Why Projects Should Be Snagged on Daily Basis?

In the engineering and construction industry, a snag list or punch list is a list of items requiring immediate attention that is usually prepared near the end of a construction project listing work not conforming to contract specifications that the contractor must complete prior to final payment. The work may include incomplete or incorrect installations or incidental damage to existing finishes, material, and structures. In other words, it is used to document the list of work that does not conform to contract specifications, usually attached to the certificate of substantial completion. The contractor must correct the punch list or snag list work before receiving the final payment and the project is accepted for final handover.

Examples of punch list items include damaged building components (e.g. repair broken window, rectify wall painting, replace stained wallboard, repair cracked paving, etc.), or problems with the final installation of building materials or equipment (e.g. loose door hinges, replace missing false ceiling tiles roof, replace loose floor tile, light fixture issues, light switch does not work, activate security system, etc.). Snag List or Punch list are not to be confused with Site Inspection Request which are usually requested by the contractor to inspect the quality of the completed work during the project construction.

The Punch List or Snag List helps to keep a clear list of quality and other issues, assign responsibility to a specific person at a specific company, select a due date, and track an issue’s current status. In addition, it will usually include the estimated cost to rectify the work which will be usually held form the approved contractor’s progress invoice. The contractor is bound by the contract to complete a list of contract items, called a snag list or punch list, in order to receive final payment from the owner. The project owner will assign the engineer representative to verify that completed snag items are as per the contract agreement. Sometimes the project owner might assign a third party to complete this work should the contractor fails to do so within the agreed period of time.

The Snag List Document Template

Most Project Management Information System (PMIS) solutions like PMWeb would have the Snag List or Punch List as one of the default modules. The form will usually have two sections. The header which captures details of the project and general details of the Snag List such as date issued, by who and to who, which part of the work as there could different Snag List issued for different parts of the work, status, priority, WBS level among others.

snag 3

The second part of the Snag List will detail the specifics items that need to be rectified by the contractor. PMWeb allows creating what is known as the “Location Breakdown Structure or (LBS)”. This will help in setting a common language among all project stakeholder on the different locations of the projects. For example, if the project has two towers, then we start we tower 1 and tower 2. This will be followed the floor levels, apartments and rooms within the apartment. This will enable dragging a dropping those locations on the detailed Snag List Log. This will be followed by adding the complete specifics of the item such as description, trade, assigned to who, issue date, received from whom, sent to who, due date, days overdue (automatically calculated), completed, days ahead or behind (automatically calculated), cost, charges to who, closed and notes.

snag 4

Since PMWeb is a Zero Foot Print application, the Snag List can be accessed using mobile devices like the rugged iPad to capture the details of snag list items from the construction field directly. The attachment tab allows to have for every Snag List item within PMWeb the documents, digital photos and videos that will provide more details on the snagged item.  Pictures and videos can be taken live using the iPad camera or uploaded from the photo library.

Snag 1

Capturing the Snag List data at this granular level allows the project team to automatically monitor the due dates of all pending item and send notifications for the overdue items. In addition, customized Snag List reports will help keep items from falling out of sight and clearly note when an item’s due date has passed. The report can be customized to display the information that in needed by project team member. It can be also grouped by the company responsible to rectify the snag list items.

Snag 2

Similar to other project management processes, the punch list or snag list can become of a documented process where a workflow will be created to identify the workflow steps and responsibilities for submitting, reviewing and approving the snag list.

Why Snag List Should Be Used On Daily Basis?

The use of the snag list should not be limited to the phase at the end of a building project. It can be used to replace the “Observation Log” used by some engineers to document site visitations and report on unacceptable work completed at the construction site. Using the PMWeb Punch List module to capture the punch list items on daily basis will make this information available to those who need to rectify them. This will enable the contractor to access this list and rectify those items as soon as they become known to him. This will enable the contractor to complete this scope of work while the resources who were responsible for doing this work are still on site. This will help in reducing the number of Snag List items at the end of project delivery phase to expedite the project handover and make it usable by the project owner.

About the Author

 

Why Request for Information (RFI) is an Important Project Communication?

Rarely an engineering and construction project is ever delivered that did not have Request for Information (RFI) issued by the contractor, subcontractor or suppliers who are responsible for delivering the project. The RFI is a project communication management process that is used to request for the interpretation of work not sufficiently described or reasonably inferable from the contract documents including drawings and specifications. In addition, RFI is also used for changed or unforeseen site conditions. Nevertheless, RFI should not be used for requesting information readily found in the contract documents.

RFI are usually are the result of incomplete contract documents, inconsistency or conflict between more parts of contract documents, insufficient amount of detail to determine design intent, inability for contractor to provide specified product or system, unforeseen site conditions encountered among others.

What Data Should a RFI Have?

The RFI document templates should be designed to capture the needed data to be able to close it without affecting the project scope, schedule or cost. The RFI should provide details on who is issuing the RFI, which project, RFI reference ID, when it was issued, which WBS level of the project scope does it relate to, which specification section it relates to, work category, priority of the RFI and if it was sent via a transmittal, the reference of the transmittal.

ART01

The RFI should also have the query or the question that the issuer has along with the needed response date. It should be noted that on some projects, there could be an agreement on the time limit to respond to RFIs depending on their priority. In addition, many of the new construction contracts require the RFI issuer to be proactive and propose a solution for the raised RFI.

From the Engineer side or the party who is responsible for responding to the RFI, there will be a section called “Answer” or “Response”. The response to the RFI query could have an impact on the project scope, cost and/or schedule. Should this be the case, then this needs to be highlighted along with the ID of the activity that could be impacted.

Should the RFI has relevance to other project communications like meeting minutes, daily reports, drawings, submittal, transmittal or even other RFI, then project records need to be linked to the RFI to provide a complete description of the RFI under question.

ART02

Supportive Documents

For the RFI reviewer be able to respond in a complete and prompt way, the RFI should have all relevant documents attached to the RFI. Those could be drawings, specification section, material catalogue, pictures and/or videos of current site conditions. This will enable the reviewer to access those documents to better understand the question raised in the RFI.

ART03

Building Information Modelling (BIM) and RFI

With the growing trend of projects using BIM to develop the project design, installation shop drawings and as-built documents, clash detection issues identified in BIM can be also managed using the RFI. In addition to the RFI details explained earlier, the RFI should also include reference of the BIM model for which the RFI is issued for.

ART04

RFI Collaboration

The project management procedures manual will detail the workflow steps and responsibilities for submitting, reviewing, sharing and approving RFI. It is possible that there could be multiple versions of the RFI workflow depending on the RFI category, whether the RFI has an impact on the project scope, cost and/or schedule.

Project Management Information System (PMIS) like PMWeb are used to map the workflow steps for submitting, reviewing and approving the RFI. For each step, PMWeb will allow setting the actions that the step owner needs to do, duration allocated to the step and the RFI fields that he/she have access to. In addition, PMWeb allows creating what is known as “Conditional Workflow” where different or additional reviewers will become involved in the review process depending on the RFI attributes. Those for example could be the category such as mechanical, structural, etc., whether the RFI has impact on the project scope, schedule or cost, project location affected by the RFI among many others. The conditional workflows help in removing the guess of who else needs to be involved in the review process.

ART05

Excessive RFI

Project Owners should be aware when projects have excessive RFIs as this could indicate different things that need to be investigated. For example, it may be an indication of incomplete contract documents: where the Contractor has to make many RFIs to obtain necessary info to construct project. Or it can be an indication of incomplete study of the contract documents by the contractor for which the contractor uses the RFIs to ask questions rather than study documents. Regardless what is the reason for the excessive RFIs, the project could be negatively affected as they could result in project delays due to the time to respond those RFIs as well as additional cost as the Contractor might claim that as a result of the clarification, additional out of scope work needs to be done.

It is no wonder that most PMIS applications like PMWeb allows generating change events from RFIs as this is that has high likelihood to happen.

ART06

RFI Reporting

Tabular and graphical reports are important to communicate RFI status and performance details. Tabular reports are usually developed to provide a log of submitted RFIs. The report can be grouped by category, type, status among others. The report will usually show important information of an RFI including Reference Number, Subject, Date Submitted, Date Answered, Status among others. The Report can be filtered to show only pending RFIs or RFI that are talking more than 7 days to close.

ART07

In addition, graphical reports and dashboards are produced to analyze RFI growth trends, RFI response time, source of RFI among others. This data will help the project manager to identify unfavorable trends in the RFI process as well as benchmark and compare the RFI performance on a specific project with other projects that the organization are managing.

ART08

About the Author

Enforcing Governance Using Stage Gates in Engineering and Construction Projects

Organizations who invest in projects to achieve their strategic objectives understand the importance of selecting the right projects and deliver those projects right from the first time. Those organizations also fully understand that much of the decisions and actions taken to achieve the selection and delivery of those successful projects are based on assumptions to address the many projects’ unknowns. What makes this even tougher is the highly dynamic local, regional and global market conditions increase the risk of project failure.

By definition, projects are temporary endeavors undertaken to create unique products, services or results to address a specific need or idea. Every project goes into a life cycle for which the initial idea or need get better defined and aligned with the final project result, product or service. No organization should allow this life cycle to progress without being monitored and controlled. Otherwise, those projects could go out of control and most probably will fail thus the organization would risk losing what they have invested and even more.

ArticleSGPLC2

For engineering and construction projects, the project life cycle, which usually takes few years to complete, consists of different stages that could vary depending on the nature, type and size of the project, procurement strategy, level of desired project control among others. The chart below assumes the traditional design-bid-build project life cycle detailing the most common project stages. Sometimes, the design development stage can be further detailed to 30%, 60% and 100% Design Development stages. Project owners have always used those stages to monitor and control the project development, ensure that needed internal and external approvals are secured, review project budget and request funding, review project milestone dates, review and accept deliverable among others.

ArticleSGPLC3

To improve project governance, it is recommended to introduce the Stage Gate Review process to the project life cycle. The Stage Gate Review process is a formal project life phase-driven go/no-go decision point where selected project deliverables are reviewed to assure that appropriate organization requirements are observed. To ensure the proper governance, the review will be done by an independent committee usually known at the Stage Gate
Review Committee. A project cannot proceed without a “go” decision by the Stage Gate Review Committee. Each Stage Gate Review is an independent confirmation by the Stage Gate Review Committee as well as relevant project stakeholders that require confirming that the project reviews have been successfully conducted. It checks that if the involved project entities have satisfactorily produced all the required deliverables and adequately met all exit criteria for a given project stage to permit advancement to the next stage. It provides the Project Manager and the Project Owner the benefit of having an independent body review the project which will enforce project governance.

ArticleSG3

The emphasis of the Stage Gate Review is on:
• The successful accomplishment of stage deliverables;
• The successful alignment with project objectives;
• The plans for the next life cycle phase; and
• The approvals needed had been secured

ArticleSG5

For each stage gate, there should be pre-agreed list of deliverables that need to be completed before the Stage Gate Review Committee can commence with the review process. Those deliverables should be clearly identified and described in the contract terms and conditions as well as technical specifications. Those deliverables are the input for a stage gate which will be produced during the relevant project life cycle stage. Project Management Information System (PMIS) applications like PMWeb will be used to map those project life cycle stages, identify the deliverables for each stage, link to the original deliverable document, assess and report the status of the stage gate, capture the reviews and approvals among others.

ArticleSG7

Stage gate deliverables could include drawings, specifications, BIM models, cost estimates and budget, schedules, PDRI score report, value engineering report among others. Stage Gate Reviews need to be part of the overall project delivery schedule to identify when those review will be done and what duration will be allocated for those reviews. This will ensure that the stage gate review team is available to complete those reviews in a timely manner and without affecting the project’s milestone dates.

