Inconsistent Tracking of Job Costs —
Give some consideration to the premise that a project plan and schedule is comparable to a flight plan. Without a flight plan, which includes the process of following specific rules and the use of flight deck navigational aids intended to help guide the aircraft safely to its intended destination, it’s possible that the craft will land at the wrong place – if you’re lucky. Safe flight does not rely on luck and neither does a successful construction project. The consequences of “navigational failures” are well known – just open a newspaper.
The inconsistent tracking of job costs is the same as creating a flight plan and never looking at it again once you’ve left the ground. Can you imagine never looking at all those instruments and gauges on the flight deck, the ones that indicate if the plane is going up or down, north or south, or if there’s enough fuel on board?
Accurate and consistent job cost tracking is necessary to measure ongoing project performance, and to develop a historical record of job cost information. These basics indicate where you are now, where you have been and where you are headed. And, just like a flight plan, you have the information (often in real time) needed to make adjustments in the project “flight” path in order to accurately control and forecast the outcome of the flight, or tell you if you’re completely off course and how you got there.
The accurate and (this is very important) consistent tracking of job costs has a lot of critically important uses. Of course, the first value is basic prudent project management. If your project hits a “storm,” such as delays, constructive changes or other unforeseen events, you’ll have a record of their impacts and the causation of these events.
Notice that I use the term “causation.” This legal term is used in a situation where a change request or claim in dispute has to be proved beyond a doubt, that is, cause equals the event and the dollars equals the effect. Even more, without a proven job cost tracking system that is consistently employed by your company the chances of cost recovery are significantly compromised regardless of the merits of your claim. The burden of proof is solely on you.
In addition, you will also likely have to demonstrate that your company routinely utilizes a job cost, pricing and tracking system on all jobs as a matter of company Enterprise Risk Management (ERM) policy. In other words, you didn’t just create this accounting document out of thin air or in a vacuum. You can demonstrate that cost tracking, on a job by job basis, is a routine business activity. Therefore, in the instance of a claim, for example, your cost tracking program would be difficult to challenge and also provide the critical elements of proof of actual monetary damages – direct and consequential. This applies to both claims assertion and in defense.
So, if your job cost tracking system is not actually a system, dysfunctional or totally inconsistent you’ll not actually know where you are, where you originally planned to go or how you planned to get there; neither will you know where you have been, or even how you got to where you think you are. This is called being lost.
And, in the event of a claim, without proper cost tracking, you will not be able to effectively prove a cost impact in terms of time or money should your project hit a “storm” – and they will. When this happens your project will likely, in effect, “land” in the wrong place. And, when this happens you’ll end up spending more time talking with accountants and lawyers than you will in building profits for your company.
And remember the long held truism, “Any landing you can walk away from is a good one.” Have a proven consistent system to track job costs so that you know where you are. Don’t leave it to luck.