Fundamentals of Project Management Part 1d

1
Fundamentals of Project Management Part 1d

• APEGGA Annual Conference
• April 24 25, 03
• Dr. George F. Jergeas PEng.
• University of Calgary

2
Schedule

• Day 1a
• Introduction
• 5-Step PM
• Planning and definition
• Day 1b
• Estimating cost and time
• Video
• Organize project team
• Selecting PM and team
• Effective teams

• Day 2 c
• Project procurement
• Bidding process
• Building sustaining project team
• Contract administration
• Day 2 d
• Schedule control
• Cost control
• Project Close-out
• Claims and disputes

3
Step 4. Control the Project
4
5-Step Project Management PLANNING
IMPLEMENTATION
CONTROL

ORGANIZE
DEFINE
PLAN
CLOSE
Identify project activities
State the Problem
Determine Personnel Needs
Define Management Style
Obtain Client Acceptance Install Deliverables
and Commissioning Document the Project Issue
Final Report Conduct Post- Implementation Audit
Identify Project Goal
Estimate time and cost
Recruit Project Manger
Establish Control Tools
List the Objectives
Prepare Status Reports Review
Project Schedule, cost, team report Issue
Change Orders
Recruit Project Team
Quality and Communication management
Determine Preliminary Resources
Organize Project Team Bidding
Identify Risks and stakeholders Success
criteria
Assign Work Packages
Write Project Proposal
Decision
Project charter WBS
Recruit Criteria
Variance Reports Final Report
Project network
Define Work packages Status Reports
Audit Reports
Project proposal Assign Work
Packages
5
Schedule Control
6
Schedule Control

• Use
• Regularly update Gantt chart
• Frequency
• Performance reports, change requests, time
  management plan, corrective action, lessons
  learned
• Control techniques e.g. meetings, 11

7
Schedule Control Steps

• To Control Schedule
• Incorporate any additional tasks and revise
  duration estimates
• Add activities that were overlooked when the
  original plan was developed
• Add new activities due to unanticipated events
• Analyse the schedule to determine which areas may
  need corrective action

8
Approaches to Schedule Control

• Decide what specific corrective actions should be
  taken
• Revisit the plan to incorporate the chosen
  corrective actions
• Recalculate the schedule to evaluate the effects
  of the planned corrective actions
• If the planned corrective actions do not result
  in an acceptable schedule, repeat the previous
  steps
• A new baseline plan is established and used as
  the benchmark for comparison
• Obtain client approval before proceeding

9
Approaches to Schedule Control

• Each time a schedule is recalculated
• Identify the critical path
• Identify any activities that have a negative
  slack
• Compare paths where slippage have occurred (Slack
  got worse)
• Apply acceleration to the paths with negative
  slack
• The most negative slack should be given top
  priority
• Focus on activities that are in progress or to be
  started in the immediate future
• Focus on activities that have long duration
  estimates

10
Acceleration

• To reduce schedule
• Apply more resources to speed up an activity
• Add more people
• Increase hours per day or increase days per week
• Assign person(s) with greater expertise or more
  experience
• Reduce the scope or eliminate the activity if
  possible
• Increase productivity through improved methods or
  technology

11
Acceleration

• Trade-off in the form of an increase in costs or
  a reduction in scope
• This could jeopardise elements of the overall
  project objective scope, budget, schedule,
  and/or quality
• There may be a dispute over who should absorb any
  increased cost to accelerate
• Bonus provision if project is completed early
• Liquidated damages
• Project meetings are a good forum for addressing
  schedule control issues

12
Cost Control
13
Cost Control System (Earned Value)

• Any cost control system should enable a project
  manager to observe current perfomance levels,
  compare them with budget levels and institute
  corrective actions to keep performance, and
  ultimately costs, within acceptable range

14
Elements of Effective Cost Control System

• Observation
• Comparison of observation with budget
• Corrective action to take if necessary
• Can also serve as
• A basis for a productivity improvement program
• A measure of productivity loss caused by adverse
  factors and changed conditions such as winter
  work, acceleration, design changes, etc.

