How can technology helps financial institutions in monitoring and evaluation their projects’ finance?

Financial institutions who are involved in providing finance for engineering and construction projects are now required more than ever to predict and report on the likelihood of loan default before it actually occurs. Project management standards have identified the best practices that must adopted to ensure robust cost variance at completion reporting. Those best practices are crucial to enforce transparency, accountability and real-time monitoring and evaluation of projects’ financial key performance indicators and metrics.

Project Management Information System (PMIS) similar to PMWeb provides those financial institutions as well as the contractors with an integrated ready-to-use platform to implement those best practices and achieve the desired outcome. All those forms allow having all supportive documents attached to the record to provide the complete details of each transaction. Those supportive documents will be uploaded and stored in the right folder or subfolder of PMWeb document management repository. In addition, a workflow can be created to formalize the steps for submitting, reviewing and approving each transaction. The trust-worthy data captured in those transactions will provide the organization with information needed to have the insight to make better and faster informed decisions.

Defining the Project Performance Budget

Regardless of your project size, type or location, every project represents an investment that was based on estimating the cost for delivering the project’s scope of work. The Work Breakdown Structure (WBS) is the technique used to define the project scope of work and determine what is included and what is excluded from each work package. This will enable the organization to estimate the labor and non-labor resources needed, materials to be procured and scope of work to be subcontracted to deliver the project. Accordingly, it makes sense that reporting the project’s financial performance should be aligned with the WBS levels for which they will become the project’s cost breakdown structure.

Assumptions for the unknown scope of works and events to be identified and assessed. The project risk register will be used to capture likelihood and impact of those assumptions and identify the most appropriate response actions to treat them. This could result in increasing the cost estimate to accommodate for additional management effort, replacing vendors and suppliers, subcontracting more project scope and allowing funds for contingency and management reserve.

The cost estimate will become the basis for establishing the project budget where additional cost might be added to cover the cost of project finance, home office overhead and profit. The project performance budget will become the total investment amount that the organization wants to earn revenue as well as spend on the project to achieve the desired profit or return on investment.

The budget planned spending will detail the spending that organization anticipates to have during the project life cycle. This requires aligning the budget with the project’s integrated schedule by associating each budget line item with the relevant project schedule activity. The spending plan for each financial period covered by the activity could be front loaded, back loaded, linear, bell shaped or any other curve format that is aligned on how actually the budget will be sent.

Managing the Revenue Contract

When the contractor submits his bid proposal, the contractor strategy for presenting his price might vary from how the budget was detailed, although the total of both would remain the same. Some contractors might front load the proposal to secure additional funds to finance the project. Other contractors might lower the price of project items that could be deleted or reduced while increasing the price of items that could be increased. With the absence of “unbalanced bid” clause, many contractors might opt to do this. Of course, the alerting part of having unbalanced bids that reporting project’s actual profit and loss will not be true. Unbalanced bids could result in having part of the project scope delivered at high profit while other scope of work at loss.

During the project’s execution, changes to the project scope will usually occur. The contractor needs to capture all pending, approved and disputed changes along with all supportive documentation. For those disputed changes, the contractor will usually submit a claim requesting for the financial, time extension and prolongation costs associated with those changes.

On monthly basis, the contractor will submit the monthly project invoice for completed works and material on site. Today, most engineering and construction projects use the activity percent complete of cost-loaded project schedule to determine the amount to be invoiced at the end of each progress period. Retention of completed works and material on site will adjust the amount that the contractor will be entitled to have.

There is a growing trend to have pre-agreed values to calculate the percent complete for the progressed project schedule activities. This will expedite the process on agreeing on what percent complete each activity should have based on tangible achievements or deliverables.

The actual payment of the approved progress invoice, or account receivable, needs to be captured and how it was paid. Some project’s agreements require that the approved progress invoice be of a minimum value to be paid otherwise it will be delayed for the following month.

Managing the Project Cost

The same approved project budget will be used to place the actual commitments against the project. Those could be subcontract agreements, material supplies as well as internal company commitments such as plant, project management, overhead contribution. This will provide the financial institution as well as the contractor a better understanding of the actual costs sources that the project will encounter. The selection and award of subcontracts and material supplies need to be competitive and compliant with the project scope of work and specifications. This will require technical and commercial evaluation of received bids before selecting the successful bidder.

The different commitment agreements will be detailed to the same cost breakdown structure levels used in the project performance budget and revenue contract. The commitment agreements could be in different currency than the currency in the project budget and revenue contract. This is very true when it comes to imported equipment and material supplies.

Similar to the performance budget and revenue contract, the anticipated invoicing for the scope of work needs to be captured to identify the payment obligations, or cash out, on the contractor. Payments can be made in full the approved progress invoice or partial.

Changes to the project could happen for many reasons and the contractor needs to implement a proactive policy to capture all potential changes as soon as a change event get identified by a subcontractor, supplier or even the contractor’s own team. This helps the contractor to be fully aware of all events and incidents that could increase the project cost.

If after reviewing the submitted potential change request it’s found that the change is valid and could have an impact on the project approved budget and/or delivery schedule, a change management will be generated from the submitted potential change request. The change management will capture the cost and time impact of the change on both, the approved project budget and cost commitment.

This will also get the contractor to submit his request for a change order based on the additional scope of work and the impact it has on the project. This will result in starting the change process for which a change order will be issued to the contractor as detailed earlier. Usually, only when the contractor’s change order is approved by the project owner, the contractor will issue a change order for relevant subcontractor or supplier.

This would also affect the approved project budget where budget requests will be used to increase or decrease the project budget depending on the nature of the change order as well as shift funds from one cost center to another. The most common budget shift is when funds get shifted from the contingency cost center to another cost center to cove for the cost of accepted project risks that were already considered in the risk mitigation plan.

On monthly basis, the subcontractors, supplier and contractor’s project management team and other business units involved in the project delivery will submit the monthly project invoice for completed works and material on site. It is highly recommended to use the same percent complete used in the revenue contract unless there are pre-agreed percentages to evaluate the actual cost of work in place. Retention of completed works and material on site will adjust the amount that the subcontractors and suppliers will be entitled to have.

Should the actual cost for delivering the project is not fully captured in the commitments, PMWeb allows capturing actual cost from timesheets and miscellaneous invoice. The timesheet module allows capturing the labor and non-labor resource hours against each cost breakdown structure as well as project schedule activity. The captured hours can be based on normal working hours, overtime, weekend and other type of hours. The rate for each hour type will vary depending on the organization’s approach in calculating premium hours.

The miscellaneous invoices can be used to capture cost of services, material and other items that are not part of a commitment contract. The progress invoices can have multi-currency depending on what is being purchased.

The actual payment of the approved progress invoice, or account payable, needs to be captured with details on when and how it was paid.

Reporting the Project’s Profit and Loss

The cost worksheet provides a tabular presentation of the project’s profit and lost against the different cost breakdown structure levels or cost centers. The cost worksheet will detail the current project performance budget which includes all approved budget requests and adjustments as well as the projected budget (BAC) which adds all pending change requests to the current budget. The earned value (EV) for each cost center will be calculated by multiplying revised budget with the approved percent complete for the cost center as calculated by the updated project schedule. The cost worksheet will also show the commitment cost against each cost center and approved changes to detail the revised commitment and all pending and disputed changes to details the projected cost at completion for each cost center (EAC). The actual cost (AC) incurred against each cost center will be also displayed. Should the contractor desire to view the actual revenue earned, this can be done too.

The project’s profit and loss as of the report date or cost variance (CV), will be the difference the between the earned value and actual cost. The cost performance index (CPI) will detail the project’s efficiency in maintaining the project budget. The estimated cost to complete (ETC) the balance of the project’s scope of work will be the Estimate At Completion (EAC) minus the Actual Cost (AC) to date. To determine whether the project will be at profit or loss when it is completed, the variance at completion (VAC) will be the difference between the projected budget at completion (BAC) and the Estimate at Completion (EAC). Those metrics are critical for assessing if the project will be completed within the approved budget thus achieving the desired profit.

Reporting the Project’s Earning Performance

The cost loaded integrated project schedule will be used to defined the planned revenue earning which was established when the baseline schedule was approved by the project owner and the actual revenue earned will indicate how good the contractor is in achieving the scheduled scope of work (SV). Along with the total float (TF), the schedule variance (SV) and schedule performance index (SPI) provide three important metrics to report on the project’s ability to achieve timely completion.

Conclusion

Financial institutions who are involved in providing finance for engineering and construction projects are now required more than ever to predict and report on the likelihood of loan default before it actually occurs. Using proven project management best practices along with the technology that supports implementing those practices provide financial institutions with a robust cost variance at completion monitoring and evaluation solution. This will ensure transparency, accountability and real-time reporting of the project’s financial performance status and health to provide the insight for better and faster informed decisions on how to reduce the risks of loan default.

Work Smart Not Hard When Monitoring and Evaluating Your Projects Performance

Regardless of the project size or type an organization needs to deliver, reporting the project’s performance and status is a must requirement. The different project stakeholders might have different requirements for monitoring and evaluating how the project is performing but would usually cover aspects that relate to schedule, cost, quality, risk, issues among others. The frequency of performance reporting could vary from weekly or monthly and it could be limited to a specific project, program or portfolio of projects.

