Introduction

Effective cost management is a cornerstone of successful capital project execution. When implemented well, it provides project teams with confidence, control, and the ability to make timely and informed decisions. With Omega 365, organizations can proactively track performance, respond to changes early, and ensure accountability across the project lifecycle.

For example, in large-scale capital projects, it's not uncommon that significant costs, changes or commitments go unreported or underreported for months, due to incorrect coding, manual work processes and tools and lack of visibility. Omega 365 helps avoid such situations by offering real-time tracking, visualizations, and structured approvals.

Rather than solely relying on after-the-fact reporting, Omega 365 enables a forward-looking approach. From detailed budgeting and forecasting to risk and contingency planning, the platform supports best practices developed in collaboration with leading capital project organizations and rooted in more than 30 years of experience—while also aligning with recognized industry standards from organizations like PMI and AACEI. This blog post outlines good practices for implementing cost management using Omega 365

1. Start with a Fit-for-Purpose WBS

The Work Breakdown Structure (WBS) forms the foundation of any effective cost management system. It breaks down the total project scope into manageable components, enabling structured planning, execution, and control.

A good WBS should capture 100% of the project scope, with clear and measurable deliverables defined at each level. This clarity ensures alignment across teams and supports accurate estimating, scheduling, resource planning, and performance tracking.

At the lowest level of the WBS, we find what is commonly called the work package — the point at which scope, cost, and progress come together. 

According to the PMBOK® Guide (Project Management Body of Knowledge) published by the Project Management Institute (PMI):

Work Package: The lowest level of a WBS. A work package is a deliverable or project work component at the lowest level of each branch of the WBS. The work package is the level at which cost and duration are estimated and managed.
(PMBOK® Guide, 6th and 7th Editions)

While WBS structures should be tailored to fit the project’s nature, contracting strategy, and organizational setup, having a company-wide WBS guideline or template helps promote consistency and efficiency across projects.

To support various needs — such as benchmarking, reporting, or lessons learned — you can supplement the WBS with additional cost coding. This makes it easier to manage both project-specific and historical data.

🔎 Common Pitfall: Confusing the WBS with the Cost Breakdown Structure (CBS).
The WBS defines what is to be done (scope-oriented), while the CBS outlines how much it will cost (cost-oriented). Keeping this distinction clear is critical for successful project control. ). For example, a WBS would typically not include elements for indirect cost/overhead, taxes and insurance, but would often be broken out in a CBS.

Read more in this article: Defining a WBS Fit for Purpose

Example of the first three levels of a WBS.

2. Project Setup and Reporting Structures

An effective cost management system starts with proper configuration:

• Define reporting cycles (typically monthly, with cut-off dates aligned with financial periods)

• Set currency exchange rate policies if multiple currencies are involved

• Assign roles and responsibilities to clarify ownership of data inputs and approvals

• Decide if alternative structures (like OBS or Tag-based filtering) are needed for cost tracking

Omega 365 Cost Management support using additional cost structure, which can be used in combination with the WBS. One widely used framework in capital projects is the Standard Cost Coding System (SCCS), originally developed under the Norwegian NORSOK standard and now adopted into ISO 19008. SCCS provides a hierarchical, structured coding system that enables consistent cost reporting across projects and organizations.

Using a common standard like SCCS ensures:

• Alignment across engineering, procurement, and construction disciplines

• Consistent reporting from contractors and suppliers

• Easier benchmarking and data reuse across projects

Omega 365 supports mapping cost data to SCCS codes—or other equivalent structures—enabling standardized analysis and integration with external reporting requirements.

Reference: Alternative Cost Reporting Structures

Alternative structures can be defined by using the lowest level of the WBS as building blocks.

3. Build a Realistic Estimate and Time-Phase It

Accurate estimates are the starting point of cost control: Note that there is also an Omega product for Estimating. This, and other tools, can be used to build your estimate efficiently and consistently.

• Develop estimates at the work package level (lowest level) in the WBS, directly in Omega 365 or import from Excel

• Apply time-phasing by distributing the cost across the timeline using:

  • Standard distribution curves

  • The schedule (Start-Finish dates)

  • Resource plans (availability and workload)

Cost estimates should be built upon a Master Control Estimate (MCE) during the project sanction phase and maintained as a Current Control Estimate (CCE) throughout execution. This enables baseline tracking and change management in accordance with AACEI best practices.

