Managing Capital Projects Life Cycle Stages: The Project Selection Stage

Organizations involved in delivering capital project investments understand that failing to manage those investments could increase the likelihood of incurring the risk of project failure. A risk that as per the Project Management Institute (PMI) pulse of the profession, organizations could lose an average of $97 million for every $1 billion invested, due to projects failure.

Implementing the professional practices of project management along with needed stakeholder sponsorship while using technology available today to enforce transparency, accountability and single version of the truth monitoring and evaluation of projects’ performance can drastically reduce the chances for incurring this high-cost risk. Project Management Information Systems (PMIS) like PMWeb provides those organizations with almost ready to use integrated platform to manage all project management processes across the complete project life cycle. PMWeb also provides highly-customized dashboards to get stakeholders the information they need to keep them continuously engaged in the projects delivery.

Although organizations might define different project life cycle stages for their project investments, nevertheless they all agree that those stages need to identify what needs to be managed to convert the idea or the need that the project investment is undertaken to convert into a tangible product that can be operated to generate the desired income or benefit. Accordingly, we will assume the following five project life cycle stages: Selection, Design, Procurement, Construction and Defects Liability.

Managing the Project Selection Stage

Organizations who invest in capital projects might have different approaches for selecting the projects that will be approved for delivery. For example, private investors might look into projects with high return on investment (ROI) while having acceptable risk exposure while public sector organizations will look into projects that are needed to achieve the country’s strategic goals and objectives. Nevertheless, they both start from the same point and that is the need to identify those projects to be reviewed, assessed and evaluated to decide if they will be approved for delivery or not.

PMWeb project form provides the organizations with a comprehensive template for capturing the complete particulars and attributes of each possible project investment. Additional fields can be added to capture additional data that could be specific to each organization or even project type or location. Knowing that some of this data could not be readily available when a project is first identified, this data can be updated as when this information becomes available for the project initiator.

If the identified project is part of an existing strategic initiative or program which has other interrelated projects, then this new project opportunity needs to be linked to this program. PMWeb program module will enable the organization to capture the details of each program they are investing in and the projects that are part of that program. Again, additional data can be added to the program module should this be needed.

Some organizations might have the need for the entity requesting the project to have a business case formally submitted for the project investment where it will be subject to formal review and analysis before it is approved or rejected. The business case template, which could vary from one entity to another, will be created in PMWeb using the custom form builder. Similar to other PMWeb forms, all supportive documents will be attached to the business case. The business case will also have a workflow to identify those who will be involved in reviewing, analyzing and approving the business case. When approved or rejected, the business case form will be linked to the project form created earlier.

The business case could also include documents that were produced by other stakeholders using other applications. For example, for private project investors, a feasibility study is a must for all project investments to be considered. Applications like Argus EstateMaster is usually used to do such assessment taking into consideration the cost and revenue model, financing cost, sensitivity analysis among others. Those documents are usually saved in PDF file format and uploaded into PMWeb document management repository. PMWeb document management repository allows maintaining different versions of uploaded documents including the feasibility report. This report can then be attached to the business case form allow viewing it when needed.

The data captured from the project form, business case and other sources will provide the project investments review committee with the data needed to perform their project investment analysis. Business Intelligence (BI) applications like MS Power BI among others are usually used to perform and visualize such analysis. Those applications can extract, transform, load, associate, blend, analyze and visualize data form different data sources to provide the information needed to make their decisions.

This analysis and information will provide the organization with the data needed to complete the project scoring to determine the attractiveness of this project investment to the organization. The selection scorecard can include all the attributes and associated weights that the organization needs to consider when deciding of the project is a go or no go. Workflow will be assigned to scorecard to ensure that the formal approval process is implemented.

The possible project investments log will provide the organization with a real-time register of all investment opportunities identified by the organization regardless if they were approved, pending approval, rejected, on hold or any other status. The log could include visuals to group projects by status, type, sponsor among others. For organizations who have the interest to visualize this data on a map, the same can be also done as each project created in PMWeb with the Latitude, Longitude and Elevation details for GIS mapping.

When is the project formally approved, the assign project management team needs to prepare the project charter to formally launch the project. The project charter is a statement of the scope, objectives, and participants in a project. It provides a preliminary delineation of roles and responsibilities, outlines the project objectives, identifies the main stakeholders, and defines the authority of the project manager. It serves as a reference of authority for the future of the project. The terms of reference are usually part of the project charter. PMWeb custom form builder will be used to create the project charter in accordance to what the organization wants to capture.

One of the best practices that all projects must adopt is having their Work Breakdown Structure (WBS) to the desired level of control. The WBS will become the basis for defining the project’s scope of work in terms what is included and what is excluded, delivery schedule, budget, procurement strategy, awarded contracts as well as the level of performance monitoring, controlling and reporting. As a best practice, it is recommended that the WBS level 2 reflects the project life cycle stages. This will enable the project management team to decompose the scope of work of each stage to the required control level.

