Methodological Solution

In developing a Project co-exist several parallel processes some of which are defined Realization processes others are defined Planning and Control processes. These processes, affecting each other, create a situation in which ”all the time, everything is in motion”.

The methodological solution identified has been designed to promptly intercept, seamless, all phenomena involving changes to "plans to complete" of the projects, during the whole life-cycle.

Planning and Control processes of a Project are intended to define and control numerous technical and economic variables that together provide an indication about the health of the project. Over the time they assume an increasing level ofreliability.

The Planning and Control processes are of two types: Continuous and Discrete.

- Continous processes (horizontal in the figure above) are run seamlessly throughout the entire project lifecycle from the stage of feasibility study to closing.

- Discrete processes (vertical in the figure above) are held sporadically, collecting the information made available by the horizontal processes and producing Plans (in subsequent revisions) that refer to a certain date and that describe the performance of all the controlled variables, both for the past and the future.

The mechanism of the ”change of state”

Within the Cost Control process the main entity subject to continuous monitoring from the beginning to the end of the Project is the Estimate At Completion (EAC). During the whole life-cycle such entity varies continuously and this occurs both for its absolute value and its "composition".

In the initial stages (evaluation and start-up of the Project) the degree of definition is normally coarse both from the point of view of design (what needs to be achieved) and of the planning (how and when it will be realized). Consequently, the value of the EAC consists primarily of Costs Estimated (Estimated).

With the progress of the project definition, part of the costs previously estimated changes its "state" into Costs Planned (Planned) and it increases the degree of reliability.

Subsequently, when the planned activities are assigned to be carried out, the Costs Planned become Costs Committed (Committed) and increase the reliability of the estimate attributed to them.

A further change of state occurs when the committed tasks are performed and the related costs involved become Actual Costs (Actual).

During the Project lifecycle, the composition of the Estimate At Completion (EAC) varies continuously increasing its degree of reliability and decreasing the capability of influencing the residual costs (ETC).

In every moment of the Project lifecycle the value of the Estimate To Complete (ETC) consists of three addenda:

-  The Residual Estimated Costs (Estimated to be Planned);

-  The Residual Planned Costs (Planned to be Committed);

-  The Residual Committed Costs (Committed to be Accounted or Accrued).

The activity of updating the Estimate To Complete (ETC) value and, therefore, the forecast of the Costs Estimate At Completion (EAC) of a project is to intervene on the remaining stake of Estimated, Planned and Committed Costs as a result of changes occurred.

The Time Phasing of the (EAC) value

If a good determination of the EAC Value is a key part of the discipline of Cost Control not less important is the good determination of the timing of the same.

The timing of Actual Costs(AC) and of Estimate To Complete Cost(ETC) determine the economic impact of the Project on the individual periods (months, quarters, years).

Depending on the time horizon (short, medium, long term) and on the composition (Costs posted, Costs Committed, Costs Planned, Costs Estimated), the ETC is characterized by a different degree of reliability.