Keeping a Project On Time and Within Budget

(EFFECTIVE PROJECT CONTROL)

CONTENTS

General 190

a) Project Manager Responsibility b) Establishing Project/Cost Consciousness c) Project Control Defined d) Cost Effective Program

Business or Technical Decisions 191

a) Business Decision Making b) Business Analysis/Information c) Communication Channels

Project Control Program/Services 192

a) Who Is Responsible?

b) Intermediate/Large Projects Techniques c) Small Projects Techniques d) Potential Techniques (Supplementary)

e) Estimating f) Feasibility Studies/R&D Projects Techniques

Good Scheduling Program 194

a) Technical Considerations b) Schedule Development/Operations

Project Control Specification for Major Contracts 195

Timely Cost Accounting/Reporting 196

a) Typical Program b) Project Accounting Group

Effective Trending System 197

a) The Blackout Period b) Owner Versus Contractor Trending System c) Typical Trending Situations d) The Weekly Trend Meeting

Accurate Cost and Schedule Forecasts 198

Engineering Progress/Productivity 199

a) Engineering Progress and Productivity Report b) Guide to Completion of Design and Drafting c) Engineering/Drawing Status Report

Equipment Bid Evaluation 203

Construction Progress/Productivity 203

a) Construction Manhour Report b) Construction Earned Budget Report

Contingency Control and Rundown 206

a) A "Slush Fund"

b) Rundown Routine c) Start-Up/Commissioning

Cash Flow Evaluation/Control 208

a) General/Objectives b) Documentation c) Banking Arrangements

Vendor Drawing Control 209

Subcontract Cost Control and Forecast 209

a) Summary Report b) Claims c) Unit Price Quantities Variations d) Low Bids

Key Cost Items Control/Report (Small Projects) 212 A Summary Schedule/Date List (Small Projects) 213 Effective Trending System (Small Projects) 213 Trend Curve(s) (Small Projects) 215

Manhour Rate Curves 215

a) Home Office/Engineering Curve b) Construction Labor Curve

Material Commitment Curve 220

Engineering and Construction Trend Curves 220 a) Purpose b) Home Office Cost Expenditure Curve c) Engineering Manhour Control d) Indirect Labor Manhour Curves

Project Rundown Control 226

a) Purpose b) Material c) Subcontracts d) Design Changes and Start-Up Problems Engineering Change Log 228

Field Staff Control 229

Work Unit Tracking Curves 229

a) Method b) Piping Erection

Subcontract Performance/Report 231

a) Purpose of Performance Evaluation b) Performance Evaluation Method c) Typical Report

Cost-Time-Resource (CTR) Program 233

a) Defining the Program b) Contracting Arrangement Example of CTR Program

GENERAL

a) Project Manager Responsibility

Without question, it is the project manager's responsibility to create an environment that will enable project control to be exercised. This means the project manager will seek counsel, accept sound advice, and stretch cost/schedule personnel to the extent of their capability.

On smaller projects, where the project manager is also the project control engineer, it is essential that the project manager develop project control skills and/or motivate the supporting/ service groups to provide the basic information that is needed for creative analysis and effective decision making.

b) Establishing Project/Cost Consciousness

Effective project control requires the timely evaluation of potential cost and schedule hazards and the presentation of recommended solutions to project management. This means that the cost/schedule specialist must be a skilled technician and also able to effectively communicate to management level. Sometimes, a skilled technician's performance is not adequate because he or she is a poor communicator. Technical expertise will rarely compensate for lack of communication skills. As in all staff functions, the ability to "sell" a service can be as important as the ability to perform the service. On larger projects, project teams are usually brought together from a variety of "melting pots," and the difficulty of establishing effective and appropriate communications at all levels should be underestimated. In this regard, the project manager is responsible for quickly establishing a positive working environment where the separate functions of design, procurement, construction, and project control are welded into a unified, cost-conscious group. Project managers who relegate the project control function to a reporting or accounting function are derelict in their duties.

c) Project Control Defined

Effective project control can be defined as the process that does the following:

1) Forecasts and evaluates potential hazards prior to occurrence so that preventive action can be taken;

2) Reviews trends or actual situations to analyze their impact and, if possible, proposes action to alleviate the situation;

3) Provides constant surveillance of project conditions to effectively and economically create a "no-surprise" condition, apart from "force majeure" situations.

d) Cost Effective Program

All project control programs must live up to their own principles and be Cost Effective. Many large and "sophisticated" and contractors over-control and over-report. There is always the tendency, and this is a feature of the petrochemical industry, to add additional levels of control, reporting and personnel as projects get larger or more complex. 'Wore " does not necessarily translate to "better." Project managers must carefully review their company program, project needs and eliminate all "over-control" and "over-reporting."

