Sage X3 Construction – Cost to Complete

SAW 01Sage adds a manual input field in the cost-to-complete functionality.

By Janice Hoppe-Spiers, Senior Editor at Knighthouse Publishing

Cost overruns have become so common on large construction projects today that it is almost expected. About 90 percent of mega-projects will have an overrun of 50 percent or more, according to reports. Australia’s Sydney Opera House, for example, may be awe-inspiring and perceived as an amazing success to the every day person, but it was a failure from a project management standpoint. Construction took 10 years when it was originally estimated at four, resulting in a schedule overrun of 250 percent and a 1,300 percent cost overrun. The project was estimated at $7 million and was completed at $102 million.

 Although Sage Business Cloud X3 solution has always provided computer-generated cost-to-complete values based on Earned Value Management, Sage X3 Construction is adding a manual input field to the calculation based on customer demand. Sage X3 Construction is known for providing greater insight to construction companies large and small. Saw Info Box 1

“The cost-to-complete manual field feature was requested by a variety of markets in August, and we will come out with it within one quarter of it being requested at no additional cost,” says Chris Wiener, CEO of {SAW} Software Mill, the developer for Sage X3 Construction. “That’s a big lift. We are deploying it in mid- to late fourth quarter and expect to see opportunities arise in new markets.”

Cost-to-complete calculations are traditionally reported on spreadsheets made up of four traditional columns: estimated cost; the budgeted amount; actuals; and a guesstimate of what it will take to finish the project. 

Sage X3 Construction dynamically generates the values for the first three columns based on current or reporting period data, allowing the project manager to input their estimates of cost-to-complete in the fourth, and provides a fifth column that includes a computer-generated calculation of how much it will cost to complete the project. The data in the fifth column provides supporting information to the project manager for justification of their estimate in the fourth column. Sage info box

In the coming months, {SAW} Software Mill will add a manual field to the cost-to-complete feature to allow project managers to add information that the computer couldn’t possibly know that will impact the calculated projections. 

For example, if a company is purchasing new equipment that will speed up a job by 30 percent or conducting training that will increase productivity by 15 percent, project managers will soon be able to account for that through manual input. 

Job Performance Data 

In order to calculate cost-to-complete, Sage X3 Construction is equipped with Earned Value Management (EVM), which is an analysis of the data inputted into the software that delivers a data-driven, unified experience built on the proven Enterprise Management platform. EVM was developed in the 1960s to help project managers measure project performance, but has only just begun to gain momentum in the industry as the software to capture the necessary data has become more prevalent.

There is an old saying in project management that the faster you recognize a risk the less it will cost, and the faster you recognize a benefit the more you can profit. 

EVM is an ideal control system that is used to find variances in projects based on the comparison of work performed and work planned. “You could spend hours looking at all the different data points, but EVM shows you what’s going on by hiding the noise and presenting it graphically,” {SAW} Software Mill Project Manager Abel Lineberger explains. “It takes all that data, all the different actual costs and planned budgets and time points and pulls it together so you can say, ‘OK, I see where we are going wrong and this is where we need to focus our attention.’”SAW 02

EVM is agnostic to projects. “It doesn’t care what type of project you are doing or how you structure your work,” Wiener explains. “It’s taking what you structured and applying a method of evaluating it, eliminating that 30-, 60- or 90-day window of becoming aware of something good or bad. We are talking about being aware of the job site within hours of the activity taking place. That transforms projects.”

Sage X3 Construction offers core capabilities for complete construction lifecycle management including: project management, contract and subcontract management, project financial and cash flow management, project document management, time-on-task support and project visualization and analytics. 

“Because we have an integrated project system, each transaction related to the project is automatically recorded into the EVM calculations with no manual activity required,” Wiener says. “With all that information, there are hundreds of thousands of transactions and events that are well beyond the capabilities of humans to manage in real-time.”

On larger projects, one of the problems with human-generated cost-to-complete is the inability to think about the thousands of individual tasks that are taking place in the project. 

