SAP Best Practices for Engineering Construction and Operations V1.604 (US)

SAP Best Practices

General Information

SAP Best Practices for Engineering Construction and Operations was developed for small and midsize companies to implement a solution quickly and easily.

The focus of this solution is primarily on construction companies that perform a subsantial portion of the project work using their own workforce.

FunctionalitiesThe SAP Best Practices for Engineering Construction and Operations V1.604 (US) package supports your business in the following areas :

Project Management

Equipment and Tools Management

Procurement

Accounting

Controlling

Analytics

AccountingProject Management

Controlling

SAP Best Practices for Engineering Construction and Operations V1.604 (US)Solution Scope

Black = Baseline ScenariosBlue = Engineering Construction and Operations

Project Setup for Engineering and Construction

Project Budgeting for Engineering and Construction

Project Planning for Engineering and Construction

Project Forecasting & Earned Value Management

Time Entry for Construction

Revenue Recognition for ProjectsProject Reporting for Engineering and Construction

SAP ERP Reports for Accounting

Analytics

Equipment and Tools management

Procurement RFQs for Project-based Procurement

Purchase Orders for Project-based Procurement

Consumable Purchasing

Procurement Contract

Equipment & Tools Management for Construction

Contract Billing for Engineering and Construction

General Ledger

Accounts Receivable

Accounts Payable

Cash Management

Asset Accounting

Period End Closing Financial Accounting

Period End Closing Activities

Travel Management

Industry-Specific Scenarios

SAP Best Practices for Engineering Construction and Operations V1.604 (US)provides the following industry-specific scenarios:

439 Project Setup for Engineering and Construction440 Project Budgeting for Engineering and Construction441 Project Planning for Engineering and Construction442 RFQs for Project-based Procurement443 Purchase Orders for Project-based Procurement444 Equipment & Tools Management for Construction445 Project Forecasting & Earned Value Management446 Revenue Recognition for Projects447 Contract Billing for Engineering and Construction448 Project Reporting for Engineering and Construction449 Time Entry for Construction

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439 Project Setup for Engineering and Construction

Purpose A project structure can be a set of work packages with reference to the physical object and construction disciplines into which the contractor organizes the work to perform, mostly for accounting and time control purposes, and is designed for project control and execution. It connects with the project owner needs reflected in a quote or awarded contract. It provides cost and resources spread in a time perspective.

Benefits The project structure provides an organized view into manageable sections and disciplines, which makes it possible to control all dimensions of a project, such as costs, milestones, dates, resources.

Key process flows coveredTake the needs of the client from the quote or awarded contract.Take the original estimate for an assessment on the scope of services.Devise a project framework following a Work Breakdown Structure approachDevise tasks and milestones just enough to represent the relevant project steps

Purpose and Benefits:

© SAP 2009 / Page 6

440 Project Budgeting for Engineering and Construction

Purpose

The project estimate, calculated when preparing the quote to the client, is essential to create the preliminary project budget and major timelines. It has now to be embedded into the project structure, having in mind the need of connecting the client needs with the construction view. It’s typical that estimates are performed in a 3rd party solution or spreadsheets. The preliminary budget provides the cost view and equally quantifies the scope of work (physical output or production) and the necessary resources to be consumed in performing such production.

Benefits The preliminary budget structure can be built mirroring the originating external estimate,

which makes it easier for planning engineers to achieve the task of connecting the client world to the construction world in a first step.

Estimators and engineers work together, resulting in teamwork delivering a reconcilable, reliable preliminary budget.

Key process flows covered Create and assign a cost version to be used as the preliminary budget (version E01) Import or re-key an external estimate master data into a project cost version Deploy the items from the estimate within the project structure (WBS and network), for

resources (material, labor, equipment, lump sum items) for each line item with their respective unit costs

Purpose and Benefits:

© SAP 2009 / Page 7

441 Project Planning for Engineering and Construction

Purpose A detailed project plan is put in place to commit resources, funding and the corporate staff, with the ultimate goal of delivering the project.The project plan can be comprised of schedule, work plan (hours), construction equipment, purchase plan (construction material, equipment), budget (cost plan) and the production plan (construction physical output).

Benefits A project plan is a solid, detailed management framework. It brings in elements to control execution and forecasting, enabling the contractor to steer the project, thus creating conditions to deliver on-time and on-budgetNumerous mechanisms to plan, simulate, execute, control, and forecast resources, costs and time can be applied to the project plan, bringing superior ability to maneuver the project to be delivered on budget and on time.

Key process flows coveredDevise the project scheduleDevise the work planDevise the production plan (construction output)Determine purchase requirements and create the purchase planAssign costs to the schedule and purchase plansCompare preliminary budget to the new budget, adjust, release the project plan

Purpose and Benefits:

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442 RFQs for Project-based Procurement

Purpose :

This scenario describes the typical processes used In the construction industry to solicit, obtain, and compare supplier pricing information to select the appropriate supplier for the material or subcontracted service to be procured.

Benefits Standardizing RFP process Transparent selection of the right supplierEasy collaboration with suppliers

Key process flows coveredThe process starts with the definition of the required materials and subcontracted services for a specific project. The definition of the quotation criteria's and the bidding packages are the next steps, followed by a selection of suppliers for the relevant quotation utilizing price comparison report. The quotation will be compared, after the decision for the relevant suppliers the purchase orders / subcontractor orders are defined.

The RFQ process is to a certain extent an optional process: It is also possible to purchase materials & subcontractor services ad hoc by converting a purchase requisition into a PO directly without the RFQ process (example: purchasing of low value materials or equipment)

Purpose and Benefits:

© SAP 2009 / Page 9

442 RFQs for Project-based Procurement

Purpose This scenario describes the typical processes used In the construction industry to solicit, obtain, and compare supplier pricing information to select the appropriate supplier for the material or subcontracted service to be procured.

