Guidelines for Project Cost Management & Review

(Document No.: 08.02.02/GL-01/R3)

Rev. Date Prepared by Reviewed by Approved by

Mail Approval
08-Dec-2023 08-Dec-2023
Dt. 05-Feb-24
R3 05.02.2024
Sachin Gupta / Shoubhik Bose Sriram Ayyar Sanjay Sharma
GM DGM Head - CPC CFO
TATA Projects Limited Guidelines for Project Cost Management & Review

TABLE OF CONTENTS

1. Objective……………………………………………………………………………………………3

2. Applicability………………………………………………………………………………………...3

3. References…………………………………………………………………………………………3

4. Project Cost Management – Overview………………………………………………………….3

5. Roles & Responsibilities – Project Control……………………………………………………...4

6. Preparation of Control Budget (CB) ………………………………………………………….…5

7. Preparation of Cost Report……………………………………………………………………....12

8. Forecasting Estimate at Completion (EAC) …………………………………………………...15

9. Margin Movement…………………………………………………………………………………23

10. Risk and Opportunity register……………………………………………………………………24

11. Selection for review and Review Mechanism………………………………………………….24

12. Mandatory documents……………………………………………………………………………25

13. Currency conversion rates……………………………………………………………………….25

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TATA Projects Limited Guidelines for Project Cost Management & Review

1. Objective

The objectives of this document are as follows.

1) To define the process for establishing Control Budget (CB).

2) To define the process of Cost Monitoring, Reporting & Forecasting during execution of Project.
3) To define the review mechanism and Formats which shall be followed for Cost Management
Process.
4) To define the roles & responsibilities of a Project Controls / Cost Controller in a Project

The purpose of this document is to ensure a consistent approach in the Cost Management
Process which needs to be followed across all TPL Business.

The document establishes minimum content and format requirements for presentation.

2. Applicability

All Projects of Tata Projects Ltd and its Subsidiaries & JV Companies. However, Projects of
SBG - Quality Services and Manufacturing Units are excluded from this process. In case of JV
projects where there may be specific variations or deviations to this process, appropriate
approvals in line with DOA may be taken.

3. References:

▪ Annexure-1: Guideline for Price Escalation in CTC (EPM 08.01.04 / GL-01 / R1)

▪ Annexure-2: Guideline for Cost Mitigation

▪ Annexure-2a: Guideline on Project Risk Management (EPM 03.04.02)

▪ Guidelines for Considering Variation to Contracts (VTC) in CTC

▪ Key Accounting Guidelines (EPM 11.05.01 / P-02 / R2)

▪ Vendor Recovery Guidelines (F&A – FC – PTP – 002 (01))

4. Project Cost Management: Overview

The overview of Project Cost Management is to outline requirements and provide direction for
managing, reporting, and control of cost through-out the project life cycle, including the development
of the original budget, monitoring of cost commitments, control and validation of actual costs,
analysis, forecasting and reporting. Following represents phases in the Project Cost Management
cycle at Tata Projects

BUDGET PHASE EXECUTION PHASE

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TATA Projects Limited Guidelines for Project Cost Management & Review

Budget Phase

a) Tend 3 Estimate is equivalent to As-Sold Estimate.

b) It includes Total Project Cost derived from TPL bid development process and is compliant to all
Tender Requirements defined in the biding package provided by Client.
c) Proposal & Tendering Team will handover the entire bidding package including Tend-3 to the
Project Management Team post receipt of LOI / Contract Award from Client as per a defined
HOTO Process (Refer EPM 04.02.05)
d) Project Controls / Cost Controller (in consultation with Project Manager) will prepare and finalize
Control Budget (CB) which will act as a baseline during the entire life cycle of the Project.

Execution Phase

 Cost Reports - During the Execution phase Cost Reports are to be prepared monthly by
Project Cost Control Engineer. The cost report shall include cost committed, actual expense till
date against CB / Last CTC approved costs along with reasons for variances, if any. The Cost
Report shall be submitted to Project Manager, Head Operations / SBU Head & SBU Project
Control for review. The Cost report shall also be circulated to the Commercial Team, CPC Team
& FRO team for reference.

 Estimate at Complete (EAC) – It includes regular monitoring & controlling of Project costs,
and re-estimation for the balance scope of work thereby assessment of total cost (and thereby
margin) for full scope of the Project.

 Project Closure – Project Controls / Cost Controller will ensure to maintain a as-built cost
during the execution of the Project which will act as an input to Project Management Team while
preparing Project Closure Report during the end of Project. This will minimum include budgeted
& actual quantity, cost, lesson learnt based overrun & underruns.

5. Roles & Responsibilities of Project Controls / Cost Controller

a) Ensuring seamless HOTO from Tendering & Estimation Team.

b) Detailing of Tend-3 / As-Sold Estimate.
c) Develop & Implement Cost Breakdown Structure (CBS)
d) Establish Control Budget based on approved CBS and Tend-3 within stipulated timeline.
e) Monitoring & Timely Reporting of Cost Reports
f) Reconciliation of Commitments & Actual Costs in ERP/SAP at regular intervals.
g) Target Budget to SCM / Sub-Contracting for Order Placement
h) Approval of PAN from SCM & Sub-contracting team before order placement.
i) Monthly Cash Flows & Forecast
j) ORM / PMR Reports
k) Support to PMT in Billing Schedule, Invoicing etc.
l) Support to Contracts for Change Trend Notice (CTN), Change Order (CO) Change trend
notice etc.

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TATA Projects Limited Guidelines for Project Cost Management & Review

m) Support to Risk Mgmt.

n) Lesson Learnt to PMT / Estimation Team
o) Cost Inputs for Project Closure
p) Time Sheet Access (Internal Resources)

6. Preparation of Control Budget (CB):

When a Project is newly awarded, it is critical for the Project to establish a Control Budget (CB)
quickly as this is important for:

• Planning the mobilization of manpower and other resources.