15
Cost Control System

• Compares actual man-hours expended to earned
  hours
• Actual man-hours come from contractors daily
  time sheets
• Earned hours are calculated by multiplying the
  completed quantities during a period by estimated
  man-hours per unit quantity
• See figure following as an example

16
Labour Productivity Report
17
Budget
Money
Time Now
Actual Expenditure
Cost overrun
Earned Value
Time
Delay
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Money
Budget
Ahead of schedule
Earned Value
Making Money
Actual
Time
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Conclusion

• You can draw immediate attention to significant
  deviations from what was planned
• Indicate what corrective action is necessary and
  by whom
• Dependent on accurate reporting and correct
  allocation of hours expended

20
Step 5 Close the Project
21
5-Step Project Management PLANNING
IMPLEMENTATION
CONTROL

ORGANIZE
DEFINE
PLAN
CLOSE
Identify project activities
State the Problem
Determine Personnel Needs
Define Management Style
Obtain Client Acceptance Install Deliverables
and Commissioning Document the Project Issue
Final Report Conduct Post- Implementation Audit
Identify Project Goal
Estimate time and cost
Recruit Project Manger
Establish Control Tools
List the Objectives
Prepare Status Reports Review
Project Schedule, cost, team report Issue
Change Orders
Recruit Project Team
Quality and Communication management
Determine Preliminary Resources
Organize Project Team Bidding
Identify Risks and stakeholders Success
criteria
Assign Work Packages
Write Project Proposal
Decision
Project charter WBS
Recruit Criteria
Variance Reports Final Report
Project network
Define Work packages Status Reports
Audit Reports
Project proposal Assign Work
Packages
22
Purpose

• To ensure that the works have been completed as
  specified, and that all facilities work properly
• To provide a record of the actual execution,
  together with operating instructions
• To train staff in the use of the works

23
Purpose

• To formally close out contractual relationships
• Obtain sign off on final report to show
  contracted deliverables have been successfully
  implemented
• To formally terminate project team assignments
• To ensure adequate project documentation and
  baseline information for changes that may need to
  occur in the future
• To obtain clients acceptance of project work and
  deliverables

24
Deficiency Lists

• These are lists of required repairs or completion
  of deficient/incomplete items.
• Schedule for completion of deficiencies.
• Need a sign-off procedure.
• Need a handover process to turn project over to
  Owner in organized way.

25
Records

• During implementation, difficulties may arise
  which result in changes to the original design.
  Records of these changes will be kept during
  implementation, mainly for financial and
  engineering reasons. These must be brought
  together to make a complete record of the actual
  execution.

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As-built Drawings

• Mandatory on some projects.
• Should be provided on all projects.
• Reflect what was actually built.
• Contract documents must set a date for completion
  of as-built drawings.
• Make sure they are worked on as the project is
  built . . . do not wait for the end of the job.

27
Termination Process

• Project termination can be complicated
• A systematic approach
• Stay in close contact with the client and
  administration to ensure close down meets with
  the clients satisfaction.

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Termination Process

• Generally the termination phases include
• 1. Prepare termination logistics
• 2. Document project
• 3. Conduct post implementation audit and
  prepare and submit final report
• 4. Obtain client approval
• 5. Close operation

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Prepare Termination Logistics
PROJECT TERMINATION PHASES
Close Operation
Document The Project
Project Termination Phases
Obtain Client Approval
Conduct Post- Implementation Audit Prepare and
Submit Final Report
30
Final Report

• Memory or history of the project.
• File others can refer to, study progress and
  impediments of the project.
• Can follow many formats.
• Should answers the following questions
• Was the project goal achieved?
• Was the project work done on time?
• Was it done within budget?
• Was it done by specifications?
• Was the client satisfied with the project
  results?

31
Final Report

• Usually includes the following elements
• Overall success and performance of the project
• Organisation and administration of the project
• Techniques used to accomplish project results
• Assessment of project strengths and weaknesses
• Recommendation of project manager and team for
  continuation or extinction of project

32
Rewarding Successes and Learning From Failures

• Closing a project is a celebration of effort.
• Brings resolution to the process.
• Project manager should bring the team together to
  review their journey.
• Way of closing formal and informal relationships.
• Way to re-enforce learning that occurred.
• Final get together brings project full circle.

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Concluding Remarks

• Projects - an increasingly important way of
  working
• Project management is challenging, rewarding
• Keep it simple, use aspects of project management
  that make sense
• Dont be an Accidental Project Manager
• Its OK to make mistakeslearn from them to
  improve project management practices

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Claim and Disputes on Projects
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Agenda

• Claims
• Causes of claims
• Dealing with changes
• Claim avoidance and resolution
• Quantification workshop
• Summary

36
Is CONFLICT INEVITABLE?
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Claim is

• The assertion of a right
• A demand for something due
• Filed by Contractor or Owner
• A claim need not become a dispute
• A dispute need not develop into litigation

38
Causes of Claims

• Claims Pertaining to Quantity
• Claims Pertaining to Quality
• Claims Pertaining to Methods or Schedule of the
  Work

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Claims Pertaining to Quantity