ArticleSGSchedule

Some of the most common project deliverables that engineering and construction projects would usually require:

Building Information Modelling (BIM) Deliverables
Today, there is a growing trend among project owners to adopt Building Information Modelling (BIM) on their engineering and construction projects. Autodesk defines BIM as an intelligent model-based process that provides insight to help you plan, design, construct, and manage buildings and infrastructure. The BIM models get detailed as the project scope get better defined into the different project life cycle stages. The Level of Detail (LOD) of a BIM models start at LOD100 at the Concept Design or Pre-Design Stage all the way to LOD500 at the As-Built Stage.

ArticleSGBIMPLC

For each project stage, there will specific deliverables that either the project engineering consultants or contractors need to formally submit and seek the project owner’s approval. For example, at the Concept design stage or LOD100, the list of deliverables could include BIM Execution Plan, Feasibility Models, Data Base of Programs/Spaces, Massing/Volume/Area, Relationships/Functions, Responsibility Matrix, Data Organization Outline and Restatement of Owner Requirements. Whereas the Schematic Design Stage or LOD200 the list of deliverables could include BIM Execution Plan Update, Preliminary Energy Model Values, Concept Model, Architectural Model, Preliminary Systems Model – Structural, MEP, Civil or other systems required by the project and Clash Detection Report.

Project Definition Rating Index (PDRI)
PDRI is a tool developed by the Construction Industry Institute (CII) to evaluate the quality of the project scope definition. It is a proven method to quantify the level of scope development during the project design stages where a project can receive a PDRI score between 0 and 1000. The PDRI consists of 3 Sections, 15 Categories and 70 elements that are detailed on this CII PDRI link https://www.construction-institute.org/scriptcontent/more/rr113_11_more.cfm

ArticleSGPDRI3

For each one of those 70 Elements, the PDRI workshop will require the project team to score out of a scale of 5 as per the below chart. The Maximum PDRI score a project can get is 1,000 while the Minimum score will be 70. The Lower the score the better (just like golf). Project owners will consider the PDRI report as one of the formal “stage gate” deliverable. The PDRI is usually done at the concept, schematic and design development stages.

ArticleSGPDRI2

Risk Management
No project can be ever completed without making assumptions to address the many unknowns. Therefore, formal risk management should be part of every project monitor and control process. The project risk register is a dynamic document that should be kept updated during the whole project life cycle. For a project owner, the risk register is one of the most important documents to assess if the project still worth the Return of Investment (ROI) it was selected for with the risk exposure that it has.

There is a growing trend among major owners to request for formal risk workshops at each stage gate and in particular before the formal award of the construction contract. The risk workshop will identify, review, assess, analyze and recommend responses to risks that could affect the project. The deliverable of this risk workshop will be the risk register will detail all risks, pre-mitigation likelihood and impacts, mitigation actions, and post-mitigation likelihood and impacts. The risk analysis will also consider any adjustments to the project budget contingency and schedule buffer to update the project’s budget and schedule.

Articleclaim4

Value Engineering (VE)
Nowadays Project Owners and more than ever understand the importance of getting the maximum value of each dollar spent on the project investment. Project Owners cannot afford and should not permit waste in delivering their projects. Value engineering (VE) is defined as a systematic method to improve the “value” of projects, products or services by using the function analysis. Value, as defined, is the ratio of function to cost. Value can therefore be increased by either improving the functions of a project or reducing its cost. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvements.

Value Engineering has the best benefit when it is done during the pre-contract stages and in particular during the schematic design and early design development stages. Value Engineering could have significant impact on the project design documents. Many project owners would require having a formal confirmation that a value engineering workshop was conducted before approving the relevant stage gate. The value engineering report will be one of the stage gate deliverables.

Article When applying VE

Work Breakdown Structure (WBS)
The project Work Breakdown Structure (WBS) is one of the project management best practices that need to be implemented on every project. The Work Breakdown Structure (WBS) is a technique used to subdivide the major project deliverables and project work into smaller, more manageable components, also known as scope decomposition. Although each organization could have a different strategy in developing the WBS but they all need to keep in mind that the WBS will become the basis for developing the project detailed cost estimate, developing the project execution schedule, identifying projects risks, developing the project outsourcing or procurement strategy among many others. There is a growing trend among project owners to have the WBS as one of the deliverables at the project life cycle stage gates.

WBS

Project Schedule
The project schedule is an important document that will depict the milestone dates for completing the project life cycle stages as well as other important interim milestone dates. The project schedule will take into consideration the project scope and level of effort needed to complete this scope following the logical sequence for executing the works. The project schedule should consider the constraints that could limit the project owner choices in delivering the projects as well as the assumptions that have been identified in the risk workshops.

ArticleSchedule

In addition, many project owners are now requesting that the impact of risks be simulated on the project schedule using the Monte Carlo technique. This will help in quantifying the probability of completing the project on time by using a 3 point estimates for durations (min, most likely, max) thus taking uncertainty into account. This analysis will provide an objective evaluation if the project schedule represents a Realists Plan (Most Likely), Aggressive Plan (Optimistic), Cautious Plan (Pessimistic), or a Scale to Fit Plan (Politics) to please the project owner.

The Monte Carlo technique will detail the chance of completing the project on time taking into consideration the identified uncertainties for project durations and sequence as well as specific risk events. The project owner can decide at which confidence level to accept the project schedule. Usually 80% is the most acceptable confidence level. This will be presented in a report that will show a cumulative frequency curve to represent the likelihood of certain milestones achieving targets. The plotting of these “S” shaped curves is used to quantify the interaction of the likelihood of certain events and their cumulative effect upon the project schedule as a whole. In addition, the analysis will identify the top 10 critical activities that need to be carefully managed and monitored.

ArticleMonte

Project Budget
The project budget represents the amount of approved investment that an organization is willing to spend on a project. The project budget will be subject to change at the end of each stage during the pre-contract stages as the project as the project scope becomes better defined. Some project owners use the Work Breakdown Structure (WBS) as the project Cost Breakdown Structure (CBS). This will help in aligning the project budget with the project WBS and schedule. The project budget will also reflect changes to the project contingency which will be aligned with the risk analysis done at the relevant project stage. The project budget is one of the critical stage gate deliverables.

ArticleSGBudget

Project Objectives and Benefits
A project should have a tangible or intangible benefit that will help in achieving the desired project objectives. Project Owners will usually review those benefits at the project stage gates which will include reviewing the business plan and any updates made on this plan. The project owner will also review the project objectives to verify if those objectives are still worthwhile or they need to be adjusted for which it can have an impact on the project’s viability.

Project Management Audit
For organizations who are adopting project management best practices would usually carry out a formal audit to check the project compliance with project management best practices. The Audit checklist will detail the project management processes to be checked and for which each will be scored as Compliant, Non-compliant, Present, Absent or Not applicable. The project management audit checklist is usually aligned with ISO standards such as 10006 and 21500. The Project Management Audit will be one of the stage gate deliverables.

Stage Gate Scoring
As the stage gate review will include the review and assessment of many deliverables, there will be a need to consolidate the decisions made on those deliverables to support the Stage Gate “Go/ No Go” decision. The consolidated list will identify the questions that need to be answered based on the output of each deliverable. Each question will have a weight to detail its importance compared to the other questions. Each question will also be assigned the number of score points that it could have. Also some organizations might decide to have different number of points for each question, nevertheless many organizations opt to standardize those scores and keep it at 5 points. The score of 5 means fully compliant and meets all requirements while a score of 1 indicates that this deliverable did not meet the stage gate review requirements. The score of each question along with the weighted average will provide the total score for the stage gate review. This score can be used for trend analysis or comparing the stage gate score for a specific project stage with other projects for the same stage.

ArticleStageScore

Stage Gate Formal Review and Approval
Similar to all other project management processes, there should be a formal process to document the approval of a stage gate. This requires having a document template that will detail the different data needed to be transmitted. This data would include project specifics, stage gate details, overall project status as it relate to schedule, cost, deliverables, risks, issues and changes. It will also include the stage gate questions and answers which became the basis for determining the stage gate score. The template need also to detail the details of those who have approved the stage gate. In addition, all deliverables will be either linked or attached to the stage gate review form.

The workflow steps for submitting, reviewing and approving the Stage Gate Review will detail the stakeholders that are part of the stage gate review committee and the sequence to be followed in the review process. It should be noted that the Stage Gate Review committee members could vary from one stage to the other.

ArticleSGforms

In conclusion, organizations who are serious on protecting their project investments should never those projects to proceed without the proper governance. Stage Gate Reviews provide a formal and proven method to ensure that the project is still worthwhile for the organization to continue to invest in.

About the Author

Can Project Management Information Systems (PMIS) Stop Project Fraud?

The recent drop in oil prices is creating great pressure on project owners in both public and private sectors in Saudi Arabia, UAE and other Gulf countries, to come up with measures to improve efficiency and stopping waste when it comes to delivering projects. Measures that will the focus on optimizing the selection of projects as well as measures to improve the delivery of the selected projects.

Those measures should not be limited to improving the project management practices and developing better project managers and team members but should also focus on how to curb actions that are intended to harm a project. Those are the actions as are usually labelled as “Project Fraud” actions which could include but not limited to:

  • Unsubstantiated project decisions
  • Under-reported estimates of project cost
  • Over-reported estimates of project benefits
  • Unbalanced bids
  • Over-reported schedule performance to hide project delays
  • Wrong forecasting for cost to complete the remaining project scope
  • Unsubstantiated change orders
  • Over-estimated change orders
  • Over-reported quality progress
  • Acceptance of lower-quality deliverables that cannot be used as originally thought
  • Delayed and/or improper approvals
  • Conflict of interest and kickbacks
  • Negligence in protecting client’s interest
  • Non-compliance with the contract’s terms and conditions
  • Creating unnecessary threats by failing to comply with best practices
  • Failing to report threats before they harm the project
  • Failing to report opportunities that could have benefited the project
  • Lost or misplaced project documents
  • Appointing unqualified project team members
  • Intended wrong actions or decisions

Fraud is very much a part of every business and projects are no different specially when there is lack of governance and control. Actually, there are more chances in project fraud than other type of frauds where usually corporate policies and procedures are well enforced and internal or external audit is a requirement.

So how can Project Management Information System (PMIS) help project owners in stopping project fraud?

First, let us define what is a PMIS? It is solution that will enable project centric organizations to manage their portfolio of projects and programs following best practices and recognized standards in project management. A PMIS provides a collaboration platform that enables all project stakeholders and team members to access needed projects data in a secure and authorized format. The PMIS should be web-enabled to allow authorized access anytime, anywhere using any device. A PMIS should have reporting and dashboard capabilities to enable data sharing and visualization. A PMIS should allow storing all types of project documents and records. A PMIS should be configurable to allow meeting the specific project management requirements of the project stakeholders. Finally, a PMIS should comply with the local requirements and regulations of where it will be used.

Accordingly, the PMIS will be used to help organizations to stop “Project Fraud” through the implementation of the following functions and features that any capable PMIS solution should provide as a minimum:

  1. Enforcing an effective and efficient implementation of the different project management procedures that need to adopted on a project.
  2. Enforcing a reliable performance and financial reporting
  3. Enforcing an effective early warning system of all delayed actions and approvals
  4. Enforcing a formal audit of ISO quality best practices
  5. Enforcing a legally-correct project communication
  6. Enforcing a formal appraisal of companies and project management team members
  7. Enforcing a robust document management system

Enforcing an effective and efficient implementation of the different proArticleClaim3ject management procedures

One of the key functions of a Project Management Information System (PMIS) is the ability to map the different project management processes that need to be implemented on a project. This will require either using the standard pre-defined project management forms or customize new forms to capture the needed project information. The quantity of Forms also known as Document Templates that are used on a project can vary depending on the level of governance and control to be exerted on the project. For example,

  1. Request for Information
  2. Meeting Minutes
  3. Daily Report
  4. Snag List
  5. Non Compliance Request
  6. Site Work Instruction
  7. Transmittal
  8. Material Approval Request
  9. Confirmation of Verbal Instruction
  10. Accident Report
  11. Site Inspection Form
  12. Permit
  13. No Objection Certificate
  14. Approved Project Budget
  15. Proposed Change Order
  16. Change Order
  17. Progress Invoice
  18. Risk Record
  19. Issue Form
  20. Lessons Learned
  21. Project Charter
  22. Deliverable Acceptance
  23. Stage Gate Review
  24. Lessons Learned

For each one of the project management document templates, there will be a workflow to detail the steps and the sequence for submitting, reviewing and approving the content of the document template. For some document template, there could be multiple workflow options the depend on specific attributes of the document template such as type of change, amount of change, project system type among many others. The PMIS should enable developing those workflows incorporating all different variables.