Benefit: This enables comparison of planned vs actual cost and supports calculation of KPIs like Planned Value (PV).

Read more about the Omega 365 Estimating functionality here: Omega 365 Estimating

A dashboard availabe in the Omega 365 Estimating product.

4. Establish Performance Baselines

A performance baseline is the integrated scope-schedule-cost plan. In Omega 365, you can set baselines per cost category (resource, contract, etc.) and per WBS level. This provides a snapshot of approved plans and supports trend analysis and performance tracking.

Baselines in Omega 365 align with the PMI PMBOK definition, enabling time-phased visibility of cost expectations over the full life cycle. When integrated with change workflows, baselines can be locked, revised, and rolled forward with full traceability.

5. Define and Track Key KPIs

Standardized terminology and KPIs are crucial for interpreting cost reports. Omega 365 tracks:

• Estimate at Completion (EAC)

• Time-phased Estimate at Completion (Planned Value)

• Actual Cost (AC)

• Earned Value (EV)

• Actual Progress (%)

• Committed Costs

• Booked Costs

• Accruals

• Forecast to Complete

These align with core EVM principles and provide cost engineers with leading indicators of project health.

Benefit: These KPIs enable Earned Value Management (EVM), giving clear insights into cost efficiency and schedule adherence.

Reference: Omega 365 Cost Management Terminology

6. Monitor Actuals and Progress

Effective cost management requires distinguishing between financial accounting and project controls. While accounting focuses on when invoices are received and booked, project cost control emphasizes the cost of work performed. In Omega 365:

• Actuals can be entered manually, imported from accounting systems, or registered via timesheets.

• Accruals can be estimated to ensure the financial picture reflects the reality on site.

• The BoQ (Bill of Quantity) functionality supports progress-based payments and measurement control.

Invoices / accounts payable needs to registered against the WBS.

7. Leverage Scheduling Information

A high-performing cost control system integrates time and cost. Omega 365 allows scheduling data to drive:

• Cost accruals

• Earned value tracking

• Forecasts based on start/finish deviations

• Progress-based earned value (BCWP) and activity-level S-curves

The key to success is ensuring that schedules and cost structures are properly aligned. Activities in the schedule must be linked to the correct WBS and cost objects so that progress, durations, and dates can be meaningfully translated into financial impact. Misalignment between schedules and cost breakdowns often leads to duplicate tracking efforts, inconsistent reporting, or gaps in earned value.

Omega 365 supports mapping schedule activities to WBS, which enables:

• Accurate timing of planned value

• Schedule-driven forecasting of cost-to-complete

• Calculate Earned Value and related KPIs

By aligning the WBS, schedule, and cost structures from the start, the project team can establish a truly integrated control model that supports continuous performance monitoring.

Reference: Leveraging Scheduling Info

Schedules can be imported into Omega 365, and form the basis for actual progress reporting and time phasing of estimate.

8. Manage Contracts and Purchase Orders

Cost control isn't just tracking internal performance—it includes managing contracts and purchase orders. Capturing potential changes at as an early state as possible, enables more accurate cost forecasting. In Omega 365 Contractors can submit their change/variation order requests and the information will be directly available for the cost controllers.

• Omega 365 links contracts and POs directly to forecasts and commitments.

• Variations can be registered and tracked from initiation to approval.

• Invoices can be matched to progress and BoQ lines, minimizing overpayment risk.

Reference: Staying up to date with contract commitments

The contractors can submit contract variation order requests / change order requests directly in Omega 365.

9. Handle Project Changes Systematically

Change control is critical in proactively managing cost and schedule on a project:

• Document potential and approved changes

• Assess impacts

• Revise forecasts and baselines with full traceability

Reference: Change Management

10. Earned Value Management

Earned Value Management (EVM) is a core part of performance management in capital projects, providing insight into both cost and schedule efficiency. Omega 365 supports a comprehensive EVM model that combines planned, actual, and earned values into standardized metrics.

