The cost model is generated in near real-time as costs are updated, for all costs except for formula or parametric costs which depend on another base cost, formula result or sizing input.  This is achieved without overloading the computer server by queuing up every labor, material, travel or other direct cost estimate as it is created or changed - provided the estimate is in a workflow state which supports automatic cost regeneration. A continuous background process, running every few seconds automatically, processes the entries in this queue and updates the cost.

For technical and infrastructure sizing/cost reasons the background process regenerates about 10 costing records per second. Therefore if you do a mass update to 1,000 costs you can expect to wait for around 1.5 minutes for the cost model to be updated. More importantly, if someone else mass updated 5,000 costing records a few seconds before you, then you can expect to wait 4-5 minutes before your costs start getting updated (and 5-6 minutes until they are completed). Because of the inconvenience of waiting each time iPE does two things for you:

• You are only informed about the completion of any jobs which perform mass updates to costing records, such as cost consolidated BOM, when the cost model has been completely updated
• Your system administrator or implementation consultant can assign different priorities and system database resources to different processes and record sizes, for example processing any cost updates of fewer than 1000 records first and larger datasets on a lower priority basis. Contact Twenty5 for more information on the Job_Priority configuration settings available.

One key concept to bear in mind is that labor, material etc. estimates are entered with a single row per 'estimate' together with start and end dates which might be months or years apart. A distribution curve can be applied to distribute these costs over the timeline. The cost model on the other hand is based on a separate record for each year/month (or fiscal year/period) in which costs are incurred, also with separate records for indirect costs like fringe, overhead and G&A. When the cost model is generated:

1. Hours (for labor estimates) and quantities (for material or travel or other direct cost estimates) are spread over calendar months from start to end using either the distribution curve or based on manual labor planning by period. Separate cost model records are created for each year and month with additional calculation of quarter, fiscal year/period and the cashflow year/month i.e. when suppliers will be paid or payments will be received from customers
   • Labor costs are assumed to be paid in the same month they are incurred whereas external supplier costs (material, subcontract labor etc.) are offset based on the supplier's payment terms (your payment terms to the supplier). For example if purchased materials costs are incurred in February 2023 (always 2/15/23) and the payment terms are 20 days then the cashflow month would be March 2023 (based on 20 days offset giving a payment date of 3/7/23)
2. Indirect costs such as fringe, overhead or G&A are recalculated and stored as separate cost model records
3. Material costs, for both make/installed and buy/purchased/subcontract parts, which derive from consolidating multiple requirements in various points of the product configuration or bill of material, are split out according to the quantity assigned to each WBS from the different points in the bill of material indenture. Excess quantities for example due to fixed lot sizing or minimum lot sizes are not costed
4. Revenue is calculated both 'equivalent time and materials revenue' for labor which has a billing rate (as hours x billing rate) as well as proposal or contract line item revenues based on the pricing strategies applied to each proposal line item. Revenues are spread out or distributed over time based on the revenue recognition method applied to the proposal with the following options:
   • Cash based - revenue is recorded into the year and month of each billing milestone (with payment year/month additionally offset based on your company/customer's payment terms)
   • Accrual based - revenue is recorded in the delivery year and month of each proposal line item (or completion date ready to ship)
   • Sales based - revenue is recorded in the year/month the contract is expected to be signed
   • Project based - revenue is recorded based on the total contract value x percent complete in each month. This is in turn calculated as the total contract value x cost incurred / total cost for each month, based on the assumption that percentage complete is anticipated to climb in proportion to incurred costs
5. Both cost and revenue risks and opportunities are evaluated and their weighted cost impact (typically - cost impact x probability) is added to the cost model (for cost risks and negative cost reduction opportunities) as well as to the revenue model (for revenue opportunities and negative revenue risks or contract penalties)
   • Cost and revenue risks and opportunities are time-phased in either the 'from' date of each risk/opportunity (which is in turn inherited from the WBS assigned to the risk unless modified by the end user) or spread out evenly or using a distribution curve between the risk 'from' and 'to' dates
6. Finally source currency costs and revenues are also converted to local (cost only), company and customer currency equivalent amounts.