• Identifying key supply & service items, plan for sourcing and other execution strategies.

• Forecasting the cash flows for working capital requirements

a) Handover Workshop:

The purpose of this section is to establish the process required to develop the Original Project
Baselines (Original Budget, Current Budget, Progress Budget and Forecast) from Tend-3 / ‘As
Sold’ Estimate in the relevant Project Management Systems and/or the Enterprise Resource
Planning (ERP) Financial/Accounting System.

i. The Project Estimator and Tendering team will review the estimate with the Project
Management Team. The purpose of this review is to provide the Project Management
Team with a comprehensive understanding of the estimate basis and changes that
occurred during the post-bid clarification and negotiation process.

ii. All developments between the Management (SBU/SBG/COO/MD) Review and the As-Sold
estimate must be updated by the Project Estimator. The changes will be updated and
defined in terms of quantities, hours and cost and aligned at the lowest level of detail
available in the Project CBS. Discounts and late adjustments must be captured in the same
manner.

iii. After the As-Sold estimate review, the Bid Manager will distribute the As-Sold Estimate
Package to the Project Management Team.

iv. Project Controls should review the estimate to ensure estimate compliance to the Cost
Breakdown Structure (CBS) and Work Breakdown Structure (WBS) developed in the Pre-
contract phase. The Unit and Work Area used in the estimate should be reviewed and
confirmed that the breakdown is still valid and sufficient for controlling both the project costs
and schedule.

v. The line items created in the project estimate are defined at the lowest level of detail
required to create the most accurate cost estimate and bid price. The estimate level of
detail will differ from what is required (and manageable) for overall cost control of the
project. However, it is extremely important that the estimate be aligned with the CBS and
WBS.

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TATA Projects Limited Guidelines for Project Cost Management & Review

b) Establish Work Breakdown Structure / Cost Breakdown Structure:

A. Establishing the Project Structure is critical during the Estimating phase of the project as it will
drive project execution and drive setup and project execution upon award. The primary
structures and elements include Work Breakdown Structure (WBS) and Cost Breakdown
Structure (CBS), facilitate the planning and control of the project.

B. Establishing WBS and CBS coding structures is required for effective management of the work
by subdividing it into manageable components, which can be planned, organized, and
maintained throughout the project’s duration. This structure facilitates the planning and control
of the project. The following deliverables are defined within this section:
 Work Breakdown Structure (WBS)
 Cost Breakdown Structure (CBS)

C. All project costs will have assigned coding as per the Project’s defined CBS.
I. General
a) The Project Structure defines the hierarchy of a project and its various levels based on scope
of work, execution plan, and division of responsibility. These structures are interrelated to
support the integration of project scheduling, progress measurement, and overall cost
control.
b) Project Structure is used to collect, analyze, and report data for all phases of a project. It
provides the structure required for estimate preparation, budgeting, work hour and cost
recording, reporting, and analysis and forecasting.
c) Development of the Project Structure requires careful preparation so that the level of detail
supports effective decision making without creating the burden of collecting and reporting
unnecessary project data.
d) The WBS establishes the framework for the integration of cost, schedule, and progress.
i. The WBS subdivides the work into multiple levels of detail.
ii. The WBS is hierarchical with the total project summarized at the highest level and each
lower level further detailing the work.
iii. The levels of the WBS may be defined as:
 Scope – EPFCIC, In/Out of Country, Compensation Type
 Unit - Project Specific Units / Facilities / Systems
 Work Area - Specific Work Area within a Unit(s) / Campaign / Deck
 Work Package - Subdivision of work by function, which is quantifiable & scheduled.
 Deliverable/Component/Progress Item - Engineering Deliverables
1) Material Components & Construction Components / Sections
2) EWP- Engineering Work Package
3) PWP - Procurement Work Package
4) CWP- Construction Work Package
5) IWP- Installation Work Package

If the WBS is pre-defined by Client, the same shall be followed.

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TATA Projects Limited Guidelines for Project Cost Management & Review

II. Identify the CBS Level

a. CBS is the breakdown of a project into its cost elements (cost codes shall be defined as per
SAP guidelines}. The breakdown will use the TPL Chart of Accounts, indicating the basis of
the costs. The levels of the CBS are defined as:
 Prime – First level breakdown of the project cost related to function, discipline, or
category.
 Sub-Prime – Subdivision of the work/cost related to each prime within a project.
 Detail – Lowest level of detail within the cost code.
 Cost Type – This level identifies the types of cost such as Labor, Material,
Subcontracts, Employee & General Expenses.

b. CBS provides the structure by which to collect the budgeted, committed, actual, and
forecasted values.

c. CBS includes all required coding elements: entity, contracts, phase, area/unit, Cost Codes,
and Expenditure Categories.

d. CBS integrates with progress and schedule for performance measurement and reporting.

e. CBS provides definition of standard units of measure and other key attributes related to the
cost of the work performed.

f. CBS provides coding for all projects cost related documents such as timesheets, purchase
orders, subcontracts, service orders, master service agreements (MSA), and inter/intra-
company transactions.

g. The following is an example project CBS structure depicting pipe rack steel labor and
material codes:

h. Considerations When Preparing the Project Structure

The following items should be considered prior to developing the Project Structure:
i. Proposal requirements – A review of the Project Controls section of the project proposal will
be performed to identify any specific reporting requirements proposed to meet the client’s
requirements, which may impact the CBS and WBS.