• Change In Design
• Change In Site/subsoil Conditions
• Increased Quantities
• Extra Work
• Measurement Of Work Performed

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Claims Pertaining to Quality

• Ambiguous Specification
• Unreasonably Demanding Inspection
• Design Enhancement Via The Shop Drawing Approval
  Process
• Deficiencies

41
Claims Pertaining to Methodsor the Schedule of
the Work

• Delay
• Disruption
• Interference
• Acceleration

42
Change Order

• Is a written agreement to modify, add to, or
  alter the work from that set in the contract
  documents at the time of opening bids, provided
  that such alteration can be considered to be
  within the scope of the original project.
• It is the only legal means available to change
  the contract provisions after the award of
  contract

43
Change Order

• Could be addition to or deletion from the work
• changes in the method of execution or manner of
  work performance
• change in owner-furnished materials or facilities
• change in the contract time or order of the work
• correct errors in the plans or specifications
• direct results of contractor suggestions that are
  approved by the owner and its agents
• Changes may involve
• a price change in the contractors favor
• cash credit to the owner
• no price change at all

44
Impact Costs

• Changes in the work may well exceed the cost of
  the immediate change itself.
• Many change order forms contain an exculpatory
  (disclaimer) clause that precludes a contractor
  from recovery of impact costs.
• Parties sometimes agree on the price of a change
  in both time and money, but the contractor wants
  to reserve the right to file for impact costs.
• Contractor would be ill-advised to sign off on a
  change order without a clear reservation, if it
  expects to claim any future impact costs.
• if owner refuses to accept reservation,
  contractor should perform the changed work under
  protest without signing the change order or
  agreeing to a price

45
Reservation by contractor

• This proposal is based solely on the usual cost
  elements such as labour, material, and normal
  markups, and does not include any amount for
  changes in the sequence of work, delays,
  disruptions, rescheduling, extended overhead,
  acceleration, and/or impact cost. The right is
  expressly reserved to make claim for any and all
  of these, and related items of cost, prior to any
  final settlement of this contract.
• How would you react?

46
If a change becomes a dispute

• Estimate the the impact costs

47
Electrical And Mechanical Work
48
Basic Principles in Handling Change Orders

• No work should be included beyond the scope of
  the base contract.
• The identity of the individuals authorized to
  request and approve change orders should be
  established early.
• During the kick-off meeting, discuss the change
  order handling procedures.
• All changes in the work must be authorized in
  writing prior to the execution of any change.
• The scope of a change order must be clear, and a
  request for a change order proposal should
  contain enough information to enable the
  contractor to make a realistic estimate.

49
Basic Principles in Handling Change Orders

• The contractor should submit its proposal to
  execute a change order as soon as possible after
  receiving the request and the owners approval or
  rejection should follow as soon as possible.
• The proposal should be fair. It should recognize
  the contractors right to include
• overhead and profit percentages
• compensation for legitimate time-delay claims
• compensation for legitimate impact costs if any

50
Types of Changes

• Directed changes
• Owner directs the contractor to perform work that
  differs from that specified in the contract
• Easy to identify, mutually recognized
• Disagreements tend to center on questions of
  financial compensation and the effect of change
  on the schedule

51
Types of Changes

• Constructive Changes
• Is an informal act authorizing or directing a
  modification to the contract caused by an act or
  failure to act
• defective plans and specifications
• engineers interpretation
• higher standard of performance than specified
• improper inspection and rejection
• change in method of performance
• change in the construction sequence
• owner nondisclosure
• impossibility/impracticability of performance
• Must be claimed in writing within time specified
• Major source of disputes

52
Sample of a change order

• PROJECT TITLE
• PROJECT NO. CONTRACT NO. CONTRACT DATE
• CONTRACTOR
• The following changes are hereby made to the
  Contract Documents
• Construction of access bridge abutment No. 1
  drainage system and
• Reset two penstock bearing plates. All in
  accordance with revised DWG S-17209
• Revision 3, dated 28 August 1991.
• Justification
• Unforeseen soil conditions
• CHANGE TO CONTRACT PRICE
• Original Contract Price
• Current contract price, as adjusted by previous
  change orders
• The Contract Price due to this Change Order will
  be (increased) (decreased) by
• The new Contract Price due to this Change Order
  will be
• CHANGE TO CONTRACT TIME

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Avoidance Of Claims

• 1. Contracting Strategies
• 2. Risk Allocation
• 3. Project Administration

54
1. Contracting Strategies

• Partnering
• Design Build

55
Partnering

• Partnering
• Tries to instil co-operation amongst project
  participants
• Focuses on teamwork, communication and alignment
  of goals
• A partnering workshop is usually conducted at
  start of project
• Used extensively on US government projects with
  good results

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2. Risk Allocation

• No Time Extension
• No Damage For Delay
• Changed Soil/Soil Conditions
• Engineering Work
• Quantity Variation
• Notice Provisions

57
Disclaimer Clauses

• No damage for delay
• Examination of the work
• Examination of engineering work

58
No Damage for Delay

• ....., the contractor shall not have any claim
  for compensation for damages against the owner
  for any stoppage or delay from any cause
  whatsoever.

