Early Spend-Out Profile and Milestone Estimator (ESPME)
Basic Technical Data Done: This is the estimated date when the project’s basic technical data should be completed. The basic technical data is a document or document package containing all the technical information necessary to support the successful engineering design and implementation of a project to meet its delineated needs and objectives.
Budget Priority: If a project has a priority to not exceed the total spend budget or anticipated cash flow, it will sometimes experience schedule slippage because of the various constraints that might be placed on project spend. These constraints can result in planned work slowdowns on the project or team members taking longer to source lower cost materials, equipment and services. Selecting Budget Priority will make the project spend at a slower rate as compared to selecting Schedule Priority.
Commissioning and Start-Up End: This is the estimated date when commissioning of installed components comes to an end and the facility is started up to begin beneficial operations and provide the intents of the project.
Complexity Factor: This is a factor that a user can input to extend or shorten the overall project as a result of their knowledge and experience associated with the respective work. A project can be deemed complex for reasons that include the use of latest or first of a kind technology, geography, environmental, cashflow, socio-political or permitting challenges. Because of one or more of these challenges impacting the associated tasks, a project may take longer than would be expected. For these cases, a user can add up to a 75% complexity factor. For projects that are a close duplicate of a previous project or the project team has significant know-how and experience on streamlining associated project tasks to lower its overall duration, a user can input a negative complexity factor up to -50% and show a faster cycle time for the project. Normally, the complexity project is set to zero. It should also be noted this tool assumes the project size, which is entered by the user, already accounts for project complexity in their cost estimate.
Conceptual Engineering Done: This is the estimated date that you end the conceptual engineering phase. The basis of design is essentially finalized, and design teams can move into the detailed engineering design phase of the project.
Construction/Installation End: This is the estimated date when construction, pre-commissioning and verification of installation ends. It is important to note that in many instances, spend will continue. This spend may include payment on invoices that are received after the construction and installation phase ends.
Construction/Installation Start: This is the estimated date that construction should start. On some projects, construction starts when enough design is completed. For example, some site work could begin when the location of a facility is locked down in the detailed design phase of a project.
Curve Factors for Spend-out Profile 1 (SP1): These factors provide a “sandbox” that you can use to manipulate the Spend-out Profile 1 Curve to fit what you believe would be representative of how your business might execute projects.
- Lowering Curve Factor 1 will increase the initial portion of the spend profile while decreasing the latter portion of the curve. Increasing Curve Factor 1 will have the opposite effect.
- Lowering Curve Factor 2 will lower the middle and latter portions of the spend profile. Increasing the curve factor will do the opposite.
- Lowering Curve Factor 3 will lower the initial portion of the spend profile while increasing the latter portion of the curve. Increasing Curve Factor 3 will have the opposite effect.
- Curve Factor 4 will do the same thing as Curve Factor 2 but to a lesser degree.
Some businesses have a lot of viscosity in their project processes and spend occurs more slowly in the beginning of a project and more quickly as the project advances. Other businesses move projects along quickly at the beginning, but advance them more slowly at the end. The user can use these curve factors to adjust the spend profile for a project as they deem appropriate. Please note that curve factors should normally be adjusted so that the total spend of the SP1 curve matches the total spend of the SP2 curve. That is, the end points of the curves should be virtually the same, after user adjustments are made. Of course, you can place the end point of the SP1 curve at any location you want based on how you want it to look and where you want it to end. However, if the end points are different by more than 1% a warning will be shown to bring awareness to the user.
Detailed Design End: This is the estimated date when detailed engineering design ends.
Detailed Design Start: This provides an estimate of the date that conceptual engineering should end, and detailed design should start. At some point either a little before or after this point, depending on the project and the amount of long lead items that have to be purchased, elements of the sourcing and procurement activities will sometimes begin.
Estimated Cumulative Spend-out by Month: This table provides two possible cumulative cash flow scenarios based on the project information that is input by the user. The units are in thousands of US dollars.
