010 20r-98 Project Code of Accounts

20R-
98
PROJ
ECTCODEOFACCOUNTS
AACE® International Recommended Practice No. 20R-98
PROJECT CODE OF ACCOUNTS

TCM Framework: 7.1 – Project Scope and Execution Strategy Development
7.2 – Schedule and Development
7.3 – Cost Estimating and Budgeting
Rev. January 27, 2003

Note: As AACE International Recommended Practices evolve over time, please refer to web.aacei.org for the latest
revisions.
Any terms found in AACE Recommended Practice 10S-90, Cost Engineering Terminology, supersede terms defined in
other AACE work products, including but not limited to, other recommended practices, the Total Cost Management
Framework, and Skills & Knowledge of Cost Engineering.
Contributors:
Disclaimer: The content provided by the contributors to this recommended practice is their own and does not necessarily
reflect that of their employers, unless otherwise stated.
Gregory C. Sillak (Primary Contributor) Scott R. Longworth, CCC

A. Larry Aaron, CCE Bruce A. Martin
Dorothy J. Burton Stephen E. Mueller, CCE
Peter Christensen, CCE Alexia A. Nalewaik, CCE
Tony Cort Dennis J. Pestka
Cynthia L. Erickson Bernard A. Pietlock, CCC
M. Steven Franklin, CCE Stephen O. Revay, CCC
Paul D. Giammalvo, CCC Robert E. Richie, CCC
Ross Gibbins David G. Rowley
Allen C. Hamilton, CCE Malcolm P. Sawle
Robert H. Harbuck, PE CCE Fred M. Seidell, III CCC
Michael A. Hauser, CCC Kim A. Setzler
John K. Hollmann, PE CCE Greg Sotile
Robert G. Kaufman Marvin Woods, CCE
Mike Lammons Kelvin Yu, CCE
Copyright © AACE® International AACE® International Recommended Practices
Single user license only. Copying and networking prohibited.
This document is copyrighted by AACE International and may not be reproduced without permission. Organizations may obtain permission
to reproduce a limited number of copies by entering into a license agreement. For information please contact editor@aacei.org
AACE® International Recommended Practice No. 20R-98
PROJECT CODE OF ACCOUNTS
TCM Framework: 7.1 – Project Scope and Execution Strategy Development
7.2 – Schedule Planning and Development
7.3 – Cost Estimating and Budgeting
January 27, 2003
TABLE OF CONTENTS
Table of Contents ..........................................................................................................................................................1

Introduction ...................................................................................................................................................................1
Purpose ..........................................................................................................................................................................2
Guideline Methodology and Background ......................................................................................................................2
Basic Principles of Codes of Accounts............................................................................................................................3
Attributes of Codes of Accounts ....................................................................................................................................4
Usage of Codes of Accounts ......................................................................................................................................4
Content of Accounts ..................................................................................................................................................5
Structure and Formats of Code of Accounts ..............................................................................................................8
Standardization........................................................................................................................................................10
References ...................................................................................................................................................................10
Appendix A: Existing Standards ...................................................................................................................................12
Appendix B: Subject Related to Project Code of Accounts ..........................................................................................13
Financial General Ledger or Balance Sheet Accounts ..............................................................................................13
Work Breakdown Structures (WBS) .........................................................................................................................14
Activity-Based Costing/Activity-Based Management (ABC/ABM) ...........................................................................14
INTRODUCTION
This guideline establishes the basic principles of codes of accounts (COA) for projects in any industry. It examines
key characteristics including usage, content, structure and format and describes benefits of establishing standard
COAs. Topics such as activity-based costing and work breakdown structures as they relate to COAs are addressed.
The issues of properly defining a WBS and how it should be structured are outside the scope of this guideline.
COAs are applicable to all phases of the asset life cycle, however, this guideline specifically addresses the project
execution phases of asset design development through to start of normal operation.
A project code of accounts is a coded index of project cost, resource and activity categories. A complete COA
includes definitions of the content of each account code and is methodically structured to facilitate finding,
sorting, compiling, summarizing, defining and otherwise managing information the code is linked to. The
information is used to support total cost management practices such as cost estimating, cost accounting, cost
reporting, cost control, planning and scheduling. Other names used for COAs are coding matrices, coding
structures, charge accounts, asset or material classification accounts, value categories, cost elements, work
breakdown structures, resource breakdown structures and activity breakdown structures.