Another best practice that will help in mapping the project deliverables across the complete project life cycle is known as the stage gates. For each project life cycle stage which is aligned with the WBS level 2, the project management team will identify the SMART deliverables of each stage. Those are specific, measurable, approved, realistic and time bound deliverables. For example, SMART deliverables could be the Letter of Award, Notice To Proceed, Project Charter, Baseline Schedule, Performance Budget, Risk Register, Tender Documents, List of Qualified Bidders, Substantial Completion Certificate, Project Handover Certificate among others. PMWeb stage gate module will be used to define the project life cycle stages and SMART deliverables.

For many organizations who are keen in enforcing project governance, requires have a formal review process for exiting a stage gate and before they permit proceed with the following project life cycle stage. This requires defining a Stage Gate Review form where it could be common to all stage gates or could differ. PMWeb custom form builder will be used to develop this form along with the workflow to formally submit, review and approve the completion of a project life cycle stage.

With the formal approval of the project selection stage, the organization will proceed to the design stage. As explained earlier, the design stage can be further decomposed into Concept, Schematic, Design Development and Construction Document stages. For those organizations who are seeking more control on the design development stage, this can be further decomposed into 30%, 60% and 100% design development stages.

How to Assess the ROI of Project Management Information Systems?

Many organizations who are involved in delivering capital projects and are keen on reducing the likelihood of the high risk of projects’ failure strongly believe that digital transformation could help them in achieving this goal. This would include investing in 5-D building information modeling (BIM), business analytics, project management information systems, internet of things among others. Similar to other business investments, those organizations need to justify those digital transformation investments by assessing their return on investment (ROI).

The adoption of project management information systems (PMIS) like PMWeb is one of the fastest growing trends in digital transformation for capital projects in particular by project owners and project management consultant firms. Those organizations understand better the drastic impact that delayed and/or over budget projects can cause to their business. They also understand the importance of enforcing projects governance, transparency and accountability across all parties involved in delivering their projects’ investments. In addition, they understand the high value of having real-time access to everyday projects trust-worthy big data to give them the insight for better and faster informed decisions.

The assessment of the ROI for implementing a PMIS will consider the investments that the organization needs to undertake in acquiring the PMIS software, hardware and web-hosting, configuring and implementing the PMIS, provide training and support the ongoing adoption and support of the PMIS. The return on the investment will be the benefits that the adoption of a PMIS will bring to the organization which are many.

The PMIS Investment

Assuming that there is a real estate developer who is interested in implementing the PMIS on three of their high-profile projects as stage 1 and then it will be rolled out to their other projects. As a priority, the organization wants the PMIS to:

1.      Upload and store all project documents in folders and subfolders that will match the filing system that they have decided to adopt on their projects. The filing system should be flexible enough to allow modifications to meet each specific project own unique requirements, if any.

2.      Capture the details of every company that the organization have business relation with.

3.      Capture the high level of all projects that the organization is currently investing in as well as projects that are under consideration by the organization.

4.      Capture all project records needed to administer everyday communications which include:

a.      Correspondence

b.      Transmittals

c.      Request for Information

d.      Meeting Minutes

e.      Safety Incidents

f.       Actions

5.      Capture all project records needed to enforce quality assurance and quality control which include:

a.      Submittals

b.      Material Delivery

c.      Site Inspection

d.      Material Inspection

e.      Non-Conformance Reports

f.       Snag List or Punch List

6.      Capture everyday events by through the contractors’ daily reports

7.      Maintain an updated register of all risks with their pre-mitigation and post-mitigation likelihood and impact.

8.      Capture the details of all schedule submissions including baseline, revised and updated schedules for which they will be developed using Oracle Primavera P6.

9.      Capture the details of pre-contract and post-contract commercial aspects of the projects which include:

a.      All budget versions and the planned budget cashflow

b.      All budget adjustments and transfers

c.      All awarded contracts

d.      All potential, pending, approved and disputed change orders

e.      All progress invoices for approved work in place and actual payments made against the approved invoices

f.       All miscellaneous invoices that are not part of the awarded contracts

g.      All internal and external funding provided by the corporate office as well as banks

h.      All tabular and graphical reporting needed to report the projects’ financial status

10.  Capture the monthly progress report that the consultant Resident Engineer needs to provide at the end of month.

The same scope of work will be rolled to other projects after the completion of the above for which the organization needs to complete within 16 weeks. Although the organization has a project management procedure that document the project management processes to be used in delivering their projects, nevertheless, they have decided to use the out of the box forms and reports that PMWeb PMIS provides. For those forms and reports, they want to add their logo and use their corporate colors to brand those forms and reports.

The organization adopts the traditional design, bid then construct project life cycle delivery. The consultant and the contractor will be provided restricted access to PMWeb PMIS. Each contractor will be provided with five access points, one for their project manager, another for the submittal coordinator, the third for the document controller, the fourth for the QA/QC engineer so submit request for inspections as well as track the closure of NCRs, and the last will be for the engineer responsible for the daily reports and site safety incidents. None of those licenses will have access to the cost management module.

The consultant will be provided with 10 licenses. Those will be for the Resident Engineer, QS/Cost Engineer, Planning Engineer, Site Inspector(s), Discipline Engineers and Document Controller. Two of those 10 licenses will have access to the cost management module.

