integrated Cost/Schedule Report—Direct Labor

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 Referring to Fig. 5, and tracing the same patterns as before, we can
see that the total project is 3-1/2 weeks behind schedule and that the
cost comparisons indicate a $110,000 underrun. The diagram also in-
cludes a plot of management reserve funds—contingency funds.
In this example, the Integrated Cost/Schedule tells us that the project
is behind schedule and under budget. Specific corrective action would
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require a more detailed investigation as to what caused this condition,

but one possible course of action would be to add more people to the
project. There appears to be money available to pay for the additional
labor.
Fig. 6, for direct labor charges, indicates that the work is four weeks
behind schedule and that the costs are currently in a $22,000 overrun
situation.
The condition reflected in this example is less favorable; the project is
behind schedule and over budget. Before the possible corrective actions
can be taken, however, careful analysis is needed as to what caused the
situation. The possibilities are many: inefficient work, changes in the
scope, faulty estimates, etc.
These two examples, taken together, illustrate one of the side benefits
provided by the use of multiple cost/schedule curves: a more complete
identification or isolation of how project costs interrelate to one another.
In the examples, the total project is $110,000 under budget, yet the direct
labor charges are $22,000 over budget. This apparent contradiction should
raise questions to a cost controller or to a manager; the obvious one
being "How come?"
The answer in this particular case was that the subcontractors working
on the job and the total project expenses were both underrunning their
estimates. Their current surpluses were making the total project look
good. One can argue whether these apparent surpluses were due to
variations in efficiency, padded estimates, miscalculated "value earned,"
faulty scheduling, or to some other cause; but the recognition of the
condition itself was triggered by the use of multiple integrated cost/
schedule curves.

FORECASTS OR PREDICTIONS

In some systems of cost control, selected variances from past periods

are used to make forecasts as to future events. Problems can thus be
identified and corrective actions developed. As mentioned earlier, vari-
ance represents the difference between planned or budgeted values and
those actually achieved.
The combination of accrued expenditures and projected (or scheduled)
obligations can be used to forecast project costs at completion, such as
illustrated in Fig. 7. Here, a number of sample variances are used to
construct a trendline projection which shows a cost underrun. These
variances may cover either the total project or individual activities. In
the same manner, time projections can be made based on a comparison
of value accrued (percent complete) versus scheduled accomplishment.
Unfortunately, taken separately, neither of the above forecasts would
be completely accurate. Any indicated problems may be ones of percep-
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 +3

+2 -

11" "~"v^ v=
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a
CO

. . _. -- ^

-3 - — — —
-4
5 6 7 8

FIG. 7.—Cost Projection

tion rather than of fact. For example, a project cost forecast which is
developed solely on the basis of the scheduled completion date may not
reflect what is really occurring (maybe the job is well ahead of schedule).
Likewise, a forecast time of completion tells you nothing about what has
happened to the budget. All three parameters of time, money, and ac-
complishment must be considered together in order to make good eval-
uations and predictions.
An Integrated Cost/Schedule Performance Curve is excellent for this
purpose. By using the recorded variance data available from previous
periods, we can make a trendline analysis and forecast such critical items
as: (1) Estimated time of completion; and (2) estimated cost overrun or
underrun.
Various display curves and graphics may be developed to high-light
potential (and actual) problems, but the objective of such aids should be
to initiate the proper corrective action before the problems seriously af-
fect the job progress.
As an example of a forecasting procedure, the variances indicated ear-

TABLE 1.—Variances
Total Project Direct Labor
Schedule Time Money ($) Time Money ($)
(1) (2) (3) (4) (5)
5 months —1.5 weeks -18,000 +1.0 week +4,250
8 months +1.0 week -75,100 — 1.0 week +8,140
11 months -2.5 weeks -25,083 -0.5 week +6,245
14 months -3.5 weeks -109,803 -4.0 weeks +22,152
Projections at 4 to 5 weeks $130,000 6 weeks behind $27,000
completion behind schedule underrun schedule overrun
Note: These slippages were caused by extended revisions to the basic scope
of work. The corrective action taken was a time extension to the basic contract
and an adjustment in the various cost categories.

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 lier in Figs. 5 and 6 from the example design project have been combined
with those variances available from previous months. These are listed
in Table 1 together with a trendline projection of project slippage and
the financial situation.
The use of variance data in the preparation of meaningful forecasts or
predictions can be adjusted as desired based on the reliability or confi-
dence gained from previous estimates. Accurate or reliable predictions
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can be quite valuable in selecting the proper corrective action to be taken

or in adjusting basic operating procedures.
Depending on the magnitude and scope of a given project, forecasts
can be expected to undergo many changes during the life of a project,
but even the trend of these changes can provide important management
information. For example, successive forecasts of cost overruns on the
order of $90,000, then $48,000, and then $27,000 would indicate that the
cost situation was steadily improving. Someone was doing something
right!

CONCLUSION

The Integrated Cost/Schedule Performance Curves can provide a vi-

sual summation of cost, performance and time. It can be used as a base-
line against which cost comparisons can be made throughout the proj-
ect, and both scheduled and actual accomplishments can be measured
to indicate any performance variances.
These comments on the use of Integrated Cost/Schedule Performance
Curves do not cover all possible applications or variations; but, hope-
fully, they may create some interest. The effective control of time, money
and accomplishment is an important area of responsibility for all man-
agers.

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