20R-98: Project Code of Accounts 2 of 14
January, 2003
PURPOSE
The purpose of this guideline is to establish a common understanding of the principles and characteristics of
project COAs so communication is improved among stakeholders across all industries. It should be used to help
cost management practitioners create or modify a COA to maximize its value. This guideline also provides the
conceptual foundation for other recommended practices and standards that address project COA applications in
specific industries.
Common understanding is important because all projects are the product of team endeavors in which the timely
and accurate flow of project cost, resource, progress, and other information is essential to project success.
Industry experience has shown that a large amount of time and resources are wasted in the effort to reconcile
disparate project records, and project failures are often traced to poor communication. The practice of
benchmarking project costs at a meaningful level of detail is a daunting task in some industries because of the lack
of cost coding commonality.
GUIDELINE METHODOLOGY AND BACKGROUND
This guideline was developed using a practical rather than a theoretical approach. Actual COAs were gathered and
dissected to identify core COA principles and attributes as they exist in the area of project cost management today.
The detailed contents of the owner and contractor company COAs gathered are confidential. Some of the sample
COAs have been published as “standards.” They are described in Appendix A. The COA from the organization
referred to as “benchmarking” is a format that 14 international process industry owner companies had agreed to
use for the purposes of cost and resource benchmarking at the time the document was provided.
There are almost as many different codes of accounts as there are companies executing projects. For this
guideline, 28 actual COAs were collected and analyzed as summarized in Table 1. Despite differences, there is
sufficient consistency of COA principles and attributes among industries to provide confidence that the COAs
collected are an adequate sample.
Industries Number Organizations Number

Environmental 2 Owners 7
Utility 1 Contractors 11
Oil & gas extraction 1 Standards - professional 6
Offshore oil & gas 2 Standards - owners 1
Process - oil & gas 13 Benchmarking 1
Process - general 2 Government 1
Process - chemical 1 Estimating software 1
Process - pulp & paper 2
Mining 2
Transportation - pipeline 1
Construction - buildings 1
28 28
Table 1 – Number of COAs Examined by Industry and Source
After identifying the attributes and characteristics of each COA, the content characteristics were listed in tables
that categorize them by their prevalence of use. Breakdowns of most common content characteristics are shown
in tables 6 and 7 later in the guideline. Content characteristics were categorized or ranked by prevalence of use as
shown in table 2.

January, 2003
Prevalence Group Percent Occurrence in the Sample COAs

Primary Equal to or greater than 75 percent
Secondary 50 to 74 percent
Tertiary 25 to 49 percent
Other Less than 25 percent
Table 2 – COA Content Characteristics Ranking Categories
While this approach is not necessarily forward-looking, it is practical, and the core COA principles identified are
expected to have lasting value. This and related guidelines will serve as a documented basis for AACE’s cooperation
with other industry COA initiatives particularly those of vendors and users of computer-aided engineering and
design, enterprise and project planning systems, and accounting systems as they attempt to further integrate their
products.
BASIC PRINCIPLES OF CODES OF ACCOUNTS
The survey of industry COA practices identified some basic, common sense principles. The principles are listed
below (the underlined words are key COA attributes that will be discussed further in the guideline).
1. COAs serve many users and usages, but should have one master.
Project managers, estimators, schedulers, accountants, buyers, and other stakeholders all have strong and
sometimes conflicting requirements for a project COA. The basic structure of a COA should be managed in a way
that prioritizes and addresses user and customer needs, considers long-term and external consequences, and
considers intra and inter-company standardization. A cross-functional team is best at managing a COA. Arbitrary
changes by individual users should not be permitted although flexibility can be a planned aspect of a system.
2. Project information content is limitless, but COA formats are always constrained.
Every COA has constraints from a human comprehension standpoint or from limited data field capacity or criteria
in information management systems. Constraints require compromises that favor using a team-managed COA
approach. The COA team needs to include members with thorough knowledge of information management.
3. A COA is a communication tool requiring structure and a dictionary like a language.

COAs are by nature intended to reduce confusion. Random elements (arbitrary alpha-numeric, lack of hierarchy,
etc.), words or acronyms weighted with connotations, unclear use of symbols, and other such practices increase
confusion. Structure and format increases usability and providing definitions of all elements in a reference
dictionary or similar document improves clarity.
4. Standardization is always better in the long term.

You can depend on change in your project organization and systems. When change occurs, the value of having a
standard COA (with planned flexibility) will shine. Here are some typical outcomes from not having a standard
COA.
• What used to be in-house work is now being turned over to a contractor. The contractor or vendor cannot
make sense of or map your organization’s COA to their accounts. Team meetings are consumed by
arguments about report content.
• A contractor’s COA needs to be mapped to the owners COA to meet owner corporate reporting
requirements and there is no way to accomplish it without reviewing every code definition of both
companies to determine how they correlate.

