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 AACE® International Recommended Practice No. 20R-98

PROJECT CODE OF ACCOUNTS

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TCM Framework: 7.1 – Project Scope and Execution Strategy Development
7.2 – Schedule and Development
7.3 – Cost Estimating and Budgeting
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Note: As AACE International Recommended Practices evolve over time, please refer to www.aacei.org for the latest
revisions.
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Contributors:
Disclaimer: The opinions expressed by the authors and contributors to this recommended practice
are their own and do not necessarily reflect those of their employers, unless otherwise stated.

Gregory C. Sillak, (Author) 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

 ®
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

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

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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
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breakdown structures, resource breakdown structures and activity breakdown structures.

PURPOSE

The purpose of this guideline is to establish a common understanding of the principles and characteristics of
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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.
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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

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20R-98: Project Code of Accounts 2 of 14

January, 2003

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

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28 28
Table 1 – Number of COAs Examined by Industry and Source
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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.
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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
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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

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20R-98: Project Code of Accounts 3 of 14

January, 2003

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.

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 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
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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.
 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.
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 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.
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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;

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