Engineering Encyclopedia

Saudi Aramco DeskTop Standards

Commitments And Forecasting

Note: The source of the technical material in this volume is the Professional
Engineering Development Program (PEDP) of Engineering Services.
Warning: The material contained in this document was developed for Saudi
Aramco and is intended for the exclusive use of Saudi Aramco’s employees.
Any material contained in this document which is not already in the public
domain may not be copied, reproduced, sold, given, or disclosed to third
parties, or otherwise used in whole, or in part, without the written permission
of the Vice President, Engineering Services, Saudi Aramco.

Chapter : Project Management For additional information on this subject, contact

File Reference: PMT10304 J. McKissack
Engineering Encyclopedia Project Management
Commitments And Forecasting

Contents Pages

INTRODUCTION................................................................................................................ 1

COMMITMENTS FOR CAPITAL PROJECTS ................................................................... 2

Definition and Reporting ........................................................................................... 2
Determination of Commitments ................................................................................. 2
Engineering Commitments......................................................................................... 2
Materials Commitments............................................................................................. 3
Construction Commitments ....................................................................................... 3
Prorates..................................................................................................................... 3
FORECASTING FOR CAPITAL PROJECTS...................................................................... 4
Forecasting Process................................................................................................... 4
Forecasting Considerations........................................................................................ 4
Forecast Uses............................................................................................................ 5
Forecasting Responsibilities....................................................................................... 5
Forecasting Change Orders and Contract Claims ....................................................... 6
Contingency Forecasting and Usage .......................................................................... 6
Cost Element Forecasting.......................................................................................... 7
SAPMT Engineering ................................................................................................. 9
Contractor Engineering ............................................................................................. 9
Direct Charge Materials............................................................................................10
Saudi Aramco Materials System Materials ................................................................10
Contractor Construction...........................................................................................10
Saudi Aramco Construction and Others ....................................................................11
Change Orders .........................................................................................................11
Commitment Review for Partial Cancellation............................................................11
GLOSSARY........................................................................................................................12

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Commitments And Forecasting

INTRODUCTION

This module introduces the Participant to the capital project forecasting processes, which are used
at Saudi Aramco to estimate the final cost of capital projects, prepare cash flow forecasts, and
determine financial commitments. To accomplish this objective, we will discuss the applicable
Company methods, procedures and guidelines.

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COMMITMENTS FOR CAPITAL PROJECTS

Definition and Reporting

Commitments are obligations by the project to expend funds. These funds may be spent with
outside contractors, vendors, or with various Saudi Aramco organizations.

Examples of outside commitments include purchase orders for equipment or materials and
contracts for engineering, procurement services or construction. Commitments within Saudi
Aramco include labor of employees, materials that are procured through the Saudi Aramco
materials system, company equipment usage, and prorates.

Commitments are reported on the Monthly Project Update (MPU) and Budget Item Summary
Report (BISR). The next module will discuss these documents. Commitments must be forecast
for inclusion in the project status reports. The definitions and methods of calculations of each
source of commitment are discussed below.

Determination of Commitments

The proper determination of commitments is one of the prime responsibilities of the SAPMT cost
engineer. This determination is essential for effective project reporting and control. Commitments
are compared to the budgets that are established within the project cost structure. The cost
structure consists of BIs that are divided into JOs and are further subdivided into phases at three
subsequent levels. These levels are engineering, materials and constructions. Each level is, in turn,
subdivided into cost categories that are titled and coded as reflected on the ER estimate form
56D. The cost categories appear in the AFE and in the various cost expenditure reports.

Engineering Commitments

Contractor commitments for engineering services depend upon the type of contract that is
awarded. Lump sum contract commitments, which are at the full contract amount, are committed
when the contract is signed. Cost reimbursable contract commitments are the sum of
expenditures, costs that are incurred but not yet shown in the cost reports, and, if stipulated in the
contract, the total contract cancellation cost.

Saudi Aramco commitment costs that are associated with engineering are the sum of
expenditures, costs that are incurred but not yet shown in the cost reports, and SAPMT costs that
are needed to close the project in the event of project cancellation.

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Materials Commitments

Commitments for DC materials are at the purchase order value plus applicable laid-down-in-the-
field (LDF) costs. The LDF costs include export packing, freight, customs charges and the
Material Supply organization overhead prorate. DC material is committed when the purchase
order has been processed by the procurement agency and a written notice has been sent to the
vendor. The SAPMT is responsible for updating the commitment values to reflect all subsequent
purchase orders and changes to purchase orders. If a purchase order is canceled, the LDF costs
must also be deleted from the total material commitments.