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TATA Projects Limited Guidelines for Project Cost Management & Review

ii. Contractual requirements – A review of the project’s contract provides information regarding
special types of financial and schedule reporting which may impact the level of detail
required in the WBS/CBS.

iii. Project Scope – A thorough review and understanding of the project scope is paramount to
the development of CBS and WBS.

iv. Business Unit and Corporate Management requirements – A review of the TPL business
unit and corporate management reporting requirements will be made to ensure the
necessary reports provide data at the level of detail needed to support TPL management.

v. Project Management requirements - A review of TPL project management reporting

requirements should be made to ensure necessary reports provide data at the level of detail
needed to support TPL Project Management. These requirements may have a direct impact
on the development of the Project Structure

vi. Financial requirements – A review of the TPL financial requirements for special data being
reported from the project can impact the CBS development. The definition of level of detail
and format requirements may influence this development.

vii.Constructability – A review of the scope, plot plan and initial constructability planning may
influence the decision for dividing and sub- dividing the project into units and sub-sequent
work areas. A determination of the work requirements within a given location of the project
can impact the decision to subdivide the project into smaller areas for schedule and
progress analysis and reporting. When Modularization is required, the project is required to
segregate the modularization components into their own “scope” (WBS) and “ownership”
(OBS) within the project structures for proper capture and collection of cost and progress
associated with the related scope.

III. Develop CBS/WBS

Project Controls coordinates the development and documentation of the CBS and WBS on
behalf of the Project Manager/Director, and in support of the entire Project Management Team.
For Standard WBS Templates of different Business’s, please refer latest WBS guidelines.
Depending on the Business, the WBS templates are standardized upto L3 / L4 level and L4 / L5
onwards shall be Project Specific. The Project Management Team includes the Project
Manager/Director who is responsible for ensuring the CBS/WBS are developed in a timely
manner.

a) Create the Project Structure:

The project contracting strategy may be a consideration when developing the WBS and needs
to be reviewed for alignment with project execution and reporting requirements. The Project
Structure shall be prepared at or before Project initiation stage to ensure the project is set up to
meet the Project Execution Plan.

b) Collect required Documents & Information:

 Engineering will provide the Project Plot Plan

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TATA Projects Limited Guidelines for Project Cost Management & Review

 Proposals will provide the contract section on Reporting

 The Construction Modularization Lead will provide the Modularization Plan, if
applicable
 Construction will provide the Constructability Plan
 Proposals will provide the Project Organization Chart
 Engineering will provide the Modelling approach for Work Packages

c) Review, Approve, and Implement

The Project Structure (CBS/WBS) will be reviewed once it has been agreed upon and
documented.
 The Proposal Team will review during the precontract phase.
 The Project Management Team will review during the execution phase.

The review will provide the opportunity for the team to collectively discuss any changes that
have been identified and make recommendations to address those issues.

IV. CBS/WBS Approval

After the Proposal and/or Project Management Team has reviewed and adjustments have
been made, the CBS and WBS will be approved by the Project Manager/Director. During
this approval process, any changes that the Project Manager/Director requires will also be
included prior to implementation.

V. Implement OBS/WBS/CBS
i. Implementation in Precontact
 After the Project Manager/Director has approved the Project Structure, the Project
Controls Manager will be responsible distributing WBS to the Project Functions for
implementation into the estimate cost, schedule, and progress.
 The Estimation team prepares the bid in accordance with the Project Structure.

ii. Implementation in Execution

1. After the Project Manager/Director has approved the Project Structure, the Project
Controls Manager will be responsible for establishing and maintaining the project baselines
according to the approved Project Structure in Project Controls systems for planning, cost
and progress.
2. The Project Controls Manager will publish the Project Structure to ensure the Project
Management Team understands the coding convention and that they apply the codes
correctly when completing documents such as timesheets, purchase orders, and reporting
progress.
3. It is the Budget Owners’ responsibility to ensure that cost and progress are recorded
against the Project Code of Accounts (WBS/CBS).
4. The following groups are required to perform their scope in accordance with the Project.
5. Structure:

a) Engineering - executes the engineering scope, records time, codes requisitions, and
prepares Cost Time Resource (CTR) sheets, engineering status reports and Master
Document Register.

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TATA Projects Limited Guidelines for Project Cost Management & Review

b) Procurement and Materials Management - ensure all bills of material and purchase
orders are coded to the appropriate WBS and CBS code elements as defined by
Project Controls during indenting.
c) Fabrication - executes the fabrication scope, records time, shop purchases, and
prepares fabrication status reports.
d) Construction - executes the construction scope, records time, site purchases, and
prepares construction status reports.
e) Subcontract Management - executes, manages, and reports subcontract status.
f) Commissioning / HOOKUP – executes the Hookup, Commissioning and Start-up
scope, records time, codes requisitions, and prepares progress status reports.

c) The Control Budget Process:

The purpose of this section is to establish the process required to develop the Original
Project Baseline Budget from the ‘As Sold’ Estimate in the relevant Project Management
Systems and/or the Enterprise Resource Planning (ERP) Financial/Accounting System.

a) Following Steps needs to be considered before finalizing Control Budget:

i) Review of the ‘As-Sold’ Estimate
ii) Assumptions / Considerations during Estimate Preparation
iii) Estimate Conforming (after Project Award)
iv) Levels of Control for Cost Management
v) Unit of Measure Considerations
vi) Budget and Schedule Alignment – Work Package Alignment

b) Following Steps needs to be considered while / after finalizing Control Budget:

i) Once the As-sold Estimate is conformed after award of Project, the Project Controls
Manager will facilitate a review of the conformed estimate with the Project
Management Team to ensure alignment and buy in.

ii) The Original Budget for each project must equal the “As-Sold” estimate for quantity,
hours & cost.

iii) An exception to this would be a reimbursable contract / Open Book Estimate

contracts where it is believed that project budgets will not be expended. In such a
case, the Project Manager/Director may request that the budgets and prices are
partially loaded to better reflect the new business taken.

iv) Approval for partial release of Control Budget, for early start activities will be provided
by the Project Manager / Director and subsequently by SBU / SBG Finance, till
approval of Control Budget is obtained and shall be governed by approved DoA.

v) In case of exceptions, the outcome of the CB preparation process may be a

movement in project contribution vis-à-vis As-sold Budget. In such a case, a joint
discussion with bid estimation team must be organized and documented for
alignment and reliability before the same is proposed for approval

