Previous  Next          Contents  Index  Navigation  Glossary  Library

Using Burden Schedules for Cost Plus

Burden schedules establish the multipliers used to calculate the burdened cost, revenue, or bill amount of each expenditure item charged to a project. You can define different burden schedules for use in internal costing, revenue accrual, and invoicing. When you define burden schedules, you specify the burden structure on which the schedule is based.

You can use both burden schedules and bill rate schedules within a project to accrue revenue and invoice. You can also use a bill rate schedule for non-labor expenditure items, and use a burden schedule for labor expenditure items.

You specify default burden schedules for each project type. You can use different schedules for different types of projects. You can override the default burden schedules for each project by using a schedule of multipliers negotiated for the project or task.

Types of Burden Schedules

There are two types of schedules you can use in Oracle Projects: firm and provisional.

Use firm schedules if you do not expect your multipliers to change. Generally, firm schedules are used for internal costing or commercial billing schedules.

Because burden multipliers may not always be known at the time that you are calculating total burdened costs, you use interim, or provisional multipliers. Provisional multipliers are generally estimates based on a company's forecast budget for the year based on the previous year's results. When you determine the actual multipliers that apply to costs (after the multipliers are audited), then you replace the provisional multipliers with the actual multipliers. Oracle Projects processes the adjustments from provisional to actual changes for costing, revenue, and billing.

Schedule Versions

You define schedule versions for a burden schedule to record the date range within which multipliers are effective. You can have an unlimited number of versions for each burden schedule, but use one active version at a given point in time. However, after you apply actuals, you can have one active provisional version and one active actual version existing at the same time within a schedule.

In addition, you may have a number of versions for each quarter of the fiscal year in which your company does business, especially for government billing projects. At the end of the year, when the government audits your burden multipliers, you create a new version that reflects the actual billing rates. Figure 1 - 22 illustrates the use of schedule versions.

In Figure 1 - 22, a company defines provisional burden schedules on a quarterly basis, based on a forecast of budgeted costs. Each quarter, the company creates a new version of the burden schedule to reflect updates in the budget. At the end of the fiscal year, when the company is audited, actual multipliers are applied which reflect the true burdened cost of affected items.

See Also

Applying Actuals

Burden Multipliers

When you create burden schedules, you assign a multiplier to an organization and burden cost code. The multiplier specifies the amount by which to multiply the raw cost to obtain the burden cost amount.

Table 1 - 42 depicts the multiplier that a company uses to determine the burden cost amounts for labor during cost calculation. In earlier pages of this essay, we described the burden cost calculations for cost details, but did not include the organization in the example.

Organization Burden Cost Code Multiplier
Headquarters Fringe .35
  Overhead .95
  G & A .15
LA G & A .20

Suggestion for Organizations that Have No Burden

You may need to set up special procedures for organizations that have no burden. For example, your company may use contractors that do not have a particular type of burden cost (such as fringe) applied to their raw cost. To implement this scenario, you can first set up a new organization for contractors. Then, create a zero burden cost amount by assigning that organization to the burden schedule and using a multiplier of zero for the burden cost of Fringe. Each time that burden cost for Fringe is calculated for the contractor's organization, Oracle Projects will multiply the contractor's raw cost multiplier by zero, resulting in a burden cost amount of zero, which reflects the true representation of the raw cost and burden multipliers.

Assigning Multipliers to Organizations

Effective multipliers cascade down the Project Burdening Hierarchy, starting with the parent organization. If Oracle Projects finds a level in the hierarchy that does not have a multiplier defined, it uses the multipliers entered for the parent organization. Therefore, an organization multiplier schedule hierarchy is really a hierarchy of exceptions; you define only the multipliers for an organization if they override the multipliers of its parent organization.

In Figure 1 - 23, we depict implementation-defined multipliers in bold, and inheriting multipliers in italics. The parent organization, HQ, has two multipliers defined: Overhead at a multiplier of 2.0, and G & A at a multiplier of 3.0. When Oracle Projects processes transactions for the East organization, no multipliers are found, so the multipliers it uses are from its parent organization, HQ. However, when Oracle Projects looks for the multipliers to use for the Boston and New York organizations, the multiplier of 3.1 for G & A overrides the multiplier from East organization, so the multiplier of 3.1 is used.

Suggestion for Burdening a Borrowed or Lent Resource

When lending a resource to another organization for a specific project, you may want to burden the resource using the borrowing organization's multipliers.

For example, the Los Angeles organization lends a resource to the New York City organization, and it is agreed that the borrowed resource is to be burdened using the New York City multipliers. For burdening, Oracle Projects uses the destination organization of an organization distribution override, in place of the expenditure organization, if an organization distribution override exists. If you want the project to have the New York City burden multipliers used burdened costs of the borrowed resource from Los Angeles, then enter an organization distribution override with a source organization of Los Angeles and a destination organization of New York City.

See Also

Organization Overrides

         Previous  Next          Contents  Index  Navigation  Glossary  Library