Key Elements in EVM with Omega 365:

• Planned Value (PV): Derived from time-phased cost estimates

• Actual Cost (AC): Collected via registered actuals, accruals, and booked costs

• Earned Value (EV): Calculated from actual progress (e.g., schedule progress, BoQ progress, or contractor updates) applied to the baseline estimate

EVM Metrics Supported:

• Cost Performance Index (CPI): EV / AC

• Schedule Performance Index (SPI): EV / PV

• Estimate at Completion (EAC): Recalculated based on EV trends and actual cost behavior

• Variance Analysis: Cost and schedule variances highlighted per WBS element or contract

Omega 365 lets users define the level of control where EVM is tracked—typically at the lowest WBS level. Multiple progress measurement techniques are supported:

• Manual progress input

• Schedule-driven progress (e.g. Primavera)

• Document deliverables

Why it matters: EVM enables teams to assess whether the project is getting value for money, how far off the baseline they are, and whether current trends are sustainable. When set up with aligned WBS, accurate time-phased baselines, and reliable progress tracking, EVM becomes a powerful early-warning system and can be a very valuable input for providing realistic forecasts.

Read more here: Earned Value Management in Omega 365

11. Forecast Accurately and Proactively

Forecasting isn’t just extrapolating—it requires inputs from various data sources:

• Use current performance (CPI, SPI) to project EAC

• Include committed and potential changes

• Allow discipline leads to manually adjust their part of the forecast

Omega 365 supports multiple forecasting techniques, allowing you to choose the best fit for the project phase and risk level. It enables integrated analysis by bringing together key cost inputs from across the project—such as actual costs, commitments, progress, schedule shifts, resource plans, and risks—all feeding into your forecast model.

Based on the available and continuously updated information, the cost controller can make well-informed evaluations of the estimate, assess trends, and communicate changes clearly. This integrated cost analysis is illustrated below:

The estimate register is updated, to ensure that a most realistic forecast is provided ('estimate at complete').
The cost controller can use features to populate the estimate register based on approved and potential changes, commitments and potential commitments and resource plans. In addition one can manually update the estimate register based on expert judgement.

12. Manage Resources Efficiently

Omega 365 enables detailed labor and resource tracking:

• Define resource rates per contract or discipline

• Track time from crew logs or timesheet modules

• Allocate labor cost across the WBS and cost accounts

Good practice includes validating progress reports with actual man-hours and productivity metrics.

The Omega 365 Resource Management product can be used for managing the resource needs, as well as estimating the cost associated. Duration, rates, FTE and connection to WBS for the individual positions is registered and can be used directly for cost forecasting.

Reference: Resource Planning

13. Address Currency Fluctuations

In capital projects that span multiple currencies, exchange rate fluctuations can significantly impact both budgets and forecasts. Omega 365 addresses this by separating performance tracking from financial exposure:

• Project performance reporting is based on fixed exchange rates—typically the rates defined at the time the project is sanctioned. These are locked to ensure that project managers are measured against the original approved plan, rather than currency movements they cannot control.

• Financial exposure and variance due to currency fluctuations is still tracked, providing valuable insight into how exchange rates have affected overall project costs. This distinction allows teams to assess both execution performance and currency-related risk separately.

Omega 365 enables:

• Defining and locking base and reporting currency exchange rates

• Translating original cost objects from local currency to project currency consistently

• Tracking currency gains and losses over time

Additionally, understanding which currencies the project is exposed to—and when—can help finance teams plan hedging strategies or other mitigation measures.

Practically, this is done the following way in Omega 365:

• Setting exchange rates assumption: When the project is approved, expected rates are registered in the Project Setup app.
• Currency impact calculation: Once the exchange rates are established, project cost estimates are populated using these predefined rates. However, actual exchange rates may fluctuate over the project's duration, impacting the project's financial performance. The currency impact is calculated by comparing the difference between the amounts based on the predefined exchange rates, and the actual exchange rates at the time of the transaction.
  
• Forecasting: The time phasing for each WBS is done in the project currency only and not phased separately per currency. However, the cost for each estimate line item and contract cost item can be specified per currency. You can then use this information to aid in forecasting potential currency impact on work that is not contracted yet, or contracted but not yet performed.