As the project owner, they will need 20 licenses to be used by the head of projects department and other members of the of the projects departments. In addition, access will be given to selected senior management and executives of the organization. Ten of those licenses will have access to the cost management module.

In other words, the real estate developer would need to invest in acquiring 65 licenses of which 16 will have access to the cost management module. As the analysis will be based on a 5-year investment, additional four years of annual software maintenance and support to be added as well as have a separate PMWeb instance for testing and training. The organization also selected to subscribe to online PMWeb training using PMWeb University for the 5-years to ensure PMWeb knowledge is shared by anyone working on their projects. This brings the total software investment to US$ 250,000.

In addition, the organization has decided to use the services of one of the many reputed data centers to host the PMWeb PMIS solution rather than investing in acquiring and maintaining their own web servers. The 5-year cost associated with this data center is US$ 100,000.

For the software implementation, configuration, training and after go-live support, it was agreed to have two resources, a PMWeb Consultant and PMWeb Report Writer for a period of 6 months where implementation will be for 4-months and 2 months for after go live support. The cost of this professional service is US$ 200,000. In addition, the organization wants to have their own dedicated PMWeb Administrator who will be responsible for supporting PMWeb users and maintain the PMWeb application. This will add an estimated cost of US$ 8,000 for 5 years, US$ 480,000. This brings the total PMIS investment to US$ 1,030,000.

Quantifying the Benefits

Automating Project Management Processes

One of the key benefits of automating project management processes is the increased efficiency in submitting, reviewing, approving and sharing the contents of those processes. By replacing the manual or semi-manual processes of completing the project management forms, distributing those forms for actions and then getting the updated status with an automated process that PMWeb will bring, one could assume that this will bring at least 30% efficiency improvement. In addition, there is the additional benefit of enforcing governance, transparency and accountability while improving the efficiency in executing those processes. As this benefit will affect all those involved in delivering each project, we will assume that there will be US$ 5,000 saving for the wasted effort per month per project. This brings the total anticipated savings to US$ 900,000.

Knowledge Management

The benefits of stopping the knowledge wasted by capturing and analyzing the everyday projects data and lessons learned is massive taking into consideration the massive talent drain facing the engineering and construction in general and the GCC region in particular. Knowledge could be related to what material to use and what not to use, contractors and suppliers’ performance, risks and how best to respond to them, cost estimates, dealing with contract agreements, among many others.

The organization will not only have access to all of the above data from the project management processes captured in PMWeb but can enforce a formal Lesson Learnt process to ensure that knowledge gained and best practices are formally captured, analyzed and shared. For this benefit, we will assume that the value of this captured knowledge is US$ 200 per day per site. Since we have three projects and the head office, this will be US$ 800 per day for five years. The total anticipated benefit will be US$ 1,460,000.

Internal Audit

The real estate developer has strict governance requirements which is being monitored and controlled by their internal audit department. The automation of the project management process will enforce governance, transparency and accountability as well as provide the documents and records at the granular level required by the internal audit. PMWeb cost ledger provides a single source for all financial transactions that occurred during the project delivery. Each transaction is linked to the record used in capturing its details. This will help in drastically reducing the effort and duration needed by the internal audit department to do their assessment and submit their finding report. The internal audit department anticipates that this saving could be quantified at US$ 100,000 per annum or US$ 500,000 for the five years.

Reporting Projects Performance

It is estimated that organizations who continue to use MS XLS as their platform for monitoring and evaluating the performance of the projects, waste 65% of their senior project management team members in consolidating, analyzing and reporting the projects’ performance data. In addition, the period between the cutoff date of the captured and when the performance reports and dashboards are available to be presented varies between 3 to 6 weeks. In other words, the presented information is not valid anymore.

On the other hand, PMWeb provides all those reports and dashboard in real-time single version of the truth form and format that can be accessed by authorized users anytime, anywhere using any device. Accordingly, one can easily assume that this could bring at least US$ 10,000 savings per month when it comes to reporting project’s real-time performance. This totals to US$ 600,000 for the five years.

Stakeholder Engagement

The benefits of improved stakeholder engagement by sharing trust-worthy projects performance and status reports and dashboards could be massive. Not only it helps in building trust and confidence with those stakeholders, but also helps in keeping them engaged in the project delivery by keeping them aware of the progress and status in the form and format that matters to them most. This will drastically reduce the conflicts that usually occur on projects when stakeholders feel that they are left out or being the last to know.

Quantifying the benefits of having more engaged stakeholders and with less conflicts is not that easy to determine. Nevertheless, we will assume that the organization has five key stakeholders that they need to manage. Having trust worthy dashboards designed to their own needs that they can access on their own when they desire regardless where they are, could save the projects department at least one day of effort to resolve conflicts and respond to stakeholder queries and needs, This saved effort will be estimated at US$ 1,000 per month per stakeholder. This brings the total anticipated benefit to US$ 300,000 for 5 years.

Project Handover

One of the key challenges in handing over a project is the snag list of items that need to be rectified by the contractor before the project can be considered complete. One of the recommended practices is to use the Snag List as an Observation Report where the assigned supervision consultant capture and share defects during the project execution as soon as they are identified rather than delaying this process toward the completion of the project. This will not only help the contractor in rectifying those defects as soon as they are identified but also reduce the list of pending snag items when it comes to handing over the project.