January, 2003
• You are going to do a project just like one completed years ago, but you cannot make any sense out of the
COA that was used on that past project; you miss some important cost items.
• You’re expected to benchmark your company performance with peer companies, but you can’t
participate in benchmarking groups in a meaningful way because you can’t share data in a standard
format.
• You’ve been merged into or must cooperate with another group and need to roll-up your costs/projects
with theirs, but it will take months to convert them to a similar basis.
ATTRIBUTES OF CODES OF ACCOUNTS
The principles above consider four attributes of a code of accounts. These attributes are:
• usage;
• content;
• structure and format; and
• standardization.
When evaluating, creating, or modifying a COA, these attributes should be considered within the context of your
project system circumstances and requirements.
Usage of Codes of Accounts
There are many uses of a project codes of accounts. Some of these are:
• classifying estimate items, budgets, and expenditures for cost control and capitalization;
• facilitating estimating and analysis of project cost data;
• summarizing cost data;
• assigning responsibility for budgets;
• complying with accounting, taxation, and regulatory requirements;
• providing a means to relate work scope to costs and schedule;
• integrating between accounting, cost reporting, cost and schedule control;
• categorizing performance and productivity measurement and analysis;
• simplifying cost and schedule forecasting; and
• facilitating audits and reporting accuracy.
Table 3 shows how these uses often vary for major processes or phases of a typical project.
Planning Execution Reporting Close-out

Scope breakdown Timekeeping Costs Historical estimating data
Estimating Purchasing Progress Valuation by asset class Tax
Budgeting Contracting Productivity classes
Planning General expenses Forecasting Post audits
Scheduling Audits Regulatory Claims
Special Benchmarking
Table 3 – Uses of Codes of Accounts in Project Processes and Phases

January, 2003
When creating a COA, these uses must be considered and prioritized. Those responsible for these activities and
uses should be involved in COA development and evaluations.
Content of Accounts
A COA in and of itself contains little information. The account is just a tag attached to a packet of information. The
content of the information packet must be evaluated as to how it can serve the various uses that have been
identified. A COA whose account content is optimized for one use may not serve another. For example, cost
control usage may favor a COA whose account content reflects the costs of tasks by various organizations (i.e.,
piping by contractor A). Capital accounting may desire account content that reflects the asset item. To serve both
cost control and capital accounting uses, an account for piping by asset and by contractor could be created, but it
would greatly complicate cost control reporting. It may be beyond the capability of the contractor to track piping
work on each individual asset. In that case, it may be better not to directly combine the uses in one COA.
Account content characteristics can be classified into six major categories as shown in table 4 below.
Accounting Geographical Physical Resource Activity Timing

cost type location product organization WBS budget year
project # country facility company work type fiscal year
cost group state/province cost group department activity quarter
billing code city/town system cost center activity type shutdown/non-shutdown phase
asset class plant unit trade discipline
capital/expense area project type discipline commodity
contract # site commodity cost type process step
change # office process material phase
cost center component contractor sub-phase
service
Table 4 – General Classes of Content Characteristics
Some of the characteristics listed in table 4 are defined below in the order of prevalence of use.
Discipline and Commodity
A discipline is a type of work, craft, profession, or trade. Each discipline will employ a somewhat unique set of skills
and knowledge and will tend to work with different types of materials (i.e., commodities) and resources. Discipline
and organizational breakdowns are often similar, but organization is a more artificial construct defined by
reporting responsibilities rather than skill sets. In construction activities, the skill set and materials being installed
are related, therefore discipline and commodity accounts tend to be synonymous (e.g., piping, electrical, and so
on). Other names for the discipline characteristic are major account, prime account, and class. This characteristic is
important to project control because grouping like skills and commodities together facilitates productivity and
progress analysis. Also, these groupings are good for benchmarking because discipline level practices tend to be
generally applicable to all projects, while asset-type accounts tend to be project specific. A summation of costs in a
discipline account will include all costs and resources associated with that discipline, including labor and material.
Although this characteristic was the most common found in the COA sample, not all industries used this
characteristic because it was considered to be part of the activity/work type characteristic.
Cost Type
Cost type generally refers to the type of resources such as labor, material (i.e., equipment and bulk materials), or
subcontract (i.e., a combination of labor and material). This account type also may be used for organizational and
accounting breakdowns. In organizational usage it may segregate owner costs from contractor costs and may
further identify contract type (subcontract, service, turnkey supply and install, design, labor, and so on). In