59
Examination of Work

• The bidder is required to investigate and
  satisfy himself of every thing and every
  condition affecting the work to be performed and
  the labour and material to be provided, and it is
  mutually agreed that submission of tender shall
  be conclusive evidence that the bidder has made
  such an investigation.

60
Examination of Engineering Work

• Any representations in the tender documents
  were furnished merely for the general information
  of bidders and were not in any way warranted or
  guaranteed by or on behalf of the Owner or the
  Owners consultants and its sub-consultants
  employees, and neither the Owner nor its
  consultants or its employees shall be liable for
  any representations, negligent or otherwise
  contained in the documents

61
Changed soil/site conditions

• Most common claims
• Innocent misrepresentation
• Duty of contractor to ascertain if practical to
  execute work
• Contractor cannot abandon the contract
• Disclaimer clause bind contractor
• Compensation within framework of contract

62
Notice Provisions

• Any claims which the contractor may have against
  the Owner shall be presented to the Engineer in
  writing not later than seven (7) days after the
  occurrence of the delay.
• Failure by the contractor to present any claim
  within the seven (7) day period shall be deemed
  to be an absolute waiver of such claim.
• Strict Compliance
• Any reasonable form of written notice is
  sufficient

63
3. Project Administration

• 3.1 Planning/Scheduling
• 3.2 Record Keeping
• 3.3 Project Monitoring

64
3.1 Planning

• What?
• When?

65
Scheduling

• Who?
• How Long?

66
Planning/Master Schedule

• Design
• Site Availability
• Purchase/Delivery of Process Equipment
• Purchase/Delivery of Owner-supplied Materials
• Interfacing of Various Packages

67
Planning/Master Schedule

• Tender Call for Various Packages
• Contract Award of Packages
• Completion of Packages
• Commissioning
• Commercial Operation

68
3.2 Record Keeping

• Do not proceed with the extra work and changes
  without written authorization
• Object to biased minutes
• Document delays and impacts
• Request appropriate extension of time and make
  clear who pays for additional cost
• Make clear who pays for acceleration
• Respond to complaints

69
Records to Keep

• Daily job reports
• Photographs and video films and digital pictures
• All correspondence
• Minutes of site job meeting
• Schedules and updates
• Change orders
• Cost/labour reports
• Diaries

70
BUILDER OR BUSINESS PERSON
71
3.3 Project Monitoring Updating Schedules

• Non-adversarial notification tool
• Illustrate and quantify cost and schedule impact
  of changes or other delays to the plan
• Watch for
• Early completion schedule
• Your commitment

72
3.3 Project Monitoring Usual Pitfalls

• Defective (Ambiguous) Specifications
• Incomplete/Unclear Drawings
• Design Enhancement Throughout The Shop Drawing
  Approval Process
• Failure To Provide Proper Instructions

73
3.3 Project Monitoring Usual Pitfalls

• Use of Inapplicable Standard Drawings
• Ineffective Expediting
• Ineffective Store Management

74
3.3 Project Monitoring What to Watch Out For

• Timely Response to Queries
• Shop Drawing Turnaround Time
• Unduly Harsh (Demanding) Inspection
• Personality Conflict
• Payment for Changes and extras
• Front-end loading

75
3.3 Project Monitoring Active Interference

• Improper Rejection of an Equally Suitable
  Alternative
• Interference with Method of Construction
• Interference with Sequence of Construction

76
3.3 Project Monitoring Constructive Acceleration

• Contractor is Entitled to Extension of Time
• Contractor Requested Extension in a Timely Manner
• Owner Refused Request

77
Claims by Owners Contractor Refuses to Sign The
Contract

• Mistake in Bid
• Cannot be Bonded
• Left Too Much on the Table

78
Claims by Owners Contractor Late in Completion

• Liquidated Damages
• General Damages

79
Obstacle to Resolution

• Owners bias
• Contractors bias
• Total cost claims

80
Owners Bias

• Loss is vastly overstated by contractor
• Underbidding
• Inadequate supply of resources
• Mismanagement
• Strike, inclement weather, default of subs...