We will Assume that there will be 10 projects that will be handed over during those five years and that implementing such best practice practice using PMWeb Snag List will save 5 days from the duration given to the contractor to rectify the snag list items. Assuming that for the project owner each day saved in handing over the project for operations can generate a revenue of US$ 10,000, then the estimated total benefits could reach US$ 500,000.

Construction Claims

No one can deny that construction claims in the GCC in particular and globally in general are on the rise. The decline of new project awards, projects at low profit margins, liquidated damages claims for late completion are rising in frequency and amount, and tough pressure on margins among other issues are compelling owners and contractors to become more contentious and adversarial thus resulting in growing volume of claims and disputes.

The benefits of having online access to all project’s documents and records that can be searched to identify documents and reports needed to either support the submission of a claim or support the response of a counter-claim are massive. Actually, they can be the deciding factor of who will have better chances to win or lose the claim. It is anticipated that this will bring a saving of US$ 2,000 per month per project for the time consuming effort spent in searching and locating the requested documents. This is a total saving of US$ 480,000.

Other Benefits

Using a PMIS like PMWeb is not limited to the benefits listed above but actually there are many other benefits that an organization can gain from using such platform. To list a few:

Lean Performance and Continuous Improvement

By automating the project management processes, the organization has now a platform to assess those processes and find ways to improve their performance. Some organizations have decided to eliminate and combine some of their processes after implementing them in PMWeb as some of them were found to be redundant and there was no added value for having different templates for each. Actually, the ability of PMWeb conditional workflow to add the conditions and branches to match the different approvals authority levels made it easy to combine different manual-based processes into a single automated process.

Big Data Knowledge and Business Intelligence

The capturing of current projects big data with the option of migrating completed projects data to PMWeb or a data warehouse, provides the organization with access to massive knowledge database that can help in analyzing trends, correlation and exceptions that can improve their current and future projects delivery. In addition, it enabled senior executives to visualize the projects performance data as part of the enterprise business analytics and data visualization dashboards.

Improved Digital Transformation

With the availability of projects data in a digital format, integrating, associating and blending this data with other digital data captured from ERP application, cost estimating, planning and scheduling, building information modelling (BIM), Internet of Things (IoT) among others, will enable the organization to achieve their desired digital transformation strategy and gain the benefits from this strategy. For example, the data captured in the PMIS can now become part of the BIM model by having the right integration between the two applications.

Enhancing Third Parties’ Confidence in all dealings with the Organization

The organization needs to obtain funds to bridge the time between making expenditures to build the three projects and obtaining revenues from leasing or selling them. The funding agency takes a risk that the organization may not pay back the loan as agreed. Thus, the interest rate provides a certain compensation for bearing risk coupled with the risk of default is the risk of inflation. Interest protects against future rises in inflation. That is why it is common the find that the interest rate to finance such projects could vary by around 3% depending on the organization risk exposure. Having a PMIS like PMWeb where all financial transactions are available to be audited and reported on, can help the organization in getting better project finance terms and condition.

Increased Company Value

The documented and automated project management processes, the captured and documented knowledge management, the improved governance, transparency and accountability, improved internal audits, the effective projects monitoring and evaluating among others are all considered as organizational assets that enhances the organization corporate image and shareholders’ confidence. It also helps in improving the value of the organization should they decide to become a publicly traded company.

Conclusion

The total of anticipated benefits for using PMWeb for 5-years is US$ 4,740,000. With an estimated invest of US$ 1,030,000, the ROI of using a PMIS like PMWeb could reach 460%. Of course, the value of the benefits listed above as well as what value the other benefits can bring to an organization when using a PMIS like PMWeb depends on each organization perspective of those benefits. Some could be lower to what was estimated while others could be much higher. Another important point to consider is that more than 40% of the investment cost for acquiring the software licenses and implementation is a one-time investment whereas the estimated benefits are ongoing with a trend of growing more when more mature project management information system environment becomes available and the PMIS solution is used to its full capabalities.

Vision with No Actions is a Dream, but Actions with No Vision is a Nightmare

My friend’s 10-years old daughter was so happy to tell her dad that today she learned something important at school which was “Vision with No Actions is a Dream, but Actions with No Vision is a Nightmare”. A statement that is so much true that we continue to see it happening when businesses fail to align their project investments with their corporate vision.

Understanding Our Vision?

To align projects or actions with the organization vision, we need to first to decompose the vision into SMART objectives that can be quantified and measured. The first step in decomposing the vision is to identify what is the desired state that our business must achieve for attaining that vision. This will enable the organization to identify the strategic goals along with the objectives that will provide the key performance indicators to measure the extent that those objectives are attained and get the confidence in attaining the desired vision.

The Saudi Arabian National Transformation Program 2020 (NTP2020) is an example of how the Saudi government has identified the strategic goals and smart objectives for each public-sector entity to achieve for realizing the Saudi Arabian Vision 2030. A vision that details the desired end-state that Saudi Arabia needs to realize by 2030. The actual achievement of those KPIs compared to the planned achievement will be measured at the end of each performance period. This will provide the organization with an objective assessment on how good they are in realizing their desired vision.