Estimated Milestone Schedule: This table of key milestones is estimated in a way that is independent of the spend-out profiles. It is important to note, the spend-out curves simply try to estimate two possible cash flow scenarios that could achieve the estimated project milestones.
Percent spend at the end of construction/installation: Expenditures will generally occur at the end of construction activities in order to commission and start up a facility. The amount spent will vary depending on the complexity of the facility. Users can input a value or adjust sliders to indicate what percentage of the total spend will be used at the end of construction and installation activities. Typically, some of the remaining cash budget is used for commissioning and start up activities. A typical range is approximately 85% to 95%.
Percent Spend at the start of detailed design: A certain amount of the total project spend will occur before you begin detailed design. These costs are sometimes not capitalizable but nevertheless, it is still may be a component of the total cash budget needed to complete the project. Use the sliders to indicate what this should be for your project. A typical range is between 10% and 20%.
Project Size (USD $ in thousands): This is the total spend of the project in thousands of US dollars. Therefore, a project that will cost 20 million dollars is represented as 20,000. Some companies track the non-capital costs (costs that will be immediately expensed) associated with a capital project as well as the capital cost (costs that will be eventually capitalized). Total spend is the sum of non-capital costs and capital costs. This tool assumes that costs will begin accumulating when Technology and /or Business Development officially starts. While some companies may not officially count this as part of the total project cost, this activity is not free and is absorbed somewhere in a company’s spend.
Schedule Penalty Percent: If a project has a priority on scheduling, it will sometimes experience a budget overrun. This overrun can be due to costs for expediting delivery of materials, using more personnel than anticipated to perform tasks or other expenditures necessary to accelerate the performance of tasks needed to complete the project. Input a penalty value or use sliders to indicate an estimated cost penalty. A typical range is approximately 2% to 10%.
Schedule Priority: If a project has a priority on scheduling, then getting the project completed even if more money must be spent could be the path that an entity chooses to take. Selecting Schedule Priority will make the project spend out a little more quickly and finish faster.
Spend-out Profile 1 (SP1) Spend Curve: This is an estimated spend out curve of a project that may not fully staffed early in the project process and cannot aggressively spend on many aspects of the project to achieve its completion goals. Perhaps this could also be a new technology project where technology is having some delays, or the business has other competing projects or is cash constrained and can’t fully commit resources. If the project moves forward, spend will have to be aggressively accelerated at some point in order to meet desired completion goals. The user can manipulate the shape of this curve to represent their experience on how they believe project may actually spend-out.
Spend-out Profile 2 (SP2) Spend Curve: This is a spend out curve estimated for a project that is generally fully staffed and ready to be implemented immediately and can aggressively spend on most all aspects of the project to achieve its completion goals. Perhaps this could be a repeat or well understood project being done by the same teams who have recently and successfully completed a similar project.
Start-up duration as a percentage of Construction Duration: Users can change slider position to estimate how long commissioning and start -up of the project will take as a percentage of the estimated construction time. Depending on the complexity of the facility being constructed and the type of technology used, commissioning and start up can go quickly or take quite a long time before the facility is being beneficially operated.
Start of Project / Conceptual Engineering or Begin Conceptual Engineering: This is the date that you formally start iterating design that will ultimately be advanced enough to get design details developed to the point where a +/- 10% to 15% estimate can be developed. For some companies, this level of estimate accuracy would be achieved when the design complete percentage reaches somewhere between 25% to 35%. Often, the start of conceptual engineering phase of a project is considered as the official start of early project activities and it is also when the project team begins to form. This milestone typically occurs after a business has completed their business analysis and can clearly delineate business objectives for the project as well as articulate, with reasonable confidence, the key technology that will be employed. This generally occurs at or near the end of what we term Technology and/or Business Development.
Technology and /or Business Development Start: This is an estimate of when a business should start the development of technical considerations and data and perform business planning to gain confidence that the project should be sanctioned or authorized.
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