Reference: Currency fluctuations: Monitoring the impact on the project

14. Integrate with Financial Systems

Cost control doesn't replace ERP—it complements it:

• Omega 365 integrates with SAP, Oracle, Visma and others

• Financial actuals (booked cost) are imported.

• Commitments / purchase orders may be imported (unless managed directly in Omega 365)

• Manual and automated reconciliation ensures cost reports reflect financial truth

This enables one version of the truth across stakeholders.

15. Reporting and Communication

Reporting is not the end of cost control—it is the beginning of action:

• Use dashboards for live data insight, such as time-phased earned value charts, burn rate trends, and cost vs. commitment deltas.

• Automate PDF reports and board presentations, highlighting key indicators like CPI (Cost Performance Index), SPI (Schedule Performance Index), and variance explanations.

• Tailor outputs to stakeholders: controllers may need drill-downs per WBS element, while executives may prefer simplified visuals with traffic light KPIs.

Omega 365 comes with several predefined reports and dashboard. Additional custom made reports and dashboards can be designed using the integrated reports designer tool available in Omega 365.

A combination of live interactive and web based reports, with PDF reports that can easily be distributed both to internal and external stakeholders ensures transparency and controlled distribution of cost information.

16. Integrate Risk Management for Cost and Schedule Impact

Risk management is a vital part of cost control. Omega 365 offers a powerful Risk Management module that integrates seamlessly with cost and schedule data. This enables project teams to:

• Log risks in a centralized repository, categorized by type and WBS element

• Assess risk likelihood and consequence using qualitative or quantitative scoring

• Track mitigation actions with clear responsibilities and deadlines

• Visualize risk exposure through a live, color-coded matrix

Understanding Impact on Cost and Schedule:

• Use three-point estimates (minimum, most likely, maximum) to model the potential financial and temporal impacts of each risk.

• Conduct Monte Carlo simulations to forecast risk-adjusted outcomes.

• Quantify potential contingency needs and feed results into budget forecasts.

Monte Carlo Simulation in Linked Projects:For projects with multiple linked schedules, Omega 365 allows users to conduct Monte Carlo simulations directly within the Link Projects module. This supports:

• Scenario-based schedule risk analysis

• P50, P80, and P95 finish date probability distributions

• Identification of activities contributing most to uncertainty

This visualization, generated from a linked schedule in Omega 365, shows the probability distribution of project completion dates—supporting better planning and communication with stakeholders.

Why it matters: Risks are rarely static—they evolve as the project unfolds. With Omega 365, cost controllers can link each risk to related WBS elements, contracts, or milestones. This helps ensure risks are not only logged but actively managed—and their effects forecasted.

Omega 365 Risk Management provides a good overview of the risk assessments and management of mitigating measures.

Reference: Risk Management Guide
Also see: Monte Carlo Simulation in Omega 365

17. Manage Contingency with Structure and Transparency

Contingency reserves are an essential component of cost control, ensuring that projects have the flexibility to respond to unforeseen events without derailing the baseline budget.

Best Practices for Managing Contingency:

• Dedicated WBS Element: Allocate contingency to a specific WBS element. This improves transparency and makes transfers easier to trace.

• Controlled Transfers: As risks materialize or scope changes, funds can be moved from the contingency WBS to the affected cost areas. Ensure this is governed through approval workflows.

• Tracking and Reporting: Omega 365 supports contingency drawdown tracking via a 'rundown curve'—a visual that shows the gradual consumption of contingency funding over time.

• Integration with Risk: Link contingency reserves directly to identified risks from the Risk Management module, ensuring proactive alignment between cost exposure and available reserves.

Why it matters: Contingency is often misunderstood or poorly tracked. By treating it like any other cost account—with structure, controls, and visibility—you empower the project team to use it responsibly and avoid budget overruns.

Conclusion

Omega 365’s cost management framework is shaped by teams who have delivered some of the most complex capital projects globally. It’s built not just to track numbers, but to help projects succeed—through better control, clearer decisions, and smarter communication.

Instead of adding overhead, Omega 365 brings structure to what matters:

• Knowing where the money goes

• Understanding what’s earned

• Seeing what’s ahead

By aligning cost, scope, schedule, risk, and forecasting in one platform, project teams can shift from reactive corrections to proactive performance.