What Actions We Must Take?

Nevertheless, to be able to do this, the organization needs to identify the strategic initiatives or high-level actions that they need to undertake to achieve the change that will take them from where they are today to where they want to be.

Using the NTP2020 again as a live example that shows how Saudi Arabia is taking the many actions to realize their desired 2030 Vision. In the professional project management practice, those actions are called Programs. Using a Project Management Information System (PMIS) like PMWeb will allow the organization to map all of those programs along with the strategic goals and objectives contribution for each program.

When all these programs are captured in PMWeb, the organization can now have real-time visibility of all those strategic initiatives and their contribution to the SMART objectives identified as the measures to monitor and evaluate the organization’s strategy performance. This information can be displayed and visualized in any desired format to give executives the insight to make better and faster decisions on how to keep the organization on the right track for realizing the desired vision.

Decomposing High-Level Actions into Manageable Actions

The high-level actions, strategic initiatives or programs need to be decomposed into specific projects or actions that can be managed by the project team to achieve the desired objectives of each program. Again, PMWeb will be used to capture the details of those projects including budget, schedule, objectives, among others. The project template will also include attaching all supportive and relative documents for the identified project.

PMWeb user defined forms will be used to create the template for the project business case. This will ensure that projects identified by the organization have merit and are really needed to achieve the organization’s strategic objectives and accordingly the strategic goals needed to attain the desired vision. The content of the business case template can be designed to meet each organization own needs and requirements. The business case will have all supportive document attached to it as well as it will have a workflow to formalize the submit, review and approve steps of the business case.

In addition, it should be understood that no organization would have all the resources, including financials, to undertake all the projects that they have identified. Trade-offs need to be made between the benefits that a project could bring to the organization along with the risk exposure associated with delivering this project as well as the amount of investment it needs. The Investment Portfolio Analysis Map will provide the decision maker with the insight to analyze those parameters and decide on which projects the organization needs to select now and maybe delay the decision on the other projects to a later date should additional funds become available or changes that will make the project attractive to select.

Those selected actions need to managed by adopting the best practices of project management from the initiation phase to the project closeout covering the phases of planning, execution and monitoring and controlling. The project management knowledge areas of scope, time, cost, quality, human resources, communication, risk, procurement, stakeholder and integration management needed to be managed professionally to ensure successful projects’ delivery. Sometimes, and due to the specific of the organization’s projects, additional project management knowledge areas need to be added. Those could include safety, sustainability, financial, claim among others. PMWeb stage gate module is used by many organizations today who are seeking project governance to ensure that the deliverables associated with each project management process are formally completed and approved before proceeding with the next project life cycle stage of a project.

Again, using the NTP2020 as an example, executives can have a real-time report to monitor and evaluate the performance of each project being executed. The report will be designed to identify performance trends and to alert executive management of troubled projects.

Project executives can drilldown to a specific project from the projects performance dashboard should there be a need to have more details on the project’s performance. The project or action dashboard could be used to report on the project schedule, budget, contracts performance, risk, issues, sustainability compliance among other aspects that are of interest to the organization.

Conclusion

The ten-year old girl has summarized the key challenge that faces organizations across the globe, “Vision with No Actions is a Dream, but Actions with No Vision is a Nightmare”. Decomposing and aligning actions with the desired vision and them managing those actions is a must to avoid having the dream and the nightmare. The Project Management Institute (PMI) in 2017 recognized a positive change in the way organizations are managing projects and programs. Hence, instead of $122 million, organizations are wasting an average of $97 million for every $1 billion invested, due to poor project performance—that’s a 20 percent decline from one year back.

Managing Risks in Engineering and Construction Projects

For those who are involved in delivering engineering and construction projects, regardless of their type, size, location among others, understand that they need to make many assumptions to address the many unknowns that could impact the project schedule, cost among other project objectives. 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.

Managing Projects Risks

To enforce professional project risk management practice, an organization needs to develop and implement a risk management plan that formalizes the processes of risk identification, assessment, response and control. In addition, it should identify how to monitor, control and report project risks. The risk management plan should identify the categories and types of project risks that need to be managed. The risk breakdown structure is an excellent practice for identifying those risk categories and types.

Project Management Information Systems (PMIS) like PMWeb provides a single web-enabled platform to automate the risk identification, assessment and response process as well as monitoring, controlling and reporting the risk management performance. This is of course true to the many other project management processes that will also be managed using PMWeb.

PMWeb custom form builder will be used to design the Risk Form that is specific to meet each organization needs when it comes to managing project risks. The form below is an example of a basic risk input form that was created in PMWeb. In general, the risk form should include as a minimum the likelihood and impact of the risk before taking any risk mitigation actions (pre-mitigation) and the likelihood and impact after risk mitigation (post-mitigation). This will provide the risk score values. In addition, the input form should be aligned with workflow that will be used to involve the authorized project team members in the risk identification, assessment and response steps. It should be noted that different project team members could be involved in this process depending on the risk type, risk score among other risk management attributes.