“The software looks at all those tasks and tracks performance, so our numbers are much tighter than a human can come up with,” Lineberger says. “Because the system has much more granular data than a human can keep in their head to calculate a cost-to-complete, our automatically generated numbers may be more reliable barring systemic change to the project.”

The sum of averages is not equal to the averages of sums. “Project managers can quickly do the sum of averages on a project, but if you rely on the sum of averages you end up with a large discrepancy,” Wiener explains. 

“Big projects have big cost overruns; the minutiae which make up the overruns are often too numerous to visualize,” Lineberger adds.

By maintaining the engineering estimate throughout the project, the software will predict the same outputs more accurately than a human interface. “Earned Value Management is still the best statistical guess for duration and performance,” Wiener says.

{SAW} Software Mill added the manual input field to accommodate a larger community of users, providing them with both tools and the ability to account for that systemic change. 

“EVM looks at how you perform to date and uses that as the basis to project how you will do in the future,” Lineberger says. “But a project manager can know something the system doesn’t and it can’t project that adjustment. Once that new equipment, for example, comes on and the software sees productivity climb, our computer-generated numbers come closer to match it and a backward average would make sense.” 

The beauty of Sage X3 Construction is that it will give its users options. “We really shy away from prescribing how someone does something,” Wiener explains. “We don’t tell you how to use the tool. We train you on how we envisioned you to use the tool, but we hope you take away that there are lots of ways to use the tools provided.”

Partner Success 

In a rapidly changing technology landscape, adding the manual input field as part of its regularly scheduled maintenance updates is just one example of how Sage Business Cloud X3 continues to evolve to meet the needs of more than 5,500 organizations globally. Sage Business Cloud X3 provides faster, more intuitive and tailored business management solutions than traditional ERP for organizations looking to retain their competitive advantage by increasing their agility and embracing change.

In 2015, {SAW} Software Mill partnered with Sage to develop Sage X3 Construction. Sage X3 Construction was developed for the whole construction industry, including not only those in the field, but also material supply companies, specialty subcontractors such as MEPs, ready mix, roofing, framing and others, and those in the back office overseeing procurement, inventory control and distribution management. 

Today, the solution empowers project managers and other stakeholders around the world to better manage the entire construction lifecycle. It captures more granular, work-in-progress project and financial data using one integrated system.  From pre-discovery to the go-live date, Sage’s ERP can be fully implemented in less than 45 days compared to others that can take a full year. 

Smartworld recently partnered with Sage to power its internal processes and operations. “Smartworld, UAE’s leading Master Systems Integrator and award-winning Etisalat Premium Business Partner. Established in 2008, Smartworld has continuously been offering UAE organizations critical support with digital planning, implementation, and operation services and solutions. The semi-government systems integrator uses cutting-edge technological resources to contribute to infrastructural and economic developments in the country. Their internal processes and operations are powered by Sage. Having implemented Sage X3 and Sage People – Smartworld has now commenced its journey of automating the entire project lifecycle with the Project Management vertical from Sage aptly titled Sage X3 Construction,” says Ahmed Youssef, Smartworld IT Service Manager.  

Triad Software Services – a leading Platinum Partner to Sage Middle East – will lead the project with a domain-led team to fully automate business and operational processes critical to Smartworld. Triad is based in Dubai and has implemented Sage X3 solutions for leading enterprises in the GCC countries. 

“We see a significant value add with the Middle East specific construction vertical with a fully configurable, ready-to-use product with best practice processes, inquiries and dashboards,” says R.S. Moni, CEO of Triad. 

Since its inception in 2004, Triad has acquired a significant base of satisfied customers on the Sage Business Cloud suite of products. The vision of Triad in providing superlative service is driven with passion from the top and overseen with a hands-on approach. It is reflected in the importance given to a process-centric approach to project management, recruitment of skilled consultants and in the implementation approach. 

 

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