AAOM Handbook

PL.15 Planned Cost Less Than Approved Estimated Cost Context The Work Orders directed to the planning process were approved based on a cost estimate (Upper Cost Limit - UCL) calculated with the information known at the time of approval. The planning process has taken the Work Order and Tasks through various activities to ensure all the required outcomes are satisfied and work methods and resources defined. In doing so, the scope of the work has been better defined and a Planned Cost estimate developed. The Planned Cost estimate must be compared to the approved Work Order UCL to check that the work is still within the amount approved. While a Planned Cost that is below the approved Work Order UCL is the desired outcome, if the Planned Cost is significantly less than the Upper Cost Limit this suggests that there may be a difference between what the Approver intended and the Planner developed. While it is mandatory that a Planned cost above the UCL be notified to the Approver, a Planned cost that is significantly below the UCL should also be notified to the Approver. Purpose To determine if the approval for the work is still valid. Quantity One decision whether the Planned Cost is less (but not significantly less) than the approved Upper Cost Limit. Quality The Planned Cost for the Work Order is the sum of the following for all tasks;  labour costs (total resource hours x current labour cost rate),  materials costs,  equipment hire costs,  tool hire or purchase costs (including specialty tools),  contract service costs, and  any other costs. If the Planned Cost is less than the approved Upper Cost Limit then the approval of the work is still valid and processing of the work may proceed. Immediately it becomes evident that the Planned Cost will exceed the Upper Cost Limit, the person accountable for planning the work is to notify the person accountable for the approval of expenditure for the Work Order. If it appears that the Planned Cost will be significantly less than the approved Upper Cost