Commitments for Saudi Aramco Materials System (SAMS) material are the sum of all SAMS
booked expenditures, which includes overheads.

Construction Commitments

Commitments on lump sum or fixed price construction contracts are the full contract amount and
are committed when the contract is signed. Commitments on cost reimbursable or unit rate
construction contracts are the sum of booked expenditures against the contract, costs that are
incurred but not yet shown as expenditures, and, if stipulated in the contract, total contract
cancellation costs.

Saudi Aramco commitment costs that are associated with construction are booked expenditures,
costs that are incurred but not yet shown as expenditures, and SAPMT costs that are needed to
close the project in the event of a project cancellation.

Prorates

Prorates are charges that are allocated to a project as a fixed percentage of the total project costs
to date. Thus, prorates are committed as other costs (engineering, material and construction) are
committed. The prorate commitment is the cumulative prorate expenditure plus prorates on costs
that are committed but not yet shown as expenditures.

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FORECASTING FOR CAPITAL PROJECTS

One of the most important duties of the Saudi Aramco cost engineer is to prepare the project
forecasts. The forecasts are reported on the Monthly Project Update (MPU) and Budget Item
Summary Report (BISR), which serve to keep management aware of the financial status of a
project. The forecast is updated monthly as more current information becomes available.

Forecasting is the art of determining the cost of future events. Saudi Aramco uses forecasting to
determine the anticipated total project cost at completion. Another use of the forecast is to
allocate remaining expenditures on a quarterly (three-month) basis, which represent the rate at
which these expenditures will appear in the various cost reports.

Forecasting can also be viewed as the process of estimating anticipated costs over a specified
period of time. These costs may be reflected in a time-phased schedule through the financial
duration of a capital project and are known as an "expenditure forecast". The sum of the
incremental costs is known as the "total project forecast". Both types of forecast are totally
interdependent.

Forecasting Process

Forecasting cannot be reduced to a series of mathematical formulae, precise rules or scientific

methods. Forecasting is an art that is developed through experience, observation and study. The
more often the SAPMT cost engineer does a forecast, the better the cost engineer becomes. Thus,
on-the-job experience is the best teacher.

Just as we have seen with the determination of commitments, a forecast is built up from data that
are collected by cost category. The cost categories are totaled into the cost elements that are
totaled into the JO level forecast. The sum of the JO level forecasts equals the total ER forecast.

Forecasting Considerations

The accuracy level of the forecast is affected by many variables. Project costs can be difficult to
estimate even when the project is well along in construction. Accuracy should be at its greatest
when the timed expenditure is closest to the date that the forecast is made. For each succeeding
period, the accuracy will be subject to more and more intervening acts and, hence, there is less
probability of true accuracy.

The accuracy of the forecast is dependent on the point in the project life cycle. As the project
progresses, additional detailed information is available to the cost engineer. The additional
information consists of such data as placed purchase orders, awarded contracts, project schedules
and manpower loadings that are received from the contractor.

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Forecast Uses
Forecasts are used in the following Saudi Aramco reports:
• Budget Brief and Saudi Aramco Form 56D. An ER estimate is prepared where the
total costs of a project are shown by phase and ER category. The quarterly cash flow
forecast is reflected on the 56D. The total and annual cash flow forecast is reflected on
the Budget Brief. Both of these documents are submitted to the board of directors or
EXCOM for ER approval.
• Monthly Project Reports. After approval, the ER expenditure forecast is used to
establish the capital expenditure plan for the year. The forecast amounts are taken
from the Monthly Project Update report (MPU) and collected in the Master
Scheduling System (MSS) report . The forecasts in the MSS report are summarized by
division and department to reflect the final planned expenditures for the year. This
document is known as the capital plan.
• Accountability Reports. Each quarter, the project management team must determine
the project expenditure variance. In this process, the actual expenditures are compared
against the quarterly expenditure forecasts that are shown in the approved capital plan.
Each project must provide a clear and definitive explanation for each significant
variance. The total variances and the explanations become part of the Engineering and
Project Management accountability report exhibits.
Forecasting Responsibilities
The SAPMT cost engineer is responsible for the development, validation and accuracy of the total
project and expenditure forecasts. The cost engineer coordinates with other members of the
SAPMT, out-of-Kingdom Saudi Aramco and contractor personnel, and other Saudi Aramco
organizations, as required. Examples of other organizations are: Material Supply Organization,
Contract Review and Cost Compliance Department, Project Support & Controls Department,
Fixed Assets & Work-in-Progress Accounting Department and Materials Accounting Department.
It is important that each cost engineer determines the persons within each supporting organization
who are able to answer his questions.
During project proposal and detail design stages of a project, the SAPMT may be located in an
out-of-Kingdom (OOK) design contractor's office. If there is no in-Kingdom SAPMT, the OOK
SAPMT has the responsibility for the development of the total project and expenditure forecasts.
When related projects are combined, a program management contractor (PMC) is selected to
coordinate the overall project proposal development, detail design, material procurement and
construction. Some of these functions may be performed by the PMC, while other functions may
be done by different contractors. Thus, the PMC acts in concert with, and sometime in place of,
the SAPMT. The SAPMT cost engineer interfaces with, and directs if necessary, the PMC cost
personnel in order to develop the comprehensive total project and expenditure forecasts.

