budget disclosure within construction projects
In a project you usually distinguish between the total available budget and the budget that can be used; the so-called “disclosed budget”.
Within real estate development the development potential of a project could be above 50 million Euro for example, while at the moment within the prestudies you would want to spend 125.000 Euro for plan design, man hours and marketing at most. In this case the project budget is 50 million Euro for the costs, but there is 125.000 Euro available.
For maintenance projects or software development project there can be a contractual agreement to grant maintenance during ten years for a budgeted amount of 100.000 Euro, but this amount can not be blown away right off the bat in the first year of the maintenance. Instead there might be a maximum of 15.000 Euro available for maintenance the first year.
How do you ensure that you can partially disclose your budget within Invantive Estate and Invantive Vision, while keeping the whole project budget in your view as well?
There are multiple possibilities to realize this, but the most commonly used method is the use of contract budgets. More information on contract budgets can also be found in the documentation on contract budgets in the web user interface. Of course you can also manage contract budgets from Microsoft Outlook. Setting the contract budgets is done as follows:
For every separately budgets per cost type that needs to be discloses you will make a blocked contract budget. In the example below you can see how you do this for a simple project with just one cost type on the cost side:
Total maintenance budget on cost type 2000: EUR 100.000
- Expected for 2010: EUR 15.000
- Expected for 2011: EUR 10.000
- Expected for 2012: EUR 5.000
- Expected for 2013 up to and including 2019: EUR 10.000
As total budget for the cost type 2000 you would put in EUR 100.000.
In addition, you will make nine contract budgets at first:
- BLOCK2011: EUR 10.000
- BLOCK2012: EUR 5.000
- BLOCK2013: EUR 10.000
- BLOCK2014: EUR 10.000
- BLOCK2015: EUR 10.000
- BLOCK2016: EUR 10.000
- BLOCK2017: EUR 10.000
- BLOCK2018: EUR 10.000
- BLOCK2019: EUR 10.000
Because of this there is just EUR 15.000 available for the actual costs at project start. The prognosis of the project is that it will go into debt as soon as the actual costs exceed the EUR 15.000 with for example EUR 1.000. In discussions with the controller it might be possible to disclose a part of the blocked contract budget. In this case by lowering the reservation for 2013 from EUR 10.000 to EUR 5.000 for example. This would make the project prognosis positive once more.
Especially with long-lasting projects (such as PPS projects) the maintenance of contract budgets can be labor intensive. In the example above, you could also opt to replace the contract budgets BLOCK2013…BLOCK2019 by the following contract budget:
- BLOCK2013ev: EUR 70.000