Setting Up Your Work Breakdown Structure with Cost Codes

Best practices dictate defining the Work Breakdown Structure (WBS) early in the project life cycle. Doing so will enable alignment with the engineering work packages, the construction estimate, the master schedule and the job cost system. Although some might say this is “project management in heaven,” it can be done with the right process, the discipline to follow the standard, and technology that supports monitoring costs and labor productivity by the established WBS. 

What is Work Breakdown Structure?

A Work Breakdown Structure (WBS) allows a project manager to organize and better plan complex projects, by breaking down large jobs into lots of smaller groupings and tasks. For example, a WBS allows your project manager to coordinate engineering, equipment, material and labor resources within a project to align with the master schedule. 

The true power of the WBS is in its flexibility. There are few hard and fast rules in creating a Work Breakdown Structure; the various levels and amount of detail can be tailored to each project’s size and complexity. 

Sample WBS cost code segmentation

Most construction job cost systems accommodate cost code segmentation, which allows project management, accounting, and finance to analyze, focus on underperforming areas, and forecast project costs with greater ease and accuracy. On a larger construction project, the job cost WBS/Cost Code segmentation might look something like this:

Project (with Project #/Id)

Phase(s) – XX

Area(s) – XX

Discipline or Division – XX

Work Package – XXX

Task or Activity Standard Cost Code – XXXXX

A cost code for a particular task on this sample project would then be 14 numerical characters representing the numbers above: XX-XX-XX-XXX-XXXXX

On the other hand, a smaller project may not require Phases or Area segmentation. If the company is a specialty contractor that only performs electrical work, for example, it may not be necessary to use the Division or Discipline cost code segment. A smaller project cost code structure could be:

Project (with Project #/Id)

Work Package – XXX

Task or Activity Standard Cost Code – XXXXX

Or 7 or less numerical characters i.e., XXX-XXXXX

Note: We strongly suggest numerical cost code schemes. Attempting to build intelligence into your cost code scheme through alpha-numerical systems will create complications as your company grows and diversifies.

Work Breakdown Structure best practices

Phases, Areas and Work Package descriptions can and will vary from project to project depending upon the delivery method, type of project, size and complexity. On the other hand, discipline, task, or activity cost codes must be standardized to capture historical data for estimating purposes.

One of the challenges in creating a WBS/Cost Code scheme for a project is that standard tasks, with standard cost codes, may fall under multiple Areas and multiple Work Packages. Project management needs to know the performance (cost, productivity and progress) of the crew working on a particular task within a Work Package, and the overall performance of the Work Package itself. 

In addition, project management and estimating needs to know the actual overall project production rate for a particular task for forecasting and historical data purposes. As an example, a task such as Welding 10 “Carbon Steel Pipe” has an estimated MHR/UOM for the overall project quantity, but this task could land within multiple Work Packages within multiple Areas. This is where the right software technology comes into play that can enable the users to filter and create reports and dashboards by Project, Phase, Area, Discipline, Work Package or a standardized task Cost Code.

Work Breakdown Structure in Trestles Labor Management System

Not only have we solved the challenge of WBS, Scheduling, and Job Cost systems alignment with Trestles Labor Management System (TLMS®), we have simplified the reporting for the Frontline Supervisor who is responsible for recording time and quantities installed.

With TLMS WBS Composer, a WBS can be created quickly and edited easily. The composer establishes how the project will be planned, scheduled, and managed, and how performance will be monitored and reported.

The Frontline Supervisor will be issued the Tasks, Task Descriptions, and associated Cost Codes on their mobile device. They simply enter the time by employee and installed quantities associated with a task/cost code. There’s no need for them to memorize or reference the Cost Codes for the work they are installing.

It’s important for companies to simplify these processes for field supervisors while still collecting pertinent data surrounding overall project productivity to forecast cost and improve productivity performance.

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