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The contractor who is awarded the construction contract will have one or more cost personnel
assigned to the project. Those cost personnel will be able to provide manpower loading data,
milestone schedules and other data in support of the construction portion of the forecasts.

Forecasting Change Orders and Contract Claims

Change orders represent modifications to the scope or schedule of a project; therefore, each
change order must be forecast, and that forecast, must be incorporated into the previous project
forecasts.

Claims by contractors against contractors must also be forecast. While this claim forecast will
become part of the total project forecast, the amount of the claim must never be stated on any of
the project status reports. The claim forecast becomes a memo number for internal use only.

Contingency Forecasting and Usage

Contingency forecasting is another duty of the cost engineer. Contingency funds are funds that are
provided to compensate for project variations that are possible but not certain. Contingency funds
are normally included in the ER estimate to allow for unforeseen costs that may arise. The normal
amount of contingency that is provided is ten percent.

Contingency is provided to cover:

• Labor productivity variances.
• Unknown geographical conditions such as rock, subka, and subsea conditions.
• Increases in such unforeseen costs as air freight, airfares, escalation rates and prorates.
• Material unit price deviations.
• Revisions in the defined material or work quantities that are not related to scope
changes.
Contingency is not intended to cover:
• Increases in the original scope as defined in the approved project proposal.
• Excess cost resulting from a natural disaster.
• Non-performance by contractors.
ER contingency is shown on the AFE by JO. A separate JO is set up for contingency that is not
allocated to individual JOs for control by the responsible JO authority. Unallocated contingency is
the portion of ER contingency that is retained under the control of the department manager.

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Cost Element Forecasting

Saudi Aramco segregates total project cost into the main elements of engineering, material and
construction. In turn, each of these three cost elements is subdivided into cost categories, which
are titled and coded as reflected in the ER estimate form 56D, the AFE form and the various cost
expenditure reports. Saudi Aramco capital project costs are estimated, budgeted and forecasted in
terms of those cost elements and respective cost categories.

It is necessary to develop expenditure forecasts for each cost element. Phases may be used to
segregate costs. The methods that are used to determine final costs, rates of expenditure and need
for contingency vary by element.

It is preferable to develop a forecast for each cost element and then combine them into a total
forecast. Following is a discussion that provides information and recommended methodology for
the calculation and analysis that are related to the individual elements. These calculations will
generate a total cost element forecast, which must be phased properly to develop expenditure
projections as appropriate to specific project requirements and schedules.

Figure 1 is an expenditure forecast checklist. The various categories are discussed below.

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 EXPENDITURE-FORECASTING CHECKLIST
COST ELEMENTS / CATEGORIES CAT CODE REFERENCE DOCUMENT REFERENCE DATE BASIS OF EXPENDITURE FORECASTING *
ENGINEERING
Use manpower loading and adjust for vacations; multiply
U Manpower loading and Manpower each month number of work days by hours-per-day by current rate.
SAPMT
vacation schedule
Engineering Encyclopedia

CONTRACTOR T Progress schedule Monthly scheduled- Add zero to one month to the progress schedule (to account
progress percentage for delay in cost booking ) and multiply the contract amount
by the monthly percentage.