Most of those organizations, and in particular those involved in delivering engineering and construction projects, continue to use MS XLS as the platform to provide this performance reporting. MS XLS is used to manually extract the performance data found in the forms used to implement the different project management processes which will become the data source for those reports and dashboards. The performance report is then printed or saved and manually shared with the stakeholders. For those who use data visualization tools like MS Power BI, Qlik, Tableau among others, they will import the MS XLS tables to create, present and share the project’s performance report with the stakeholders.

Nevertheless, the effort spent and time needed to capture, analyze and verify the projects’ performance data needed for those performance reports could be massive. It is estimated that it will take as long as 6 weeks and 500 man-hours to produce the performance report per project. At least, 65% of those spent hours are usually spent by project executives who need to review, analyze, verify and approve the reported performance data. Assuming an average cost of US$ 50 per man-hour, this could cost US$ 300,000 per project per annum. For an organization with a portfolio of 5 ongoing projects, this could jump to as high as US$ 1.5 million per annum.

In addition to this high cost, there is the cost of wasted benefits when using MS XLS to capture projects’ performance data. For example, in addition to the high cost of fraud risk due to the lack of transparency and accountability in captured performance data, there is the high cost of wasted benefits of not gaining the knowledge from storing and analyzing projects’ historical data. For example, if the organization can capture the details of all request for information (RFI) issued across all of their projects for the current and past years, they can analyze the data to identify the most common reasons for RFIs and how to avoid them, respond to them in a better way or use them to generate change orders to adjust the project price and delivery period. The same could apply to the many other data content generated during the project delivery life cycle stages.

How Can Technology Help Us to Work Smarter Not Harder?

Project Management Information System (PMIS) like PMWeb helps organizations to formalize the capturing of projects’ performance data. PMWeb comes ready with most of the everyday forms needed to manage a project including but not limited to request for information, meeting minutes, daily reports, submittals, transmittals, safety incidents, budget, contracts, change orders, progress invoices among many others.

In addition, PMWeb custom form builder allows creating unlimited number of new forms that PMWeb might not have by default. The custom form builder can be used to create non-compliance report, request for inspections, audit reports, permits, executive narrative report among many others. Those input forms can be in English or any other language, Latin or Non-Latin.

Since these forms would have repeated type of data that should be standardized across all forms within a project or even across the complete organization’s portfolio of projects. PMWeb allows creating pre-defined lists of those values not only to ensure consistency and correctness of captured data but also to speed adding this data by the different project team members.

PMWeb security rules will be used to enforce accountability on captured data by setting the right access rights for the different project entities and team members for using those forms. This could include access rights for each form at each project as well as access rights for the fields within the form itself. PMWeb audit trail captures the details of all those users who have accessed PMWeb along with the details of what actions they made and when.

PMWeb customizable online help allows the organization to access an extensive help content that explains how to use each form. When the user clicks on “?”, PMWeb will open the online help manual to provide the needed knowledge. This editable online help can be used by the organization to customize the help manual to align the content with the project management procedures adopted by the organization.

PMWeb document management repository allows the organization to upload the different documents such as drawings, pictures, videos, manuals and others that are usually attached to the above project communication. Folders and subfolders are created to match the project’s filing system structure as well as to limit access for each folder. Document attributes and redline comments can be added to each uploaded document.

To enforce transparency in submitting, reviewing and approving the captured data, PMWeb visual workflow will be used to map those steps for each form. The visual workflow can include branches and conditions to match the level of authorities assigned to each project team member as it relate to reviewing and approving or rejecting project management processes.

All of this captured data will be stored in PMWeb database to provide the real-time content needed for the different performance and status reports needed to monitor and evaluate the projects performance. Tabular and graphical reports as well as dashboards can be designed in the desired form and format. Those web-enabled reports and dashboards will become available for the intended stakeholders anywhere, anytime using any device.

Nevertheless, this is not the only benefit those stakeholders will get but they will be able to drilldown for additional details on the reported performance information all the way to the input form that was the basis for the reported information. This not helps in building trust on what is being reported but also provides the details and links to other records that could be related to the reported information. Of course, filters can be added to those reports to limit the selection of the data being reported on. This provides decision makes with the insight to make better and faster informed decisions.

For those organizations who want to continue monitoring and evaluating projects performance data using data visualization tools like MS Power BI, Qlik, Tableau among others, all those applications can extract PMWeb performance data as long as they have the right access rights for the database. The PMWeb data can be associated with other data sources like those of ERP, accounting, CRM, human resources among others to blend and provide business-wide performance reporting.

Conclusion

Sooner or later, organizations who are involved in delivering projects, and in particular engineering and construction projects need to adopt technology to improve their business bottom line and sustain their business growth if not existence. PMIS technology like PMWeb provides organizations with the proven technology to work smart rather than hard which will enable them to get more from their resources. The high benefits from increased transparency, accountability, real-time single version of the truth reporting and the insight to make better and faster informed decisions will offset the investment needed to adopt PMIS technology. Organizations who have adopted PMIS technology are reporting a return on investment (ROI) in excess of 300%.

So in conclusion, organizations can decide if they want to continue working hard or start working smart and get more out of the resources, financial and manpower, that they have.

How Can Technology Support Your Projects’ ISO Compliance Audit?

With the growing trend among capital project owners in using ISO to enforce the adoption of quality, HSE and Sustainability best practices on their projects’ delivery, checklists tend to be the preferred method to perform the compliance audit. The audit checklist, which will be unique for each ISO practice, is used to assess the organization’s compliance with the ISO quality management systems (QMS) and how its processes are implemented and maintained.

Once all the audit data has been gathered accordingly, auditor will need to analyze and determine the data, to be classified in which category of audit finding. In general, there are 4 types of Audit Findings; Non-conformance, Observation, Opportunity For Improvement (OFI) and Compliant. The Non-conformance is when a breakdown, or partial breakdown of a process in the Quality Management System (QMS) which requires Corrective Action Request to document action taken. Whereas, Observation is when a minor deviation from an otherwise well-implemented process. Opportunity for Improvement (OFI) is a finding based on facts and data that shows a potential improvement opportunity.

The audit checklist ensures the audit is conducted systematically and consistently, provides a repository for notes collected during the audit process, ensures uniformity in the performance of different auditors and provides reference to objective evidence.

How Can Technology Support Your Projects’ ISO Compliance Audit?

Using a Project Management Information System (PMIS) like PMWeb will help in automate the ISO audit process and use the data captured in the audit process to analyze non-compliance trends and report on the overall performance of the audit process. The PMWeb custom form builder will be used to create the ISO audit checklist. There could be different audit checklists depending on the ISO standard being audited. For those involved in capital projects delivery, the most common ISO standards used are the ISO 9001 for quality management system, ISO 14001 for environmental management system and 18001 for occupational health and safety assessment. In addition, some organizations might also consider having audit checklist for ISO 10006 for quality management in projects. Those audit checklists can be created in English or any other language used by the organization like for the example those shown below which were done in Arabic.

The audit check list can be designed to capture the data needed to perform the ISO audit which will include the clause No., question No., audit question, audit finding and audit evidence. In addition, it can include comments and examples, details of the opportunities for improvement and the reference to the PMWeb module used to fulfil the audit requirement like request for inspection, daily report, etc.

The documents used to support the audit evidence will be uploaded into PMWeb document management repository. Folders and subfolders will be created to match the ISO clauses and audit questions for each ISO standard. This will help the organization in storing those audit evident documents for all projects being audited. Those uploaded documents will then be attached to the relevant ISO audit checklist.

Should there be a need to have a formal process for submitting the audit checklist for review and approval, a workflow can be created for audit checklist. The workflow could include conditions to determine who should be involved in the review and approval process depending on the ISO standard, project being audited among others.

Reporting The ISO Compliance Audit

All data captured in the audit process for all ISO standards, for all audit periods and for all projects will be available in a single real-time log. Filters can be added to the report to select which projects to display, which periods to report on, what audit actions results to be selected and which ISO standard to be included. The layout of the report can be designed in any desired format.

The same real-time data can be used to create the ISO audit dashboard for each project. The dashboard will report on the ISO standards being audited, for example ISO 9001, 14001 and 18001. The dashboard will include a donut chart to detail how many audit items were in compliance, had opportunities for improvement, reported as observation (sometimes also considered as minor non-compliance) and those reported as non-compliance. The dashboard also reports on the non-compliance trend for the past three periods where it includes both non-compliance and observations. The dashboard also details the percentage of audit findings per each clause group of the relevant ISO standard.

For those executives who are interested in having an overall view of the ISO audit across the complete projects portfolio being delivered by their organization, the projects audit dashboard will be used to provide this insight. The dashboard has similar visuals of the specific project dashboard but instead of reporting on the data of a specific project it consolidates the data from all audited projects. In addition, it provides an overall audit status of each project by showing the percentage of audit findings for that specific project.

Of course, the audit data can be also used to create more specific analysis reports like the report shown below which details the non-compliance and observation audit findings for each audit item for each project. The report consolidates the data from all audited projects and separates the data for each ISO standard.

Conclusion

With the growing trend among capital project owners in using ISO to enforce the adoption of quality, HSE and Sustainability best practices on their projects’ delivery, checklists tend to be the preferred method to perform the compliance audit. PMWeb PMIS can be used to automate and improve the audit checklist process as well as make the real-time data captured in the audit available for the organization in the desired form and format. Reports and dashboards are created to monitor and evaluate ISO compliance as well as analyze non-compliance trends.

How Can Technology Support Your Construction Project Quality Management Plan Implementation?