Benefits Standardizing RFP process Transparent selection of the right supplierEasy collaboration with suppliers

Key process flows coveredThe process starts with the definition of the required materials and subcontracted services for a specific project. The definition of the quotation criteria's and the bidding packages are the next steps, followed by a selection of suppliers for the relevant quotation utilizing price comparison report. The quotation will be compared, after the decision for the relevant suppliers the purchase orders / subcontractor orders are defined. The RFQ process is to a certain extent an optional process: It is also possible to purchase materials & subcontractor services ad hoc by converting a purchase requisition into a PO directly without the RFQ process (example: purchasing of low value materials or equipment)

Purpose and Benefits:

© SAP 2009 / Page 10

443 Purchase Orders for Project-based Procurement

Purpose

This scenario describes the typical processes used in the construction industry to generate and process purchase orders (PO’s). These PO’s are used to procure materials, subcontracted services with retentions and equipments with the aspect of progress tracking.

Benefits Transparent view of created outstanding orders, commitments and delivery Standardized invoice handling by using retentions Progress tracking option based on PO’s for equipments

Key process flows covered Transforming purchase requisitions (PR’s) into purchase orders (PO’s)for

materials, subcontracted services and equipments, create PO’s directly without using master records, define delivery commitments, create goods receipt and service entry. Invoice receiving and handling from suppliers with progress tracking and quality tracking. Handle retentions for the subcontracted services.

Purpose and Benefits:

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444 Equipment and Tools Management

Purpose Addresses the unique requirements of self performing construction companies, building contractors and equipment distributors by handling the industry-specific business processes such as equipment planning, -processing, -settlement and evaluation of resources (equipment and materials) including performance measurement.

Benefits Improve the availability and tracking of equipmentManage the increasing administrative workload Reduce handling and administration costIntroduce most flexible prices and account determination Optimize equipment utilizationImprove the visibility of profitability, TCO and return on asset and equipment

Key process flows coveredTimebased Equipment Process Timebased Equipment Process including 3rd Party Rental Equipment Performance Based Equipment ProcessNon-Consumable Material ProcessConsumable Material Process

Purpose and Benefits:

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445 Project Forecasting & Earned Value Management

Purpose

Earned Value Management is used to evaluate current project performance. Earned value management is a method to accurately determine a project’s health in terms of cost and schedule progress against the plan.

Project Forecast is used to evaluate based on the past performance of the project the future course of the project. It provides insights how current productivity, for example, will impact the project’s final results and is used to indicate areas of concerns.

Benefits Both processes provide project insights which are essential for the management to control

the future course of the project.

Key process flows covered Determine the planned and actual POC, based on defined rules and POCs estimated

manually or automatically Determine Earned Value and other KPIs like productivity, cost performance index, and

scheduling performance index Project Forecasting

Process prerequisites Posting of project actual cost and quantities like time Enter Network confirmations

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446 Revenue Recognition for Projects

Purpose In industries such as engineering and construction, it can take months or years to finish an entire project. Therefore, it is essential to recognize revenue against the time spent, cost incurred, or milestones achieved.Results Analysis (RA) is a sophisticated tool within the Controlling module that computes the cost of sales, WIP inventory and the reserves for unrealized revenue or surplus revenue. It uses percentage of completion based upon planned costs and revenue to calculate the values.

Key process flows coveredExecute Results Analysis Perform SettlementProject Reporting for revenue posting and related KPI’s

PrerequisitesEssential master and organizational data was created in your ERP system in the implementation phase, such as the data that reflects the organizational structure of your company and master data that suits its operational focus, for example, master data for materials, vendors, and customers.The pre-requisite for executing results analysis is that an appropriate RA key has been assigned to the top level WBS element during the setup of the project.

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447 Contract Billing for Engineering and Construction

Purpose This scenario covers the three primary contract billing processes used by the engineering construction and operations industries, the first is Lump-Sum Contract with Milestone Billing, the second is Bill of Services – Unit Price Contract with Service Entry Sheet and third is Cost Plus and Time and Material Billing (RRB)

Benefits Project ManagementContract ManagementMilestone Billing according to performance of defined Milestones

Key process flows coveredLump-Sum Contract with Milestone Billing Bill of Services – Unit Price Contract with Service Entry SheetCost Plus and Time and Material Billing (RRB)

Purpose and Benefits:

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448 Project Reporting for Engineering and Construction

Purpose Show basic reports for a project manager / project controller in a construction environment. Custom reports developed using Report Painter tool. Standard delivered project financial reports.

Benefits View of cost, revenue, cash flow, earned value, installed quantities, recognized revenue, project forecast, budget as out of the box reporting capabilities

Key process flows coveredProject Budget (Project Overview) Report – Orginal Budget, Changes, Current Budget, Actual Cost, Commitment, Forecast as main KPIProject Progress & Productivity Report – PoC, EVA, Budgeted and Installed Quantities, Productivity, Actual Cost as main KPI

Purpose and Benefits:

© SAP 2009 / Page 16

449 Time Entry for Construction

Purpose Record working hours for employees, installed quantities. Transfer hours and derived cost to project. Assign prevailing wages against employee and the working hours. Maintain employee information as new hires come onboard or employees leave the company. Maintain the company organization structure – maintain organizational units, jobs and positions.

Benefits Hours and quantities (as statistical key figures) can be entered in an easy to use UIHours and Quantities can be transferred to the project as base for cost, productivity and progress reporting

Key process flows coveredEntry of Time and Quantities installed for one person Timesheet approval process Time and Material Project - Transfer to Costing Object (Projects, FI/CO) Maintenance of employee mini master recordsMaintenance of the company organizational structure

Purpose and Benefits: