HIGHBAR TECHNOLOGIES

Engineering And
Construction
Organisation Best
Practices
This document is designed to impart SAP Best Practices for securing good project
delivery utilizing the SAP information system at various levels of the
organization. The idea is to provide the Best Practices suiting to the
organization without making changes in the existing project delivery mechanism
of the organization

Disclaimer

This document does not endorse any specific SAP Process and that the selection
of the specific process would depend on the individual organization’s size and
existing project delivery mechanism. The views and opinion of authors in this
document shall not be used for any advertising or process endorsement of SAP in
the name of Highbar Technologies. In particular, Highbar Technologies shall not
be liable for any loss or damage whatsoever, arising from the usage of
information contained in this document.

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 Contents

1. Executive Summary ........................................................................................................ 4

2. SAP Best Practices .......................................................................................................... 5
Business Process Template .................................................................................................... 10
4.1. Cost Planning............................................................................................................ 10

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1. Executive Summary
Today the Engineering and Construction sector is grappling with multiple challenges in the area
of Project Selection, Workforce Productivity, Payment Delays, Design Changes, Cost Overrun,
Material Delays, Subcontracts Management, Schedule Overrun, Inventory Management, Safety,
Policy Changes, Corruption. Despite persistent uncertainty in the engineering and construction
industry, optimism remains high as growing global demand for infrastructure development,
improving economic conditions, and increased availability of project financing provide industry
participants with new growth opportunities.

The construction industry is one of the most complex and multipurpose economic sectors. Its
value added chain encompasses activities which include the production of raw materials and
processed goods (ranging from simple sand extraction, wood processing and woodworking, to
the manufacture of cement and steel, to metal products, such as fixtures), civil and heavy
construction works, as well as project engineering, development and management.

The construction industry is a highly fragmented industry. It needs to communicate on a large

scale with other related businesses such as material and equipment suppliers, vendors,
subcontractors and clients. ERP systems are being used by construction companies to improve
responsiveness in relation to customers, strengthen supply chain partnerships, enhance
organizational flexibility, improve decision making capabilities and reduce project completion
time and lower costs. These information systems are designed to integrate and partially
automate many of the company’s business processes such as human resources, financial
management, manufacturing, procurement, construction, operations and maintenance.

The following benefits could be gained by implementing the ERP systems:

1. Provide an integrating working environment and enable automation

2. Availability of information from field level until the management level

4. Integration in applications in any departments

5. Flexibility and facility to standardizing process or to accommodate changes and globalization.

6. Achieve balanced people, process and technology changes across all areas.

7. Apply planning and program management practices throughout the program life cycle of a
project.

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2. SAP Best Practices
SAP Best Practices is functionality preconfigured for a particular vertical industry. This
document covers following processes on the Engineer and Construction Project.

2.1 Enterprise Structure

 The controlling area is the basic organizational unit in Controlling. A controlling area
represents a closed system that is used for cost accounting. Cost allocations can
only be carried out within one controlling area, they cannot relate to objects in
other controlling areas.
 The company code is the balance sheet unit in Financial Accounting. Balance sheets
and profit and loss statements are prepared at company code level in order to meet
the legal Reporting requirements.
 The plant is a manufacturing facility. It is the central organizational unit in the R/3
components Materials Management and Production Planning. In the definition of
organizational structures, plants are assigned to company codes.
 Purchasing organizations and sales areas are organizational structures for
Purchasing or Sales and Distribution.

2.2 Project Structuring, Planning and Scheduling

 The project definition is an outline of all objects created within a project.