Regardless of your project type or size, projects need to be completed on time, within the approved budget while meeting the required quality standards. Similar to the other project management plans, the Project Quality Management Plan (PQMP) documents the necessary information required to effectively manage project quality during the construction stage. It defines the project’s quality policies, procedures, criteria for and areas of application, and roles, responsibilities and authorities.

The successful implementation of the PQMP will enable the project delivery team to achieve the following objectives: Minimize construction defects from occurring, Ensure work conforms to contract documents and functional performance requirements, Select quality-oriented subcontractors and suppliers of all tiers, Ensure that workmanship required by contract documents is performed by qualified craftsmen from every trade, Perform contractually required inspections and tests in a timely manner, Perform relevant inspections/observations as defined by the approved construction inspection checklists, Minimize rework during the course of construction, Strive for a zero-item completion list at substantial completion and Minimize final punch list.

How Can Technology Support Your Construction Project Quality Management Plan Implementation?

Project Management Information Systems (PMIS) like PMWeb are specifically designed to manage the complete project life cycle of capital projects. This will cover managing the project schedule, budget, procurement, commitments, communications, risks, HSE, stakeholders, quality among other project management processes. PMWeb provides an integrated web-enabled platform to automate the processes of quality assurance and quality control as stated in the PQMP as well as provide real-time single version of truth monitoring and evaluation of the project’s QA/QC performance.

QA/QC Organization Chart

The project’s QA/QC organization chart created in PMWeb organization chart module will be used to reflect the requirements presented in the project’s execution plan (PEP). The organization of the project staff, including QA/QC staff, Construction Quality Manager (CQM) will provide QC oversight and guidance throughout the duration of the project.

The needed resources as per the QA/QC organization chart will be booked to ensure their availability as per the project’s quality management requirements. PMWeb resources requirement module will be used to identify and book the required resources for the needed duration and level of effort. The booking of resources can be detailed and mapped to the QA/QC activities identified in the project schedule.

This will help the organization to assess the efficiency of the QA/QC resources by comparing the actual hours recorded using PMWeb timesheet module and the planned hours as per the resource requirements template. The timesheet module allows capturing the details of actual hours whether they were spent as regular, overtime or weekend pay. PMWeb timesheet module allows capturing the hours for the complete QA/QC team in a single timesheet if needed. Of course, the timesheet also allows capturing the details of non-labor resources in addition to the labor resource.

QA/QC Roles and Responsibilities

The Project Quality Management Plan should include clear job description detailing roles, responsibilities, authorities and performance criteria assigned to each QA/QC resource. PMWeb custom form builder will be used to capture the job description details for each QA/QC resource position. For example, the Construction Quality Manager (CQM) will be responsible for Overall implementation of the PQMP, Review and approval of daily reports, Ensure proper scheduling of preparatory and initial phase inspections, Attending preparatory and initial phase inspections, Prevent, stop, or correct QC deficiencies, defective work, or noncompliance, Exercise “stop work” authority when required to prevent performance inconsistent with contract documents, Investigate research, define, and isolate quality problems and participate in their resolution, Initiate and maintain QC records, review procedures, and monitor documentation for completeness, accuracy, and compliance with contract requirements, Monitor and update the submittal register and review submittals, Ensure that as‐built drawings are being accurately maintained and Staffing, approval, and assignment of additional discipline specific inspectors as needed to ensure effective implementation of this PQMP.

In addition, the job description forms could include a scoring field for each identified task to appraise the resource performance in achieving their assigned tasks. This data can be then used to report the performance of the QA/QC team and to identify actions and measures that need to be taken to ensure the proper performance of the assigned team.

Project Directory

The PQMP should have detailed list of all organizations and individuals who have a role in the project to achieve the project’s quality assurance and quality control requirements. The list should include the contact details for each individual which are captured in PMWeb companies’ directory.

PMWeb pre-qualification module will be used to enforce a formal process for selecting quality-oriented subcontractors and suppliers who might be involved in the project delivery. The pre-qualification template can be designed to capture the needed information for each entity that might be involved in the delivering the project’s scope of work. In addition, it includes a scoring matrix that can be defined by the QA/QC team to ensure that subcontractors and suppliers are objectively assessed against the same measures that matter most to the organization as well as the project.

Quality Control Meetings

Weekly Quality Control (QC) meetings are a must on every construction project. As a minimum, the following shall be accomplished at each QC meeting:

  • Rework items (Identified since the last meeting and Completed since the last meeting)
  • Submittal status (Submittals reviewed since the last meeting and Submittals expected within the next 2‐week window)
  • Identify any testing required in support of or confirming remedial activities
  • Review status of any offsite activities
  • Identify any special documentation requirements for either production or QC
  • Address and resolve any production or QC problems
  • Identify any production or QC procedures that may be less effective than anticipated and may require revising the project delivery or contingency plan and annotate any recommendations
  • Identify any activities or items that may require revising the PQMP and annotate any recommendations

Daily Reports

Daily Report is one of the many formal communications that a Contractor is obliged to submit on daily basis. The daily report is used to record details of the completed works and resources, labor and non-labor, employed on the construction site. The daily report will detail the weather status among others. In addition, the daily report will also report on quality control activities including field calibrations. PMWeb Daily Report module will be used to capture those details along with the progress photographs of progressed works or important incidents.

Submittal Review and Approval

Submittals are the contract documents that require the contractor to prepare, review, approve and submit to the Consultant for review, approval, or other appropriate action. They demonstrate the contractor’s understanding of the contract documents and how the contractor intends to execute the project requirements by Identifying products selected from acceptable products in specifications, Detailing how items constructed and interface with adjacent construction, Identifying optional characteristics, Scheduling types of products by location, Describing physical and performance criteria and Certifying that products meet or exceed specified requirements.

PMWeb submittal module allows capturing the details of all needed submittals including the relevant specification section, title, supplier, subcontractor WBS level, project schedule activity ID, lead time to procure among others. In addition, PMWeb allows creating unlimited number of attributes with list of values that can be used to better describe the submittal and use to report and analyze the performance of the submittal process.

Request for Inspection

During construction of works in a Project, the Contractor needs to constantly inform the Engineer about his work plan. This Information is passed in the form of ‘Request for Inspection’ (RFI). Usually, the project specifications detail the inspection tests needed for each section. Therefore, it is highly recommended to have a detailed inspection checklist defined for each specification section. This will help in building consensus among all parties involved in the inspection process whether this was at a single project level or across all projects managed by the organization. PMWeb custom form builder will be used to create the RFI for all specification sections.

Non-Conformance Reports (NCR)

Non-Conformance Reports (NCR) is a construction related document that keeps track of deviation and work that fails to meet standards and specifications. The following are the most common situations that will require the issuance of an NCR: Work that was not built as indicated in the approved Issued for Construction Drawings, Work that fails to meet specified tolerances as established in the project specifications, Work that is being performed using non-approved methods or standards, When the testing and inspection plan is not followed as agreed, When testing results demonstrate that the product does not meet established and approved standards, When a material is used and has not been approved as a substitute (equal or similar), When design is not accurate and does not represent actual field conditions and When the approved procedure was not followed, and quality defects have been identified by the project team. (https://www.thebalance.com/non-conformance-report-how-to-report-a-quality-issue-844987). PMWeb custom form builder will be used to design the NCR in the desired form and format to capture the needed information.

Punch List Inspection

Near completion of all work or any increment thereof, the CQM will conduct an inspection of the work and develop a “punch list” of items that do not conform to the approved figures and specifications. This “punch list” will include the estimated date by which the deficiencies will be corrected. In addition, the CQM can assess the amount of funds to be withheld from the Contractor’s progress invoice until those deficiencies are corrected and accepted. The CQM will make a second inspection to ascertain all deficiencies have been corrected.

Documents Filing

Documents generated by the QA/QC processes must be maintained in an orderly fashion. PMWeb document management repository will be used to store all documents that were attached to the different QA/QC processes. These should be arranged by category to include Photographs and videos, Specifications, Contract, Shop-Drawings and As-Built Drawings, Test Results and Certificates, Warranties and Guarantees, Operations and Maintenance Manuals, among others. All of those documents will be available to be linked to one or many PMWeb QA/QC records and other PMWeb records like change orders, Request for Information, Transmittal among many others.

Automating QA/QC Processes

The Project Quality Management Plan (PQMP) should include a responsibility assignment matrix (RAM) the details the role for each project entity and team member in implementing the processes included in the PQMP. The RAM defines the project management processes and identifies the team member responsible for their performance, review, comments and who to be informed. The RAM helps to clearly define the responsibilities of the project Team Members, lines of authority and flow of approvals and information among the Team Members.

The RAM or RACI defines the Responsible individual to do the work to achieve the task, Accountable (also Approver) is the one ultimately answerable for the correct and thorough completion of the deliverable or task. In other words, an accountable must sign off (approve) work that Responsible provides. There must be only one accountable specified for each task or deliverable. The Consulted are those team members whose opinions are sought while Informed are those who are kept up-to-date on progress, often only on completion of the task or deliverable.

Using PMWeb workflow module, RACI values for each process will be translated into a workflow that details the steps for the project team member responsible for initiating the process, the project team member accountable for reviewing and approving the process, the project team members who might need to be consulted by the team member accountable for reviewing and approving the process, and the project team members who need to be informed on the process status and details.

QA/QC Management Performance Reporting

The data captured in the different QA/QC processes will become the trust-worthy source of information to provide real-time single version of the truth on project’s performance from the quality perspective. Tabular logs for the different processes including submittals, request for inspections, non-conformance reports, punch lists among others can be produced in the desired form and format.