January, 2003
accounting usage it may segregate rental and lease costs from purchases. Also, asset owners need to separate
capital costs from expense costs (e.g., demolition and software development are often expensed) because they
affect depreciation, taxation, and ultimately profitability.
Product or Deliverable
Deliverables are the physical product or a key milestone that results from the execution of work activities. It may
be the final product at the completion of a project or an intermediate product such as a requirement document. A
software program and a chemical process unit are examples of products resulting from a project. Usually, the
product account rolls-up all the costs (i.e., all disciplines and cost types) that were invested in that product. Asset
accounts also reflect product-oriented characteristics, but asset accounts are generally reserved for classifying
products by useful life for depreciation purposes (asset accounting is usually a financial allocation that occurs after
the asset is created or installed).
Area and Unit
These are two separate characteristics, but they are routinely used in combination. Area refers to a geographical
location with a defined boundary and is most often a term used in the process industries. Units are a characteristic
used in the process industries. A unit is a set of process equipment and ancillary commodities that together
perform a defined process step (a unit also may be considered a product). There are generally several units within
an area.
Cost Group
A cost group represents a summary categorization used for general cost reporting. A cost group may be a
combination of the cost type and direct/indirect characteristics (e.g., direct material, direct labor, and so on).
Another cost grouping is field versus home office costs. . Table 5 shows how different organization types tend to
group or summarize costs at a high level.
Generic Group Name By Owners By Contractors By Standards and Others

Direct costs Capital directs Directs Directs
Indirect costs Capital indirects Field indirects Field indirects
Home office Project management & administration
Engineering
Expense costs Expense (Included in details) (Included in details)
Suspense costs Suspense (Rarely used) (Rarely used)
Other costs (Rarely used) Other costs Other costs
Table 5 – Typical Cost Groups Used by Organization Types
Direct and Indirect Cost
Direct costs are those which are readily or directly attributable to or become an identifiable part of the final
product (e.g., piping labor and material). Indirect costs are all costs that cannot be readily attributed to a part of
the final product (e.g., costs for managing the project). Indirect costs are sometimes called prorates or distributives
because they often are allocated to direct cost categories to determine the total costs of a product or asset class.
Indirect costs are occasionally called overheads, but overheads are generally considered a subtype of indirect
costs. This characteristic is often combined with cost type to form a cost group (e.g., direct materials, indirect
labor, and so on). Owners and contractors commonly account for indirects differently. For instance, a contractor
may account for employee salary as a direct cost and benefits as an indirect cost, but the owner is only billed for
total labor cost (i.e., all-in rate including contractor direct and indirect labor items), which the owner considers a
direct cost.

January, 2003
Geographical Location
This covers any geographical characteristic such as country, region, state, province, plant, area, or unit. It may also
include geological characteristics such as fields or reservoir pools in the oil and gas industry or stratagraphic layers
in mining.
Work Process/Activity/Phase Characteristics
This represents the process steps or activities required to execute the work scope (e.g., review drawing, write
code, drill well, erect pipe, install door, and so on). Work classification structure (WCS), standard activity
breakdown (SAB), discipline, and activity type are other common names used. Phases are stages of project
development over time and represent summarized work process steps and activities. Tracking costs against phases
can provide a high-level view of expenditure profiles and related cost performance. This characteristic is a basic
part of activity-based costing (ABC).
Organization
Organization is primarily a responsibility characteristic. It is often combined with cost type to achieve a hybrid cost
type and eliminate extra coding requirements. Responsibility, company, department, trade, discipline,
internal/external are examples of organizational characteristics. Organization tends to be more company and
project specific than the discipline characteristic. Owner versus contractor is an organizational breakdown.
Timing
Budget approval year, fiscal year, and quarters are examples of timing characteristics. Budget approval year can be
part of the coding structure, but this is typically associated with the highest level on the project and not required
to be a part of detail coding. The availability of project funding drives the start timing of projects, and some
projects are driven by cash flows to the extent that scope and schedule are adjusted to accommodate cash
constraints throughout the life of the project.
In the process industries, facility outages, turnarounds, and shutdowns are done to perform a large volume of
maintenance work in a short period of time with the goal of minimizing production downtime. Outages often
involve both maintenance and capital investment scope of work. It is desirable to integrate the planning and
execution of maintenance and capital work as one project while capturing costs for the different types of work.
Note on Owners Versus Contractor COA Usage
The primary use of COAs by owner companies is for allocation of costs for financial budgeting and asset
accounting. Many owners contract out their detailed execution work as well as much of their front-end planning.
Therefore, they perceive less immediate need for activity-based accounts as used for project control during
execution. In many cases, owners do not have a COA that allows effective project control of their own internal
activities such as front-end engineering. Discipline and activity-based cost data are critical for owners to
understand their own long-term project cost performance and develop their own conceptual cost estimating,
benchmarking, and contract bid evaluation capabilities.
Owners have a need to categorize costs into capital or expense categories. Capital costs are further categorized
into asset classes for taxation, capital cost allowance, and fixed asset accounting depreciation. Owners also tend to
have suspense accounts which act as temporary holding places for costs that are to be cleared-out before closing
the project. Examples of suspense accounts, are contractor hold-back, project material stock, and back-charge
collection. Contractors have suspense accounts but they are handled by separate detail accounts rather than a cost
type or group.