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MATERIAL
P Purchase order / PATIS Estimated-time-of-ar- Add one to two months to the estimated time of arrival date
DC MATERIAL and use the total landed cost.
rival date

Add zero to one month to the required date from the schedule
SAMS MATERIAL R Material take-off and con- Material -required date
and use the total mateial cost.
struction schedule
CONSTRUCTION
Add zero to one month to the progress schedule (to account
A Construction progress Monthly scheduled- for delay in cost booking ) and multify the contract amount by
CONSTRUCTION CONTRACTS schedule progress percentage the monthly percentage.

B Manpower loading and Use manpower loading and adjust for vacations; multiply
CONSTRUCTION MTS LABOR Manpower each month
vacation schedule number of work days by hours-per-day by current rate.

E Manpower loading and Manpower each month Use manpower loading and adjust for vacations; multiply
SAUDI ARAMCO LABOR US S / CS
vacation schedule number of work days by hours-per-day by current rate.

SAUDI ARAMCO LABOR SR F Manpower loading and Manpower each month Use manpower loading and adjust for vacations; multiply
vacation schedule number of work days by hours-per-day by current rate.

CONSTRUCTION - EQUIPMENT USAGE H Contruction schedule with Monthly number of Multiply the number of vehicles and eqiopment assigned per
number and types of vehicle/ vehicles/ equipment month by the monthly cost (including differential). Allow one
equipment assigned month delay for cost booking.

Figure 1 Expenditure Forecast Checklist

CONSTRUCTION - MISCELLANEOUS K Contruction progress Monthly scheduled- Add one month to the progress schedule (to account for delay in
DIRECT COST schedule progress percentage cost booking ) and multiply the cost by the monthly percentage.

PRORATES, REALLOCATED COSTS L Contruction progress Add zero to one month to the progress schedule (to account for
Monthly scheduled-
AND OTHER INDIRECT COST schedule delay in cost booking) and multiply the cost by the monthly
progress percentage
percentage.

* The cost-booking time lag shown in this column is based on historical information and can be used in the absence of actual project data. The cost engineer, with the project
accountant, must identify by entry code the actual cost-booking time lag as early as possible in the project life cycle and use that information to increase the accuracy of the forecast.
Commitments And Forecasting
Project Management

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SAPMT Engineering

The forecast is commitments to date plus an estimate to complete the remaining work. For out-of-
Kingdom SAPMT engineering, transportation and company-paid living allowances must be added
to wages.

The estimate-to-complete is calculated by determining the level of effort in man-days or man-

hours for each remaining month of duration. This estimate is multiplied by the most current rates
that are found in General Instruction (GI) 216.965-1. Prorates must also be included. An
alternative is to divide the monthly total SAPMT charges by the number of man-hours or man-
days to reach an historical cost. This historical cost is then multiplied by the monthly manloading
through the completion of engineering.

Contractor Engineering

The contractor engineering forecast is the sum of commitments to date plus an estimate to
complete the remaining engineering. The estimate to complete is calculated by determining the
level of effort in man-days or man-hours for each month over the remaining work that is to be
performed. Using forms such as the design engineering statistics (DES) report or the proposal
engineering statistics (PES) report, it is possible to relate completed work to expended man-
hours. The DES and PES forms also are used to determine engineering productivity and the
remaining time/hours that are available to complete the engineering effort.

To forecast contractor engineering, it is necessary to determine the type of contract that is

awarded to the engineering contractor.

Reimbursable cost contracts for engineering services are based on the deliverable work units as
defined in the scope of work. The unit costs by the type of labor that is necessary to perform the
work unit will form the basis for the forecast. The allowable profit is then added to the labor cost
to arrive at the total forecast expenditures. The cost engineer must monitor delivered work
against planned work to determine if the funds that are available will be sufficient to complete the
contract.

Lump sum engineering contracts are based on a total amount to be paid by Saudi Aramco for the
known scope of work. The cost engineer must monitor the expended amounts against the
remaining funds to determine if the work will be completed according to the scope.

In both type of contracts, the productivity against deliverables (quantity of work units) provides a
major clue as to the ability of the contractor to achieve completion within the budget
expenditures.

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Direct Charge Materials

The project proposal contains a list of the major items of direct charge (DC) material to be
procured for the project. This proposal forms the starting point for a purchase order log. The
materials are specified on a purchase requisition, which is sourced from vendors world-wide by
means of a quotation request. After receipt of the vendor responses, the cost and delivery
schedules are compared against the project schedule and, for price, they are compared with each
other. The most favorable quotation request response is used to prepare a purchase order. The
purchase order represents the cost of the material FOB vendor. To the purchase order cost, costs
for export packing, shipping, customs duties, clearance charges and the Material Supply DC
overhead must be added to arrive at the total cost.