In addition, graphical reports and dashboards can be produced to provide the insight to make better and faster informed QA/QC related decisions. The project quality status report displayed below provides the QA/QC team as well as other project team members with real-time monitoring and evaluation of Non-Conformance Reports, Request for Inspections and Punch Lists that could be assigned to different project’s milestones.

Conclusion

Regardless of your project type or size, projects need to be completed on time, within the approved budget while meeting the required quality standards. Similar to the other project management plans, the Project Quality Management Plan (PQMP) documents the necessary information required to effectively manage project quality during the construction stage. PMWeb PMIS provides a single web-enabled platform to automate the PQMP processes to capture real-time trust worthy data to provide the insight to make better and faster informed QA/QC related decisions.

How to Maximize the Value of Meeting Minutes During the Project Construction Stage?

You will rarely find any construction project, regardless of its size, type, location or duration that does not require having meetings between the project parties. Meetings are scheduled gatherings of individuals for stated purpose, to discuss and act upon matters of common interest. Meetings serve valuable purpose in the project to effectively communicate information, exchange ideas, render decisions, resolve issues, coordinate work, prevent problems among others. It is estimated that project management team members spend more than 50% of their time in participating in meetings.

What Meetings Are Common to Construction Projects?

During the construction phase of a project, there are different type of meetings for which each serve a specific project management purpose and accordingly the attendees of those meetings could differ by type. Those meetings include kick-off meeting, progress meetings, technical meetings, contractor meetings, QA/QC meetings, HSE meetings, change management meetings, steering committee meetings, BIM coordination meetings, risk management meetings, interface management meetings, project handover meetings among others. The frequency of those meetings could vary as some could be weekly, bi-weekly, monthly or when needed.

How Can Technology Improves the Management of Project Meetings?

The majority of those involved in managing and delivering construction projects today, continue to use applications like MS Word and MS Excel to capture, report and present their meeting minutes. This limits those involved in taking actions or ensuring actions were taken on those meeting minutes from tracking, monitoring and evaluating the status of those actions as well as who need to use the meeting minutes information to support a claim submission or any other type of argument.

Using a Project Management Information System (PMIS) solution like PMWeb provides the parties involved in delivering construction projects with a single web-enabled platform to manage all project processes including meeting minutes. To start with, the project manager needs to establish the dates, timings and locations of the different meeting types to ensure that the required team members needed for those meetings are available to attend.

What is Common to All Meeting Minutes?

All meeting minutes share the same requirements for what data to capture although the content will vary from one meeting type to another. The first requirement for a meeting minute is that it needs to capture the particular of the meeting such as project, type, subject, WBS level, location, date, timing among others. Second it needs to captures the details of those invited to attend the meeting and who has actually attended the meeting.

The third requirement which is the most important of all, the business items discussed during the meeting, who are responsible to address those business items and by which date, the status of this business item if it is still open or closed, the actual date this business item was closed and the project schedule activity that could be subject to be delayed if this business item is not closed as per the set due date. Of course, additional details such as business item category and type can be added to improve the classification of the business item.

Another challenge in maintaining complete, accurate and effective meeting minutes is that it is common practice during a meeting, documents such as drawings, reports, pictures, videos, catalogues among others are shared among those attending the meeting. Therefore, it is critical that all those documents are attached to the meeting minutes to ensure that they can be reviewed when needed. In addition, the meeting minutes could have links to other PMWeb records like submittal, risk register, changes among others that can be linked to the meeting minute.

Sharing and Distributing the Meeting Minute

When the meeting minute is complete and all supportive documents are attached, the meeting coordinator can then generate a transmittal to distribute the meeting minutes through a pre-defined workflow to those who have attended the meeting as well as others who might need to be involved to review, approve and share the content. Usually, if within 2 days no objection is received on the meeting minutes then they are considered approved.

Generating the Next Meeting Agenda

In addition, meeting minutes require to keep track of the history of business items from one meeting to the other. Therefore, the follow-on meeting agenda needs to be generated from the previous meeting to ensure that closed items are removed and on-going items get captured in the next meeting. This will enable the project team to keep track of all business items and when those items were closed.

Presenting the Meeting Minutes

Most construction projects, at least in the MENA region, requires the party authoring the meeting minutes to formally present a printed version of the meeting minutes. The layout of the meeting minutes could vary from one project to another and even between one meeting type and another. Those printed meeting minutes can be designed in an intelligent format to provide the authorized reader the option to drilldown to the meeting minutes item captured in PMWeb to review all attached documents and linked records to that particular meeting minute business item.

Tracking Status of Business Items

PMWeb Business Intelligence (BI) report writer allows creating different reports to track the status of the different business items discussed and recorded in the meeting minutes. For example, a report can be created to capture the history of each business item, when it was first recorded and when it was closed. The report could include filters to limit the reported data to a specific individual for which the business items were assigned to. The report could be limited to single type of meeting minutes for a single project or portfolio of projects or for all meeting types across a single project or portfolio of projects.

Searching Content of Meeting Minutes

Sometimes there is a need a search for the content of meeting minutes as well as other project records for specific incidents and events. PMWeb allows the project team member to search for key words that relate to those incidents and events across all project records including meeting minutes. Those records that are related to the specific incident or event can be saved in an electronic issue file to enable the project team member to review and take the needed actions.

Analyzing Business Items Performance Trends

The granular data captured from the meeting minutes business items for the different meeting types across the different projects managed by the project owner provides unmatched knowledge and insight to the quality and efficiency of meeting minutes. Key performance indicators (KPIs) can be created to measure the efficiency of resolving meeting business items as well as trigger actions when the performance is not in accordance with approved performance benchmarks.

Project Communication Dashboard

In addition to meeting minutes business items, there are other formal project communication that needs to be managed, monitored and evaluated when it comes to delivering construction projects. Usually, a project communication dashboard is will be created to provide the insight on the performance of other project communication RFI, Submittals, Transmittals, Correspondence among others. The communication dashboard will usually display key performance indicators for volume, growth over time, approval periods, items by status among others will be captured at this dashboard.

Project Dashboard

The project communication data along with other project’s data captured from cost management, schedule, risk management, quality control, safety and health and other PMWeb modules will provide the input for the project dashboard. This is a dashboard that will summarize the KPIs of all those data sources as well as show additional data such construction camera among others.

Conclusion

Project meetings is one of the most important formal communication that takes place during the construction stage. Meetings bring project entities to discuss and act upon matters of common interest. It is estimated that project management team members spend more than 50% of their time in participating in meetings. PMWeb PMIS helps in capturing the details of all project meetings regardless of their type. This enables monitoring and evaluating the performance of meetings minutes in communicating information, exchanging ideas, rendering decisions, resolving issues, coordinating work and preventing problems.

How to Use Earned Value Method to Monitor and Evaluate Your Property Gross Development Value (GDV)?

Gross development value (GDV) is one of the most important performance metrics that all investors and property developers closely monitor and evaluate when building their project assets. The gross development value of a property investment project gives a near accurate figure of what that property or real estate development project may be worth when all development works have been completed. In other words, it will show if a profit has been, or will be made from the development project, and at what level.

How to Calculate Gross Development Value (GDV)

The most common and most basic formula to estimate the Gross Development Value is as follows:

GDV = Land + (Construction + Contingency + Fees + Profit)

Where:

GDV = Gross development value

Land = Purchase price of land/property/site acquisition

Construction = Engineering, construction and management costs

Contingency = Contingency and Management Reserve

Fees = Fees and transaction costs

Profit = required Developers profit

How to Use Technology to Monitor and Evaluate Gross Development Value (GDV)?

Using a Project Management Information System (PMIS) platform like PMWeb will provide the investors and property developers with a real-time monitoring and evaluation of the property Gross development value (GDV) that is based on trust worthy data captured using the different project management processes mapped into PMWeb. This will enable using earned value method (EVM) to monitor, evaluate and report on the Gross development value (GDV).

The Earned Value Method (EVM) budget cost will be set to equal the property Gross development value (GDV). This will include the budget cost for the land purchase price, engineering, construction and management cost, contingency and management reserve, fees and transaction cost and the required target developers profit. PMWeb Budget module will be used to capture those details at the level of detail set in the cost breakdown structure (CBS). The assigned budget value for each CBS level can be in the currency associated with the estimated cost. The sum of all those budget line items is what is know as the Budget at Completion (BAC) or the property Gross development value (GDV).

Each budget line item will be linked to project schedule activity the details the planned start and finish dates of spending the funds associated with that specific budget item. PMWeb allows selecting the spending curve pattern associated with each budget line item. This will be the basis for creating the Planned Value (PV) for spending the property Gross development value (GDV).

The project budget baseline could be subject to revisions until the project is formally approved to proceed. PMWeb can maintain all those budget versions to enable the real estate investor to compare and track the changes in the GDV as well as other metrics like the IRR, NPV among others.

When the gross development budget value is frozen to become the approved GDV budget baseline, all revisions to the approved project budget should be carried out using PMWeb budget adjust module. This will provide a formal process for submitting, reviewing, approving and tracking all changes to the approved budget. Those could be changes that could result in increasing or decreasing the budget as well as to transfer funds from one cost center to another including all contingency and management reserve drawdowns. The workflow assigned to the budget adjust module will incorporate the approval levels set by the real estate developer.

Verifying the Gross Development Budget

The gross development budget (GDV) is based on the property sales and lease values that was established on the information that can usually be obtained from leasing agents or specialist firms of valuation surveyors. This will help to establish how much the real estate developer can expect to take in sales and rent on a per annum basis for the building asset when completed.