BUSINESS OR TECHNICAL DECISIONS

There are three important steps to effective project control of any project:

a) Business Decision-Making

The first important step is to ensure that the decisionmakers make decisions on the basis of sound business practice. In most cases, the real decisionmakers are the project manager, the engineering manager(s), the procurement/contracts manager, and the construction manager. When these decisionsmakers are not motivated by the business ethic, then cost overruns and schedule delays are common.

b) Business Analysis/Information

The second important step is that all information necessary for making good decisions be available at the right time and in the right place. All too often, the necessary information for analysis of options and alternatives is just not available or has not been developed. Much of this "information" is found in a firm technical scope of work, a quality estimate and a good schedule.

When these items are not available, then decision-making may be flawed or ineffective. The early stage of a project is often the time when many significant business decisions have to be made and, therefore, "quality information" is vital at that time. This early stage is also the time when "firm" information may not be available, as technical options are being considered, execution plans and contract strategies being developed. Creative analysis and experienced judgment is, therefore, essential to "bridge" this gap that is sometimes referred to as "The Blackout Period." "The Blackout Period" is described in more detail in this chapter. It is also extremely important that personnel having the responsibility for technical scope, estimating and schedule development be good communicators as well as technical experts.

c) Communication Channels

It is the project manager's responsibility to actively promote "project consciousness" with all involved departments and key personnel, to ensure that the project team and/or service groups work to the "agreed" project objectives and execution plan, and also to properly coordinate and liaise with the client to establish a good interface for all decision-making/approval requirements. Limits of authority, lines of communication, degrees of responsibility and approval requirements must be clearly established in the Project Coordination Procedure. Personnel motivation and leadership skills are essential in developing "project consciousness" and effective communication channels.

PROJECT CONTROL PROGRAM/ SERVICES

a) Who Is Responsible?

On intermediate/large projects, the project manager may utilize the services of departmental specialist(s) to provide project control services. On small projects, it is anticipated that the project manager will carry out some or all of the project control work. In either case, it is the responsibility of the project manager to ensure that the project is supported with appropriate cost/ scheduling methods. The following techniques are recommended for different size projects.

b) Intermediate/Large Project Techniques

The following are "essential" requirements:

2. Good scheduling program

3. Project control specification for major contracts

4. Timely cost accounting/reporting (five days after cut-off)

5. Effective trending system

6. Accurate cost and schedule forecasts

7. Engineering progress/productivity

8. Equipment bid evaluation

9. Construction progress/productivity

10. Contingency control and rundown

11. Cash flow evaluation/control

12. Vendor drawing control

13. Subcontract cost control and forecast c. Small Project Techniques

The following are "essential" requirements:

2. Key cost items control/report

3. A summary schedule/date list

4. Timely cost accounting/reporting (five days after cut-off)

5. Effective trending system

6. Trend curve(s) (overall)

d) Potential Techniques (Supplementary)

The following techniques are additional to the previous listing and should be considered on a unique or supplementary basis.

Reimbursable projects would require greater owner control than fixed-price projects.

1. Manhour rate curves (engineering and construction)

2. Material commitment curve

3. Engineering and construction trend curves (manhours and/or monetary)

4. Rundown control system (engineering and construction)

5. Engineering change log (supports trending)

6. Field staff control

7. Work unit tracking curves (engineering and construction)

8. Subcontract performance/report e) Estimating

A comprehensive estimating program is covered in Chapter 6. The emphasis in this chapter is on the use of the estimate as a scope definition and control base. To this end, the project manager should "direct" the estimate(s) development, approve the estimate(s) prior to issue and ensure the estimate(s) properly reflect:

1. Project objectives and their relative priorities

2. Design scope and design specifications

3. Maximizing of quantities and minimizing of factors (numbers of drawings and construction work units)

4. Correct evaluation of design and labor productivities

5. Project and site conditions (access/congestion, etc.)

6. Proposed execution plan/contract strategy

7. Schedule requirements (economic versus acceleration)

8. Adequate contingency evaluation.

The detail and work breakdown structure of the estimate should be developed so as to provide, as much as is possible, a clearly identifiable financial base for controlling project costs and providing the information necessary for good business decisions.

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.

Get My Free Ebook


Post a comment