January, 2003
Summary of Content of Account Characteristics
Table 6 categorizes account content characteristics by usage priority for each major type of organization that
provided reference code of accounts. Table 7 is an overall categorization regardless of organization type.
Type of Primary Secondary Tertiary

Organization Characteristics Characteristics Characteristics
Commodity Cost Type Area/Unit Internal/External
Product Cost Group Asset Class
Owners Cost Center Project Number System
WBS
Activity
Commodity Project Number System
Cost Type WBS Billing status
Contractors
Cost Group Activity Phase
Area/Unit
Commodity Cost Center Project Number
Cost Type Area/Unit System
Product Trade WBS
Standards
Phase
Cost Group
Activity
Table 6 – Characteristic Ranking by Organization Type
Type of Primary Secondary Tertiary

Organization Characteristics Characteristics Characteristics
Discipline/commodity Area/unit Cost center
Cost type Cost group System
Deliverable/product Work type/activity Project type
Direct/indirect Trade
All
Geographical Billing status
Organization Asset class
Project number Phase
WBS
Table 7 - Characteristic Ranking for All Organization Types Combined
Structure and Formats of Code of Accounts
Structure and format issues that should be considered when evaluating, creating, or modifying a COA include:
• relative cost of major project components;

• type of industry;
• type of organization (e.g., owner, contractor, service, professional, standards, etc.);
• type of project (e.g., research and development, design/build, software, maintenance, reorganization,
etc.);
• data processing capability and design (e.g., integration with systems for accounting/purchasing/payroll,
estimating, etc.);
• reporting requirements (e.g., project control/management, contractual, financial/tax, regulatory,
historical, etc.); and

January, 2003
• use of related structures/methods (e.g., WBS, OBS, ABC, etc.).
Coding Formats
A cost code usually contains a series or set of cost code elements. COAs for projects should include a key to the
overall coding format that explains how the various code parts fit into the structure. Figure 1 illustrates a typical
method used to illustrate this in COA documents.
Project no.
Area/unit
Prime account
Activity account
Cost type
XXXXXX – XXXX – X – XXXX – X
Figure 1 - Example of a Coding Format Definition Key
Alpha or Numeric Characters or Alpha-numeric
In the COA samples evaluated for this guideline, there are about the same number of COAs with combined alpha-
numeric codes as there are with pure numeric codes. Detail accounts tend to be numeric. Numeric codes are
constraining because each character can only represent ten breakdown categories (9 if zero is not used). More
than ten breakdowns requires the use of letters (i.e., alphas) or alpha-numeric combinations. Using only letters
allows 26 categories (English alphabet) in a single character field. A combination of both numbers and letters
would yield 36 categories. One drawback of using alpha-numeric codes but is potential confusion because of the
visual similarity of some characters. (letter I vs number 1 or letter O vs number 0). Refer to Table 8 for the number
of combinations per digit used. Alpha-numeric can reduce data processing and storage costs because increasing
the number of fields or code categories increases database size. "Intelligence" is commonly designed into the
coding to facilitate understanding learning and accuracy. For instance, ENG may stand for engineering, L for labor,
and so on.
# of Digits Numbers only Letters Only Alpha-numeric

1 10 26 36
2 100 676 1296
3 1000 17576 46656
Table 8 – Number of combinations available by type of character
Scope of Each Code (dictionary descriptions)
Each cost code item requires a clear definition of what is included and what is excluded regardless of whether the
COA uses “intelligence” within the code identifiers or not. Three or four-word descriptions or definitions will only
suffice on the simplest of projects. For example, having a concrete account for foundations without specifying
whether concrete piping, cast-in-place pipe racks, concrete paving or concrete piling are included or excluded.
Coding Structures and Hierarchies
Over 80 percent of the project COAs sampled have some form of a hierarchical coding scheme to facilitate
summarization or drill-down, depending on the level of focus required. The benefits of this are:
• scaleable to any size of project - use only what is necessary;

• breaks costs down into manageable parts;

January, 2003
• allows efficient summarization or drill-down into details;