Although the details of those revenue contract agreements and other sales opportunities could be captured in different applications, nevertheless, it is highly recommended to add their details in PMWeb revenue contracts module. The PMWeb revenue module will be used to capture the summary information of those contracts which could include possible property sales, long term lease agreements, long term usage agreement (healthcare, education) among others. PMWeb allows capturing the revenue earning durations as this will be needed when it comes to calculating the Internal Rate of Return (IRR), Net Present Value (NPV) and any other time-sensitive performance measures.

In addition, having the revenue details captured on the same PMWeb platform enables the real estate developer to track changes to the market trends and demand for the developed assets. This could have massive impact on the initially anticipated gross development value which will require immediate actions to revisit the project budget or gross development value.

Monitoring and Evaluating the Schedule Aspect of the Real Estate Development

One of the key factors in achieving the targeted GDV is to ensure timely completion of the real estate asset to ensure that the planned revenue is materialized. In addition, many of those revenue contracts could have penalty clauses should there be delay in handing over the real estate assets. To evaluate and monitor the on-time completion of the real estate asset, three performance measures will be needed. Those will be the Total Float (TF), Schedule Variance (SV) and Schedule Performance Index (SPI).

To calculate those measures, the Earned Value Method (EVM) will need the progress schedule data to capture the Percent Complete for each activity assigned to the budget line item. This will be used to calculate the Earned Value (EV) which is based on multiplying the approved percent complete for the project schedule activity assigned to the GDV budget line item by the budget value for that line item. For example, if the budget price of the land is USD 20 Million and the land acquisition was completed during that particular month, then the Earned Value for the land acquisition is USD 20 Million.

The schedule performance analysis is not limited to analyzing if the project is on schedule or not, but also to ensure that the allocated budget spending is spent as planned. This is important as otherwise the real estate developer will have funds that were blocked but they are not being used. This indicates lack of efficiency when it comes to budget spending. The Schedule Performance Index (SPI) is the measure that shows the efficiency in spending the project budget.

Monitoring and Evaluating the Cost Aspect of the Real Estate Development

Ensuring that the project budget does not exceed what has been planned and approved is very critical as otherwise the real estate developer will have an asset that has a cost that exceeds the value set by market for similar developments. The real estate developer would usually retain the services of a project management consultant, engineering consultant, contractors, suppliers among others to deliver the project scope of work. PMWeb commitment module will capture all of those contracts as well as changes whether they are potential, under review, approved or disputed.

At the end of each month, a progress invoice will be issued to capture the cost of approved completed scope of work. Usually, the same schedule percent complete will be used to calculate this cost. For actual cost expenses that are not invoiced against a specific commitment contract, PMWeb miscellaneous invoices module will be used to capture those expenses. In addition, for the real estate developer own resources, timesheets will be used to capture the hours spent on the project. PMWeb allows defining different rates for each resource to capture their actual cost incurred on the project.

By comparing the earned value (EV) for completed project scope of work with the actual cost (AC) spent for the scope of work, the real estate developer can immediately determine if there is any cost variance (CV). The cost performance index (CPI) details the cost efficiency in spending the approved project budget. For example, a CPI of 0.80 indicates that for each US$ 1,000 value of works, the real estate developer spent only US$ 800 for achieving this scope of work. In addition, it is important to report on the project contingency and management reserve drawdown as those are funds allocated by the real estate developer to respond to the project’s accepted risks.

Putting All Together

The schedule and cost value measures along with the earned value method at completion measures are used to assess the gross development value (GDV) coupled with the IRR and NPV measures provides the real estate developer with a real-time single version of the truth monitoring and evaluation of the real estate development performance status. This provides the real estate developer leadership team with the insight to trust worthy information to make better and fasted informed decisions.

Why Monitoring and Evaluating Your Capital Project Investment IRR Is Critical?

Although for those who are involved in investing in capital projects have many criteria to decide if the project opportunity worthwhile investing in or not, nevertheless, two of the most important measures that will always appear on this list are the Risk Attractiveness and Internal Rate of Return (IRR). Those interrelated measures identify the organization’s appetite when it comes to investing in capital projects as the common sense always says the higher the risk is, the higher the return should be.

Assessing Project Risks

Assessing the risk attractiveness of a project requires the organization to implement a formal management process to identify, analyze, respond, monitor and control project risks. A Project Management Information System (PMIS) like PMWeb not only enables the organization to implement their project management process across their complete projects’ portfolio but to also monitor and evaluate how the risk attractiveness of a project could change over time. The risks captured during the project life cycle stages across the organization’s projects’ portfolio provide a risk knowledge database that no organization can afford not to have. The real-time risk register will be used by the organization to monitor and evaluate their risk exposure and trigger needed actions to keep it inline with the organization’s risk policy.

Assessing Project Internal Rate of Return (IRR)

Assessing the project IRR requires have a consolidated cashflow project of all project costs and revenues. The project cost will include all construction direct and indirect cost for building the project asset, professional services, price of land, statutory fees, operation cost, funding and financing cost, pre-sales commission, marketing and promotion fee, contingency and management reserve allowance among others. On the other hand, project revenue could be from building assets sale, short and long -term lease, operation revenue like school fees, hotel room and restaurant revenue, healthcare revenue, interest received among others.

WBS and Control Accounts (CA)

To estimate the project cost, the organization needs to define the work breakdown structure (WBS) which will detail the project scope of work. The more detailed is the WBS is, the more accurate cost estimate the organization will have. The WBS will also become the Control Account (CA) which will be used to capture other project cost components including in addition to cost estimate, budget, budget adjustments, commitments, changes, actual cost, revenue contracts, revenue adjustments, actual revenue collected and project funding.

Cost Estimate

For each Control Account (CA) level, the quantity of the work needs to be calculated in accordance with international recognized quantity take-off standards. If Building Information Model (BIM) is in use, then those quantities can be extracted from the BIM model. Again, the level of accuracy depends of the BIM Model level of detail (LOD) which will improve as the project design moves from concept to detailed design development.

Project Schedule

The Control Account will also enable the organization to develop the project’s delivery schedule taking into consideration design, authorities approvals, contracts and material procurement, construction, commissioning, handing over and other scope of work needed for delivering the project asset. In addition, the schedule should include all revenue, maintenance and operation activities during the complete revenue generation stage of the asset life cycle. Applications like Oracle Primavera P6 is usually what capital project owners would use to develop the detailed project schedule. The schedule which is aligned with the WBS needs also to be aligned with the cost estimate to ensure that scope of work and level of effort to delivery is fully captured in the integrated project schedule.

Project Budget

The control accounts, cost estimate and project schedule will be imported into PMWeb to have a single repository of those important components who will be used to develop the other records needed to come up with the project consolidated cashflow to calculate the Internal Rate of Return (IRR) as well as other measures like Net Present Value (NPV). The project budget will be the first record to be generated from the approved cost estimate. Of course, different budget versions will be created depending on the cost estimate revisions.

The project will be appended with additional records that were not covered by the cost estimate. Those could the project finance and funding cost, price of land, contingency, management reserve among others. PMWeb allows having multiple currencies within the budget itself to allow for the currency exchange rates to determine the impact on the budget if those were not covered under other budget line items. Each budget line item will be also linked to its relevant project schedule activity to determine their planned spending dates. When those schedule dates are revised or updated, a new budget version needs to be created to reflect the new schedules while keeping track of previous budget versions. PMWeb allows distributing the budget amount using predefined projection curves like linear, bell-shaped, front-ended and back-ended. This will help in getting a more accurate budget cashflow projection.

Budget Adjustments

All adjustments to the approved budget will be captured using budget request module. Those adjustments could be to reflect budget increase or decrease due to some changes, transferring approved budget amount from Control Account to another. One of the most common budget transfers is the one associated with project contingency and management reserve for which the organization needs to keep track of the funds drawdown during the project life cycle. Each budget adjustment needs to be posted to the financial period that it had occurred at.

Revenue Contracts

The revenue contracts module in PMWeb will be used to capture all planned and actual income sources for the project. This would usually include building assets sale, short and long -term lease, operation revenue like school fees, hotel room and restaurant revenue, healthcare revenue, interest received among others. Similar to the budget, each revenue source will be linked to the relevant control account and the project schedule activity. This will ensure that the revenue projection is captured in the consolidated project cashflow.

Planned Cashflow Projection and the IRR

With both, the planned budget spending and revenue, the planned consolidated cashflow projection for the project will be generated. This will also enable the organization to make adjustments for the those captured values. For example, for the planned budget per period, the organization might decide that the Earned Progress Value should be 90% of the budget amount, allowing for the 10% retention, and it needs to be delayed by 30 days for the review and approval period. This earned value amount will become the Actual Cost to be paid but again with another 30 days delay to accommodate the payment terms. The Internal Rate of Return (IRR) and Net Present Value (NPV) at 18% measures will be calculated using the formulas that are common to reporting tools used by PMWeb. Should the organization be interested in running “what if scenarios” on the project cashflow without modifying the budget and revenue data captured in PMWeb, the projection cashflow report can be saved in MS XLS file format to enable the organization to run different scenarios and calculate the associated IRR, NPV and other needed financial measures.

Should the organization be interested in running “what if scenarios” on the project cashflow without modifying the budget and revenue data captured in PMWeb, the projection cashflow report can be saved in MS XLS file format to enable the organization to run different scenarios and calculate the associated IRR, NPV and other needed financial measures.