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TATA Projects Limited Guidelines for Project Cost Management & Review

vi) The Original Budget Baselines shall be approved by designated authorities as per the
approved DoA.

vii) Once the Control Budget (CB) is approved by the designated authorities, the same
will be treated as the Baseline Budget against which all variances, positive &
negative, shall be reported. No changes are allowed to be made to the Baseline
Budget unless a confirmation of Scope change is received from the Client. Any
adjustments to the CB / Baseline Budget, i.e. increase or decreases to revenue and /
or cost due to scope change by Client shall be through Internal Change Order
approved by the designated Authorities as per the latest approved DoA configured in
the ERP.

viii) After approval of Original Budget as per designated authorities in DoA, the original
budget will be reflected in the appropriate systems which are maintained by Project
Controls and Finance.

ix) Project Accounting is required to import the distribution of the original budget as
provided by project controls in the company financial system.

x) The conformed estimate details will be summarized to the agreed budget level and
transferred to the company ERP / SAP Financial/Accounting System for corporate
reporting at the same.

xi) Project Controls will provide finance a copy of the required accounts in the ERP /
SAP

xii) Finance will import / create the accounts in the company ERP / SAP system.

xiii) All level 4 accounts valid cost code/cost type combinations in the conformed estimate
will be created in the ERP / SAP Finance/Accounting System to allow for collection of
actual qty. / cost / hours and this step in creating the original budget allows for
charging and collection of costs at the lowest level of detail for analysis.

xiv) Control Budget (CB) is to be prepared and approved in the ERP at the earliest but not
later than 30 days of order booking date as per the defined policy.

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TATA Projects Limited Guidelines for Project Cost Management & Review

The Control Budget process flow is summarized below:

7. Preparation of Cost Report:

Once the Control Budget is approved in ERP, the Project Controls Manager is responsible for
preparing Monthly Cost Reports with the support from entire Project Team as below:

I. Project Controls is responsible for preparing cost status reports, checking for alignment with
Finance/Accounting, and identifying potential impacts to the EAC. A review should occur to
identify issues and potential impacts to the EAC prior to meeting with the project team.

II. The Project Manager is responsible for ensuring the team’s participation.

III. Project Team Leads are responsible for reporting their purchasing status as it relates to
future purchases. They are also responsible for providing updates to procurement
management on any specific site purchasing issues related to indirect costs and temporary
facilities which shall be incorporated into the procurement status report (procurement log).

IV. Engineering team to provide updated BOQ / Keq Quantity Report (KQR) every month to
Project Controls, based on which revised EAC shall be calculated.

V. Procurement and Subcontracts with the support of Project Controls are responsible for the
monthly update to accruals relating to their scope on the project.

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TATA Projects Limited Guidelines for Project Cost Management & Review

a. Procurement is responsible for providing status on current purchase orders and the value
remaining to commit on existing and future purchase orders. . For future estimate of bulk
items Last Purchase Price (LPP) is to be taken as reference.

b. Subcontracts is responsible for reporting on potential and pending changes to

subcontracts, including any contract-related claims or unresolved issues. They are also
responsible for reporting status on subcontract awards in place and projections of
subcontracts not yet executed.

VI. Materials Management is responsible for supporting analysis efforts as it relates to identified
material requirements and third-party fabrication status.

VII. Finance is responsible for reporting Letter of Credit and other financial costs associated with
the project like Financing Charges, BG Charges, Insurances, Forex Hedging Cost etc.

VIII. Project controls is also responsible for consolidation of data provided by the budget owners
outlined above and incorporating into the project forecast.

 Collect, Review & Analyze Committed Cost

During the preparation of Monthly Cost Reports, the Project Cost Controller shall be assessing
the following.

A. Collecting Committed Costs

I. Committed cost is categorized as per the following:

a) Material and Equipment in the form of purchase orders.

b) Purchase orders for services.

c) Subcontracts in the form of contract awards.

d) Labor costs as expended - Labor costs are not committed in advance – these cost are
considered committed as expended.

e) Owned Equipment Cost – Internal equipment costs are not committed in advance these
costs are committed as expended. (i.e., Vessels, Forklifts, Generators, etc.)

II. Collect Material and Equipment commitments.

a. Material and Equipment commitments are developed as a result of quantity requirements
defined during the Engineering phase of the project. Engineering Leads will develop Bills of
Material for bulk items and equipment.

b. During this process, the requisition will be coded by the budget owner to the appropriate
Code of Account or may be automated through system interfaces. As part of the Purchase
Order approval process, Project Controls will review all purchase orders and will identify
and correct cost coding errors prior to signoff.

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TATA Projects Limited Guidelines for Project Cost Management & Review

III. Collect Subcontract Commitments

a. The Engineering Leads will develop the scope of work and designate the specifications
required for the subcontract to form a subcontract technical package.

b. Project Controls supports the formation of the subcontract terms as they relate to progress
measurement, schedule development and updates, requirements related to reporting of
actual hours and cost where applicable and reporting formats and cadence.

c. Project Controls assists in the development and/or verification of the subcontract scope and
identification of the associated budget if not already established/outlined in the estimate
details. This technical package is issued to the Subcontracts Group for development of the
tender package and invitations to bid.

d. Subcontracts Management is responsible for awarding scopes to the established Project

WBS/CBS in all sub-contracts technical packages.

e. Project Controls will be included early in the process prior to the award to align scope with
budget prior to subcontract award.

f. Once a subcontract is awarded, the award is recorded and committed in the TPL financial
system (ER/SAP) to the appropriate Project Cost Account and is available in management
reports as committed cost.

IV. Track Cost Related to Back Charges

The need to track back charges arises when there is a defect in procured materialor
equipment or other failure by a supplier to adhere to the terms of a purchase order or
subcontract. Project Controls is responsible for the following tasks:
a) Support the collection of costs related to back charges.
b) Updating and distributing the Supplier Back Charge Register with actual cost based
on agreed cadence.