ARTICLEWorkflow

Enforcing a Reliable performance and financial reporting

No organization should allow the “watermelon” syndrome to be the basis for their performance and financial reporting. Organizations who are still dependent on having their team to capture and report project performance and financial reporting using MS Excel or other solutions that depend on data fed by individuals must accept the fact that is being reported on is what others want them to visualize which could be far from the truth.

A Project Management Information System (PMIS) will enforce reliable performance reporting as the content for those reports will be extracted from the data captured in the document templates through the pre-defined workflows. In other words, the reports are based on 100% true, correct and updated data that was not influenced by any team member.

The PMIS can use to develop:

  1. Tabular and Graphical reports that will enable grouping, sorting, filtering and summarizing captured data in the desired format. For example, those could include RFI Log, Change Orders Log, Risk Register, Issues Log among others.
  2. Project Management Discipline Dashboards that will enable grouping data from different interrelated data tables to provide the knowledge needed to better manage this discipline. For example, those could include Cost Management, Risk Management, Document Management, Schedule Management among others.
  3. Project Dashboard that will enable having a single version of the truth of the overall project’s performance based on knowledge captured in the Project Management Discipline Dashboard.
  4. Program, Portfolio and/or Enterprise Dashboards that will enable having an overall view of how a specific program of projects or a portfolio of projects are performing.

ArticleDashboards

Enforcing an effective early warning system of all delayed actions and approvalsKPI

Having the projects data captured in a Project Management Information System (PMIS) will enable developing alerts that will be triggered when performance for any specific project management process is unfavorable. The project owner need to identify the Key performance indicators (KPIs) that will be used to ensure that approvals and reviews are done in a timely manner to avoid causing delays that could result in claims for time extension, additional finance cost among others.

The Key performance indicators (KPIs) will usually have pre-set limits on when to trigger an alert. Those limits are usually set based on past experience as well as best practices and industry trends. Therefore, if the performance values reported by those KPIs are not correct or not valid because of the delay in reporting them, the decision made will not only be of no value but could even harm the project.

Enforcing a formal audit of quality best practices

There is a growing trend among many organizations to adopt ISO International Standards to ensure that products and services are safe, reliable and of good quality. They look into ISO International Standards as strategic tools that reduce costs by minimizing waste and errors, and increasing productivity. Some of those standards used by Project Owners include ISO 9000 – Quality management, ISO 14000 – Environmental management, ISO 31000 – Risk management, OHSAS 18001 – Occupational Health and safety Assessment Series and ISO 10006:2003 Quality management systems — Guidelines for quality management in projects.

One of our clients have the PMWeb Project Management Information System to create ISO compliance matrix where on monthly basis and for each ISO standard an audit will be performed. A pre-defined weight factor as assigned to each item in the ISO Audit Checklist. Based on the assessment done by the authorized project owner representative, the total ISO compliance score will be calculated which has a high value of 100%. The complete ISO audit will be submitted using the pre-defined workflow to be reviewed and approved. The Audit score will appear immediately on the ISO Audit Dashboard as well as the project dashboard. The PMIS ensure that all ISO Audit forms for all project periods and for all projects is captured on a single database repository.

ArticleISO

Enforcing a legally-correct project communication

One has to admit that Project Managers are not always the right individuals who might be entrusted in right legally-correct project communication. Projects and in particular those for engineering and construction depends on outsourcing the project execution to third parties such as consultants and contractors. This outsourcing is the approach that project owners use to transfer some of the project risks to those organizations. For each contract awarded, there are terms and conditions that both parties of the contract should abide with the full. Whether the conditions of contract are based on FIDIC, NEC3, AIA or any other form of contract, the conditions of contracts sets notification notices that parties of the contract should abide with. Those notifications are legal and need to comply with the specific clauses that they relate to.

To eliminate the risk of drafting or failing the draft the legally-correct notifications and communications, the project owner need to adopt the same best practice of document templates. Some of the project owners are retaining the services of qualified legal firms should they do not have this experience in-house to help in drafting letter templates that are aligned with the contract clauses. This will ensure that that the project manager will use the proper communications that will protect the interest of their organization.

ArticleLetterTemplate

Enforcing a formal appraisal of companies and project management team members

Without formal appraisals of how companies and project team members are performing it will be hard to identify opportunities to improve as well as communicate the message that “High Performing Organizations” are the organizations want to continue to do business. The appraisal should be based on objective goals that can be measured such as compliance with quality standards, Health, Safety and Environment, Sustainability, being proactive in solving project issues among others.

Similar to other document templates, the PMWeb PMIS was used to develop a form for the appraisal of contractors and consultants as well as project team member. The form lists the different areas that an appraisal needs to be carried on. This form when completed will be formally submitted for review and approval. The frequency of this appraisal process vary depending on the organization’s policy but what is important that all appraisals for all stakeholders for all projects and for all periods are captured and stored on a single database repository. This will enable producing reports and dashboards that would report on this database in the desired format.

ArticleAppraisalGC

Enforcing a robust document management system

During the project life cycle stages there are so many documents that get exchanged between the different project stakeholders. Those documents come in different formats. Some are scanned communications, others are electronic files of different file formats while others could be videos and videos. Those documents could be interrelated to each other, could be a different version of the same document or could be attached to document templates generated in the Project Management Information System (PMIS). Those documents need to be stored in a folder based structure that is identical to the physical filing system that a project has. The folder based structure not only helps in finding and reviewing related documents but also help in setting access rights to those folders.

Today, many project owners use PMWeb Project Management Information System (PMIS) as their projects filing and document management system. Many of those project owners also have their own corporate electronic document management systems (EDMS) nevertheless they do not want other stakeholders to access the corporate EDMS. They want to completely separate the projects document management repository from the corporate document management repository.

Having a complete storage of all project documents enable the project owner to search and locate any specific communication or document. It will enable the project owner to make better decisions as there is no missing documents that could affect the outcome of their decision.

ArticleClaimDocument

Therefore, if you are interested in putting an end to project fraud and have committed to develop the policies and procedures as well as develop the qualified project team to support this initiative, having an integrated Project Management Information System (PMIS) is a must and not a choice.

About the Author

Can an Integrated Construction Claims Solution Protect Project Relations?

Thirty years ago during the early days of CMCS, our first client was one of the major contractors in Kuwait who had an impressive 100% return client rate. This contractor was awarded a very prestigious project where it must be completed in 365 days even when the scope was not complete. The CEO of the company was sure that no one can complete this project but him, nevertheless he needs to win the project as it was a public project that most go through competitive bid process. The project was one and I was asked to do the construction claim for the project. The CEO was sure that the project had many assumptions that most will prove to be wrong and change to the contract will happen. The CEO was visionary enough to see that the project will be completed on the intended target date but at a much higher cost than the bid price because of the changes. He was visionary enough to understand that even if the Project Owner will appreciate the timely completion but this Owner will have tough time asking for the additional funds without complete and justifiable documentation. The company CEO understood that failing to do so will harm him and the Project Owner. So simply, our role was to prepare a fully documented construction claim report that a layman will fall in tear when he reads it when he sees what this contractor have achieved. The CEO was very clear in requesting that the construction claim report to be all based on factual data and be fully documented. To cut the story short, more than 350 change orders were issued on the 12-month project, contractor completed the project 10 days ahead of schedule and more 60% over budget. The contractor got his claim settled and continued to be the market leader.

Funny enough, few months CMCS was approached by another international contactor whom we have worked with for more than 20 years asking us for a similar request but at a global level. The requirement was very simple. Our Clients trust us and they know that we are the only one who can deliver their projects. They have no issues in paying all of our claims but we also understand if we do not provide them with the complete factual documentation and justification, we will be harming them and will not find them next time. Their decisions to grant us our claims could be questioned and challenged by the Audit, Finance, Legal and other departments. Therefore, they asked us to come with a complete solution to manage their construction claims.

Assumptions Are Part of Every Project

Every project stakeholder regardless what role he or she is playing on a project, understands that there are many assumptions need to be made to address the many unknowns that could or could not happen during the project execution. Those assumptions are the risks that could impact the project schedule, budget and other project objectives. When those risks occur they become issues that need to be managed to reduce their negative impact on the target project schedule and budget.

Assumptions are needed on every project to address the absence of facts relating to what would the project encounter while being developed as well as to the benefits it is supposed to generate upon its completion. Only time will prove if those assumptions were correct or not. In other words, every project stakeholder will be always faced with the risks that those assumptions he or she made as well as other assumptions made by those he retained to help him to develop the project might prove to be incorrect. Failing to manage those risks effectively might mean that the anticipated benefits from the project investment will never be realized.

Understanding Project Risk, Issue, Change and Claim

A Project Risk is the possibility of a problem that has not occurred yet, and if it occurs it would have a negative impact on a project budget, schedule and scope. A Project 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. A Project Change is a problem that has changed the project original scope, schedule and/or budget for which an equitable adjustment might be needed. If this adjustment is disputed, then we have a construction claim.

ArticleClaim1

Some of the most common causes of risks that might result in construction claims include:

  1. Acts of God
  2. Acts of Government
  3. Actual Acceleration
  4. Adverse Weather Conditions
  5. Cardinal Change
  6. Commercial Impracticability/ Performance
  7. Commercial Impracticability/ Supply
  8. Constructive Acceleration
  9. Constructive Change
  10. Defective Specifications
  11. Delay of Approvals
  12. Delayed Issuance of Change Orders
  13. Delayed Notice to Proceed
  14. Destruction of Work
  15. Destruction of Materials
  16. Differing Site Conditions
  17. Early Completion Prevented
  18. Impossibility of Performance
  19. Improper Inspection
  20. Inadequate Supervision
  21. Inadequate Utilities
  22. Interference
  23. Labor Shortage
  24. Lack of Access
  25. Lack of Information or Decision
  26. Lack of Permits
  27. Lack of Right of Way
  28. Late Drawings
  29. Late, Defective Material, Etc.
  30. Payments Not Made
  31. Scheduling Difficulties
  32. Stacking of Trades
  33. Strikes
  34. Subcontractor Delay
  35. Superior Knowledge/ Misrepresentation
  36. Supplier Delay
  37. Suspension of Work/Delay
  38. War and Other Hostilities

For those who are involved in executing projects fully understand that projects that have disputed construction claims is bad for the business as:

  1. They will result in Project Cost Overrun
  2. They will result in Project Delays
  3. They will result in Distracting Project Management Team as well as Senior Management from Achieving Project Objectives
  4. They will result in Reduced Resources Efficiency and Waste of Effort
  5. They will result in Damaging the Relation Between the Project Stakeholders; Project Owner, Project Management Firm, Consultant, Contractors, Subcontractors, Suppliers among others
  6. They will result in Creating Stressful and Tense Project Environment
  7. They will result in Turnaround of Good Resources
  8. They will result in Lost Opportunities for The Contractor to Win Other Projects with Same Clients and Others
  9. They will result in Lost Opportunities for The Project Developer and Owner to Generate Income from Customers and Tenants

The Proposed Enterprise Construction Claims Solution

CMCS proposed an integrated Enterprise Construction Claims Solution based on the PMWeb enterprise Project Management Information System (ePMIS) for which will formally manage the three processes of risk, issue and change management while integrating with all other relevant project management processes and documents. The project management processes need to be aligned with the Project Management Institute (PMI) Project Management Body of Knowledge (PMBOK) standards and best practices. The web-enabled solution needs to be report performance and status at project, program, portfolio and enterprise level. He wanted to stop the “watermelon” dashboard reporting that is currently place where MS Excel is used to capture projects’ information and then use this data to report to management. Not only no one trusted the dashboards but they were always week late. It was also requested that there should be a single point access for the whole solution with no Data Silos. Our client viewed Silos are perfect to store wheat but not data. The schematic chart below explains the solution.