Of course, the monitoring and evaluation of the IRR, NPV and other financial measures will continue to be needed during the project life cycle stages. This entails that control accounts that are part of bid packages awarded to consultants, project management firms, contractors, subcontractors, vendors, suppliers among others will become the basis for the planned cost spending rather the budget planned spending. In addition, actual cost incurred for scope of work delivered plus the actual cost of all miscellaneous invoices will be used to record the past periods actual cost. Those cashflow adjustments will automatically result in recalculating the IRR, NPV and other financial measures.

Awarded Commitments

The commitment of the organization to spend the approved project budget is usually linked to the award of contracts, subcontracts, purchase order among others. The procurement of those commitments need to follow a formal process that will include defining the bid packages, which include all relevant control accounts, qualifying the bidders for each bid package, create the contract documents for bid packages, invite qualified bidders, capture the submitted proposals by those bidders, reviewing and analyzing those bids and finally award those commitments. Each commitment will include the payment terms for the approved completed work. The anticipated commitments spending, which also referred to as the Contractor’s Cost Loaded Schedule needs to be reviewed and ensure that is aligned with the approved budget spending plan.

Changes to Awarded Contracts

All potential and actual changes, whether they are approved, under review, rejected or disputed, will be captured in PMWeb. This will enable the organization to have real-time understanding of the revised committed project cost and the projected at completion project cost. Again, as a best practice, all those changes need to be captured in a single document that will also detail the changes in the approved budget as a result of those changes. This document is known as the change event. Similar to budget adjustments, commitments changes need to be posted to the financial period that it had occurred at.

Actual Cost and Actual Revenue

The actual cost for approved work in place for each awarded commitment contract will be captured using the monthly progress invoice for which the project schedule activity percent (%) complete for each control account will be imported. This will be repeated for each period. In addition, the actual cost for all miscellaneous invoices incurred at each period will be also captured in PMWeb. Similarly, the actual revenue from building assets sale, short and long -term lease, operation revenue like school fees, hotel room and restaurant revenue, healthcare revenue, interest received among others will be captured using the revenue requisitions module.

For some organizations, there could be a requirement that all actual costs and revenues to be captured using their accounting and ERP applications like SAP, Oracle, MS Dynamics, JD Edwards among others. Should this be a requirement, PMWeb provides the option to import the actual cost and revenue data into PMWeb using the Integrator Manager. In addition, there is an option to create more advanced integration using the application programming interface (API) which is a set of clearly defined methods of communication between various software components.

Monitoring and Evaluating IRR, NPV and Other Measures

The organization needs to continue monitoring and evaluating the IRR, NPV and other financial measures including but not limited to project budget, revenue, commitment, earned value, actual cost, paid amount, cost performance index (CPI), schedule performance index (SPI), cost variance (CV), schedule variance (SV), contingency drawdown among others.

Conclusion

Those involved in capital project investments require a number of financial, risk among other measures to ensure that their investments are still viable. The Internal Return on Investment (IRR) is one of those important measures that executives would like to track to ensure that the return on investment is still attractive. PMWeb PMIS provides a single web-enabled platform to capture the data needed to calculate the IRR, NPV and the many other key performance indicators needed to monitor and evaluate project investments performance. Thus, not only enable those investors to have real-time single version of the truth performance status but the insight to make better and faster informed decisions to keep their investments on track.

Monitoring and Evaluating Progress of PPP Projects

Monitoring and evaluating financial progress for PPP project as presented in the previous article, is crucial but not enough. In addition to financial aspects, a successful PPP project delivery requires monitoring and evaluating physical, schedule, risk, issues among other aspects of a project. PMWeb project management information system (PMIS) will provide the two parties of the project finance agreement with a real-time single version of the truth platform to monitor and evaluate all project management processes. PMWeb will help the two parties of the contract to implement the best practices of project management like those of the Project Management Institute (PMI) Project Management Body of Knowledge (PMBOK).

Project Life Cycle

PPP projects might take 5 to 20 years to repay its project finance. This requires having complete understanding of the asset life cycle covering the period to build the asset and the period to collect the lease rentals. Using the PMWeb Stage Gate module, the two parties of agreement can agree on the stages, deliverables for each stage, and the success scoring criteria for assessing the completion of each stage among others.

Scope Management

A well-defined project scope will reduce the likelihood of incurring the risk of “scope creep” and other risks associated with incomplete and improper scope definition. The Work Breakdown Structure (WBS) will be used to decompose the project scope to the desired level of control. PMWeb will be used to create or import the WBS levels so they can be used with the different project management processes. In addition, the WBS Dictionary document template will be used to identify the exact scope of work including the requirements that are included or excluded from each WBS level.

Schedule Management

With the WBS levels well defined, the project detailed integrated schedule can be developed using Oracle Primavera P6 for which the baseline schedule and all subsequent updates will be maintained. The schedule will be resource loaded as well as include all activities for technical submittals, procurement, interface points, authorities’ approvals, testing and commission among others. To ensure that time-sensitive project management processes are aligned with the current project schedule, the schedule activities will be imported to PMWeb. The imported schedule % complete will be also used to calculating the earned value for completed works which will be the basis for determining the monthly progress invoice for awarded contracts.

In addition, PMWeb will be used to create forms to formally review and analyze the baseline schedule and periodical updates, capture delay events and their impact on the project schedule along with available options to accelerate to recover those delays, report on the project the milestones status among others. The objective is to ensure that all needed project management measures are taken to ensure on-time project completion to enable the repayment of the project finance loan as it was originally planned.

Value for Money (Vfm)

Achieving value for money is a key requirement when a PPP project is selected. This concept should never end when the PPP project is awarded but should continue during the complete project life cycle. The objective should be to reduce the project life cycle cost as this will help in making more funds available to repay the project loan or even increase the profit for the PPP shareholders. Value engineering is a proven practice that needs to be implemented during the engineering and construction stage of the project. PMWeb will be used to capture all ideas generated and their evaluation as well as value engineering proposals.

Quality Assurance and Quality Control (QA/QC)

The project asset should be designed and built to the standards set in the PPP not only to comply with the contractual obligations set in the PPP agreement but also to eliminate the high cost of maintaining low quality products which will affect the borrower ability to repay the loan. QA/QC should start as early as when the design is being developed by conducting formal design reviews and coordination workshops to cleanse the construction documents, eliminate ambiguities and ensure that building systems are well coordinated. Technical material and shop drawings submittal should be reviewed thoroughly and approved in a timely manner to avoid project delays.

Site inspections should be performed for all key project systems and elements. Non-conformance reports for work to be rectified should be completed without delay. Snag list needs to be implemented during the project’s construction and not to wait until the project’s handover. There should be a strategy to handover the project in phases where a snag list will be used to ensure that the completed work is in accordance to what was specified and agreed on.

Health and Safety Management

By principle, no organization should allow accidents, fatal or not, to occur on their project sites. Those involved in the project construction should implement all measures to ensure site and labor safety. Should any accident do occur, the details should be captured and reported on. This will help in identifying the causes of those accidents and what measures should be taken to avoid repeating such accidents. PMWeb accident report will be used to capture the details of all accidents to make it available to report on. PMWeb meeting minutes modules will be used to document all safety meetings and actions taken during those meetings. PMWeb custom form builder will be used to create Safety Audit Checklists, Permits and other related safety management communication.

Human Resources Management

The sustainability of the key resources assigned to manage the project asset delivery is a key performance indicator when it comes to delivering PPP projects. Good resources quit a project due to lack of leadership, role mismatch, responsibility ambiguity, lack of appraisal among many others. Managing project resources require having organization charts that details the authority and reporting lines during each stage of the project delivery stages. For each position, PMWeb will be used to create role template to capture the purpose, key responsibilities, key relationships, key competencies and skills among others. The project manager will be responsible for conducting periodic appraisals of the project team members against the skills and responsibilities assigned to each as per the job description. Those appraisals will help the project manager and the organization in identifying issues that relate to the key project resources.

Communication Management

There are many types of formal communications that take place between the different parties of a PPP project. Some of those communications are usually captured in pre-defined document templates such as transmittals, request for information, site work instruction, meeting minutes, notice to proceed, substantial completion among many others. All those document templates are either available as out of the box forms in PMWeb or can be created using the custom form builder. For each document templates, the workflow for submitting, reviewing, approving or rejecting the communication is usually pre-defined for each project. The workflow will also include conditions and branches to enforce compliance with the set authorities and responsibilities assigned for each project role. Documents can be attached to those document templates to provide the recipient with complete details on the project communication.

In addition, to document templates, formal communications also include letters or correspondence which are used as formal communication on as-needed basis. PMWeb allows the organization to create letter templates that has the right legal content to ensure proper formal communication. Similarly, all supportive documents can be attached to those letter communications. The importance of having all project document templates and letters created, submitted, reviewed and approved in PMWeb is that the organization can track all those communications to avoid delays to the project milestone dates.

Project Document Management

Delivering PPP projects will result in massive volume of project documents including drawings, specifications, operations and maintenance manuals, catalogues among many others. Most projects until now, at least in the MENA region requires maintaining hardcopies of documents that could have legal and financial implications. PMWeb document management repository enables the project team members to map the filing structure into folders and subfolders to upload an electronic copy of all those documents. Attributes and other important details of each document need to be added to those uploaded documents to improve the search and location of those documents when needed. The document management repository allows keeping versions of all documents, redline and add comments as well as view those documents.