V. Review and Analyze Actual and Committed Costs

a. Compare Actual Expended Costs to Commitments and EAC

 Project Controls will identify any expended cost that exceeds the commitment or EAC for
a given cost code and cost type. If the actual expenditure to date is higher that the
commitment or EAC, Project Controls will review the detailed transaction to determine the
cause.

 Actual Cost greater than the commitments or the EAC can be caused by an error in the
committed value, payments to an incorrect purchase order or subcontracts, an error in
recorded payments, and/or an incorrect EAC forecast. b. Compare Commitments to
Budget, Actual Cost and EAC

b. Project Controls will compare current committed costs by cost code/type against the
following:

 Current Budget.

 Actual Expended.

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 Estimate at Completion (EAC).

c. A commitment should not exceed the EAC. If the commitment is higher than the EAC,
Project Controls will determine the cause. Total commitments and open commitments, as
well as Incurred Cost

d. Cost (actual paid plus all accrued amounts) are reviewed to determine if these values are
contributing factors.

e. If the commitments are correct and exceed the EAC, then the EAC will be adjusted based
on further analysis of equipment, consumables, or material requirements not yet
purchased, potential change orders (including claims and back charges), and projections
of future subcontract awards.

f. Where commitments are less than the forecast, the remaining uncommitted forecast is
included in analysis of anticipated future commitments or potential opportunities.

g. Open commitments are compared to to-go scope and requirements for purchase orders
and subcontract awards. Both must be maintained monthly so that the potential for a
commitment to exceed its EAC is minimized.

h. Final committed costs are reconciled to paid amounts so that project costs and EAC are
accurate. It is the responsibility of the Project Procurement Manager and Project
Subcontracts Manager to ensure awards and subcontracts are closed in a timely manner
(including final reconciliation of open commitments).

In the event of an overrun or underrun, Project Controls coordinates with Engineering, SCM,
Fleet, Construction Team, Finance / Accounting and completes the following to address
corrective actions:

 Confirm commitments/actuals are accurate.

 Determine the root cause of over-run or under-run.
 Assist Project Management with the development and implementation of agreed
corrective actions to make the required EAC adjustments.

The cost reports shall be reviewed by Project Manager, Head Operations / SBU Head & SBU
Project Control every month. The Cost report shall also be circulated to the Commercial Team,
CPC Team & FRO team for reference. The monthly cost report shall also form a basis for the
periodic EAC Review

8. Forecasting Estimate at Completion (EAC)

I. Forecasting
Providing accurate and timely forecasts is an integral element of successful project execution.
Forecasts provide an early warning of potential trends and their effects on budgets and
schedule so that Project Management can take action to mitigate potential overruns and
capitalize on positive opportunities. Accurate and timely project-level forecasts are also critical
to overall financial planning within TPL and directly affect shareholder value.

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a. General

i. All forecasts developed should be in alignment with the Forecasting Plan developed by the
project and included as a component of the Project Execution Plan (PEP). The Forecasting
Plan establishes the content and extent of the project forecast and identifies the person
responsible and timing for providing the content.

ii. Project forecast reviews will be held monthly.

iii. Changes in the execution method, quantities or duration of tasks should be monitored and
documented internally by the Project Team as these changes occur. This proactive practice
allows more time for analysis and review of changes prior to issuing any reports.

iv. The forecasting process usually follows a logical sequence. Changes in the volume of
quantities, including change in specifications, are typically considered first, as this has the
potential to influence all other analyses when building the forecast.

v. Methods, steps and assumptions taken to produce a forecast will be documented and
retained by the project (usually by Project Controls) to provide an audit trail.

II. Support Development of the Project EAC

a) Responsibilities
i. The Project Management Team and Project Controls work together to develop the project
EAC. All members of the Project Team contribute to the components of a project EAC as
required.

ii. Project Management reviews and provides approval of the project EAC and its components
(as outlined in the DOA process). Project Management will review and approve the following
after they are produced by Project Controls and Risk Management:
 Updated Project Schedule.
 Updated Risk Management Plan/Register.
 Updated Project EAC.
If possible, the order in which the tasks are listed here should be followed, as the schedule
will likely affect the risk register and in turn the EAC.

iii. Budget Owners are responsible for managing their budget and providing the required data for
EAC development. Project Controls facilitates the process of joint or individual review with
the groups or functions as outlined below.

a) The Project Management Team is responsible for providing updates to the staffing plan.

b) Engineering Leads are responsible to support progress and productivity analysis for the
individual disciplines as well as staffing plans for engineering indirect support staff.
Engineering is also responsible for monthly updates of the Key Quantity Report (KQR).

c) Procurement and Material Management are responsible for managing their budget,
ensuring that they have captured quantity growth with the support of Project Controls, and

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updating procurement status reports based on committed or expected values. . LPP shall
be referred to for future estimates of bulk items.

d) Fabrication is responsible to support progress and productivity analysis for the individual
disciplines as well as staffing plans for indirect support staff. Fabrication is also
responsible for providing construction equipment plans when required.

e) Construction Management is responsible for supporting progress and productivity

analysis for the individual disciplines as well as staffing plans for indirect support staff.
Construction is also responsible for providing updates to the construction equipment and
site temporary facilities plan.

f) Subcontracts Management is responsible for managing and updating the subcontract

register, manage subcontractor scope, subcontractor scope definition, subcontract change
management (including claims and back charges), and overall subcontract forecast per
the Project COA. If the subcontract is reimbursable, Project Controls is required to support
the development of the forecast. Project Controls will supply the reporting requirements
that will facilitate the development of the forecast for this type of subcontract.

g) If Managing Foreign Exchange on Projects, Project Accounting is responsible for

developing the foreign exchange EAC and providing it to Project Controls for inclusion into
the over Project EAC.

h) Project Controls is responsible for providing any updates or changes to quantities,

schedule, or execution that may have not been captured by the Budget Owners as part of
their review. This includes a full review of the Change Management Log, to ensure all
relevant changes have been captured in the development of the EAC.

i) The Project Management Team and Budget Owners are required to participate in the
monthly Forecast Review Meeting. This process allows for cross functional/discipline
review and identification of potential impacts caused by changes to execution or planning
made by others.

j) Once the EAC is approved, the same shall be used for producing all internal and external
reports. These reports shall reviewed and approved by designated authorities before they
are released for distribution.