Saudi Aramco Materials System Materials

Materials that are ordered through the Saudi Aramco Materials Supply (SAMS) system are priced
at the average moving unit price times the quantities ordered. To this cost, the Materials Supply
SAMS overhead must be added to arrive at the total cost of each item.

SAMS materials are entered into the materials reservation system (MARS). The SAPMT cost
engineer establishes a log to reflect all SAMS materials, including those materials that are issued
without being entered into MARS. These non-system materials are known as X issues.

Contractor Construction

Contractor construction forecasting depends upon the type of construction contract that was
awarded.

Reimbursable cost construction contracts are used when the quantities of work are not well
defined at the time of contract signing. Reimbursable cost construction contracts are based on the
costs of actual man-hours that were expended. The allowable profit in then added to the labor
cost to arrive at the total forecast expenditures. The cost rates in the contract should be used since
the labor crafts will vary during the life of the contract. It is necessary to relate the construction
milestone schedule to the planned work to determine the man-loading for each craft. The forecast
consists of expenditures that appear in the cost reports, completed work with the invoices in
process, and work that remains to be completed. A reimbursable cost construction contract is
difficult to administer because the scope of work is flexible due to the imprecise nature of the
scope definition. Close coordination is necessary with the SAPMT scheduling engineer and
construction engineer to determine remaining work.

A lump sum turnkey construction contract is used when the scope is well defined at the time of
contract award. A fixed amount is paid to the contractor over the life of the contract. Progress
payments are made based upon completion percentages. Close coordination is necessary with the
SAPMT construction engineer to determine work completed.

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In both types of contracts, the productivity of the construction contractor provides a basis to
evaluate the ability to complete work against the budget and schedule.

Saudi Aramco Construction and Others

The SAPMT labor is forecast by using the remaining man-hours through project closeout. The
PMT will manload the monthly manpower, which is costed at the rate that is specified in GI
216.965-50.

Inspection and surveying charges represent labor costs that are reallocated to the SAPMT. It is
necessary to estimate the level of effort in manhours for each month over the remaining duration.
The source of rates will be found in GI 216.965. The forecasts consists of the lump sum
inspection and surveying contracts.

The project proposal contains a list of Saudi Aramco-owned equipment, the durations, and times
when the equipment will be used. Forecasting Saudi Armco equipment is based on the latest
construction schedule, and the rates for each type of equipment as found in GI 216.965-50.

The construction overhead prorate is an amount that is applied to unexpended forecasted amounts
for the month that these charges appear as expenditures. The construction overhead prorate
percentage is found in GI 216.965.

Change Orders

During the life of a project, numerous changes occur in the scope, work quantities, and schedule
milestones. It is necessary to maintain a log of change orders. Each change order is estimated for
the total cost and cash flow impact. These estimates are added to the previously calculated cash
flow and total project forecast to equal the new forecast.

Commitment Review for Partial Cancellation

Expenditure forecasts should be based on the current completion costs. Differences in the
estimated cost compared to the approved funding may result in the necessity for the initiation of a
partial cancellation.

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GLOSSARY

Accountability Reports A performance review that compares progress against the

established operating plan.
Allocated Contingency The portion of ER contingency that is released by the
general manager or department manager to individual JOs
for control by the responsible JO authority.
BISR Budget Item Summary Report. A report for upper
management that provides a summary of the project status
as of the month of issue.
Change Order A document that is issued to reflect changes to scope,
cost, or schedule. The signatories to the contract must
agree to the contract change order.
Claim An assertion of legal right. A claim implies that one party
has failed the contract in a way that results in damages to
the other party. These damages can be expressed in
money.
Clearance Charges Charges that are imposed at the port of entry for
processing documentation and customs clearance.
Commitment Commitments are generally defined as financial
obligations.
Contingency Funds that are included in an ER estimate to provide for
project variations that are possible but not certain.
Cost Category Subdivisions of cost elements, which provide further
identification of similar items. For example, the cost
element of material is divided into direct charge materials
and SAMS materials.
Cost Element The three main subdivisions of a job order. They are
engineering, materials and construction.
Cost Trends A forecast of the anticipated change in engineering,
materials and construction costs for the next several years.
Cost trends are used in determining prospective future
expenditures, and they are applied in the development of
an ER estimate.
Customs Duties An amount that is imposed by the Saudi Arabian
government for the import of certain materials into the
Kingdom.