ArticleIntegratedRisk

The Enterprise Construction Claims Solution required three interrelated project management processes that will be formally implemented and managed.  Those are Identify, Assess, Mitigate, Monitor and Control Risks, Manage and Resolve Issues and Manage Changes and Delay Events.

ArticleClaim2

Identify, Assess, Mitigate, Monitor and Control Risks

A process was developed to capture all possible risks that could happen on a project. A detailed document template was created to serve the purpose of Risk Identification and Assess and Mitigate Risks. To protect the particular requirements of our client, we are using sample forms and reports that although are from other projects or examples but they help to explain the objectives of ArticleClaim3the solution.

A custom form was created in PMWeb using the Custom Form Builder to map the data that must be captured. The form has set access rights to limit who can fill what from the project team. The form was linked to a workflow to detail the steps for document template submission, review and approval. It was also a must requirement that each Risk Document Template should have all supportive documents attached or linked to it. A Risk Document Template should be self-explanatory. They did not want to create a new risk of having an incomplete risk submission.

The custom form has most of the data fields to be completed available for a pre-defined dictionary list. This was a must requirement to ensure consistency and single terminology to be used globally across all of their projects. Also they want standardization to be able to summarize and report on risk data from multiple projects. Some of the standard fields included:

  1. Risk Breakdown Structure
  2. Risk Titles
  3. Risk Types
  4. Likelihood range
  5. Impact range
  6. Risk Score grading
  7. Risk Response Actions for both negative and positive risks
  8. Countries and Locations

The information captured from the risks in the pre-defined document templates where presented in online risk register that details the impact of risks before and after the approved mitigation actions. The risk register report was available in a single format but with flexible options to sort, group and filter risk records. The report was designed to present information at project, program, portfolio and enterprise level.

Articleclaim4

Manage and Resolve Issues

An Issue Form was created to immedarticleclaim5iately capture all problems that have occurred where they were already identified in the risk register or not. The issue form record the participants involved, submission and resolution dates, status, identify and record issues clearly, issue type which is aligned with the risk types, related risk record, which activity in the project schedule it will impact.

A custom form was created in PMWeb using the Custom Form Builder to map the data that must be captured in the Issue Form. The form has set access rights to limit who can fill what from the project team. The form was linked to a workflow to detail the steps for document template submission, review and approval. It was also a must requirement that each Issue Document Template should have all supportive documents attached or linked to it.

The issue form was a very important process in the enterprise claims management solution. It was at this stage where all related documents, records and events were captured. It was the process were proper contractual correspondence to be written to protect the interest of the company and increase their chances for getting the change order approved should this be needed and without confrontation.

The information captured from the issues in the pre-defined document templates where presented in online issues register that details the status of all issues and their criticality on the project objectives. The register also showed the proposed solution, whether it was implemented or not and whether it has solved the problem or not and whether it has resulted in a change request or not. The Issues register report was available in a single format but with flexible options to sort, group and filter issue records. The report was designed to present information at project, program, portfolio and enterprise level.

This Issue Register was designed to help the contractor to:

  1. Prioritize issues and report on their status
  2. Review all issues and decide on a course of action
  3. Monitor the outcome of the actions taken
  4. Report on the status of issues to management, for example Open, Investigating, Implementing, Escalated and Resolved.

ArticleClaim6

Manage Changes

The process of Manage Changes was more to ensure that there is a proper coordination between the project team members involved in change management. Contractually, the contractor was obliged the change management document templates developed by the Project Owner. Therefore, the needed change management form was to capture the details the needed details from the Project Owner change management document templates and details of changes the Contractor needs to do internally and with his subcontractors, suppliers and other stakeholders.articleclaim7

Similar to the earlier forms, a Change Request Form was created to capture the details of the change which will be the basis for the claim submission. The change request form will be used to record the claim statement and justifications, relevant contract clauses, cost implications, schedule implications (based on the Delay Event Form) among others.

A custom form was created in PMWeb using the Custom Form Builder to map the data that must be captured in the Change Register Form. The form has set access rights to limit who can fill what from the project team. The form was linked to a workflow to detail the steps for document template submission, review and approval. It was also a must requirement that each Change Register Document Template should have all supportive documents attached or linked to it.

In addition, another custom form was created to capture the details of the time impact delay analysis associated with the change. The contractor fully understands that the issue in change orders is not whether there an increase or decrease in the project scope of work as this can be easily quantifiable. Rather the issue with changes is to quantify the delay associated with the change, whether this delay was critical to the project completion date or not, is this delay with compensation or not depending on the contract conditions, was this delay concurrent with other delays, did the contractor needed to accelerate to recover the delay or not, was there any impact on the resources efficiency among others. The Delay Event Form was designed to capture all of this information.ArticleClaim8

It was also a requirement that for each Delay Event Document Template to have all supportive documents attached or linked to it. Those included project schedule, contract clauses, site work instructions (SWI), daily reports, meeting minutes, time sheets, progress photos, videos from the time lapse camera and any other document or record that explains the impact of the delay on the project’s execution and resources needed to execute this work.

The information captured from the Change Register and Delay Event where consolidated in an online changes log that details the status of all changes with their cost and time impact. The register also showed the status of those changes and whether if any is disputed by the Project Owner. The change register report was available in a single format but with flexible options to sort, group and filter change records. The report was designed to present information at project, program, portfolio and enterprise level.

ArticleCllaim9

Integrated Construction Claims Dashboard

To provide the project team members with a single version of the truth for managing, monitoring and controlling the construction claims solution, they needed a single dashboard that will report on risks, issues, change requests and delay events status. PMWeb was used to develop the dashboard where a claims management dashboard was created based on the information captured in the risk register, issues register and change request log. From those tabular reports the authorized user can drilldown to the specific risk, issue, change request and delay event record.

aRTICLEcLAIMS

Document Management Repository

Another important feature of the integrated construction claims management solution is that although PMWeb Document Management Repository was used to store all projects documents, the contractor wanted a separate folder for each claim heading. The contractor wanted the folder for any specific claim to provide a single location for the reviewer to have the complete picture of everything that relate to the claim without the need to search and locate. All relevant exhibits or documents need to be available under the appropriate claim heading even if it means that the same document will be available under different claim folders. Those documents could include drawings, CPM schedule, pictures, videos, meeting minutes, daily reports, correspondence, emails. Site Work Instructions (SWI) among others. The contractor wanted the documents included in those folders to be scanned from the original from the original communication showing signatures and stamps thus fulfilling the contractual obligation of showing formal communications. In addition, PMWeb redline function was used to highlight and add comments to the specific sections of those communications.

ArticleClaimDocument

The contractor was fully aware of the fact that many of those who get involved in reviewing claims on a project are not aware of the project particulars or what has happened on the project. He wanted to be sure that there will be no excuse for having missing documents for any claim submission. He wanted to provide the level of supportive documentation that will be needed by all those from the Project Owner team who will be involved in reviewing the construction claims. Those could include the technical, financial, legal, audit, lawyers among others. This ensured that no one can doubt what is been presented as well as shows that the contractor is ready to go all the way to get paid for his due claims. It is that level of trust as well as confidence the contractor wanted to convey to the Project Owner team as well as the seriousness that the contractor is ready to pursue arbitration and/or litigation to get the construction claims settled.

Construction Claims is an Integral Project Management Process

The contractor looked into Construction Claims as one of the project management processes that need to be managed like managing project scope, schedule, cost, quality, human resources, procurement among others. Actually, the Project Management Institute (PMI) Project Management Body of Knowledge (PMBOK) extension for engineering and construction has added Construction Claims as one of the four additional areas that need to be managed. Those included Safety, Environment, Financial and Claims. The project dashboard included relevant details from the construction claims dashboard, which was in turn summarized to the projects enterprise dashboard.

ArticleMultiDashboard

The integrated construction claims solution will help in reducing the tension and subjective arguments that usually happens when trying to settle construction claims. It ensures that there is objective and contractually correct process for managing and resolving those construction claims before they become disputes and harm the relation between the project stakeholders.

About the Author

Integrated Cost Management in a Project Environment from a Project Owner Perspective: Reporting a Single Version of the Truth

Project Owners and in particular in the private sector understand the criticality of ensuring that their project investments are completed within the approved budget. For them, projects are no different than other investments they undertake where the Return of Investment (ROI) along with other factors such as risk exposure determines their selection. Going over budget, or increasing the capital cost without an increase in the operations revenue could very much turn the project into a “Big White Elephant”.

This article continues and concludes the two earlier articles which explained the steps that project owners usually would follow to have better control on their project cost during the pre-contract and post-contract phases of the project life cycle. The pre-contract phase covered the processes of Cost Estimate, Project Budget and Procure Contracts while the post-contract phase covered Award Contracts, Change Management, Progress Invoices, Forecast to Complete and Closeout. This article will provide details on how to have a single version of the truth when it comes to reporting cost management across the complete project life cycle. The proposed integrated cost management process is aligned with the best practices of the Project Management Institute (PMI) Project Management Body of Knowledge (PMBOK).

ArticleALL

The PMWeb Enterprise Project Management Information System (PMIS) software will be used throughout this article to detail how a single Commercial of the Shelve (COTS) platform can capture the details of all processes needed to manage the project cost and other related processes. PMWeb provides those involved in delivering the cost management processes with the following important functions:

  1. Pre-developed document templates to capture project cost management information
  2. Custom developed document templates to capture additional cost management information
  3. Link WBS and Schedule activities from the planning and scheduling application
  4. Capture all type of cost data including the support for multi-currency at line item level
  5. Document management repository all documents needed to support the cost management processes such as drawings, BIM models, material brochures and catalogues, material specifications among others
  6. Workflow to formalize the process of submitting, reviewing, sharing and approving project management processes
  7. Tabular and graphical reports to aggregate, summarize, sort and filter the information captured from the cost management processes
  8. Dashboards to summarize and analyze the cost management data to enable faster and better informed decisions on the project cost.
  9. Ability to import and export data to third party cost estimating and other cost management applications
  10. Integrate with all other best practice project management processes
  11. Web-enabled to allow team collaboration in developing the cost management processes

Single Data Source Platform

What makes PMWeb unique when it comes to reporting a single version of the truth on the cost management performance for a project, a program or a portfolio of projects is that all of the document templates used to capture the data from the different construction management processes across the project life cycle stages are all stored on the same platform. No data import, integration or input redundancy is needed.

Nevertheless, some organizations could have the requirement to export and import cost data among other type of data to third party software applications like Oracle EBS, MS Dynamics, SAP and others, then the PMWeb API Integration will be used to build this integration to facilitate this bi-directional automated integration. This integration will enable the organization to capture the complete data from the different sources and report on the same.

ArticleAPI

The Cost Ledger

The cost data captured from the different PMWeb cost management modules are stored in a single repository known as the cost ledger. For every cost transaction, the cost ledger provides the type of the transaction, which document was used for the transaction, the amount, the currency, the financial period, the date, status among many others. This granularity in capturing the cost data will enable creating the desired cost report reporting on data captured from different document templates.

ArticleCostLedger1.jpg

In addition, PMWeb enables adding additional cost transaction to the cost ledger using what is known as a Journal Entry to avoid adding a document template that is not needed. The Journal Entry is used to reverse the value of an existing document template or add new values to the cost ledger.

ArticleJournal

Cost Worksheet

One of the most important integrated cost management reporting is the Cost Worksheet which is a powerful report or analyzing the project’s finances. This is a tabular report that can be customized to capture cost data from the different data captured in the cost ledger which include project’s budget, time-phased budget per period, commitment, change orders, progress invoices, income among others.

ArticleCWandLEDGER

The cost worksheet which can considered to be similar to a MS Excel template but with the main difference is that the content of the file is captured from the cost ledger. The cost worksheet in PMWeb allows adding new columns, adding formulas between the different data fields and ability to select data within time range from the project’s financial periods where only Cost Ledger transactions with a period between the selected financial periods will be included in the worksheet.

ArticleCostWSDetail

The online cost worksheet will enable the user to drill down to the source of each record from the cost database. The online cost worksheet can be grouped and sub-grouped based on the select cost breakdown structure or WBS levels. The cost worksheet can be also saved as a MS Excel to enable the user to do further analysis including what-if scenarios without affecting the original cost database.

ArticleCWSample

The cost worksheet reports can be designed to capture the cost data from different projects to generate cost worksheet report at Program level as well as Projects Portfolio or Enterprise level.

Cost Dashboard

The cost dashboard is a multi-layered will capture and present the integrated cost management in the desired format by the project owner. It will usually reflect the cost data at three levels. Level 1 will be the overall cost performance of the project, level 2 will detail the information captured from the different document templates such as Estimate, Bids Procurement, Budget, Commitments, Change Management, Progress Invoices, Payments, Forecast to Complete and any other document template that the Project Owner has implemented to manage the project cost. For each displayed report, the report viewer can drilldown to the specific document template record used to capture the relevant project’s cost data. Of course, should the user have the proper security credentials they can record to the actual data entry form along with all attached documents. Those documents could be documents stored in PMWeb own document management repository, Aconex, MS SharePoint, Emails, documents on any other repository, hyperlinks to documents on the cloud and links to other PMWeb records from other PMWeb modules and not limited to the Cost Management module.

ArticleIntegratedCostDash

Cost Management Key Performance Indicators (KPIs)

The Cost Management dashboards depends on summarizing and analyzing the project’s cost data to compare the performance with best practice benchmarks, performance trends among others. The list of possible KPIs are extensive and depends on what the organization believe it is best for them to manage and direct the project’s successfully. The organization can set the target performance levels to indicate the favorable, acceptable and unfavorable performance.

KPIs for Cost Control

  • # project cost performance index
  • # project cost schedule index
  • % budget allocated to budget spent ratio
  • % of projects on budget
  • % of projects on time and on budget
  • % of projects without deviation of planned budget
  • % project budget variance
  • % projects on budget
  • Cost-/benefit estimation %
  • Deviation of planned budget
  • Engineering costs as % of total installed costs (TIC)
  • Project cost predictability
  • Sum of costs of “killed” projects
  • Total deviation of planned budget of projects
  • Average amount of overspending on project budget

KPIs For Earned Value Management (EVM)

  • # project schedule performance index
  • Earned revenue to total expenses
  • Schedule performance index (SPI)
  • Schedule variance (SV)
  • Actual cost of work performed (AC)
  • Budget at completion (BAC)
  • Budgeted cost of work performed (EV)
  • Budgeted cost of work scheduled (PV)
  • Cost performance index (CPI)
  • Cost variance (CV)
  • Estimate at completion (EAC)
  • Estimate To Complete (ETC)
  • Variance At Completion (VAC)

KPIs For Project Investment

  • % of projects with non-positive ROI
  • % of projects with pre-defined ROI
  • % of projects without deviation of planned ROI
  • % of projects without deviation of planned net present value (NPV)
  • Return on investment (ROI)
  • Deviation of planned ROI
  • % of projects without deviation of planned break-even time
  • Average deviation of planned ROI of projects
  • Average project/program ROI
  • Net present value (NPV)
  • Average net present value (NPV) of projects
  • Deviation of net present value (NPV)
  • % profitable projects
  • % successful projects
  • Average deviation of planned net present value (NPV) of projects
  • Modified internal rate of return (MIRR)

Project, Program and Portfolio Dashboard Reporting

Having a 360-degree status of the overall project’s performance requires reporting on the knowledge captured from other project management processes including schedule, risk and issues, documents among others. Similarly, if the project is part of a program of projects or a portfolio of projects, then again the knowledge from those projects need to be reported on.

ArticleMultiDashboard

Extract, Transfer, Load, Associate, Blend and Visualize

Organizations and in particular project owners might intentionally avoid integrating all of the cost data and other relevant data on a single platform due to corporate governance, Information Technology considerations and data security policy. For project owners in the public sector, certain aspect of the integrated cost management could be handled by other government entities.

To resolve this issue, a solution is needed to extract, transform and load (ETL) data from multiple data sources to become the input the for consolidated and integrated cost management reporting. Data sources could be from applications like PMWeb, Oracle Primavera P6, Oracle EBS, MS Dynamics, SAP, ESRI GIS among many others. The captured data from the multiple data sources will become the source for developing the integrated cost management performance dashboards.

The key development in recent data visualization solutions like Qlik, Tableau, iDashboards among others is what is known as “Data Association” rather than “Data Integration”. Multiple data sources need only to have some common fields for the association to happen so it can become possible to blend and visualize data. Some of the data fields that are usually used to associate data in a projects environment include:

  1. Breakdown Structures
    1. Projects Breakdown Structure (PBS or EPS)
    2. Work Breakdown Structure (WBS)
    3. Organization Breakdown Structure (OBS)
    4. Cost Breakdown Structure (CBS)
    5. Resources Breakdown Structure (RBS)
    6. Risk Breakdown Structure
    7. Document Breakdown Structure (DBS)
    8. Location Breakdown Structure
    9. Financial Periods or Progress Periods
  2. Other Common Attributes
    1. Project ID
    2. Life Cycle Stage
    3. Contract ID
    4. Category
    5. Consultant
    6. Contractor
    7. Project Manager
    8. BIM Object
    9. Asset ID

The data analysis and visualization solutions will enable using the data captured from the multiple data sources to develop new variables that are used to report the performance and status of a project, program or portfolio of projects.

ArticleP3MIS

About the Author

Integrated Cost Management in a Project Environment from a Project Owner Perspective: The Post-Contract Phase

Project Owners and in particular in the private sector understand the criticality of ensuring that their project investments are completed within the approved budget. For them, projects are no different than other investments they undertake where the Return of Investment (ROI) along with other factors such as risk exposure determines their selection. Going over budget, or increasing the capital cost without an increase in the operations revenue could very much turn the project into a “Big White Elephant”.

This article continues the earlier article which explained the steps that project owners usually would follow to have better control on their project cost during the pre-contract phase of the project life cycle. The pre-contract phase covered the processes of Cost Estimate, Project Budget and Procure Contracts. This article will cover the Award Contracts, Change Management, Progress Invoices, Forecast to Complete and Closeout. The proposed integrated cost management process is aligned with the best practices of the Project Management Institute (PMI) Project Management Body of Knowledge (PMBOK).

ArticlePostCont

The PMWeb Enterprise Project Management Information System (PMIS) software will be used throughout this article to detail how a single Commercial of the Shelve (COTS) platform can capture the details of all processes needed to manage the project cost and other related processes. PMWeb provides those involved in delivering the cost management processes with the following important functions:

  1. Pre-developed document templates to capture project cost management information
  2. Custom developed document templates to capture additional cost management information
  3. Link WBS and Schedule activities from the planning and scheduling application
  4. Capture all type of cost data including the support for multi-currency at line item level
  5. Document management repository all documents needed to support the cost management processes such as drawings, BIM models, material brochures and catalogues, material specifications among others
  6. Workflow to formalize the process of submitting, reviewing, sharing and approving project management processes
  7. Tabular and graphical reports to aggregate, summarize, sort and filter the information captured from the cost management processes
  8. Dashboards to summarize and analyze the cost management data to enable faster and better informed decisions on the project cost.
  9. Ability to import and export data to third party cost estimating and other cost management applications
  10. Integrate with all other best practice project management processes
  11. Web-enabled to allow team collaboration in developing the cost management processes

Award The Commitment Contracts

It is a common practice that a project could have many contracts to outsource the scope of work that the organization has found its better to be done by other qualified organizations. It is one of the risk response actions to transfer the risk to others. It is always becoming a growing trend award contracts with their own departments that will have a role in delivering the project. For example, the organization might sign a contract with projects department to manage the project delivery. Similarly, the organization might have a contract for providing the head office support for the project. In other words, the project owner has the objective to ensure that the project’s commitment contracts will tally with the project’s approved budget or the approved project’s investment.

ArticleCommitnentLog

For each awarded contract, the document template should include the following details as a minimum:

  1. The details of the two parties contract
  2. Contract type (Contract, Subcontract, Purchase Orders, etc.)
  3. Contract format (Guaranteed Maximum Price, Cost Plus, At Risk, Time and Material)
  4. Contract Award Date, Effective Date, Completion Date and Duration
  5. Revision as the contract agreement might have been went into multiple review cycles
  6. Billing Currency even if it has cost items in different currencies
  7. Billing Terms and Conditions
  8. Billing adjustments such as Advance Payment Recovery, Withheld Tax, etc.
  9. Does it allow overbilling and by what %?
  10. Total Contract Value
  11. List of all Contract Clauses
  12. All supportive attachments and links like drawings, specifications, conditions of contracts, BIM Models, addendums, pre-bid meetings, bid clarifications, pre-award communications among others.

ArticleCommHead

In addition, the contract should include the line items of the Bill of Quantity or Schedule of Values showing as a minimum the following for each line item:

  1. Reference ID
  2. Description or Title
  3. Unit Price
  4. Quantity
  5. Unit of Measure
  6. Total Price
  7. Cost Code or WBS Level to align with Project’s Budget and Cost Estimate
  8. Other details as needed

ArticleCommdetail

Anticipated Commitments and Cost Loaded Schedules

To ensure that the actual contracts periodical invoicing is aligned with the approved budget spending, it is a must requirement on all contracts that the contractor or the organization executing the contract to link the contract line items with the approved project’s execution schedule. This will provide the anticipated commitments that the project owner should consider when finalizing the project funding plan. PMWeb allows distributing the total amount for each line item over the project period in the most accurate format that will align on how the project will be executed.

ArticleCommitAnti

One of the most important reports that project owners need to maintain at all times is the comparison report for the anticipated project budget spending and the anticipated commitment spending. This will assist the project owner to avoid blocking funds that might not be used on a specific project as well as avoid to be short of spending the needed funds to match the project’s delivery.  In other words, help to optimize the user of the project cash and available funds.

ArticleVAR

Change Management

Changes to any project are inevitable. Causes for change but could include the following:

  • Intent of documents not “reasonably inferable” and corrections required
  • Unknown conditions necessitate changes
  • Owner’s requirements change
  • Changes in code or changes in interpretation of code
  • Specified product no longer available
  • Consider new product because of cost savings or other benefits
  • Specified product inappropriate
  • Adjust contract sum for difference in actual cost versus allowance
  • Estimated quantity of work for unit prices changes
  • Revision of unattainable requirement

Proposed Change Orders

Changes can be initiated by the project owner, consultant, project management firm or contractor. Although, contractors tend to be the party that usually start the process as soon as he feels that the scope needs to be delivered differ from what the contract documents stated. The process will start with the submission of Proposed Change Order (PCO) or any other name that been agreed to be used as per the project management procedures.