• aids in determining the most effective level of detail to be used;
• maintains a minimum level of consistency regardless of level of detail used;
• reduces costs of training through a structured approach; and
• reduces the amount of data collation required by information systems.
Typical project COAs are designed so the costs can be summarized by commodity (from 5 to 15 categories), by cost
type (from 3 to 10 categories), or major deliverable (varies by project). Some COAs have no summarization
capability while others show 30 categories or more on the highest level of summarization. The highest level of
summarization below total project level should easily fit on one page so recipients do not have to search for
summary information. Large contractor coding formats tend to have between 10 and 15 primary categories for
direct costs and about the same for indirects.
A balance must be struck between the amount of information desired from the code and the capability of users to
understand and efficiently use the code. Extremely complex coding requirements will lead to inaccuracy because
users will look for short-cuts it will reduce acceptance from users.
Standardization
Standard or shared COAs facilitate cost management activities such as internal and external benchmarking,
estimating, bid or estimate evaluation, and general communication of cost information. For instance, estimate
accuracy largely depends on the extent and quality of historical cost data that is available, and quality is largely
determined by the clarity and compatibility of past cost coding. Owners often become frustrated because bid
submittals by various contractors may look the same at a summary level, but the content of each category can vary
widely between contractors.
Standard code of accounts provide many benefits for projects:
• reduced project team confusion: uniform/consistent basis for all project information;
• increased accuracy in actual cost charging and reporting;
• improved ability to integrate and roll-up multiple project cost and schedule information;
• reduced cost from more accurate and quicker asset capitalization and expensing;
• reduced costs of training; it is easier to learn only one coding system rather than several;
• increased efficiency and accuracy in collection and analysis of historical project cost data;
• increased estimate and schedule accuracy due to improved historical data;
• improved project reporting credibility due to clarity and stronger basis;
• improved cost/schedule control due to more accurate trending, forecasting, productivity data, etc.;
• improved auditability of cost and progress; and
• less effort required to develop a COA for each new project.
Despite the many differences in work types and products between industries, the principles, uses, content, and
structure of COAs will have many similarities in all industries. A standard code structure could achieve the goal of
common understanding of project information and provide a vehicle for integrating project cost information with
technical classification systems, document management, and CAE/CAD/CAM formats.
REFERENCES
1. A New look at Work Breakdown Structure. Robert Youker, PMI Seminar, Oct ’90.
2. Accounting: The Basis for Business Decisions. Meigs, Mosich, Johnson, Blazouske.

January, 2003
3. Applied Cost Engineering - 2nd edition, Clarke & Lorenzoni.

4. Conducting Technical and Economic Evaluations in the Process and Utility Industries. AACE Recommended
Practices, November 1990.
5. Cost and Optimization Engineering, 2nd edition, Jelen and Black.
6. AACE International, Recommended Practice No. 17R-97, Cost Estimate Classification System, Morgantown,
WV: AACE International, Latest revision.
7. MasterFormat - The Construction Specifications Institute, May 1995.
8. North American Industry Classification System (NAICS).
9. Project and Cost Engineer’s Handbook, 1979, American Association of Cost Engineers.
10. Project Management: A Systems Approach to Planning, Scheduling and Controlling, 3rd edition, Harold
Kerzner.
11. Standard Code of Accounts - The Association of Cost Engineers (UK), 1994.
12. Standard Cost Coding System - Statoil, Saga Petroleum, Norsk Hydro, Norwegian Petroleum Directorate, May
1992.
CONTRIBUTORS
Disclaimer: The content provided by the contributors to this recommended practice is their own and does not
necessarily reflect that of their employers, unless otherwise stated.
Gregory C. Sillak (Primary Contributor)

A. Larry Aaron, CCE
Dorothy J. Burton
Peter Christensen, CCE
Tony Cort
Cynthia L. Erickson
M. Steven Franklin, CCE
Paul D. Giammalvo, CCC
Ross Gibbins
Allen C. Hamilton, CCE
Robert H. Harbuck, PE CCE
Michael A. Hauser, CCC
John K. Hollmann, PE CCE
Robert G. Kaufman
Mike Lammons
Scott R. Longworth, CCC
Bruce A. Martin
Stephen E. Mueller, CCE
Alexia A. Nalewaik, CCE
Dennis J. Pestka
Bernard A. Pietlock, CCC
Stephen O. Revay, CCC
Robert E. Richie, CCC
David G. Rowley
Malcolm P. Sawle
Fred M. Seidell, III CCC
Kim A. Setzler
Greg Sotile
Marvin Woods, CCE
Kelvin Yu, CCE