III. Perform EAC Component Analysis

A. Quantity and Unit Rate Analysis
i. Physical quantities are one of the most influential components that impact cost and
progress. The volume of items (Engineering deliverables) that must be produced or
installed requires both time and cost. As this volume changes, (either positive or negative
from the original estimate), it directly influences the amount of time and cost required to
complete the work.
 The items referred to in Engineering are total quantities.
 in Procurement, it takes the form of quantities to be purchased.
 in Modularization, the quantities to be prefabricated and assembled.
 in Fabrication, the quantities to be fabricated or assembled.

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 in Construction, the amount of quantities to be installed / constructed

 in Subcontracts, it takes the form of quantities to be purchased and installed.

ii. Since the goal of Project Controls is to provide an EAC of cost and schedule as early as
possible, it is imperative that the analysis process begin in the Engineering phase and
follows through into the Procurement, Fabrication, Construction, and/or Installation phases.

iii. A tool to track changes in quantities and produce accurate quantity forecasts is through Key
Quantity Report (KQR) which Engineering Discipline Leads are responsible for producing
and updating on a monthly basis. The budget quantities will be populated from the As-Sold
estimate. Additional quantities should reflect approved Contract Change Orders and
forecast design quantity changes discovered in the detail design phase.

iv. A quantity forecast should consider not only changes in the key quantities but also non- key
quantities that will affect the installed cost. Items such as fittings, weld density changes,
complexity of foundations, more complicated forming for foundations, or changes in the
reuse of existing backfill can also affect the quantities forecasted.

v. To effectively utilize quantities in the forecasting process, an analysis of estimated, actual,

and applied unit rates must also be performed. When a project is estimated, standard unit
rates are applied to quantities to develop the estimated hours and cost. As quantities are
installed, actual unit rates may be different than estimated due to productivity issues or
other external factors.

vi. Following Items to evaluate as part of the quantity analysis:

 KQR Quantities (ensure remaining Qty’s are inclusive of approved change orders).
 Current Take Off Quantities.
 Actual unit rate vs. Estimated Unit Rates.
 Actual Quantities installed vs. Planned Quantities (analysis of time).

vii. Analysis of the items outlined above should be compared to the work hour analysis
described in the next section to verify the accuracy of the EAC.

B. Work Hour Analysis

i. Work Hour analysis is the process of comparing actual and planned work hour performance
in various formats. These comparative formats can be:
 Actual vs. Planned work hours (based on staffing plans).
 Actual vs. Planned full time equivalent (FTE) manpower (workforce based on the
schedule).
 Performance Against Budget (PAB or PF) ratio (calculated as Earned/Actual Work
Hours).
 Comparison of Actual vs. Planned work hour Unit Rates (Work Hours per Installed
Quantity).
 Work hour expenditures to percentage of completion.

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ii. Any change in execution that affects the work schedule will likely have a resulting impact on
productivity. Review the impact of acceleration or recovery schedules carefully to
understand the full impact on work hours and project cost.

C. Labor Rate Analysis

i. For this analysis, the average wage rate is calculated by dividing the total labor cost
expended by the total work hours spent. The EAC and ETC wage rates should be
compared against the current wage rate. The EAC and ETC rates may be different from the
current rate due to a changing crew mix or inflation rates over the course of the project but
should be analyzed to ensure that the variance against actual rates is not caused by a
discrepancy in the EAC development.

D. Material Analysis
ii. The Material analysis is the review of estimated material quantities and pricing vs required
quantities and purchase price for the three major categories of material listed below.
 Major Engineered tagged items.
 Minor Engineered tagged items.
 Bulk Materials like Civil, Piping E&I, HSE etc.

iii. The ability to identify cost on these items occurs in two (2) stages. The first stage is the
Engineering phase where cost impact can be influenced the most. The second stage is
when design is complete, and commodities are specifically defined. When preparing
material analysis use an 80%/20% approach where the analysis concentrates on those
items that have the greatest impact on the project. Miscellaneous other material costs such
as freight, duty, escalation, and taxes need to be considered during the analysis.

E. Subcontract Analysis
i. Subcontract analysis is the process of comparing actual and forecasted subcontract cost to
planned budgets for subcontracts as listed in the original estimate. Analysis includes in-
depth review of the scope of work (awarded scope and quantities), contract type (NMR,
Lump Sum, Unit Rate, Fixed Fee, etc.), and terms as they relate to the original estimate. As
part of analyzing the progress of a subcontractor, it is important to review both actual and
planned progress. If it is determined that the schedule is shifting to the right, an assessment
of the impact on indirect subcontracts should be done.

F. Back Charge Analysis

i. Costs related to back charges need to be reviewed and any potential recovery needs to be
accounted for when evaluating the EAC as follows. Change notification to traced to avoid
miss outs or duplication. If we are expecting a partial or full recovery of back charges from a
supplier or subcontractor, the recovery needs to be accounted for in the EAC of the back
charge accounts.

ii. Project Controls should ensure that back charge values are not already covered in the
Procurement or Subcontract registers to prevent a double dip in EAC back charge
recognition.

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G. Construction/Installation Equipment
i. Equipment requirements should be estimated and scheduled for each piece of equipment
needed. The equipment schedule should contain a listing of all equipment inclusive of a tag
number when available. Accompanying the equipment item should be the rental rate, either
third party or TPL, to be used to calculate the EAC. If it is determined that the schedule is
shifting to the right, an assessment of the impact on equipment, fuel and maintenance
should be done.

