Glossary of Technical Terms Used in Cost Estimation & Control: Total Expenditure to Date

Total Expenditure to Date

Understanding Total Expenditure to Date: A Key Metric in Cost Estimation & Control

In the realm of project management and cost control, accurate tracking of expenses is paramount. One crucial metric employed is Total Expenditure to Date (TED). This article will delve into the significance of TED, its definition, how it's calculated, and its crucial role in cost estimation and control.

What is Total Expenditure to Date (TED)?

TED represents the cumulative sum of all costs incurred for a specific project, work package, or activity up to a specific point in time. This includes both direct costs (e.g., materials, labor) and indirect costs (e.g., overhead, administrative expenses). It provides a clear snapshot of the financial health of a project at any given moment.

Calculating TED:

The calculation of TED is fairly straightforward:

TED = Σ (Direct Costs) + Σ (Indirect Costs)

This involves adding up all direct costs, such as materials, labor, and equipment, and all indirect costs, including administrative expenses, utilities, and overheads. The summation is performed for all expenses incurred until the specified cutoff date.

Importance of TED:

Understanding TED is vital for effective cost estimation and control for several reasons:

  • Tracking Project Progress: TED provides a clear picture of how much has been spent on a project, enabling project managers to assess progress against budget and identify potential cost overruns early on.
  • Budgeting and Forecasting: By analyzing TED trends, project managers can make more accurate budget forecasts and predict future expenditure requirements.
  • Performance Evaluation: TED helps evaluate the efficiency of project execution and identify areas where cost optimization is possible.
  • Risk Management: TED allows for the identification of potential cost overruns and allows for corrective measures to be taken to mitigate these risks.

Key Considerations:

  • Cutoff Date: The accuracy of TED depends on the chosen cutoff date. It's crucial to use a consistent and well-defined cutoff date for accurate comparison and analysis.
  • Cost Breakdown Structure (CBS): TED should be calculated for each level of the CBS to provide detailed insights into cost distribution across different project elements.
  • Reporting Frequency: Regular reporting of TED allows for proactive cost control and ensures early identification of potential issues.

Conclusion:

Total Expenditure to Date (TED) is a critical metric in cost estimation and control. By accurately tracking and analyzing TED, project managers can effectively monitor project progress, manage budget, evaluate performance, and identify potential risks. This ensures efficient and cost-effective project execution.


Test Your Knowledge

Quiz: Understanding Total Expenditure to Date

Instructions: Choose the best answer for each question.

1. What does TED represent?

a) The total estimated cost of a project. b) The cumulative sum of all project costs incurred up to a specific date. c) The difference between the actual cost and the budgeted cost. d) The percentage of project completion.

Answer

b) The cumulative sum of all project costs incurred up to a specific date.

2. Which of the following is NOT included in the calculation of TED?

a) Direct costs b) Indirect costs c) Profit margin d) Overhead expenses

Answer

c) Profit margin

3. Why is understanding TED important for project management?

a) To track project progress and identify potential cost overruns. b) To forecast future expenditure requirements. c) To evaluate the efficiency of project execution. d) All of the above.

Answer

d) All of the above.

4. Which of the following factors can affect the accuracy of TED?

a) The chosen cutoff date b) The Cost Breakdown Structure (CBS) c) The frequency of TED reporting d) All of the above

Answer

d) All of the above.

5. TED is a crucial metric for:

a) Cost estimation and control b) Project scheduling and planning c) Risk assessment and mitigation d) Both a) and c)

Answer

d) Both a) and c)

Exercise: Calculating TED

Scenario:

You are managing a construction project with the following cost breakdown:

  • Direct Costs:
    • Materials: $100,000
    • Labor: $50,000
    • Equipment: $20,000
  • Indirect Costs:
    • Overhead: $15,000
    • Administrative expenses: $5,000

As of today, 60% of the materials have been purchased, 40% of the labor has been completed, and all equipment has been procured.

Task:

Calculate the Total Expenditure to Date (TED) for this project.

Exercice Correction

Here's how to calculate the TED: **Direct Costs:** * Materials: $100,000 * 60% = $60,000 * Labor: $50,000 * 40% = $20,000 * Equipment: $20,000 (since it's fully procured) **Indirect Costs:** * Overhead: $15,000 * Administrative Expenses: $5,000 **Total Expenditure to Date (TED):** TED = Σ (Direct Costs) + Σ (Indirect Costs) TED = ($60,000 + $20,000 + $20,000) + ($15,000 + $5,000) **TED = $120,000** Therefore, the Total Expenditure to Date (TED) for this project is $120,000.


Books

  • Project Management Institute (PMI). (2021). A Guide to the Project Management Body of Knowledge (PMBOK® Guide) - Seventh Edition. Project Management Institute. - This comprehensive guide covers cost management principles, including budgeting, cost estimation, and control.
  • Kerzner, H. (2017). Project Management: A Systems Approach to Planning, Scheduling, and Controlling. John Wiley & Sons. - This classic textbook delves into project cost management, including topics like cost estimation, budgeting, and cost control, providing valuable insights into TED.
  • Cleland, D. I., & Gareis, R. (2013). Project Management: Strategic Design and Implementation. McGraw-Hill Education. - This book explores project management concepts, including cost management, emphasizing the importance of tracking and analyzing costs.

Articles

  • "Cost Management in Project Management" by John M. R. Evans. Project Management Journal, Vol. 23, No. 2 (1992). - This article discusses cost management in project management, highlighting the significance of monitoring and controlling expenses, including TED.
  • "Cost Estimation and Control in Project Management" by Charles W. Grubb. Journal of Construction Engineering and Management, Vol. 117, No. 4 (1991). - This paper focuses on cost estimation and control within construction projects, providing insights into the application of TED in these scenarios.

Online Resources

  • Project Management Institute (PMI): https://www.pmi.org/ - The PMI website provides a wealth of resources on project management, including articles, webinars, and certification programs.
  • Project Management Institute (PMI) Knowledge Center: https://www.pmi.org/learning/resource-library/knowledge-center - This section within the PMI website offers a collection of articles, white papers, and other resources covering various project management topics, including cost management.
  • Cost Engineering & Project Management Institute (CECP): https://cecp.org/ - CECP provides resources and guidance on cost engineering and project management, including information on cost estimation, control, and budgeting.

Search Tips

  • "Total Expenditure to Date" AND "cost management": This search term will find articles and resources that specifically discuss TED in the context of cost management.
  • "Total Expenditure to Date" AND "project management": This search term will find articles and resources that discuss TED within the broader context of project management.
  • "Total Expenditure to Date" AND "budgeting": This search term will find articles and resources that focus on the relationship between TED and budgeting within projects.
  • "Total Expenditure to Date" AND "cost control": This search term will find articles and resources that discuss the application of TED in cost control for projects.
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