Simple Change Control Method

In Figure 6.1a (pg. 189), we illustrate a simple spreadsheet-based method for logging changes to project scope. We use this illustration, both for an example of providing an audit trail of such changes, and for registering any changes to the project baseline for EVA purposes.

In this example of a telephone system installation project, we see that it is a commercial, for-profit contract for an outside client. However, the basic approach can be applied to internally funded projects, with some modification. This example also supports my philosophy that divides the contract into three cost segments.

Segment One, the Task Budget, includes all the work that has been specifically identified and planned. This task budget is the original baseline for the EVA. If we were employing a traditional CPM system for planning and control, its content would consist of all the work items included in the task budget, including schedule, effort, and cost baselines.

Wouldn't it be grand if we were so wise as to be able to identify every work item at the onset of the project and even enjoy the benefit of foreseeing the future to pre-identify all potential problems? However, we have learned from experience that such is not the case. We somehow manage to omit some items from the original plan. And, sooner or later, a few unplanned problems will pop up. So we learn to allow a contingency for these incidents.

Segment Two, therefore, is what I call Management Reserve. It is a contingency amount (in this case 15%) that has been set aside (based on experience) for items that we expect to add to the project workscope, but have not yet been defined (because we don't know what they will be).

It is called management reserve because it is a fund that is to be managed, rather than a bucket of dollars available to any passerby. Funds are moved from management reserve to task budget only when a specific cause is noted and the resulting work is planned. Funds so moved to the task budget become part of the revised EVA baseline.

Segment Three is the Project Margin or profit. It is the contract price, less the task budget and the management reserve. At the conclusion of the project, unused management reserve, if any, becomes part of the profit. By the same rule, an overrun of either the task budget or the management reserve will eat into the profit.

Figure 6.1a shows the base dollars and schedule, plus an audit trail of five approved changes. Where the changes were not chargeable to the account of the client (and were not due to performance issues) dollars were moved from the management reserve to the task budget. In each of these (changes 1 & 2) additional work was defined and added to the project plan, and the EVA baseline.

In change 3, the additions were chargeable to the client, and in change 4 the extra work was split with the client. The source of funding is immaterial to the task budgeting process. In each case, the extra work is defined and added to the baseline.

In change 5, we have a deletion from the workscope. The effect on the task budget is similar. Only this time, we identify work to be removed, and the task budget and EVA baseline are reduced.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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