January, 2003
APPENDIX A: EXISTING STANDARDS
Existing standard codes of accounts included in the sample of COAs used to develop this guideline are described
below.
The Association of Cost Engineers (UK) has produced a standard code of accounts as recently as 1994 which is
intended to cover a variety of industries. The code structure is hierarchical and minimizes the volume of accounts
required.
Norwegian petroleum industry operators have developed a coding guideline called the standard cost coding
system (SCCS) in concert with the Norwegian Petroleum Directorate (NPD). The SCCS is an extensive three-
dimensional model of hierarchical coding structures that covers resources, activity types, and physical components
for both offshore and land-based installations. These are known as code of resource (COR), standard activity
breakdown (SAB) and project breakdown structure (PBS). The NPD requires all companies operating on the
Norwegian continental shelf to report costs prior to or with submission of a development plan and also report
actual costs upon completion of each development project. There are specific statutory reporting requirements
under the jurisdiction of the NPD. The offshore oil and gas exploration and production industry has the most wide-
ranging coding requirements because of its diverse nature. This industry has land-based facilities, process facilities,
marine work architectural/buildings, and heavy civil/structural. Due to the potential environmental and safety risks
involved, it also tends to be highly regulated.
In Canada, all oil and gas exploration and producing organizations exchange project and operating cost information
using the Petroleum Accounting Society of Canada (PASC) standard. Exchanging cost information is required
because joint ventures are common practice in this industry. PASC is more of an accounting standard than a
project standard so it is not often used for cost management of medium and large EPC projects or
exploration/drilling projects.
The US Federal Energy Regulatory Commission (FERC) has specific and extensive reporting requirements that all
utilities in the USA must conform to. The focus of these standards is on asset accounting rather than on project
control.
Construction Specifications Institute’s (CSI) MasterFormat is a widely used standard among the
industrial/commercial/buildings/architectural construction and government contracting industries. Consequently,
several estimating software packages use this format as well. As the CSI name implies, it is primarily directed at
construction contracting, so engineering and other indirect costs are not primary considerations. This standard is
not very effective for process industry project control because it does not emphasize equipment, piping and
process control which are significant cost accounts in process projects.
UniFormat is another standard (though not used as a reference for this guideline) that is related to MasterFormat.
UniFormat combines the accounts into a systems orientation that is particularly useful for conceptual estimating.

January, 2003
APPENDIX B: SUBJECT RELATED TO PROJECT CODE OF ACCOUNTS
Financial General Ledger or Balance Sheet Accounts
General ledger or balance sheet accounts are used to record, classify, and summarize business financial
transactions. The use of general ledger accounts helps to determine the overall financial state of a business. A
listing of business ledger and balance sheet accounts is frequently referred to as a chart of accounts. There may be
several project account codes that correspond to a single general ledger account. One example is the asset account
called “work-in-progress,” which captures the value of projects under way (excluding land already purchased
which is typically a separate asset account). While large projects may use thousands of accounts for managing the
project itself, most of these would be rolled into the owner’s work-in-progress asset account of the balance sheet,
along with all other projects the owner has under way. After the project is complete, the costs are transferred
from the work-in-progress account to other asset accounts that represent the type of asset and are used to
determine depreciation expense. The format of accounting chart of accounts differs from a project code of
accounts in that project coding tends to be multidimensional because of the requirement to analyze cost
information in many different ways.
Project Code of Accounts General Ledger Accounts
A. Land 100 Current Assets

110 Cash
B. Civil work 120 Accounts receivable
B1 Rough grading
B2 Piling
B3 Excavation & backfill
C. Equipment 200 Fixed Assets

C1 Static Equipment 130 Land
C2 Rotating Equipment 140 Building
150 Plant & Equipment
D Piping 160 Assets under construction
D1 Underground piping (Assets under construction are
D2 Above ground piping transferred to appropriate asset account
upon completion)
E Electrical
E1 Power supply
E2 Lighting
500 Liabilities
F Buildings 510 Accounts payable
F1 Structural 520 Long-term debt
F2 Exterior shell
F3 Floors, walls, ceiling
F4 Doors & Windows
F5 Finishing
Figure 2 - Relationship Between Project Code of Accounts and General Ledger Accounts
Some organizations attempt to expand on their accounting general ledger and balance sheet accounts with
accounts for project management use or vice versa. Unfortunately, it results in a situation in which neither primary
stakeholder has a good solution. Each group finds itself with a number of seemingly irrelevant codes. Contractors
have learned that imposing financial account codes onto projects is often a hindrance to meeting project