H. In-directs and Overhead

Indirect Cost: Indirect cost broadly includes Employee Cost, Other Establishment
Expenses, Project Add-on Cost.

i. Actual cost as per ERP to be referred to populate the WBS wise cost incurred.
ii. Future Insurance cost is to be worked out based on the revised completion date of the
project
iii. For Employee cost, future cost to be estimated based on the requirement of resources
considering the revised completion schedule and close out duration of the project.
Detailed month wise staff and other resources deployment plan needs to be prepared for
the balance period to arrive at the future cost. HR / Admin team is accountable for the
staff cost considered in the EAC.
iv. Future period interest charges to be worked out based on the residual cashflow
projections.
v. Expected Labour Cess cost for the balance period is to be worked out based on the
balance construction revenue of the Project.
vi. Future BG charges for the balance period shall be worked out as per agreed rate of
commission.
vii. In case of GST, basic prices are to be considered in the EAC. Anti-profiteering and
Inverted duty structure impact (if any) shall be considered as cost in the EAC.
viii. These types of costs are routinely billed against projects and should be analyzed monthly
by Project Controls and reviewed by the Project Management Team. There are three (3)
distinct types of cost, services, general expenses, and finance costs. Services will typically
translate into personnel and subcontracts which support general activities, while general
expenses include purchased items to support the personnel (i.e., small tools,
consumables, travel, facilities, utilities, etc.). Each has its own unique method of analysis.
a. Services (Personnel and Subcontracts):
If it is determined that the schedule is shifting to the right, an assessment of the impact
to in-directs should be done based on the added duration.

b. General Expenses:
 Items such as facilities and utilities typically utilize a duration-based approach.
 Items such as tools, consumables, and subsistence are typically driven by direct
labor requirements and are calculated based on a rate per direct labor hour.
 Other items such as travel may be calculated utilizing a quantity approach (number
of trips per month x cost per trip).

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c. Finance Cost
 Foreign Exchange: Project Accounting is responsible for developing the foreign
exchange EAC and providing it to Project Controls for inclusion into the overall
Project EAC.
 Bank Charges and Insurance

I. Progress and Schedule Analysis

i. The analysis of progress is the comparison of the scheduled planned progress consisting of
an early, late, and baseline plan to the actual. By plotting the early and late progress
curves, an envelope is created which provides a degree of variance from the baseline. If
actual progress begins to move to the right, approaching the late curve, corrective
measures should be implemented. Maintaining progress to the baseline plan is the
objective to complete the project on time. It is the evaluation of actual progress
compared to this set of curves which determines if corrective measures are required by
management. When performing the evaluation, the difference between the baseline plan
and the actual progress indicates the value of the variance in the schedule. If it is
determined that the schedule is shifting to the right, an assessment of the impact should be
done on all time-based components of the EAC.

J. Contingencies
Contingencies are downside risk estimates for unforeseen circumstances associated with
the project. There are broadly 3 types of contingencies.
 Cost Contingency
 Normal Contingency
 Special Contingency
Projects should adhere to the company’s policy to release & utilize Contingency (For details
refer Key accounting guidelines).

It is to be noted that there will not be any Actual Cost against contingency line item. If the
project releases or utilizes a portion of contingency, available balance provision will be kept
in the current CTC column.

K. Other Miscellaneous Inputs:

I. Contract Value Elements: The output taxes e.g., GST allowable as reimbursement under
the contract should not be included in the Total Contract Values. In the case of inclusive
contract values, the GST element must be excluded to reflect in CB or CTC.

II. Original Contract Value: Original Contract Value (OCV) is the base price agreed with the
customer for the defined scope of work mentioned in the contract document. Any change
to the contract value, including increase or decrease in item rate contracts, shall be
recorded in ‘Variation to Contract” (VTC)
 Actual – Actual cumulative amount billed to the customer till the quarter.
 Future – Balance to be billed as per original contract value, or new, amended Contract
Value.

III. Price Variation: Price Variation will be included in TCV provided valid clause stating the
mechanism to allow for price escalation of goods & services, is available in the contract.

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• Approved PV – If PV clause is applicable in contract and PV invoice is certified by

Customer. Reflected in Actuals.
• Unapproved PV – If the PV clause is applicable in contract but PV Invoices are yet to
be submitted to the Customer.

IV. Variation to Contract: Variation to Contract (VTC) is an alteration to the scope of works in
a contract in the form of an addition, substitution, or omission from the original scope of
works. Refer “Guidelines for Considering Variations to Contracts (VTC) in CTC” for
consideration of VTC in CTC.

V. Claims: Claims can be a result of delayed events, changes in agreed contract conditions,
unforeseen circumstances, insufficient information, and dispute with the customer during
the lifecycle of the project. Refer “Key accounting guidelines” (EPM 11.05.01 / P-02 / R2)
clauses – 1.1 & 2.2 for consideration of claims in CTC.

VI. Unbilled Revenue/Advance Billing: It is the difference in Billed Revenue as per Billing
Breakup (BBU) agreed with Customer and Revenue Recognized based on POCM on the
given date. UBR/Advance billing is calculated as per the below formula and values are to
be provided in the CTC.

VII. Other Income: Any other income in a project such as bonus and other items which are
not part of any of the above-mentioned revenue components can be considered in this
section.

VIII. Cost Credit: Cost Credit refers to income of a project adjusted to cost. These
constitutes incomes received on interest on bank deposits, corporate deposits, I-T dept,
vehicle loans, housing loans, other loans & advances, Exim bonds, hire charges, Inter
Corporate Deposits (ICD) given to subsidiaries, insurance claims, sale of fixed assets
and other miscellaneous income etc.

Apart from the above, items such as credit for sale of scrap, surplus materials, and
material transferred to other sites, sales to vendors are to be considered under this
section.

GL Account Codes of various types of Cost Credits are mapped to ERP CTC Reports.
When Actual Cost is booked through’ GL code in finance module, same value is
captured in actual cost column of ERP CTC Report and PA Budget Master Report of the
project.