Project Interface Management

PPP projects has many internal and external interface points. Interface management is the control and oversight of interactions and information flow between the major contracting parties on the PPP project. Effective management of the interfaces will facilitate good communication and transparency across these boundaries and allow each party to request, offer or exchange data and technical information in the best interest of the Project.

Each interface point could include a number of interface agreements (IA) which contain interface information and “Need Date” by which the interface data to be made available for resolution. The IA shall be the only recognized document for the sharing the interface information between all parties. Interface Agreements will be used to document and track the exchange of information and deliverables between contractors that are part to an interface. Interface Agreements are created and tied to an Interface Point.

Project Risk Management

Risks are part of every PPP project delivery. Risks identification, analysis, response, monitoring and control should be an on-going process until the conclusion of the PPP project. Not only this will help in mitigating the negative impacts of risks on project’s budget and completion date, but will also help in creating knowledge database of all those unknowns uncovered during the PPP project delivery. A knowledge database that will benefit the current PPP project as well as other PPP projects. PMWeb will be used to capture, analyze and respond to project risks. The risk register will be a real-time report to monitor and control the project’s risk exposure. In addition, issues management will be implemented to respond to those risks that were accepted as is without a formal response action. This will help in limiting the negative impacts of those risks.

Project Issue Management

An issue is a problem that is currently occurring. An issue must be resolved as soon as possible, otherwise it will have detrimental effects on the project budget, schedule and scope. Each project, including PPP projects should have a documented process for managing issues details who does what, the detailed procedures, forms, workflow, etc., protocols for levels of authority and how to communicate and promote the process and its importance to all participants. PMWeb custom form builder will be used to create the customized issue form along with the workflow to submit, review, close or escalate an issue. This will enable having a real-time visualization of all issues that could harm the PPP project.

Stakeholder Management

Although stakeholder management is one of the requirements for managing projects, but in PPP projects this is even far more important than other projects. PPP project involves stakeholders that are not common to other non-PPP projects. For example, a PPP project could include the media (social, TV, Radio, Newspaper, etc.), community, labor unions among others. Stakeholder management requires identifying and assessing the influence and the interest that those stakeholders have in the PPP projects and how to engage them to get them migrate them from the current interest level to the desired interest level. Those requires running campaigns, improve communication and other actions to achieve the desired state.

Monitoring and Evaluating the PPP Project Performance

Having a single web-integrated platform like PMWeb means that all projects data captured from the different project management processes will become available for the authorized project team members to report on. This could be a tabular or graphical report to report on the status, performance trends, transactions volume growth and other details that are specific for a single project management process like issues log, risk register, change orders log among others. In addition, data for interrelated project management processes can be aggregated to provide a complete understanding of how that perspective is performing. For example, the financial perspective will aggregate data from project budget, budget adjustments, funding, contracts, potential change orders, change orders, progress invoices and revenue contracts. The same would apply to the quality, schedule, risk, safety, procurement, communication and other dashboards. Finally, the same data used in the logs and the perspective dashboards will be the data source for the PPP project dashboard. A dashboard that will provide a real-time single version of the truth of the PPP health and performance status. Of course, it is very common to create different PPP dashboards depending on the party visualizing the dashboard, nevertheless, all dashboards are based on the same PMWeb data source.

Conclusion

Monitoring and evaluating financial progress for PPP project is crucial but not enough. In addition to financial aspects, a successful PPP project delivery requires monitoring and evaluating physical, schedule, risk, issues among other aspects of a project. Having an integrated project management information system (PMIS) platform like PMWeb not only provides the real-time single version of the truth reporting of project’s performance and health but the insight to trust worthy real-time data to make better and faster informed decisions to keep the project on track. Further, the data and document transactions granularity captured in PMWeb, provides the transparency and accountability needed for internal and external audit.

Monitoring and Evaluating Financial Progress of PPP Projects

According to a joint report published by JLL and DLA Piper, public-private partnerships (PPPs) are increasingly being used in Saudi Arabia as a platform to encourage more private-sector engagement in different sectors including real estate. PPPs are considered as a key component of the country’s National Transformation Programme (NTP), which aims to increase the percentage of private sector investment from 40% of GDP in 2016 to 65% by 2030.

A key motivation for governments considering public-private partnerships (PPPs) is the possibility of bringing in new sources of financing for funding public infrastructure needs through project finance. Project finance as defined by International Project Finance Association (IFPA) is the financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure where project debt and equity used to finance the project are paid back from the cash-flow generated by the project.

Islamic PPP Project Finance

One of the available project finance options in the Islamic world in general and the GCC in particular is project finance that is compliant with Sharia law, also known as Islamic Project Finance. The most common form of Islamic project finance structures is the combination of procurement (Istisna’a) and forward lease (Ijara). This will be used to explain the needed financial progress monitoring for PPP projects.

The Istisna’a procurement agreement will be used by the borrower to build the project assets and deliver upon completion to a special purpose vehicle (SPV) (owned by the Islamic financiers), as the purchaser. As consideration for the project company procuring the assets, the Islamic financiers agree to pay the project company an amount no greater than the total project cost of these assets. The project company, as lessee, and the SPV, as lessor, will also enter into a forward lease agreement to lease the assets on delivery. The forward lease agreement operates during the operational phase of the project.

Monitoring and Evaluating Financial Progress of PPP Projects

For Islamic as well as other types of project finance, it is of great importance that the funds allocated to construct the assets are not exceeded as well as the completed assets to be delivered on time and in accordance with the agreed quality standard to ensure timely payments of periodic lease rentals. PMWeb project management information system (PMIS) will provide the two parties of the project finance agreement with a real-time single version of the truth platform to monitor and evaluate project finance. Although PMWeb can be used to implement the best practices of project management to manage, monitor and evaluate physical, schedule, risk, issues and other aspects, nevertheless, this will article will only address the financial aspects as it relates to PPP projects.

Performance Budget Management

One of the most critical objectives in project finance is to ensure that there will be no cost overrun for the approved budget to be financed. Actually, failing to adhere to the project’s approved budget baseline would have drastic impact on the project’s viability and the target internal return on investment (IRR). It is therefore a must to have detailed cost estimate that covers direct and indirect cost as well as contingency or reserve to cover for the unknowns. The detailed cost estimate which is usually done a third-party cost consultant needs to be imported into PMWeb to maintain track of all cost estimate versions and those involved in reviewing and approving the cost estimate along with all the documents used to come with the cost estimate. It should be noted that the cost estimate should not be limited to the asset building stage but also for the operation and maintenance stage.

The project budget will be generated from the approved cost estimate using the cost breakdown structure (CBS) levels which will become the basis for controlling the project cost. Some organizations might opt to have the CBS to be the same as the WBS levels used to define the project scope. Since PMWeb allows multi-currency at line item level, budget line items could have different currency than others when needed. PMWeb has an automated currency exchange module to update the exchange rates at the desired frequency.

The next important step is to provide the financial projection for each budget line item taking into consideration the relevant project schedule activity’s start and finish dates and the expected budget spending for each project period. There are pre-defined projection curves to expedite the projection allocation process, nevertheless, this can be manually adjusted to improve the planned budget value for each period.

All adjustments to the approved baseline budget including budget additions and ommissions as well as transferring funds between cost centers will be governed using the budget request process. This will also include any usage of the approved project contingency and management reserve. Workflow can be assigned to the budget request adjustments to formalize the steps to submit, review and approve those adjustments.

This will enable having real-time report on the project budget performance which could include comparison between the different budget versions, budget planned spending projection which is the same as loan drawdown, list of all budget adjustments along with the reasons for those adjustments, drawdown of project contingency and management reserve among others.

Project Funding

PMWeb project funding module will be used to capture the details of all fund sources that are available to the project including debit (Istisna’a), equity or any other source. It will also include all funding requests issued against those fund sources and the authorization to release those funds. The fund authorization allows breaking down the authorized funds against each Work Breakdown Structure (WBS) levels of the project to keep track of how the funds were dispersed.

Commitments

Although the project performance budget should be accurate, nevertheless the degree of accuracy can be only verified when the actual purchase orders, subcontracts and other commitments to deliver the project asset are formally awarded. PMWeb will be used to capture all those commitments including their payment terms and conditions. PMWeb will be also used to capture the details of the main contractor who might be also one the equity partners of the PPP project. PMWeb procurement and online bidding modules will be used to manage the procurement process and ensure that there is documented technical and commercial evaluation for all awarded commitments. In addition, PMWeb pre-qualification module can be used to ensure that all awarded contracts where to only pre-qualified suppliers and subcontractors.

Actual Cost and Actual Payments

All invoices received for completed work in place for each commitment contract as well as all miscellaneous invoices and the cost submitted through timesheets for any other resources assigned to manage the project will be captured in PMWeb. All those invoices will be assigned a workflow to formalize the submit, review and approve process. PMWeb will be also used to capture the actual payments made against the approved progress invoices.

Change Management

Changes to the approved commitments could have drastic impact on the project’s approved performance budget as well as project’s completion date. Therefore, there should be a robust proactive change management process to reduce if not eliminate the negative impact of those changes. PMWeb potential change order module will be the early warning notification process of all possible changes that could impact the project. Based on the formal review of each potential change order, change events will be created for all those viable changes. The change event will capture the impact details of each change on the project’s performance budget and relevant commitment contracts. This will become the basis for issuing a change order to adjust the affected commitment contract. To enforce transparency and accountability, workflow will be assigned to the change order process with conditions to escalate the change order to right individuals based on the approval authorities’ levels assigned to them.