During the different steps of the risk management process, the project team members involved in this process might find it necessary to upload and attach project and other related documents. For example, this could include specification sections, drawings, progress photographs, weather conditions for the past years, contract agreements, insurance documents among others. Those documents will be uploaded into PMWeb document management repository where they can become available to be attached to the risk form.

In addition, PMWeb allows linking the Risk Form to other PMWeb records like the project schedule, cost estimate, budget, awarded contract among others. This will enable the reviewer to launch that record and review the details. PMWeb also allows linking the Risk Form to websites like the Meteorology and Seismology website of a specific country where the project being executed.

Risk Register

The risk data captured by PMWeb will become the basis for creating the real-time risk register which can be designed in any desired format. The risk register will provide details of each risk along with pre-mitigation and post-mitigation risk scores along with the approved risk mitigation actions. In addition, the risk register could include visuals to group and display the risk score pre-mitigation and post-mitigation as well as the Probability-Impact Matrix that shows the likelihood and impact of each identified risk value pre-mitigation and post-mitigation.

In addition, using PMWeb Business Intelligence (BI) reporting tool, the organization can analyze the volume of reported risks by the risk breakdown structure category and type, project phase, WBS levels, risk owner among others. The granular data captured in the risk management process allows the organization to create different business intelligence reports to dice and slice the risk data.

Another important risk management report is the report that analyzes the additional cost that the organization could incur to treat the identified project risks. This will enable the organization to do a trade-off analysis between the cost that could be incurred due to schedule delays, disruption and other type of damages that could be incurred should the identified risks occur and the cost of treating those risks to reduce their risk score or risk exposure.

Monte Carlo Risk Simulation

The risk data captured in PMWeb can also be aligned with the Project Integrated Schedule where the risk form will include a field to assign the activity that could be affected by the identified risk. This can be used to determine the optimistic, most-likely and pessimistic duration variance for the activity or to identify the probability of this activity occurrence during the project execution.

Using Schedule Monte Carlo Simulation like Oracle Primavera Risk Analysis or Acumen Risk, this schedule risk data can be imported into the software to perform the Monte Carlo simulation. This analysis will provide a number of risk analysis report including Schedule Risk Probability Curve, Tornado Risk Duration Chart, Risk Criticality Drivers among others. Those reports can be generated for the identified risks pre-mitigation and post mitigation. Similarly, and if the PMWeb risk analysis include the cost impact of those identified risks, the Monte Carlo simulation can also analyze and report on the cost risk similar to what done for the schedule risk.

It is a recommended practice to save all the Monte Carlo Analysis reports as PDF and upload them to PMWeb document management repository. Those documents along with the other risk register and analysis reports can be attached to risk review meeting that is held on regular basis to analyze the current project’s risk exposure, new risk identified or risks that are not valid any more, effectiveness of risk treatment measures among other risk related business items that are usually reviewed during those meetings. PMWeb meeting minutes module will be used to capture those meeting minutes and assign responsibility for each action.

Conclusion

Organizations who are involved in delivering engineering and construction projects are now more conscious about the need to manage their projects’ risks. Those organizations understand that for the risk management to be of value, it requires enforcing transparency and accountability when it comes to risk identification, analysis, assessment and response. In addition, those organizations understand that having access to this important risk data that they can trust, they can analyze this data to have better and faster insight on how they can best reduce the threat that those risks could cause the success of their projects delivery.

Managing the Extension of Time (EOT) Analysis Process

No one can deny that construction claims in the GCC in particular and globally in general are on the rise.

The decline of new project awards, projects at low profit margins, liquidated damages claims for late completion are rising in frequency and amount, and tough pressure on margins among other issues are compelling owners and contractors to become more contentious and adversarial thus resulting in growing volume of claims and disputes.

One of the key challenges in quantifying the damages of construction claims is the quantification of the delays associated with each claim. Those delays could result in financial damages as it relates to prolongation cost, idle resources, disruption, loss of efficiency, constructive acceleration among others. The project planner has the obligation to provide the project team responsible for the claims submission, review and negotiation with a robust and comprehensive quantification of the delay impact that claim events have caused to the project.

The Integrated Baseline Schedule

Every project has the contractual requirement for preparing and submitting a detailed integrated construction schedule that details all the activities needed to deliver the project with the approved milestone and completion dates. The project schedule needs to incorporate the Work Breakdown Structure (WBS) used to decompose the project’s scope into manageable control account or work packages. The project schedule is usually resource loaded with the manpower and other resources needed to execute each schedule activity. In most projects in the Middle East region, contractors are required to submit this schedule using Oracle Primavera P6.

To ensure that this submitted schedule is complete and correct, it is highly recommended that it is formally reviewed and analyzed before it is submitted for approval. Reviewing the schedule will ensure that the schedule is reasonable and complete while analyzing the schedule will ensure that the schedule represents a workable plan considering available managerial and production resources. Using PMWeb Project Management Information System (PMIS), a standard checklist template will be created to formalize the review and analysis process. A workflow will be added to this template to capture the comments made by the review team and ensure that they were incorporated in the schedule before submitting it for formal approval by the project owner or his/her authorized representative.

