Oracle Projects – Part 2

What is Burdening?

You burden a type of cost with burden costs to obtain a more accurate representation of your company’s operating costs. For example, each hour of employee time costed directly to a project may be supported by burden costs for benefits and office space. A burden cost code represents the type of burden costs you want to apply to raw costs. For each burden cost code in the burden structure, you specify what cost base it is applied to, the expenditure type or types it is linked to, and the order in which it is applied to raw costs within the cost base.
You use the multiplier to derive the total amount of the burden cost. For example, you may burden the raw cost of labor using a multiplier of thirty percent to derive the fringe component, and in turn, the total burdened cost of labor is computed as follows:

Labor (raw cost) 1,000
+ Fringe @ 20% (burden cost) 200
Total Burdened Cost 1,200

On a project for which costs are burdened, you can create some transactions that are burdened and others that are not burdened. You define which projects should be burdened by setting the Burden Cost indicator for each project type in the Project Types window. When you specify that a project type is burdened, you must then specify the burden schedule to be used. The burden schedule stores the rates and indicates which transactions are burdened, based on cost bases defined in the burden structure.

(Info taken from Oracle Projects User Guide)

Oracle Projects – Part 1

Last few days I have been involved with the Oracle Projects module. I’ll try and put forth some basic learning of this module.

Oracle Projects is meant primarily for organizations that are project-oriented. Using this module, it becomes easy to track costs, budget and track the project status.

Oracle Projects consists of the following products:

• Oracle Project Costing

• Oracle Project Billing

• Oracle Project Connect for Microsoft Project

• Oracle Activity Management Gateway

• Oracle Project Analysis Collection Pack

Prior to Oracle Projects Setup, one has to setup the Set of Books in GL, setup Organization and Organization hierarchy in Oracle HRMS, define employees and job in HRMS and create customer in Oracle Receivables. However if Oracle Projects is being installed as a standalone package then one needs to define all above in Oracle Projects itself. Some other mandatory setups include defining locations, defining implementation options, defining Project Accounting periods, defining expenditure types and categories, define revenue categories, etc. Also one has to create a burdening hierarchy in Oracle HRMS which may vary from the Project or Task Organization hierarchy.

Invariably a Project is broken into a hierarchy of tasks as per Work Breakdown Structure (WBS, a hierarchy of tasks that rollup into a project) to manage project and task related information. One can define as many levels of tasks in a hierarchy in Oracle Projects. However, proper naming conventions need to be followed while naming projects, tasks and sub-tasks. An organization has to be associated with a project and a Task, which may be same or different.

One can have three different Project Types for managing the cost of a project: Indirect, Capital and Contract. An Indirect Project Type is used to track the overhead costs and labor hours for overhead activities like Admin, Legal, etc. Capital Project Type is selected to track costs and labor hours related to asset development activities which ultimately results in an asset for the organization. A Contract Project Type is selected in case the costs are reimbursed by a client.

Oracle Costing is the used for processing of expenditures for finding out costs which can be attributed to projects and tasks which can then be posted to GL corresponding to different account lines. There are two cost amounts associated to each transaction: Raw and Burdened. The raw cost is the actual cost of the work performed, and the burden cost is the indirect cost or overhead of work performed, like administrative cost. The Burden cost is calculated by multiplying Raw Cost with the Burden Multiplier. The burdened cost is the total cost that is incurred, i.e., the sum of raw cost and burden cost.

Burden Cost = Raw Cost x Burden Multiplier

Burdened Cost = Raw Cost + Burden Cost

More on Oracle Projects, primarily I'll try and provide inputs on Burdening Cost and Oracle Project Billing in subsequent days.