Loan Recovery (Ijara)

For a PPP project, the revenue to be generated from the project asset is what makes the project viable or not. The revenue could be based on long term commitment form organizations, public or private that will be using the project assets. For example, for an affordable housing project, the government, semi-government and private sector organizations might commit to long term lease of those houses. The same approach could be applicable for residential and commercial buildings, hospitals, hotels among other type of capital projects. PMWeb revenue contract document will be used to capture the details of all those agreements and the due payment dates for those periodic lease rentals. In addition, the revenue module will be used to capture any changes to those lease or revenue agreements. Further, the revenue module will be used to issue the invoices for those leases and the actual payments received against those invoices.

Consolidated Financial Report

All of the financial transactions captured above will be consolidated by PMWeb in a single table called the cost ledger. This real-time cost ledger is linked to each financial transaction to provide immediate transparency on the source of the transaction. The cost ledger will become the data source to create what is known as the Cost Worksheet which looks like a spreadsheet with the option to save as a MS XLS file. PMWeb allows creating unlimited number of cost worksheet including new columns and formulas to provide the needed financial analysis.

Reporting Financial Performance

The real-time data captured from the performance budget, budget adjustments, awarded commitments, potential, pending, disputed and approved change orders, progress invoices, actual funds payments, lease and other revenue sources among others will become available to report on in different forms and formats depending on the project stakeholder requirement. What is important is that regardless of what is being displayed, the data source for all is the same.

Conclusion

Monitoring and evaluating the PPP project physical, risk, issues and financial progress is a must for all parties involved to ensure that the PPP project is on track and to trigger performance alerts when needed. Having an integrated project management information system (PMIS) platform like PMWeb not only provides the real-time single version of the truth reporting of project’s performance and health but the insight to trust worthy real-time data to make better and faster informed decisions to keep the project on track. Further, the data and document transactions granularity captured in PMWeb, provides the transparency and accountability needed for internal and external audit.

Why Interface Management Is Critical in Capital Projects Delivery?

By nature, capital projects delivery involves different entities for which each have part of the project’s scope to deliver. For example, multiple contractors and subcontractors could be part of a specific project or even a program delivery. An interface is the place at which independent systems meet or communicate with each other. For example, flange connection details, cable connections, valve connections among many others.

What is Interface Management?

Interface management is the control and oversight of interactions and information flow between the major contracting parties on projects. With the increased complexity of today’s capital projects, the need for interface management has really became a must. A project can typically have in the range hundreds, if not thousands of interfaces to manage.

Effective management of the interfaces will facilitate good communication and transparency across these boundaries and allow each party to request, offer or exchange data and technical information in the best interest of the Project. Interface management is one of the formal communication processes that a project would have.

Technology and Interface Management

Interface management can not be managed in isolation of the many other processes needed to manage a project. Those include processes for project controls, engineering management, quality management, HSE management, contract administration and management, change control and management, procurement management, risk and issues management, communication and document management, commissioning management and handover management.

Project Management Information Systems (PMIS) like PMWeb provides a collaborative environment that allows all contracting parties on a project to participate in interface management, providing the visibility and tracking needed to mitigate project risk when it comes to interfaces. All parties have the information they need to complete the required interfaces on time, and all parties are aware of roles and responsibilities. The same applies to all other project management processes that are needed to manage the project life cycle.

The Interface Manager (IM)

Each entity involved in the project delivery shall nominate a representative as “Interface Manager” to act as a single point of contact for a scope package or for the entity as an overall. The Interface Manager will have a support team, which consists of discipline engineers who will support and assist the Interface Manager in preparing and responding to queries. Interface Manager of each entity has overall responsibility for implementation and maintenance of the interface management process throughout the project life cycle.

Interface Point

Interface Point (IP) is a contact point where two or more entities, for example contractors, come together. Most often deal with physical interfaces but can also include commercial or regulatory interfaces. Physical interfaces include for example flange connection details, cable connections, valve connections among many others. Interfaces could be also for civil works such as roads, interfaces for paving, cable trenches, electrical and instrumentation interfaces

There are Internal and External interfaces. Internal interfaces are those interfaces between disciplines, or within work area of contractors’ responsibility whereas external interfaces are those interfaces between scope packages. Internal interfaces include Technical, Physical, Logistical, Commercial, Organizational interfaces.

In addition, interfaces can be grouped into two types, tangible or intangible. Tangible or hard interfaces, have a physical connection such as a structural steel connection, pipe termination, or cable connection, tie-in to existing facility whereas intangible or soft interfaces, involve the exchange of information such as design criteria, clearance requirements or utility needs between delivery teams.

The project’s integrated master schedule, which include the work schedule for all entities or contractors, should include all interface points as activities. This will help in determining the need dates for those interfaces, the allotted duration to complete the interfaces agreements, and their criticality to the project’s completion milestone dates. They will also identify the preceding and succeeding activities for each interface. Those activities will be part of the schedule activities imported to PMWeb to make them available for Interface Agreements.

Interface Agreement

The Interface Agreement (IA) contains interface information and “Need Date” by which the interface data to be made available for resolution. The IA shall be the only recognized document for the sharing the interface information between all parties. Interface Agreements will be used to document and track the exchange of information and deliverables between contractors that are part to an interface. Interface Agreements are created and tied to an Interface Point.

PMWeb custom form builder will be used to create the Interface Agreement form. The form will capture the details of the interface point activity, IBS (Interface Breakdown Structure), phase, discipline, system, location, type and other particulars of the IA. It will include the title of the IA along with detailed description of the IA as stated by the originating party and the response by the responding party. Additional fields can be added depending on the project requirements.

Most of the fields in the Interface Agreement form will be available from a list of predefined values that is specific for the organization as well as the project being managed. For example, for the Phase field, the predefined list will include Design, Procurement, Construction, Pre-Commissioning, Commissioning and Closeout. The same will apply for WBS, IBS, Location, Type, Discipline, System, Nature among others.

Interface Agreement Documents

Documents such as drawings, tests, certificates among others will be needed for each interface agreement. It is recommended to have an interface management filing system that is aligned to what is known as the Interface Breakdown Structure (IBS). The IBS will have the project as level 1, work package as level 2, interface point as level 3 and interface agreement as level 4. For each interface agreement, all documents will be uploaded under its own specific folder. This will ensure that all documents are properly captured and stored.

PMWeb document management repository will be used to upload and store all documents needed for each interface agreement. PMWeb allows the entity to create folders and subfolders to match the IBS. In addition, it is recommended to enable the “subscribe to RSS notifications” for each IA folder as this will send email notifications to the subscribed users whenever documents/revisions are added, documents are checked in/out, documents are moved out/deleted and documents are downloaded. Of course, it all maintain all versions of uploaded documents.

Those uploaded documents will become available to be attached to each Interface Agreement. In addition, those involved in the interface agreement process can link other relevant PMWeb records to the IA form such as interface meetings, daily reports, action reports, correspondence and any other type of project communication that is relevant to the IA. In addition, email communications which were imported to PMWeb can be linked to the IA similar to other project communications.

Interface Agreement Workflow

PMWeb workflow will be used to manage interface agreements. Interface Agreements can be created and initiated by the Interface Manger or by the technical contacts supporting the interface manager on the project. In either case, the agreement must be reviewed and approved by the Interface Manager of both the requesting and responding party.

The interface team input for each workflow step for each IA will be captured during the execution of the IA process. All those comments and team input will become available to review and report on. PMWeb will capture the date and time those comments to maintain a complete audit trail for each IA.

Interface Data Register (IDR)

The IDR is a consolidated real-time list that records the status of current Interface Agreements (IA) identified with assigned action for each IA within the parties. The IDR is reviewed within Interface Managers on prescribed time frequency in meetings. The layout of the IDR can be fully customized by the organizations to display the needed details. For example, it can be designed to display Project ID, WBS Level, IBS, Package Title, IP Activity ID and Title, Originating Contracting Party, IA No., IA Title, Phase, Description, Responding Contracting Party, Status, Need Date and Close Date.

Interface Meetings

The PMWeb meeting minutes module will be used to capture the interface management Kick‐Off ‐meeting, and then the regularly scheduled Weekly Interface Meetings. The attendees for those clients could include participants from the Client(s), Project Management Consultant, Engineering Consultant, Contractors, Vendors, Discipline Leads and concerned attendees as required. During those meetings, a review outstanding interface issues, which are available in the IDR, agree on means to resolve issues, set new target dates or revise, record action items with due dates.

Interface Management Dashboard

The Interface Management Dashboard provides real-time status and performance reporting of all interface management processes. The dashboard will include the list of interface points that are due in the next 6 weeks, list of delayed interface agreements, visuals on the performance trends of interface agreements among others. The dashboard will quickly highlight any areas or interfaces which require immediate attention. For example, in the case of the Early Warning dashboard, interface agreements that have their status as red is bad. Those are overdue interface agreements that should be looked at and closed.

Conclusion

Interface Management should be part of every project management plan. In the past, interface management was limited to complex mega capital projects mainly in the oil and gas sector. Nevertheless, no project regardless of its size or type will be free of interfaces between the different entities of the contract. Failing to manage those interfaces in a structured, integrated and comprehensive process will create many risks for the project owner who needs all project components and systems to function as one integrated facility regardless of the entity who completed which component. PMWeb provides an integrated web-enabled platform that can enforce the implementation of interface management, as well as the many other project management processes, across the complete project life cycle stages.