The form needs to provide the details of the project and contract, details of the change, claimed extra cost and time extension, details of the claimed cost among others. The PCO should also include all supportive attachments and links to other project records such as meeting minutes, Request for Information (RFI), daily reports, project communications, emails, pictures, videos, drawings, time impact analysis among others.

ArticleCO

For every project and contract, there will be pre-defined workflow for submitting, reviewing, sharing and approving the Proposed Change Order. Only when the PCO is approved by the project owner or by the designated agent, a change event will be generated from the PCO.

ArticlePCOGen

Change Events and Change Orders

When the project owner becomes aware that a change could have an impact on the project cost, it becomes important that the change analysis should address the impact on both the project budget and affected commitment contract. PMWeb Change Events module provide a central point from which the responsible project team member can manage all aspects of the change order process. Change Events serve as the basis for generating Commitment Change Order Requests and Budget Change Orders.

ArticleCE

A change order for a commitment contract will be the change that could decrease or increase the awarded contract value as well as increase or decrease the project duration. Change orders submission, review and approval need to follow a pre-defined workflow steps. The steps for approving a change order would usually vary depending if the change order considered in the scope of the original contract or not, value of the change order and the delay it might cause to the project’s target completion date. Of course and similar to all other document transactions, change orders need to have all supportive documents attached and relevant records linked.

ArticleCO

 The PMWeb PMIS solution will enable the project owner to capture change orders across all contracts and across all project investments that the owner has as those will have direct impact on the additional projects funding that will be needed. The Change Orders log will group, sort and filter the data based on the parameters set the project owner.

ArticleCOLOG.jpg

Progress Invoices

As work progresses on executing the project scope of work, contractors will submit periodical, usually monthly, payment requests for the accomplished and approved deliverables. There will be a process for submitting requests for inspection of completed works which will become the basis for the submitted invoice. The approved amount of the progress invoice will represent the actual cost incurred by the project owner for the work completed. The method for calculating the amount due for payment could vary but it must be aligned with the agreed condition of the contract. Payments could be made against work installed at site, man-spent on site, orders placed, inspections made among others. On some contracts, there could be allowance to make payment against material delivered and stored at the project site.

ARTICLEProgress Invoice

Progress invoices will be generated for each period taking into consideration the amount certified in the previous period as well as approved change orders that have adjusted the awarded contract value. The value of the progress invoice will provide another important input for the Earned Value Analysis which is the Actual Cost.

Another important aspect for progress invoices and that is a certifying progress invoice does not mean that the invoice was actually paid by the project owner. Most contracts have pre-set payment terms where the progress invoice could be due payments after 30 or 60 days from approval. For some contracts, it sets a limit for the minimum or maximum amount to be paid per period. This means that some invoices need to be combined with others to become due for payments while others could be paid partially.

Forecast to Complete

At the conclusion of each financial period, the project owner must review the different project cost components to come with a realistic forecast to complete to remaining project scope. For each cost line item, the following details need to be provided:

  1. Cost Code or WBS level. For example, “02-030000”
  2. Description of the Cost Code or WBS level. For example, “Concrete”
  3. Total Approved Budget as per the final approved budget document and budget adjustments or changes. For example, “US$ 925,000”
  4. Anticipated Budget or the Time-Phased Budget value for up to this period. This is also known as the Planned Value (PV). For example, “US$ 925,000” which means this work should be 100% complete as per the original Anticipated Budget.
  5. Anticipated Cost which equals to the sum of commitment contract and commitment change orders to date. For example, “US$ 850,000” which indicates that the contractor did not plan to execute the work in full by the end of the period.
  6. Anticipated Variance which equals to Anticipated Budget – Anticipated Cost. For example, “US$ 75,000 = US$ 925,000 – US$ 850,000”
  7. Actual Cost which equals the amount invoiced and certified for work completed on site. For example, “US$ 765,000”
  8. Balance to complete which equals the sum of total approved budget and budget changes minus the actual cost certified to date. This indicates the amount of funds still available for this cost center. For example, “US$ 160,000 = US$ 925,000 – US$ 765,000”
  9. Forecast to Complete is an estimate to be provided by the project team for the funds that are needed to complete the balance of the work for this line item. For example, in this case, the estimated amount is set as a saving of US$ 50,000.
  10. Forecast Variance which equals to the difference between the Anticipated Variance – Forecast to complete. For example, “US$ 25,000 = US$ 75,000 – US$ 50,000”

articleEV1

The monthly forecast would also the additional attributes and Earned Value metrics which include:

  1. Project Schedule Activity ID and Title. For example, “15 – Layout Building Foundation”
  2. Percent Complete as reported by the updated schedule. For example, “75%”.
  3. Activity Strat and Finish Dates. For example, “Start Date FEB-16-2009 and Finish Date FEB-20-2009”.
  4. Earned Value or EV which the value of Total Budget multiplied by the Percent Complete. For example, “US$ 693,750 = US$ 925,000 X 75%”
  5. Cost Variance or CV is the difference between the Earned Value (EV) and Actual Cost (AC). For example, “US$ -71,250 = US$ 693,750 – US$ 765,000”. This is an unfavorable indicator as it says the value of work achieved on the project is less than what was actually paid to the contractor. This could be due to some Project Owner caused changes that might require additional cost to modify and rectify. This is usually uncommon in Guaranteed Lump Sum (GMP) contracts.
  6. Cost Performance Index (CPI) which is the Ratio of work accomplished versus work cost incurred for a specified time period. The CPI is an efficiency rating for work accomplished for resources expended. For example, “0.91 = US$ 693,750/US$ 765,000” which indicates that for this line item, the project owner is only getting 91% of the value for actual cost paid.
  7. Schedule Variance or (SV) which is the difference between the anticipated budget of work performed or Earned Value (EV) and the budgeted cost of work scheduled at any point in time. For example, “US$ -231,250 = US$ 693,750 – US$ 925,000”. This is an unfavorable indicator as it says the value of work achieved on the project is less than what was actually planned to be performed. This indicates a delay in executing this activity.
  8. Schedule Performance Index or (SPI) which is the ratio of work accomplished versus work planned, for a specified time period. The SPI is an efficiency rating for work accomplishment, comparing work accomplished to what should have been accomplished. For example, “0.75 = US$ 693,750/ US$ 925,000”.
  9. Notes will be used to clarify the variances in the calculated earned value metrics.

ArticleEV

The Earned Value Analysis (EVA) will provide the project owner with an internationally recognized best practice that will provide an objective estimate to complete (ETC) forecast during the project delivery life cycle. It provides the project owner a reliable assessment to develop revised estimates of cost at completion based on performance to date, commitment values for work to be executed, and estimates of future conditions. Comparing this information with the performance measurement baseline will help to identify variances at completion important to the organization and additional funding requirements.

ArticleEVReport.jpg

Closeout and Snag List

The change management, progress invoices and forecast to complete processes will continue until the project comes to completion and all of the project scope of work captured in the Work Breakdown Structure (WBS). Nevertheless, it is common practice that the project owner along with the designated consultants will carry a formal handover process for the project. This process is known as preparing the snag list or punch list where all incomplete or unacceptable items will be identified and a completion date will be given to rectify. In addition, a cost estimate for rectifying this scope of work will be done. Should the contractor fail to complete this work, then the project owner would have the option of deducting those funds from the contractor’s contract amount and assign a third party to complete this scope of work.

The punch list should be explicit and identify the exact locations for all the unacceptable work with the appropriate description. Attachments to support those snags are very important and it is preferred to attach pictures or videos to explain and document the problem area. Other attachments like drawings, specifications, communications will be also needed. In addition, there should be a formal process for submitting, reviewing, sharing and approving the completed snag lists.

ArticleSnag

Project Owners are warned from incomplete snag lists where for some tend to do re-snagging after the Contractor completes the initial snag list. Contractors might use this to claim against the Project Owner for negligence in preparing a comprehensive snag list that will delay project’s completion and payments due for the Contractor.

About the Author

.

 

 

Integrated Cost Management in a Project Environment from a Project Owner Perspective: The Pre-Contract Stage

Project Owners and in particular in the private sector understand the criticality of ensuring that their project investments are completed within the approved budget. For them, projects are no different than other investments they undertake where the Return of Investment (ROI) along with other factors such as risk exposure determines their selection. Going over budget, or increasing the capital cost without an increase in the operations revenue could very much turn the project into a “Big White Elephant”.

This article explains the steps that project owners usually would follow to have better control on their project cost. It divides the cost control process into eight steps: Cost Estimate, Project Budget, Procure Contracts, Award Contracts, Change Management, Progress Invoices, Forecast to Complete and Closeout. The proposed integrated cost management process is aligned with the best practices of the Project Management Institute (PMI) Project Management Body of Knowledge (PMBOK). This article will cover the pre-contract phase of the project life cycle.

ARTICLPLC1

The PMWeb Enterprise Project Management Information System (PMIS) software will be used throughout this article to detail how a single Commercial of the Shelve (COTS) platform can capture the details of all processes needed to manage the project cost and other related processes. PMWeb provides those involved in delivering the cost management processes with the following important functions:

  1. Pre-developed document templates to capture project cost management information
  2. Custom developed document templates to capture additional cost management information
  3. Link WBS and Schedule activities from the planning and scheduling application
  4. Capture all type of cost data including the support for multi-currency at line item level
  5. Document management repository all documents needed to support the cost management processes such as drawings, BIM models, material brochures and catalogues, material specifications among others
  6. Workflow to formalize the process of submitting, reviewing, sharing and approving project management processes
  7. Tabular and graphical reports to aggregate, summarize, sort and filter the information captured from the cost management processes
  8. Dashboards to summarize and analyze the cost management data to enable faster and better informed decisions on the project cost.
  9. Ability to import and export data to third party cost estimating and other cost management applications
  10. Integrate with all other best practice project management processes
  11. Web-enabled to allow team collaboration in developing the cost management processes

Developing the Project Cost Estimate

Direct and Indirect Cost

The first step in the integrated cost management is to develop the estimated cost for delivering the ARTICLEDIRECTCOSTproject scope and services. The project cost estimate should take into account both Direct Costs and Indirect Costs. Direct Costs are proportional to the project such as material for products, workers, project managers. Direct Costs are also known as Variable Costs as they vary with the project requirements. Indirect Costs are the costs that are expended regardless of the size of the project such as project management, advertising for company, taxes. Indirect Costs are also known as Fixed Costs as they do not vary with the project requirements.

Pre-Contract Phase Stages

For a project owner, the project would usually start with very limited information to come up with a detailed cost estimate. At the concept design stage, the project would not have detailed drawings, Building Information Model (BIM) or specifications to determine the cost of the different project elements or components. As the project development evolves into the project life cycle design stages, more information will become available to come with a more accurate project cost estimate. The construction document stage is the stage where the project cost estimate should reflect the most definite estimate before the project goes into the contracts procurement stage.

It is a common practice to come up with revised detailed cost estimates at the conclusion of each stage during the pre-contract phase of the project life cycle. Those will be the concept design (also known as Level of Detail 100 in BIM), schematic design (also known as Level of Detail 200 in BIM), 30% design development, 70% design development, 100% design development (the three stages are also known as Level of Detail 300 in BIM) and construction document stage (also known as Level of Detail 350 in BIM). All those cost estimate versions, along with all the backup documents, need to be stored to keep track of how the cost estimate has evolved during those stages.

ARTICLEPRECONTRACT

Developing the Project WBS

One of the important project management best practices that need to be implemented before proceeding with the cost estimate is to develop the Work Breakdown Structure (WBS) which is a technique used to subdivide the major project deliverables and project work into smaller, more manageable components, also known as scope decomposition. Although each organization could have a different strategy in developing the WBS but they all need to keep in mind that the WBS will become the basis for developing the project detailed cost estimate, developing the project execution schedule, identifying projects risks, developing the project outsourcing strategy among many others. It is a growing trend nowadays that organizations, and in particular project owners, to have the WBS as also the project Cost Breakdown Structure (CBS).

