Mastering Master Commitments With e-Builder
Posted on: October 6, 2016
At the Elevate conference last week we got an introduction to a new concept called Portfolio Level costs. This includes managing funding and commitments at the global level, not tied to specific projects.
This is a big breakthrough, and many of us have been waiting years for a project management information system to not only implement this, but to implement it correctly. And I can say that the solution looks great to me! In this post I will focus on the Master Commitments part of this system. What is a Master Commitment? There are
a number of concepts in different industries. In the Federal Government they are also called Indefinite Definition Indefinite Quantity contracts, or IDIQ. They are also called things such as Master Contracts, Service Agreements, Blanket Purchase Orders, or Job Order Contracts (JOC). Here is the unifying concept: these contracts stipulate an agreement between two parties that the contracted party can provide goods and or services under a set of terms and conditions. They may also define the kinds of work to be done or nature of the items to be delivered. They may stipulate a time period for the work, and a maximum amount that can be spent. But a key concept is that the agreement itself does not authorize work. Instead, the work can be assigned as it is needed on specific projects.
The assignment of the work may be through a work authorization, task order, purchase order, or something of that nature. That work then has a dollar amount which can be committed (or encumbered) against a project. So these commitments are only made as requested for finite periods of time, and under the umbrella of the Master Agreement.
This saves time because when work is needed, the two parties need only discuss the specific deliverable work that needs to be done. And time is saved because things such as payment terms are already covered under the Master Agreement. The bidding process is complete, the vetting process of the vendor has already been done.
It sounds like a simple concept. And it's been around for decades. But Project Management Information Systems (PMIS) have traditionally been focused on projects as the center of the universe. Many only allow commitments to be created only on specific projects. So if you have a vendor working on multiple projects, these systems require you to enter each commitment on each project, and there is no place for the master commitment which effectively owns the project-level commitments.
On Thursday I had the pleasure to attend a talk by Brett Purdy, Solutions Engineer at e-Builder. The talk covered what they call portfolio level costs. What this means is costs which are not project specific, and this includes Funding and Commitments. Now both Funding and Commitments already exist in e-Builder at the project level. The new functionality allows you to add both items a the top level, and then as needed, tie them to projects. This is a wonderful capability when you are making a multi-year plan for a Capital Program.
Funding is a large topic all by itself, but I'm not going to get into that in this posting. Instead let's talk about how these Master Commitments work by going through an example.
A Practical Example
Let's say that a public agency needs someone to pave their parking lots. This agency could be an airport, a university, or a city; you get the idea. The agency puts out a RFP to get bids from various contractors who can do the paving. There are many qualifications to fulfill, many companies bid, and eventually one company wins that paving contract. The contract they get is a Master Agreement. It has a limit of $2,000,000 and is valid for five years. It stipulates payment terms, quality control, duration, and so on. But it does not specify any particular parking lots to pave.
One day the agency needs to pave a lot on project site A. They get a price from the company. They may have to still negotiate the price, but it's a direct negotiation between the agency and the contractor under a clear set of terms. The cost for paving this lot is $200,000. About the same time there is another lot that needs paving on project site B. This will cost $15,000.
In the old, project-only way of doing things, someone at the agency would enter one work order (committed contract) for site A and another for site B. And when the work is performed there will be two invoices issued, one in each project. This is not too bad in itself, but imagine this process involving many more task orders and many more projects. And the agency still needs to track that of the $2,000,000 contract, $215,000 has been allocated to the two projects. In the old way, the master contract would not have a project to belong to, but maybe it would be tracked in another placeholder project, or an Excel spreadsheet. But keeping the master and its work orders in synch will require manually keying in the information. This is error-prone, not to mention tedious.
This was all covered in Brett's talk, but afterward I wanted to see it in action. So I went to the support center and sat with Greg Braveman, and we walked through this exact scenario.
In e-Builder's new Master Commitments module, here is how you do it. First, you make a Master Commitment to the vendor for $2,000,000. Now how you want to assign this cost could vary, but in this case we will have an account called "0000" which is described as "Unallocated".
When it's time to issue those two paving task orders, you go to each project in turn and add a commitment. In project A you add a commitment. If you have permissions to see master commitment, you will see a drop down to select a master commitment. Choose the one we just made. The contractor and other properties from the master commitment will auto-populate. Now on this commitment you can choose the specific account to encumber (commit) the money to. In the project you may be using CSI Codes, or have some other project level coding for the work.
When you complete the commitment, wonderful things happen! As expected, you have now committed $200,000 to Project A. But now look at the master commitment in the screen shot below and see what you have. That commitment now has two lines, a new one for $200,000 to that commitment in project A. And the original line for $2,000,000, but now with a deduct which balances that commitment! You are done! You have allocated this work and that allocation is clearly shown in both the project and the mater commitment. Next you can do this for project B and you will get the results in the screen below. This is great, not having to artificially track the master commitment and work orders separately. It's all allocated correctly with no extra work. Now let's take the next step. When the work is performed you need to pay the contractor. Let's say they do half the work in each project. In the project-centric way, you would issue invoices in each separate project. But now we can invoice both items at the master commitment level in one fell swoop! Simply go to the master committment and add an invoice. You get to choose which lines to invoice against, and there are two, one for each work order. Note that you cannot invoice on the unallocated line- those monies are not committed against any project, so not payable.
The invoice works just like any invoice in that you can withhold retainage and materials stored, assign dates and an invoice number, and so on. In the old, purely project process, you would have generated invoices in each project separately. And then replicated this information in the placeholder project, or Excel, or however you were managing the master commitment. And you probably would have had to manually merge those two invoices into one outside of the system, which is manual duplication work, or you would have issued two separate invoices to the contractor, who might not be very happy about having to process them separately. But with the Master Commitments you now just have one invoice and it tracks the monies you need to track against the master contract. Now I did not get into my funding, but you can track that as well. And you can apply rules for staying within funding limits at the master commitment level, as well as at the budget level. You can set up a custom field to hold the master commitment end date too so that you can close the contract when it is done.
There were many other things I learned at Elevate, and even better, I got to meet many great people. This was the first presentation I went to at Elevate and I can say that it is the one I am most excited about. It shows that e-Builder is listening to their clients and adding what they need. I think many people will get great benefits from these Master Agreements and the whole Portfolio-Level costs as well. Our Project Controls Integration Group operates out of Boulder, CO and provides seamless integration solutions to integrate your project controls data, including Oracle Primavera P6, Contract Manager, and Unifier with a large number of systems including JD Edwards, PeopleSoft, Timberline, Procore, e-Builder, and many more.
Need more help?
Related Blog Posts
Procore + MRI Integration by Calance
Procore + Sage Insurance Integration by Calance