Aligning the Project Schedule with the Project Everyday Events and Communications

To be proactive in capturing and analyzing the impact of everyday project events and communications, the project schedule WBS levels and activities need to be part of the different project records used in documenting project events and communications. Those include submittals, transmittals, request for information, daily reports, change orders, progress invoices, meeting minutes, safety incidents, snag list among many others. Accordingly, a PMIS like PMWeb must not only allow importing the schedule WBS levels and activities but also associate those schedule records with the different records generated from PMWeb.

PMWeb default out of the box forms have pre-defined fields for the WBS and activity ID to allow associating the record with the relevant project schedule WBS level and activity. The same will be done to the other custom forms created in PMWeb to capture other project’s data that are not covered in the default forms. Of course, for each PMWeb record, the project team member can attach all supportive documents as well as link to other relevant PMWeb records and imported emails.

Capturing Actual Progress Details

Although it is very important to capture the actual progress details needed to update the schedule, nevertheless this becomes more critical and important when the purpose of this actual progress data is to support the delay analysis submission. In construction projects, the document that all parties agree on as being the only formal communication document to capture the actual project progress is the daily report. The daily report is used to capture the daily weather condition, work completed on site, resources used to perform the works among others.

In addition to the basic details like weather conditions, PMWeb default daily report module allows capturing the details of all work activities accomplished on the project for each particular day. The location breakdown structure provides a structured approach to identify all project locations so by just drag and drop that specific location, the project team member can report the actual progress achieved at that location. It allows quantifying the work done as well as associate it with the Cost Breakdown Structure (CBS) level which is part of the project budget, commitment, change order and progress invoice records in PMWeb. For each progress entry, pictures, videos and other documents can be uploaded and attached to that entry.

The PMWeb daily report also allows capturing the details of all resources, manpower, equipment and others that have worked on that day. For each resource entry, there will be quantification of the hours spent, from when to when, and whether those hours were overtime, weekend or regular working hours. Those resource hours can also be labelled as idle hours. For each entry, the resource hours will be associate with the Cost Breakdown Structure (CBS) they are associated with and the work done on that day as well as the project schedule activity that those resource hours are associated with.

Since it is possible that key project deliverables are completed at one of the project days, PMWeb daily report module allows creating a checklist that can be used to verify the completion of that deliverable. PMWeb allows creating a repository of all possible checklists to enable the project team member to simply drag and drop the checklist to be used.

One of the best practices used today on construction sites is to allow every site superintendent or site engineer to submit his/her own daily report for each WBS level he/she are accountable for. This not only will expedite the capturing of daily progress data but also will ensure accountability for the reported progress data for each WBS level or control account. Again, a workflow can be assigned for the daily report to formalize the submit, review and approve process or as an alternative choose to generate a transmittal to capture this submit, review and approve process.

Capturing the Delay Analysis Details

When there is the requirement to perform the delay analysis due to an event that could have an impact on the project’s schedule, the planning engineer needs to capture the particulars of this delay analysis to ensure that he/she has the complete particulars of this delay event. PMWeb custom form builder will be used to create the Delay Event Form which will be used to record the delay particulars including the details of its being Excusable or Non-Excusable, Concurrent or Non-Concurrent, Compensable or Non-Compensable and Critical or Non-Critical. It will also make reference to the contract agreement clauses that this delay event is associated with.

Identifying the Reason for the Delay

The Delay Event form will also allow to select from a predefined list for the reason of this delay which could be Acts of God, Acts of Government, Actual Acceleration, Adverse Weather, Bankruptcy, Cardinal Change, Commercial Impracticability/ Performance, Commercial Impracticability/ Supply, Constructive Acceleration, Constructive Change, Defective Specifications, Delay of Approvals, Delayed Issuance of Change Orders, Delayed Notice to Proceed, Destruction of Work, Destruction of Materials, Differing Site Conditions, Early Completion Prevented, Impossibility of Performance, Improper Inspection, Inadequate Supervision, Inadequate Utilities, Interference, Labor Shortage, Lack of Access, Lack of Information or Decision, Lack of Permits, Lack of Right of Way, Late Drawings, Late Defective Material, Payments Not Made, Scheduling Difficulties, Stacking of Trades, Strikes, Subcontractor Delay, Superior Knowledge/ Misrepresentation, Supplier Delay, Suspension of Work/Delay, War and Other Hostilities among others. Nevertheless, it is usually recommended to have another PMWeb form created to capture the details of those occurrences and link it to the relevant Delay Event Form.

Search and Locate Project Communications to Support Delay Analysis

Similar to all other PMWeb records, the planning engineer can attach all supportive documents to the Delay Event Form but n delay analysis, the planning engineer needs first to locate those records. Therefore, PMWeb allows the planning engineer to search for the records captured in PMWeb for the needed key words and store those selected documents in what is known as a Claim Issue. The planning engineer can do multiple record search and keep appending the Claim Issue with newly identified records. Only those that are relevant to the delay analysis will be then attached to Delay Event Form.