WBS

Top-Bottom Cost Estimating

At the concept design stage, project owners would usually come with a high level project cost estimate based on the building area to be developed, number of beds in a hospital, number of rooms in a hotel, number of villas in a residential development among others. The top-bottom cost estimating technique is usually used to identify the breakdown of this summary project cost estimate into the project main elements. The Work Breakdown Structure (WBS) will be used as the tool to provide the cost breakdown based on past experience for the weight of each component of the project scope to the total project cost.

ARTICLETOPDOWN

Cost Assemblies

Project owners who are involved in delivering repeated real estate projects of similar nature such as Hotels, Bank Branches, Schools, Clinics, Villas, Residential Towers, Commercial Towers, Retail Outlets among others tend to develop what is known as a “Project Cost Assembly”. The assembly will be based on coming up with a total project cost estimate based on a number of attributes such as floor area, number of floors, number of car parks, number of hotel rooms, number of hospital beds among others as well as adjustment factor for the project location, year, etc. After the total cost is calculated, the assembly will breakdown this cost on the project WBS components using the top-bottom cost estimating concept. The assembly design reflects the organization past experience and knowledge in delivering projects. It is considered as an organization asset that differentiates an organization from another.

ARTICLEAssembly

Detailed Project Cost Estimate

As the project components get detailed through the development of drawings, specifications or Building Information Models (BIM), a more detailed cost estimate will be developed. The project WBS will be detailed to lower levels to reflect this level of detail. The values for the detailed cost estimated could either be calculated from the quantities and rate for each item or based on quotes offered by third parties. All drawings, specifications, BIM models, quotes used to develop the cost estimate, needs to be attached to the estimate to provide the verification on the basis of calculating the cost estimate.

ARTICLECOSTESTIMATE

Similar to the building cost assembly used during the early concept design stages, detailed cost assemblies can be also developed to identify the components and quantities of specific building systems such as retaining wall, built-up roofing, wall cladding among many others. Applications like PMWeb allows attaching all supportive documents such as product catalogues, drawings, specifications, BIM object details among others to those detailed cost assemblies. Again those assemblies reflect the assets the organization has developed and accumulated over their years of experience in delivering projects. The more cost assemblies an organization has, the more value this organization for itself over the years.

ARTICLEDETAILED

Developing the project cost estimate in particular projects that require using products from multiple sources from different countries that uses currencies and exchange rates that could vary, the cost estimate should take this into consideration. Some applications allow linking the cost of those line items to an exchange rate table that can be updated on daily, weekly or monthly basis.

It is also common for some project owners to depend on third parties such as quantity surveying and cost management firms to develop the project cost estimate during the design development stages. Those consultants might use Commercial of the Shelve (COTS) cost estimating software applications as well as MS Excel to develop the cost estimate. COTS cost estimating software including applications like Nomitech CostOS, Hard Dollar, Timberline among others can export their developed cost estimate in MS XLS file format to enable the project owner to import those estimates into PMWeb or whatever solution is being used to manage the project cost development. Project owners should avoid creating silos of cost estimates where it will become impossible to track the cost estimate development and eventually lose governance on the project capital investment.

ARTICLECOSTESTIMATEIMPORRT

Cost Contingency

One of the important line items that must exist in each cost estimate is the contingency allowance for accepted project risks. Those are the risks that that the organization has decided not to avoid, mitigate or transfer to others. An organization might opt to breakdown the contingency line item into separate groups to provide better control. The contingency allowance will be adjusted whenever a revised cost estimate is developed as more project information becomes available and thus some of the project unknowns become known or when the organization to avoid, mitigate or transfer those earlier accepted risks to others. Therefore, it is important that the project risk register is maintained current and shared with the project cost management team so they can come with the appropriate contingency amount to include.

ArticleRisk

Generating the Project Time-Phased Budget

It is recommended practice to generate a project budget after approving the cost estimate for each design stage. The project budget could be at the same level of detail of the cost estimate or be rolled up to higher WBS level. There will be no jeopardize to the accuracy of the budget as the base for both is the same. Having said so, the budget could include additional cost line items that the cost estimate did not include as those could be related to the organization’s business rules and practices. For example, the PMI’s PMBOK recommends that the Risk Management Reserve be included in the project budget rather than the cost estimate. This is the contingency level that is under the senior management control. In addition, some organization might add the profit contribution to the budget rather than the cost estimate.

ARTICLEBUDGET

In addition, a project budget would have different user access rights as well as different stakeholders’ approvals level. The project budget will become the basis for requesting and securing the project funding, plan the project fund spending, identify procurement and bid packaging strategy and eventually procure the contracts. Further, the project cost performance will be eventually based on the approved budget rather than the approved cost estimate. Similar to the project cost estimate, the project owner needs to keep a register of all budget versions with only one budget to be considered as the “Approved Budget”.

ARTICLEBUDGETVER

Project budget needs to be linked to the project execution schedule to establish the time-phased budget. This will enable distributing the approved budget for each line item over the associated project schedule activity duration. The distribution of those funds can be equal over the total periods, front loaded, back loaded or any preferred distribution curve. Those distributed values are the “Planned Values or PV” which will be used to perform the Earned Value (EV) analysis and performance reporting during the post contract phase.

BUDGET

Similar to other document templates for project management processes, the project budget should include all necessary document attachments and links to other project management document templates that could impact the project budget. The project budget will also have a workflow to govern the steps for submitting, reviewing, sharing and approving the project budget.

Budget Adjustments

When a budget becomes approved as the baseline budget for measuring and assessing the project’s performance, any changes to this budget should be done in a controlled and governed format. Budget adjustments or changes could result in reducing or increasing the approved budget as well as transfer funds from one cost center or WBS level to another but without changing the total of the approved budget. Those changes would require different workflow steps and stakeholder involvements depending on the nature of the adjustment and the value of the adjustment.

ADJUST

The approved budget is a critical stage gate for any project owner as it provides the anticipated value for the project investment as an overall as well as how and when this investment will be spent during the project post contract stages. This will impact when contracts will be procured, what will be maximum awarded value for those contracts and when payments will be done for delivering the scope of those contracts. The approved budget will enable the project owner to negotiate with the funding agencies on how to finance the project and what conditions need to be provided to secure the funding. Those conditions might have impact on the approved budget for which adjustments might be needed to comply with those constraints.

It should be noted that for some projects, project owners might decide to terminate or shelve the project as the final approved budget might not provide the desired return on investment compared to other investment opportunities.

Procure Contracts

Contractors Pre-Qualification

This is the stage that when completed, the project will move from the pre-contract phase to the post-contract phases. Project Owners will usually set the criteria to pre-qualify who are the contractors who should be invited to bid on the project. The project scope could be also divided into separate bid packages such as enabling works, superstructure, Mechanical-Electrical-Plumbing or MEP services, Finishes among others to invite the qualified bidders to bid each package. PMWeb pre-qualification module allows creating a customized pre-qualification document to be filled by all contractors who will be interested to bid on the project or selected bid packages.

PREQUALI

The pre-qualification document will include details on the contractor, bonding capacity, insurance, certifications, registrations, legal entity, ratings, ISO certifications among others. The captured information will enable the Project Owner to qualify and short list the contractors who will be formally invited to bid on the project.

The Bidding Process

The project owner will invite the contractors to bid on the project and provide their best commercial offer for the completing the project scope of work as per the construction contract documents which will include drawings, specifications, conditions of contract, bill of quantity and maybe BIM LOD350 models. The bidding process will include responding to Request for Clarifications from the bidders, attend pre-bid meetings and make site visits to confirm their understanding of the site conditions. The submission of the bidders’ proposals can be on either on two stage where first the technical proposal is submitted and only those who are qualified will be requested to submit the commercial proposal. Others might request the traditional approach of submitting the technical and commercial proposals at the same time.

ONLINE BID

Today there is a growing trend in requesting the bidders to submit their commercial bids online. The public sector usually has a government portal that all bids need to use. For private project owners might opt to have their own online bidding portal similar to the one offered by PMWeb.

Bid Analysis

The submitted online bids will be captured in a bid analysis document where the approved estimated cost for each line item developed earlier in the approved cost estimate will be compared with the submitted bids by the pre-qualified bidders. It will immediately detail the variances between the bidders and help to identify if there is unbalanced bid, front loaded bids, misunderstanding of the scope among others. Unbalanced bid is where a contractor intentionally adjusts the unit price for specific project elements while keeping the total bid price attractive. This is a practice followed by some contractors who might be award that some items might be decreased so the unit price will be decreased to reduce the amount of deduction while items that could be subject to increase are increased in value to increase the amount of variation and make more profit. Many countries prohibit this practice and would consider the contractor bid as null and void. Other contractors might front load their bid to provide project finance for the project. Again most project owners would refuse those bids and disqualify the bidders.

The bid analysis will provide the project owner with the confidence that the final approved cost estimate and for which the project time-phased budget was developed is valid and in line with the formal bids received from the pre-qualified contractors. Should the received bids be acceptable, then the project owner will be ready to generate the commitment contracts that will move the project into the post-contract phase. Of course, the project owner might decide to terminate or shelve the project as the final received bids might exceed the originally approved cost estimate and approved time-phased budget.

BID ANALYSIS

About the Author

What Does It Worth to You to be Able to Do Faster and Better Informed Project Decisions?

For those who are involved in delivering projects understand the importance of being able to make faster and better informed decisions specially when those decisions have direct impact on the project’s success or failure.  Decisions should protect the project’s objectives to finish within budget and meet the target completion date. Failing to achieve those objectives could label the project as a failure.

So the question is how can project management best practices help a decision maker to make better and faster informed decisions? And what value does it brings to his or her business?

Project Management Information System

Regardless what business one is in, the more knowledge you have on the situation that you need to take decision on and the impact it would have on the project end result, the better decision you will usually make. Therefore, the starting point should be to have a robust integrated platform that can capture all project’s data during all the project life cycle stages. The PMIS platform will provide the needed project information by extracting, aggregating and analyzing the data captured from the difference processes. This information will become the reliable sources for providing the knowledge on the project’s performance and thus enable the decision make to make faster and better informed decisions. To ensure that decisions are implemented successfully, there should be a processes to enforce the actions made by the taken decision.

ARTICLEPMIS

Capturing Projects’ Data

The platform should ensure the quality of captured data by enforcing the best practice of document templates to ensure that we have needed data for each project management process. The document template practice will ensure that the right data is captured by the right team members in the right sequence by enforcing a workflow to formalize the submission, review and approval of captured data. The platform should also ensure that all supporting documents and records are linked to those document templates to provide needed verification.

One of the recommended project management information system (PMIS) platforms is PMWeb where this article uses actual examples from PMWeb to depict how a solution like PMWeb can fulfill the actions needed to have better and faster informed decisions on a project environment.

ARTICLEWorkflow

Project Information

This captured data will provide the information for the project team members and other stakeholders on the status of the different processes that could have an impact on the project objectives. This data can be aggregated, sorted, filtered, averaged and summarized to present important information on the project’s status. For example, the Request for Information (RFI) register can identify what RFIs are still pending reviews, what RFIs that are taking more than 7 days to close, what is the average cycle time to respond to an RFI among others. Similar information can be extracted from data captured for other project management processes like submittals, transmittals, change management, progress invoices, non-compliance requests, authorities’ approvals, permits, quality inspection requests among many others.