The project definition contains data that affects the entire project (start and finish
dates, for example, and organizational data).
 The project definition contains data used for the entire project (start and finish
dates, organizational data and planning parameters, for example). It contains
default values, which can be passed on to the WBS elements.
 The controlling area is unique for the entire project. You specify it once you have
created the project. You define organizational units such as company code,
business area, profit center, and plant for each WBS element.
 The work breakdown structure (WBS) shows the individual elements of a project in
a hierarchical structure. A WBS is the operative basis for planning further steps in a
project. Here the focus is on planning, analysis, description, control, and monitoring
costs, basic dates, and budgets.
 Activities are used to show the flow of a project or of activities involved in a project.
The individual tasks are linked to each other, and grouped together to form what
are known as "activities". Activities form the operative basis for planning and
controlling dates, costs, and resources (personnel, machinery, PRTs, materials).
 When activities are assigned to WBS elements, the dates and costs defined in the
individual activities are totalled up (aggregated) at the WBS level, and can be
evaluated. Activity funds already assigned are checked against the budgets of the
WBS elements.
 Milestones are events that are of particular relevance to a project. You can assign
milestones to activities or WBS elements.
 The following types of dates are available in the system, and occur at all levels:
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  Basic dates are defined manually, and are often binding for lower-level objects.
Activities can be fixed by means of time constraints.
 Scheduled dates (or earliest and latest dates for activities) are determined
automatically when network activities are scheduled. Scheduled dates are
determined for WBS elements by summarizing the scheduling data of the
corresponding activities.
 In the execution phase of the project, actual dates are set by entering actual
dates for WBS elements, or by confirming activities.
 Forecast dates are a means of storing a specific scheduling scenario for
information purposes.

2.3 Resource(Manpower and Equipment) Planning

 People can be assigned to work centers:

 At capacity category level or
 At work center level
 This assignment is important for:
 Workforce planning
 The time sheet, which proposes a work list to enter activities for a person.

2.4 Cost Planning and Budgeting

 You can plan project costs in two different ways:

 Manual cost planning in the WBS
 Cost planning using activities (network costing).
 Manual planning in the WBS involves:
 Overall planning (structure-oriented planning) in its most basic form, where you
enter costs for each WBS element. You can break down your figures by fiscal
year if you want (see Appendix).
 Detailed planning of primary costs and activity inputs (cost element planning).
This type of planning is cost element based and period based.
 Unit costing, where you use a profile to enter quantities (materials, internal
activities, external services, variable items, and so on) for each WBS element.
This type of planning is cost element based (see Appendix).
 Easy Cost Planning from Release 4.6C. Easy Cost Planning offers you an easy-to-
use tool for planning costs by cost element in a quantity structure. You can then
use Execution Services to enter commitment and actual data for the planned
costs.
 Planning using network activities is by cost element and period.
 The Default Plan Value transaction to copy the cost planning data to the Budget
Allocation
 To ensure that the available funds are not exhausted at an early stage, you release
the budget in stages.

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2.5 Revenue Planning

 Manual planning in billing elements in the project structure.

This type of planning can follow the same procedure as cost planning, or can be by
revenue element.

2.6 Progress Monitoring

 To monitor the dates for a project, you compare the actual dates with the basic
dates or the forecast dates.
 Actual dates can be set manually for WBS elements. If you are using network
activities, actual dates are updated by confirming activities.
 If activities are assigned to a WBS element, the actual dates of the activities are
proposed to the WBS element as provisional dates, which can be transferred to the
actual dates of the WBS element, if necessary.

2.7 Material(Project Material, Consumables)

 By assigning materials to activities, you can plan the necessary material

requirements for a project. The system differentiates between stock items and non-
stock items.
 Stock items (L) are entered for materials that are kept in stock (warehouse, or
project/sales order stock). Reservations are created for stock items.
 Non-stock items (N) are entered if materials are to be procured directly for the
network (which is not using MRP). Purchase requisitions are created for non-stock
items. These requisitions are passed on directly to Purchasing.
 The type of component procurement depends on both the item category and the
attributes of the material. The material master contains information on whether:
 The material is purchased or produced internally,
 The material is managed in project stock or in plant stock,
 The material can be produced in advance (planned independent requirement)

2.8 Services Procurement

 The procurement of services may involve the following steps:

 Determination and recording of requirements
 Determination of possible sources
 Bid invitation procedure
 Entry of data from quotations submitted by bidders
 Comparison of quotations
 Award phase (order placement)
 Monitoring of purchase orders
 Entry of services actually performed
 Acceptance of services performed
 Verification of invoices for services
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2.9 Site Safety Management

 An audit is a systematic examination to determine to what extent an object fulfills

predefined audit criteria. Audits are usually performed using question lists whose
content reflects these criteria.
 SAP’s Audit Management meets the requirements of the ISO 19011 standard. You
can use this business process to:
 Plan and process audits
 Document findings
 Grade audit objects
 Process corrective actions
 Analyze audit data
 Audit Management is a versatile tool that can be used for various types of audits.
Audit management can be used on the following application areas:
 Environment, health and safety management
 Safety and security management (industrial hygiene and safety, fire safety, facility
safety)

