Change management

There are very few projects which do not change in some way during their life cycle. Equally there are very few changes which do not affect in some way either (or all) the time, cost or quality aspects of the project. For this reason it is important that all changes are recorded, evaluated and managed to ensure that the effects are appreciated by the originator of the change, and the party carrying out the change is suitably reimbursed where the change is a genuine extra to the original specification or brief.

In cases where a formal contract exists between the client and the contractor, an equally formal procedure of dealing with changes (or variations) is essential to ensure that:

1 No unnecessary changes are introduced;

2 The changes are only issued by an authorized person;

3 The changes are evaluated in terms of cost, time and performance;

4 The originator is made aware of these implications before the change is put into operation. In practice this may not always be possible if the extra work has to be carried out urgently for safety or security reasons. In such a case the evaluation and report of the effect must be produced as soon as possible;

5 The contractor is compensated for the extra costs and given extra time to complete the contract.

Unfortunately clients do not always appreciate what effect even a minor change can have on a contract. For example, a client might think that by eliminating an item of equipment such as a small pump, a few weeks into the contract would reduce the cost. He might well find, however, that the changes in the design documentation, data sheets, drawings, bid requests, etc. will actually cost more than the capital value of the pump, so that the overall cost of the project will increase! The watchwords must therefore be: is the change really necessary.

In practice as soon as a change or variation has been requested either verbally or by a change order, it must be confirmed back to the originator with a statement to the effect that the cost and time implications will be advised as soon as possible.

A Change of Contract Scope Notice must then be issued to all departments who may be affected to enable them to assess the cost, time and quality implications of the change.

A copy of such a document is shown in Figure 18.1, which should contain the following information:

• Project or contract no.

• Name of originator of change

FOSTER WHEELER POWER PRODUCTS LTD. HAMSTEAD ROAD LONDON NW1 7QN

ADVICE OF CHANCE OF CONTRACT SCOPE

DEPARTMENT: ENGINEERING No 82

To: Contract Management Department

0 Please note that the scope of the subject contract has been altered due to the change(s) detailed below. To: Contract Management Department

□ The following is a statement of the manhours and expenses incurred due to Contract Variation Notice reference dated 17 Dec. 1982

ICI BILLINGHAM 2-32-07059

Distribution:

Project Manager

Estimating Department

Management Services

Deaprtmental Manager

Manager Engineering (see note 4 below)

File

N. Smith J. Harris

By internal mail

BRIEF DESCRIPTION OF CHANGE AND EFFECT ON DEPARTMENTAL WORK

The provision of an 'Air to Igniters' control valve.

Scope of work includes purchasing and adding to drawings.

The clients preferred-specified vendor for control valves is Fisher Controls.

Manhour requirements are as follows:-Dept 1104-63 manhours (1104 Split) Dept 1102- 8 manhours Req. 60

Dept 1105-38 manhours MH. 1 63"

MANHOURS AND COSTS INCURRED IN

Department No. |

1104, 1102, 1105 1

□ Increase

□ Decrease

Engineering

1

69 1 Manhours

Design/drghtg

1

37 1 Manhours

Tech clerks

1

3 1 Manhours

TOTAL

1

109 1 Manhours

COSTS

1 £T.B.A. 1 Manhours

Remarks

Initiated by

Date

N. Smith

17.12.82

Checked by

Date

MWN

22.12.82

Approved by

Date

CHANGE NOTIFIED BY

Minutes of Meeting with client

□ Client's telex K Client's letter

□ Client's request by telephone

□ Client's Variation Order

Date of Meeting Subject of Meeting Minute Number

Date of Telex Reference Signed by

Date of Letter Reference Signed by

NOTES

1. The 'change notified by' section need not be completed if form is used to advise manhours and costs only.

2. This form to be completed IMMEDIATELY ON RECIEPT of definite instructions.

3. Manhours MUST BE REALISTIC. Make FULL ALLOWANCE for all additional and re-cycle work. Take into account 'chain reaction' affect throughout department.

4. Submit copy of this form to Manager Engineering if manhours involved exceed 250.

SGP 3641

B. Francis

Figure 18.1 Change of contract scope form

• Method of transmission (letter, fax, telephone e-mail, etc.)

• Description of change

• Date of receipt of change order or instruction.

When all the affected departments have inserted their cost and time estimates, the form is sent to the originator for permission to proceed or for advice of the implications if the work has had to be started before the form could be completed. The method of handling variations will probably have been set out in the contract documentation but it is important to follow the agreed procedures, especially if there are time limitations for submitting the claims at a later stage.

As soon as a change has been agreed, the cost and time variations must be added to the budget and programme respectively to give the revised target values against which costs and progress will be monitored. However, while all variations have to be recorded and processed in the same way, the project budget can only be changed (increased or decreased) when the variation has been requested by the client. When the change was generated internally, as for example, by one of the design departments due to a discovered error, omission or necessary improvement, it is not possible to increase the budget (and hence the price) unless the client has agreed to this. The extra cost must clearly still be recorded and monitored, but will only appear as an increase (or decrease) in the actual cost column of the cost report. The result will be a reduction or increase of the profit, depending on whether the change required more or fewer resources.

The accurate and timely recording and managing of changes could make the difference between a project making a profit or losing money.

Change management must not be confused with management of change, which is the art of changing the culture or systems of an organization and managing the human reactions. Such a change can have far-reaching repercussions on the lives and attitudes of all the members of the organization, from the board level to the operatives on the shop floor. The way such changes are handled and the psychological approaches used to minimize stress and resistance are outside the scope of this book.

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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