rate shutdownaccounting is
made more difficult because:
The shutdown event is compressed in time and
intensity so that information about proper charging floods in, and if it
is not captured correctly, might be forgotten or lost.
Under the best circumstances work orders are
difficult to read and interpret. Under shutdown circumstances they might
be impossible to understand (without a powerful system that forces the
mechanic and supervisor to completely and clearly fill out every field).
Contractors are used and they don’t always
submit bills in a timely way or in a format that is easy to relate to your
Bills for rental equipment might not indicate
that they were used for a shutdown.
Some maintenance work uses exactly the same
resources as shutdown work, making it difficult to separate normal
maintenance costs from shutdown costs (particularly if it is a partial
shutdown and other maintenance work is still going on).
There is sometimes an incentive or a
temptation to transfer costs out of the shutdown to routine maintenance
(to make a budget number and look good), or out of routine maintenance
into the shutdown (to make a different budget number and different people look
The cost to accumulate accurate costs (by work
order for example) might be prohibitive.
Shutdowns are on the cutting edge of issues of
capitalization and expensing for accounting and tax purposes, which might
make some artificial distinctions necessary and complicated to manage. The
decisions on these issues are unrelated to the maintenance and engineering
of the shutdown and are entirely driven by tax law and accounting goals.
The Budget spreadsheet
One tactic is to prepare a spreadsheet with all the
major projects and work orders down the rows and the expense categories across
the columns. The rows can be keyed off work order numbers or WBS (Work
Breakdown System) codes, or both.
There is some advantage in including the WBS codes
(if you are already using them for project management). WBS codes will allow
costs to be tracked against individual work orders or activities where that is
practical (at a terminal activity level). Where that is not practical, the
costs can be charged to higher levels of the WBS. Also, the WBS facilitates
totaling of costs to higher levels.
For example, you might rent a crane for a whole
project such as ‘Install new stack’ that might have 15 work orders. You could
charge the crane against the whole project (very simple), rather than trying to
allocate it by hours or another method (very complicated), to the individual
jobs making up the project. Charging the crane to the whole shutdown is another
possibility, but does not capture the costs for installing the stack (if that
was the only work for which the crane was used.)
Constants will be charge rates (the hourly salary +
benefits + overheads) for each craft (many places might have only two or three
charge rates) such as C1 and C2 below.
The Etc. column represents as many columns as are
necessary for all other resources for each job. There might be several versions
of this spreadsheet over time with jobs added and others deleted.
After the work orders are listed the spreadsheet
would add all the columns and have lines for extra and emergent work. The Extra
column might add 5% of the sum of all the work orders. The Emergent column
might add 15% of the sum of the work orders. Your historical percentages would
be useful (assuming you have tracked emergent and added work from shutdowns of
this type in the past).
After Extra and Emergent would be a series of
charges for site-wide requirements not charged to individual jobs. These jobs
would include everything from spare cranes to eyewash stations, from welding
tanks to extra site security, from free access items to extra PPE. This
spreadsheet becomes a control document once the shutdown begins. Every shutdown
bill would be coded to this spreadsheet.
This spreadsheet accumulates the costs for the
shutdown. Intermediate versions should be saved in the project archives.
How to use the budget spreadsheet
It is very useful to take all the estimates from
the work list and expand the costs into the budget spreadsheet. Estimate all
the site way costs, emergent work, and other unknowns. This first version of
the budget spreadsheet is the starting budget. Save this record, and don’t
change it once it is approved. Graphs are generated showing the amount of hours
and dollars of various categories.
Clear all the numbers from the spreadsheet to make
a blank sheet with titles and formulas only. As soon as the shutdown begins,
route all information through the person responsible for this spreadsheet. Add
in data about actual costs as it becomes available. Estimates, and rounded
numbers are okay. Every week at the shutdown update meeting (or at milestones),
rerun the spreadsheet graphs for comparison with the budget (called the
Along with an estimate of work to be completed,
this spreadsheet will give you a good leading indicator of budget performance
at the end of the shutdown.