If the Project has received Cost Credits (Negative Cost), the same shall be reflected in
the Total Cost Column of Current CTC. Refer detailed Guideline on Cost Mitigation for
compliance.

IX. Project Margin: Project Margin/Contribution is the difference between Total Contract
Value (TCV) and Total Cost to Complete.

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The process flow for the Monthly Cost Report & EAC is provided below. Each Project shall be
reviewed mandatorily once in the financial year. The frequency may be increased if there is
change in margin or as per management requirement.

The EAC / CTC shall be submitted in the format provided in Annexure-A

9. Margin Movements:

The movements in the Margin between reviews (current “n” versus previous “n-1”) must be
explained in detail as part of the Project EAC / CTC review presentation. The Project Manager
is responsible for providing the deviation report detailing the analysis and justifications.

The analysis of the root causes (quantity or rate) must be done to understand the deviations
and to put in place an efficient action plan to avoid future deviations. Thus, any cost line
variance between reviews (n versus n-1) shall be explicated by root cause(s) together with
justifications for the change. In case several root causes conjointly contributing to a line
variance, a detailed split shall be made to show the exhaustive picture of the cause’s spectrum.

If there is no movement in the aggregate between reviews, it does not mean necessarily that
there were no changes. As some embedded movements could have been offsetting one and
other, PM therefore have to disclose details of the movements. Unrelated costs and savings
must not be netted (e.g.: a cost due to quantity changes, and an equivalent saving because of
rates must be shown individually).

The movements should ideally be the result of event occurrences or developments since the
previous CTC review. The movements shall be categorized in one of the below categories –

• Unclear scope definition

• Scope wrong estimate in Tend 03
• Engineering variations (deficiency/ innovation)
• Supplier deficiency / efficiency

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• Changed market condition / change in law (external factors)

• Planning inconsistencies
• Resource management
• Process deficiency / improved efficiency
• Force Majeure events, ROW issues
• Others

Any project where a material movement is proposed in the cost estimates must have
necessarily gone through the Project ORM in the quarter.

10. Risk and Opportunity Register

The Risk and Opportunity Log (ROL) is an essential tool to record the identified risks and
opportunities which arise out of the management / administration of the contract during
execution stage as well as pursue those identified during tender stage. Some of the recorded
risks or opportunities in ROL may potentially have the financial impact on the contract expected
results and therefore shall be reported along with submissions of Control Budget (CB) and
Cost to Complete (CTC) during the contract execution phase. Please refer separate
guidelines issued on “Project Risk Management” (PRM) (EPM doc No. 03.04.02)

The level of net financial risk from the PRM should be reviewed against the level of
contingencies available in the Project.

11. Selection of Projects for review and Review mechanism

a) Selection of Projects for review

Every quarter, projects need to be identified out of applicable projects for senior management
review. All the projects must be covered for review atleast once in a financial year.

b) Review with Stakeholders

There are 4 level of reviews of the CTCs prepared in the quarter, as explained below.

• Review with SBU / SBG Team:

Projects for the quarter will be reviewed by the panel consisting of Head CPC ,Head FRO,
SBU Head, SBU/SBG Finance Controller, SBU/SBG Commercial Controller and other
Project team members. Participation from other functions, as required, is encouraged. Head
FRO will be responsible for conducting the review with these stakeholders in a time bound
manner in every quarter. Action items coming out of the review to be published by FRO team
and followed up for closure before CFO

• Review with CFO & COO:

SBU Head and SBG Commercial would make the presentation to CFO, COO, Head CC, Head
FC, and CPC. CPC & FRO teams shall bring in the key discussion points including the risks
and opportunities on the Project. FP&A representative shall be the participant to this review
meeting.

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• CTC Audit by Statutory Auditors

Head FRO shall finalize all the CTCs under CFO & COO review ensuring that the all the
action items out of the review are completed and thereafter submit the same to statutory
auditors for quarterly audit. FRO Team shall be responsible for clarification of audit points
and further inputs either directly or through project teams.

• Presentation to Board and Audit Committee

Every quarter, Head FRO shall present the critical information related to CTC such as
movement of CTC, TCV and Margin, Claims, etc. w.r.t previous quarter at portfolio level to
the Audit Committee and Board.

12. List of Mandatory documents to be submitted with CTC

a) Confirmation from Project Manager that inputs received as per the RACI matrix have
been fully incorporated in the review presentation.

b) Confirmation from the Project Manager that all past events, occurrences, or
developments on the project which are material and having an impact on the project
financials have been accounted for in the CTC or captured in ROL.

c) Client Approved EOT letters if any

d) Manpower deployment schedule for remaining period

e) T&P deployment schedule for remaining period

f) PV detailed calculation for entire project life cycle, if applicable

g) Summary and details of approved Claims, if any together with relevant supporting
documents

h) Unapproved Claims considered in CTC in line with clause 2.2, if any with supporting
documents

i) Summary and details of “approved”, “in principle approved”, “unapproved” VTC’s, if any

j) together with relevant supporting documents

k) Details of Vendor recovery considered in CTC, if any with supporting documents

l) Details of Cost mitigations considered in CTC, if any with supporting documents

m) Project Risk and Opportunity Log (ROL)

n) Deviation Report detailing out the movements and analysis thereto

13) Currency conversion rate

The rates to be used for currency conversion in calculation of future income to be earned or
costs to be incurred in currencies other than the functional currency of Tata Projects i.e., INR
will be the rate prevailing on the cut-off date relevant for preparation of CTC in any given
quarter. The actual cost or income is booked in ERP at the rates prevailing on the date of
transaction.

For CB, the rate prevalent on the last day of the month of contract booking would be relevant.

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Version History

Version No Effective Date Summary of Changes

R0 14-10-2021 Initial Rollout

R1 01-10-2022 Revised as per the organizational changes

R2 01-06-2023 Revised as per the organizational changes

Revised as per the Transformation
R3 05-02-2024
Initiatives

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