81
Contractor Bias

• Causes of loss
• Late supply of equipment, drawings
• Changed conditions
• Acceleration
• Design changes

82
Total Cost Claims

• Contractor submits without notification a claim
  for additional costs
• Actual minus estimated
• This means
• no underbidding
• all causes owners responsibility
• damages were mitigated
• no other practical method

83
Successful Settlement

• Get the facts
• Keep good records
• Know your contract
• Preserve your rights

84
CLAIM COMPONENTS
ENTITLEMENT (CONTRACT)
CAUSE
EFFECT
LINK OF CAUSE TO EFFECT
FACTS
DAMAGE / COST INCURRED
85
HAVING AN HONEST DISPUTE IS NOT SHAMEFUL

• UNWILLINGNESS TO RESOLVE IT
• IS

86
Resolution of Disputes

• During Construction
• Post-Construction

87
During Construction

• Negotiation
• Face to face by parties themselves
• Cheapest quickest method

88
During Construction

• Joint Performance Evaluation
• Specific criteria to evaluate effectiveness
• Progress meetings
• Forum for identifying a problem
• Periodic survey
• Compare of survey responses
• identify areas of improvement and potential
  problems

89
Example Joint Evaluation
1. Communications between the
owner/contractor personnel are 2. Top
management support of partnering process
is 3. Problems, issues or concerns
are 4. Cooperation between owner
and contractor personnel is 5. Responses
to problems, issues, or concerns frequently
become
Difficult, guarded
Easy, open, up front
1 2 3 4 5
Not evident, Inconsistent
Obvious, consistent
1 2 3 4 5
Attacked promptly
1 2 3 4 5
Ignored
Cool, removed, detached,
Genuine, unreserved, complete
1 2 3 4 5
Personal issues
Treated as project problems
1 2 3 4 5
90
During Construction

• Problem Resolution Mechanism
• Lowest level with time limit
• Escalated to the next level of management
• No action is not an option

91
Problem Resolution Mechanism
92
During Construction

• Project Neutral Adjudicator
• Appoint an impartial professional to offer
  unbiased advice and decisions
• Some contracts/contracting processes based on
  this principle
• New Engineering Contract (NEC) by the UK
  Institute of Civil Engineers

93
During Construction

• Dispute Resolution Board (DRB)
• Three members
• Established at the beginning of project
• Non-binding

94
Post-Construction

• Negotiation
• Mediation
• Mini-Trial
• Arbitration

95
Mediation

• Voluntary
• Economical
• Uses impartial mediator to facilitate
  conciliation process
• Assist negotiation
• Relies on communication to achieve resolution
• Problem solving approach
• Decision is not binding
• Some contracts include mediation clauses

96
Mini-trial

• Presentation of both sides arguments before an
  advisory panel and executives of both sides. May
  include a judge
• Used to predict the likely outcome and the
  strength and weakness of the case
• Voluntary and non-binding

97
Arbitration

• Provisions for arbitration are included in most
  contracts
• May or may not require mandatory arbitration
• Most contracts stipulate that the process will be
  governed by the arbitration act

98
Arbitration

• Uses impartial arbitrator(s) as trier of facts
• 1or 3 arbitrators
• Selection of arbitrators
• Each party selects one arbitrator
• Both select a chairperson
• Decision is mostly binding
• Could be expensive

99
Litigation

• Outcome decided by the courts
• Not private
• Dirty linen is hung out!
• Very adversarial
• Not recommended!

100
Litigation

• Too adversarial
• Outcomes unpredictable
• Very expensive and lengthy
• Cost of a 100,000 litigation was shown to be
  140,000 for each

101
COST OF A 100,000 CONSTRUCTIONLITIGATION Fees
Disbursements
Plus 6,000 for Transcripts Plus
15,000 for Experts Fee _at_ 1,500 per day
102
Voltaire

• I have only been ruined twice in my life. The
  first time was when I lost a lawsuit the second,
  when I won one!

103
BE FAIR
104
Conclusions

• Pay attention to risk allocation
• Understand contractual terms
• Even unpalatable terms are enforceable
• Work within terms of contract
• Understand causes of claims
• Nip problem in the bud
• Early non-adversarial communication
• Keep negotiating
• Work with people
• Proper project management
• New approaches

105
Key Points

• TRUST is the key to effective contracting and
  project delivery
• Beware of the practical impact law of contract
• Read and understand your contract
• Apportion risks on a business basis
• Changes are inevitable, so accommodate it

106
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