2.10 Accident/Incident Management

 The incident/accident management component gives you the support you need to
comply with such statutory requirements by providing the following functions:
 Entry and editing of all relevant event data in an incident/accident log
 Besides entering recordable accidents, you have the option of recording
accidents that result in an employee being absent from work for less than three
days, or not being absent at all. You can also enter any ‘near-accidents.‘
 Automatic transfer of data from the injury/illness log to the incident/accident
log if required
 Creating and shipping of the accident report required by law for notifiable
accidents in the SAP System
 Evaluation of the incident/accident log

2.11 Timesheet Booking and Workforce Productivity

 CATSTIMESHEET is an integrated function for entering actual time data important in

modules like HR, PS, PM & CO.
 You can determine the layouts yourself, using data entry profiles.
 Report programs pass on the released (and, if necessary, approved) data to the
various applications. The actual time data may be important for various
applications simultaneously. In this case, the data is transferred to the applications
in question
 Time data is entered for one or more people.
 The screen configuration (for the request screen, worklist, and data entry part) is
flexible:
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  Dependent on the employee group (using data entry profile)
 User-defined (using table control)

2.12 Equipment Log-Sheet Entry - Kedar

2.13 Plant Maintenance Management - Kedar
2.14 Information Management

 Actual data is recorded by means of purchasing and sales documents and the
customer and vendor subsidiary ledgers.
 The actual data can be evaluated in the PS Information System by means of
cost/revenue and payment reports

2.15 Billing - Deepak

 As the project is executed, invoices are generated using billing and appear in the
project as actual revenues and customer payment obligations. In the case of down
payment data, the billing program generates down payment requests which are
recorded in the payment data for the project.
 You can create a billing plan for a sales order, a sales order item, or for a billing
element in the WBS.
 The invoicing plan is relevant to planned costs and planned outgoing payments.
The dates for the down payment are relevant to payments only (not costs). The
payment terms (example: payment two weeks after invoice issue, with 3%
discount) are important for dates and amounts.
 You can create invoicing plans for externally-processed activities, service activities,
cost activities, and externally-procured material components.

2.16 Payment Management - Nilesh

2.17 Claims Management

 As your project is executed, you may experience delivery problems, price variations,
unforeseeable bottlenecks, and so on, that give rise to variances from the project
plan. In this event, it is very important to clarify which partner(s) to the contract
is/are responsible and in what degree. Claim Management ensures that claims
arising from variances are either prepared or lodged against the contractual partner
at the right time or, if the claim is in the other direction, that it can be deflected.
You can use the claim management feature in the Project System to document any
variances from your project plan, identify the party responsible, and initiate follow-
up activities.

2.18 Period End Closure

 Period-end closing procedures are performed periodically in the background,

usually once every plan period. The procedures are generally carried out at the start
of the month for the previous month.

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  The cost forecast determines the remaining costs expected to be incurred in order
to complete the project. Planned, actual and commitment values as well as the
confirmed forecast dates and forecast work are used as a basis for this.
 Cost forecasts can be made for projects with activity-assigned, appended networks;
the forecast takes account of activity costs and the costs of material components
managed as collective stock.
2.19 Project Closure – Technical and Financial

Business Process Template

4.1. Cost Planning

4.1.1. Purpose

4.1.2. Business Process with Flow Diagram

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 Construction Projects Cost Planning and Budgeting

Estimator
Cost Planning V.1 and V.0

Estimator Central Planning Team Central Planning Team

Estimation in 3rd Party
Start Software/Excel during Analyse the Estimated
Estimated Cost BPO in V.1 Planned Cost BPO based
Tendering Phase and the Planned Cost
through Candy Interface on BOQ in V.0
BPO
Candy Interface to
Create BPO

Central Planning Team Budget Review Committee

Update the Planned Cost Approve the Planned Cost

BPO Norm
Budget Approval and Release Work Flow

SAP Budget Approval WorkFlow

SAP
For Approval
Contracts Operations
Sr. Site QS Site Manager
Manager Director
Central Planning Team Central Pl.

Planned Cost in CJ40 Budget CJ32

in V.0 Version Allocation

Management Commercial
Head
End

4.1.3. Benefits

4.1.4. Business Roles and Authorisation Matrix

Process DESCRIPTION TCODES DESCRIPTIONS Responsibility Matrix

Highbar Technologies Ltd.

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