January, 2003
objectives. With the recent arrival of enterprise-wide software programs, there is potential to improve on the
situation because they allow customers to structure each project with its own unique cost reporting requirements
while maintaining relationships with financial codes to meet accounting requirements at the same time.
Work Breakdown Structures (WBS)
A WBS can be described as a hierarchical division of work scope into manageable parts that correspond to key
deliverables, phases, or milestones. Work breakdown structures can be product-oriented (e.g., bridge section,
building foundation, software program, aircraft wing) or process-oriented (e.g., phase, step, activity), organization-
oriented (e.g., contractor, department, team), or combined product/process/organizational hierarchies. Some
organizations use WBSs only to break work down into manageable parts while others use WBSs as a replacement
for COAs. Labels or identifier codes for WBS elements are often called cost codes because it is possible to
predefine a dictionary of WBS elements in the same manner that is done for codes of accounts. Conversely, several
organizations refer to their code of accounts as a WBS because the project breakdown is incorporated into the cost
coding. Many organizations executing projects have some form of both.
When an extensive WBS exists, there is reduced need for a fully detailed code of accounts. For example, if the WBS
is broken down by discipline (e.g., civil, electrical), cost codes for discipline become redundant if costs are being
charged to the WBS.
Activity-Based Costing/Activity-Based Management (ABC/ABM)
In a manufacturing environment, ABC is akin to the cost accountting concept of process costing or job-order
costing. The intent is to understand and reduce or eliminate the cost of individual steps in a process. Overhead
costs are allocated to the direct costs of every step in the process to understand the full cost of each step.
In a project environment, ABC is a technique for estimating and cost control of work operations or activities. This
requires planning and scope definition to be at the appropriate level of detail to meet criteria for the class of
estimate being produced. For example: shutdown planning activity “blind water system” 2 pipefitters for 6 hours
(total 12 hrs), plus blind materials, plus a crane with operator for 2 hours. Fully-burdened” rates for labor,
materials, and equipment are used to estimate the “full cost” of the activity. Over the last 40 years, organizations
such as the US Army Corps of Engineers have built large estimating databases for activity types (i.e.: work-hours
per square foot of painting). Project codes of accounts must be designed to accommodate ABC if it is to be used on
the project.


010 20r-98 Project Code of Accounts

Uploaded by

Copyright:

Available Formats

010 20r-98 Project Code of Accounts

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

010 20r-98 Project Code of Accounts

Uploaded by

Copyright:

Available Formats

20R-

PROJECT CODE OF ACCOUNTS

Rev. January 27, 2003

Gregory C. Sillak (Primary Contributor) Scott R. Longworth, CCC

January 27, 2003

Table of Contents ..........................................................................................................................................................1

Copyright © AACE® International AACE® International Recommended Practices

GUIDELINE METHODOLOGY AND BACKGROUND

Industries Number Organizations Number

Copyright © AACE® International AACE® International Recommended Practices

Prevalence Group Percent Occurrence in the Sample COAs

BASIC PRINCIPLES OF CODES OF ACCOUNTS

3. A COA is a communication tool requiring structure and a dictionary like a language.

4. Standardization is always better in the long term.

Copyright © AACE® International AACE® International Recommended Practices

ATTRIBUTES OF CODES OF ACCOUNTS

Usage of Codes of Accounts

Planning Execution Reporting Close-out

Copyright © AACE® International AACE® International Recommended Practices

Accounting Geographical Physical Resource Activity Timing

Discipline and Commodity

Copyright © AACE® International AACE® International Recommended Practices

Area and Unit

Generic Group Name By Owners By Contractors By Standards and Others

Direct and Indirect Cost

Copyright © AACE® International AACE® International Recommended Practices

Work Process/Activity/Phase Characteristics

Note on Owners Versus Contractor COA Usage

Copyright © AACE® International AACE® International Recommended Practices

Summary of Content of Account Characteristics

Type of Primary Secondary Tertiary

Type of Primary Secondary Tertiary

Structure and Formats of Code of Accounts

• relative cost of major project components;

Copyright © AACE® International AACE® International Recommended Practices

• use of related structures/methods (e.g., WBS, OBS, ABC, etc.).

XXXXXX – XXXX – X – XXXX – X

Figure 1 - Example of a Coding Format Definition Key

Alpha or Numeric Characters or Alpha-numeric

# of Digits Numbers only Letters Only Alpha-numeric

Scope of Each Code (dictionary descriptions)

Coding Structures and Hierarchies

• scaleable to any size of project - use only what is necessary;

Copyright © AACE® International AACE® International Recommended Practices

• allows efficient summarization or drill-down into details;

Standard code of accounts provide many benefits for projects:

Copyright © AACE® International AACE® International Recommended Practices

3. Applied Cost Engineering - 2nd edition, Clarke & Lorenzoni.

Gregory C. Sillak (Primary Contributor)

Copyright © AACE® International AACE® International Recommended Practices

APPENDIX A: EXISTING STANDARDS

Copyright © AACE® International AACE® International Recommended Practices

APPENDIX B: SUBJECT RELATED TO PROJECT CODE OF ACCOUNTS

Financial General Ledger or Balance Sheet Accounts

Project Code of Accounts General Ledger Accounts

A. Land 100 Current Assets

C. Equipment 200 Fixed Assets

Copyright © AACE® International AACE® International Recommended Practices

Work Breakdown Structures (WBS)