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Detail Design engineering that takes place after ER approval.

Engineering
DES Detail Engineering Statistics. A report that is prepared to
monitor and evaluate the progress of a design engineering
contractor.
Direct Charge A type of material that is purchased solely for a specific
use and not held in open stock inventory.
Materials
Escalation Rate A factor that is applied to planned expenditures to provide
for inflation. Compare to cost trends, which represent a
general amount that is similarly applied.
Expenditure Also known as cash flow forecast. The expenditure
forecast represents a time phased forecast, usually in
Forecast
calendar quarters, through project completion.
FOB Free on Board. A purchase order and shipping terms that
refer to the placing of goods on board a carrier, without
charge, at a specified point. For example, FOB New York
would obligate the seller to place the goods on board at
the port of New York.
Forecasting A process of estimating the cost or timing of a future
event. Forecasting by a Saudi Aramco PMT is used to
determine cash flow and total project cost.
Inspection The process of viewing materials or labor to ensure that
compliance is made with all Saudi Arabian government or
Saudi Aramco standards. The inspection may take place in
the vendor's plant or in the field. Inspection services are
provided by the Inspection Department, and the cost is
reallocated to the SAPMT.
In-Kingdom Services that are provided within the boundaries of Saudi
Arabia.
LDF Factor Laid down in the field. LDF consists of all costs that occur
after the material has left the vendor's plant.
Man-days The number of days one man would take to perform a
certain task; for example, ten workers on a job for two
days would equal twenty man-days.
Man-hours The number of hours one man would take to perform a
certain task; for example, one worker on a job for three
days would equal twenty-four man-hours.

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Material Unit The cost of a single unit of SAMS material. The material
unit price is the total cost of goods in inventory divided by
Price
the total price that is paid. Thus, if more recently received
materials cost more, the material unit price would
gradually increase. This unit price varies from the first-in,
first-out or last-in, lastout (FIFO, LIFO) pricing that is
commonly used in accounting.
MPU Monthly Project Update Report. A report that is prepared
by the SAPMT to advise project manage-ment of the
status of a project. It contains information on progress
against the approved schedule, commitment and
expenditures by cost element, and a cash flow forecast.
Space is provided for comments by the project manager.
OOK Out-of-Kingdom. Refers to services that are performed
outside of Saudi Arabia.
Overheads Overheads are a support organization's realloca-ted costs
that are charged to the users. For example, the Material
Supply Organization adds approximately fifteen percent to
the purchase order cost of materials to cover procurement,
handling, storage and delivery to the job procurement,
handling, storage and delivery to the job site.
Partial An action that is taken to reduce the approved ER value
of a budget item due to lower than anticipated total
Cancellation
project forecast costs.
Procurement The organization that determines sources of materials,
obtains price quotations from possible vendors, and
Agency
prepares the purchase order. The procurement agency may
be the Material Supply Organization or the contractor.
Productivity The measure of the actual rate as compared to the
budgeted rate. For example, if an engineering drawing
took 100 hours rather that the planned 85 hours, the
productivity would be 85 divided by 100 to equal 85%.
Proposal A report that is prepared for the purpose of monitoring
and evaluating a proposal engineering contractor.
Engineering Statistics
Prorates An additional sum that is added as a percentage to
expenditures. Prorates represent a share of costs to be
borne by users, and this share is based on some equitable
measure of usage.

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Reallocation The process of billing previously incurred expenditures to

a user organization. For example, inspection labor, in
terms man-hours that is devoted to a capital project is
reallocated based on a published hourly rate, to the
SAPMT.
SAMS Saudi Aramco material system. SAMS material represents
cataloged materials in inventory and issued by the
Materials Supply Organization to projects, maintenance
organizations, and other users.
Scope Change The modification of the original scope of the project as
existing at the time of ER approval. A scope change can
be an addition or deletion of scope.
Total Project Forecast The total anticipated cost of a project at completion. The
total project forecast is the sum of the incremental cash
flow forecast.
Unallocated That portion of ER contingency that is retained by the
general manager or department manager. Unallocated
Contingency
contingency, when it is released to the BI upon a
demonstration of need, becomes allocated contingency.
Variances The difference between a budget and actual or forecast
quantities. Variance may be measured in time or dollars.
X Issues AMS material requirements that were not originally
planned or identified, and, thus, become extra issues.

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