ARTICLEINFORMATION

Project Knowledge

In turn, the project information will become the source for developing the key performance indicators (KPIs) for the different project management processes to measure the project’s performance and health. The information will also be used to analyze trends in project performance and benchmark the current project’s performance with other projects. The performance, trend, benchmark and associated analysis will provide the right content for the performance dashboard which could be at discipline, project, program or portfolio. A discipline dashboard is a dashboard that will focus on a specific project management area like cost, schedule, document, risk, quality, safety among others. A project dashboard is a dashboard that will provide a summarized view of the project’s performance whereas a program dashboard will report on the performance of the projects that are part of a specific program. A portfolio or enterprise dashboard is a dashboard that will report on all projects and programs performance with the option to select portfolio of projects.

ArticleDasshLevels

The importance of these dashboards goes beyond providing a single version of the truth of the projects performance as they provide the decision maker with dynamic alerts to trigger the need to make a decision before this situation start to impact the project’s performance. For each decision, there is a sweet time that one can start make a positive difference to current situation. Missing this time period might result in less-effective decisions. Further, it provides the decision maker with the trust that what is being reported is based on factual data captured in the document templates.

Key performance indicators (KPIs) will usually have pre-set limits on when to trigger an alert. Those limits are usually set based on past experience as well as best practices and industry trends. Therefore, if the performance values reported by those KPIs are not correct or not valid because of the delay in reporting them, the decision made will not only be of no value but could even harm the project.

ARTICLETriggers

Decision Making

To keep track of taken decisions, it is recommended to use the best practice of “Issues Management” where an Issue document template will be created for each decision. The Issue document template will capture the details of the problem or issue details and the details of the decision taken whether it was reactive, preventive or predictive. The issue document template will identify and record issues clearly including issue type whether it was Technical, Business process, Change management, Resource, Third party or Others It will also detail the importance and urgency of this decision. Similar to other project management processes, the issue log will capture the details of all issues and provide the needed information in the tabular format desired by the decision maker.

ARTICLEISSUES1

Since by definition a risk is the possibility of a problem that has not occurred yet, and if it occurs it would have a negative impact on a project budget, schedule and scope while an issue is a problem that is currently occurring and if not resolved it will have detrimental effects on the project budget, schedule and scope, some decision makers find it a must to have a dashboard that will provide the knowledge on project’s risks and issues. The risk and issues dashboard will capture the latest information from the Issues Log as well as the Risk Register. The information is those two logs will be captured from the “Risk” and “Issue” document templates where each will have its own workflow for submit, reviewing, approving and/or resolving steps.

ARTICLEDASHBOARDRISK

Action Management

For most decision makers, making the right decisions is not their only concern. Actually, ensuring that those taken decisions were implemented as planned by the designated team members. This not only means that the problem continues to be unresolved but it could result with sequential damage to other project objectives. It is therefore highly recommended to introduce the best practice of “Action” document template where it will list the different tasks to be undertaken by the project team members to implement the taken decision. Those tasks will assign the dates that each should be completed and when it was actually completed. The “Action” document template will be linked to all other document templates that could be related to the needed action including the “Issue” document template.

ARTICLEACTION

The Value to be Able to Do Faster and Better Informed Project Decisions

The challenge for some decision makers is to quantify the value of being able to make better and faster informed decision so they can approve the investment in having a project management information system like PMWeb. This is very much true nowadays with tight budgets and spending. For such instances, it is better to try to estimate the lost benefit for not implementing those best practices.

The Project Management Institute (PMI) estimates that on average, organizations risk $109 million for every $1 billion spent on delivering projects (PMI Pulse of the Profession 2014  http://www.pmi.org/~/media/PDF/Business-Solutions/PMI_Pulse_2014.ashx) due to projects failure. Project failure extend beyond the scope of any individual project. When project is late, over budget or when intended project goals are not fulfilled, disturbing demands are placed on project resources. This boils down to wasted money that your organization may never get back. The PMI study found out that organizations have 93% less likelihood to incur this high risk of failure when they have adopted the following three practices:

  1. Aligning talent to strategic initiatives results in higher number of successful projects
  2. Maturing project, program and portfolio practices reduces dollars at risk
  3. Having engaged executive sponsors and managing change lead to great success

Accordingly, if we assume that the total value of your organization’s project portfolio is US$ 100M per annum and there is a 10% risk of encountering the losses associated with project failure, so you will have US$ 10M at stake. Assume that only 10% of this risk is attributed to ineffective decision make process. In other words, if a solution that enable your organization to make better and faster informed decision will cost you less than US$ 1M per annum, would at least worth serious consideration.

About the Author

 

Transforming Bad Projects’ Experiences into Valuable Organization’s Asset

It is said that knowledge comes from bad experience while good experience comes from knowledge.

This cannot be more true when it comes to organizations who are projects intensive where bad experiences have high chances to happen during projects selection and execution. By definition, projects are unique endeavor to deliver a service or produce a tangible product. This uniqueness means that the likelihood of repeating the same mistakes is high if past projects’ experience was not formally documented and made available for the project team members in a usable format to avoid on their current projects.

One of the proven methods to share the accumulated knowledge in managing projects is using document templates to enforce adopting best practices in project management. The format of those document templates must be aligned with project management best practices such as those of the Project Management Institute (PMI) among others. In addition, they need to incorporate the terms and conditions of the legal documents such as FIDIC, NEC3, AIA among others used to govern the relationship between the project’s parties of the contract. Document templates need also to incorporate the project responsibilities, authorities and approval limits set for the project team members.

Picture1

Document templates should be designed in a generic format to enable using them across the complete projects portfolio of the organization. This will not only ensure that there is a sustainable process to capture projects’ data but enable the organization to analyze the captured data to identify trends and benchmark performance thus improving the knowledge from the experience captured in delivering the organization’s projects. Organizations will usually incorporate those document templates into their Project Management standard operations procedures manual. Those organizations could then use this manual to attain their international certification of ISO 10006:2009 or ISO 21500 which provide the Guidelines for Quality Management in Projects.

ArticleSOP

This how an organization can turn its project management knowledge into a valuable asset that an organization can use across all of their projects, current and future. An asset that will reduce the organization chances to repeat the bad experiences and to the contrary enable them to implement good experiences when it comes to selecting, delivering and transferring projects. An asset that will differentiate the organization from the competition and indirectly increase its value by building the reputation of successful projects delivery.

The California State University (CSU) is an example of the many organizations who have captured their knowledge and developed standard document templates or forms for their project delivery. The forms are categorized according to the construction phase for which they are used. Those are Pre-bid, Prequalification, Bid, Award, Service Agreement, Construction Phase, Project Performance Report, Change Order, Claims/Settlement, Escrow Agreement and Capital Outlay Management Plan. For each form, the table identifies the contract agreement that the form will be used at. Those contract general conditions include DBB Majors (CGC for Design-Bid-Build Projects (Major)), DB (CGC for Design-Build Projects (Major)), CMR (CGC for Construction Manager at Risk with Guaranteed Maximum Price Projects). JOC (CGC for Job Order Contracts) and Minors (CGC for Design-Bid-Build Projects (Minor)).

ARTICLEUSC

Developing a project management procedures manual requires following a structured process to ensure that it will enable the organization to achieve its goal of selecting the right projects and delivering those projects right. The first step in developing the procedures manual is for the organization to spell out its policy when it comes to ensuring quality in their project management processes. This will identify the project management processes that need to be covered in the procedures manual as well as the project life cycle stages and stage gates that project management processes should cover.

Picture2

The project management processes need to be aligned with project management best practices and standards as well as the terms and conditions of contracts to be used by the organization in outsourcing’ the project delivery services. In addition, those processes need to be aligned with the local authorities’ rules and regulations as it relates to projects delivery which might require having the document template in the local language used, for example Arabic. Those processes should be aligned with the internal policies and procedures that the organization uses in managing other parts of their business but could have an impact on the project delivery.  Finally, those processes should incorporate the organizations past experience in managing projects as well as the experience and best practices recommended by international bodies such as Construction Specification Institute (CS), Design-Build Institute of America (DBIA), The American Institute of Architects (AIA), Construction Management Associate of America (CMAA), Construction Industry Institute (CII), RIPA International among many others.

ARTICLEArabicForm

The Project Management Body of Knowledge (PMBOK) by the Project Management Institute (PMI) is a widely accepted and used standard in the Middle East and North Africa (MENA) region. This project management standard provides the guidance to what project management processes need to be implemented during the project life cycle. The PMBOK identify the processes need to manage project scope, schedule, cost, quality, risk, human resources, communications, procurement and stakeholders. For selected industries, additional knowledge areas were also developed to address the particular needs of projects in those industries. For example, the engineering and construction extension identified four additional processes: Environment, Safety, Claims and Financials. The PRiSM™ (PRojects integrating Sustainable Methods) methodology has also identified additional knowledge areas to address sustainability needs in projects. Those are Planet, People and Profit.

ArticlePMBOK

Today Enterprise Project Management Information Systems (ePMIS) are helping project centric organizations to make this transformation in a relatively quick and proven approach. PMWeb ePMIS is one of the Commercial of the Shelf (COTS) solutions that comes readily available with modules to manage the complete project life cycle stages, from the Idea or Initiative stage to the Asset Management. PMWeb has most of the document templates needed to manage projects predefined to help organizations jump start their project management processes implementation. In addition, PMWeb Custom Form Builder allows creating all additional project management processes or even replace what is already predefined in PMWeb.

There are many document templates that are used in managing projects. There are documents that focus on project’s communication such as meeting minutes, Request for Information (RFI), Site Work Instruction (SWI), Confirmation of Verbal Instruction, Daily Reports, Project Authorization, Project Charter, Transmittals, Permits, Authorities Approvals, Stage Gate Approval, Notice to Proceed (NTP) among others.

ArticleENGForms

In addition, there are document templates that are used to manage project cost. Those would usually include project cost estimate, project budget, budget adjustments, bid comparisons, contracts, proposed change orders, change orders, progress invoices, forecast to complete, cost worksheet, timesheets among others.

ArticleCOST

In addition, there are document templates that relate to project quality assurance and control such as Request for Inspections, Test and Inspection Forms, Snag List or Punch List, Non-Compliance Notice (NCR), Submittals among others. Finally, there are document templates that are used to manage project risks, issues as well as contractual communications which need to be legally correct and aligned with the project’s condition of contracts.

ArticleOTH

Almost every document template that will be used on a project would require additional documents to support the content and maybe provide additional details. Those documents could include drawings, pictures, videos, catalogues among others. It is critical that all those attachments are properly stored using a structured filing system that is in line with internationally recognized best practices such as those of the Construction Specification Institute (CSI), Construction Operations Building Information Exchange (COBie) among others.

ARTICLEDMS

Now the document template along with the attached documents is ready to be shared with the appropriate project team members. The project’s standard operating procedures (SOP) manual will detail the workflow steps and sequence for submitting, reviewing, sharing and approving the document templates for each project management process. For a single document template, there could be multiple workflow branches depending on the document attributes and contents as well as the responsibilities and authorities granted to the project team members. Those workflows are vital for enforcing project’s governance and in many cases reduce the chances of project fraud.

ARTICLEWorkflow

The value of the project management standard operating procedures (SOP) asset goes far beyond of ensuring that good practices are implemented for projects selection and delivery. Actually It helps in building senior management and executives confidence and trust in the reported projects performance. The performance and status dashboards will be generated from the pre-defined key performance indicators (KPI) using the granular data captured in the document templates. Thus eliminating the tedious and effort-wasting manual process of re-capturing the data from the document templates. The will also stop the risk of captured data manipulation.

The level of details and content of projects performance dashboards do vary and depend on the role of the stakeholder who will be visualizing the dashboard. Dashboards could be at enterprise, business unit or portfolio, program, project, contract and even project management process level. Dashboards could also address performance details of schedule, cost, quality, safety, risk, issues, documents review among others.

ArticleDashboard

About the Author