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Using Phases/Cost Codes – Part 1 Standardization

“Until we “standardize” the terminology in our industry, the answer to the above question will be; Whatever any Accounting Software Company, Controller or Estimator wants them to be! Each one having different values.” – Lee Clark

Before we try and answer the question, let’s briefly define the terminology.

Cost Codes are specific types of work being done on a project. Examples of cost codes would be footings, CIP walls, and slab on grade. These generally resemble the CSI index in some form. The differences between companies using them will be in the amount of detail that they are trying to collect for these specific types of work. Generally I have found the detail is to complex for the field.

Phases are segments, areas, floors, buildings, etc. The best way to describe them is from the drawings and the descriptions that the architect used. Phases are only used when you what to break down the cost codes to match the schedule and analyze the cost in greater detail. In some accounting systems phases are called cost codes! This makes job cost and production measuring discussions extremely difficult in our industry.

Cost classes are the types of cost. Examples are labor, material, subcontractor, etc. In some accounting systems cost classes are really cost codes!

The following terminology will be the reference for the balance of this blog;

  • Phases = areas, floors, buildings, etc. (Schedule, Sequencing)
  • Cost Codes = footings, CIP walls, slab on grade, etc. (Production Measuring, Skill)
  • Cost Classes = labor, material, subcontractor, etc. (Cost)

The diagram below illustrates it;

TerminologyTerminology

The chart above is based on Foundation Construction Accounting and many other accounting systems. But the real problem is that the above chart is not common to all accounting systems in the industry. Because of the differences, trying to standardize production measuring and skill assessment would be impossible. Accounting systems are designed for cost collecting and reporting not production measuring. Forward communication is not designed as a function of accounting systems. Accounting systems provide a great rear-view mirror for costs. Until recently most accounting systems like Quickbooks didn’t even recognize a quantity of measure associated to a cost code.

Production measuring will require a “standardization” in terminology. Each cost code needs to be defined on the tasks required, skills needed, safety needed, quality expected, and be measured and evaluated daily.

Does anyone measure cost codes by a unit of measure like I have described above?
Should we “standardize” the terminology for our industry?
If so, who should do it? My thought would be NCCER National Center for Construction Education.
When looking at the chart above, specifically the cost codes. Could the skills required to accomplish each cost code be measured and defined daily with production measuring? Any comments would be appreciated.

To conclude, a cost code is a specific type of work. Generally they closely follow CSI, but not always. I would propose the word “cost” be replaced with “work” and we make sure that a unit of measure for each work code is established and communicated daily so that all employees take an active part in reaching realistic expectations.

Lee Clark
Lee Clark

As the CEO and co-founder of PayCrew, Lee Clark is passionate about the people in the field, because he understands the importance of trust between a company and its people. As a construction business owner, he saw first-hand how attracting and retaining skilled people form the foundation of a company’s success.

Lee has a passion for measuring daily performance in the construction industry and is also a regular contributor at Concrete Construction.