Reporting on Delay Analysis Status

The planning engineer needs to maintain a log of all submitted Extension of Time (EOT) requests along with their relevant details. The log will be based on the data captured in the Delay Event form as well as the Occurrence form which details the reason for the EOT. The dashboard has four visuals: EOT By Reason, Awarded Time Extension by Reason, Awarded Compensation by Reason and EOT By Status. In addition, the dashboard includes a table that details all EOT submissions made to date. The project team member can drilldown to the Delay Event form to get additional details on the Extension of Time analysis when needed.

Conclusion

Disputes arising from claims for time extension are on the rise. Planning engineers use different techniques to analyze the time impact of delays associated with claim events. All those techniques require having approved baseline and periodically updated project schedules. In addition, they require formal details of the different events associated with those delays to quantify the time and cost impact of those events. Daily report is a formal project communication that all construction projects must have. If daily reports are implemented correctly, they will provide true description of what has happened on the project for which all parties of the contract have agreed to when they were submitted. This data along with other project records and documents will enable the planning engineer to come with the EOT Submission that the project owner/consultant can review, analyze and approve or reject.

How To Reduce The Risk Of Delayed Response To Project Communications?

One of the most critical issues yet basic requirements in managing projects, and in particular engineering and construction projects, is ensuring that the project’s communications are actioned by the right project team members in a timely manner to avoid delay claims.

In engineering and construction projects, and because of the common approach in outsourcing the project scope of work to different entities, there will be always contract agreements to govern the relation between those entities. Executing those contract agreements, will result in formal and informal communications between those different organizations involved in the project delivery whether they have direct agreements between each other (owner and consultant, owner and project management consultant, owner and contractor, contractor and subcontractor among others) or do not have direct agreements (consultant and contractor, project management consultant and consultant, project management consultant and contractor among others). Those contract agreements usually have clauses that govern the time allotted for responding for the different types of project formal communications. Failing to adhere to those durations would entitle the affected party in many cases to claim for project delays.

Project Formal Communications

The management of engineering and construction projects involve the implementation of many processes that are needed to fulfil the technical and contractual requirements of the project. Usually, all of those processes are summarized in what is known as the Responsibility Assignment Matrix (RAM) where for each process, the RAM will detail the contract parties responsible for submitting, reviewing and approving the formal communication associated with that process.

For each process, there will be pre-defined document template to be used by the contract parties. Those document templates will use the terminologies and abbreviations used in the project’s contract agreement and project management plan. The document template will include the data fields that need to be completed by the contract party submitting the document template, reviewing it and approving it. The document templates are not limited to forms but also could include letter templates.

To avoid miscommunications and unauthorized approval by the wrong team member when not abiding with the authority approval levels, workflow will be created for each process to detail the responsibilities included in the RAM and to identify which fields of the process form will be filled by each party. The workflow will detail the project roles involved in the submit, review and approve process. It will also detail if there are multiple reviewers and if those reviewers need to perform their review in certain sequence or all at the same time. The workflow will also detail condition branches that could result from rules associated with approval authority levels, document attributes among others.

Automating the Project Management Processes

Project Management Information Systems (PMIS) like PMWeb can help organizations in automating their project management processes and maximize the value from the data captured through the different project management processes. PMWeb comes ready with most of the input forms needed to manage the project management processes. In addition, PMWeb custom form builder allows creating unlimited number of additional input forms to capture the details of newly created project management processes. PMWeb allows setting role-based access rights to limit access for those forms as well as limit access to specific fields within the form itself.

In addition, it allows the form user to attach all supportive documents, link emails and link other project management records to the selected form. Those documents are usually uploaded and stored on PMWeb document management repository. The document management repository allows creating folders and sub-folders to match the organization’s project filing structure. PMWeb administrator can also limit access to those document folders to only authorized project team members.

Each input form could be assigned with the workflow that maps the process for submitting, reviewing, approving and sharing the project management process. The workflow will usually include branches and conditions to match the authorities and approval levels associated with each process. The workflow could include multiple reviewers for specific steps with the condition that all must approve or only one can approve. Comments made at each step will be captured to keep track of the workflow team input. PMWeb allows creating notifications and reports to identify those who are delaying the review and approval of a document as per the workflow steps duration and actions.

Documents Events Portal

The real-time status of each of document template managed through PMWeb will be become available to be reported on by the project team in any desired format. The Document Notification Portal is a real-time dashboard that can be accessed from within PMWeb or through Business Intelligence and Data Visualization application like MS Power BI which will be linked to PMWeb database. Assuming that a project team member could be involved in more than project, the dashboard has a filter to select a project or multi-projects to report on. The dashboard also has a filter to list the individual who is responsible for those reported documents. Of course, the security access right will restrict the access which individual can view when he or she logon.

The dashboard has four visuals. The first is to group documents by Status (Approved, Pending, etc.), the second to group documents by Type (RFI, Change Order, Submittal, NCR, Transmittal, etc.), the third to group documents by Organization Who Sent the Communication and the fourth to group documents by Days Withheld (Green within 14 days, Cyan within 21 and 15 days and Red over 21 days). In addition, the dashboard includes a scorecard lists all those documents transactions.

In addition, each document entry in the scorecard, a hyperlink can be created to allow the user to click and open the source document. This enables the user to view the document, attached documents, other linked PMWeb records and emails, comments made by the workflow reviewers and other data captured in the form.

Using data visualization tools like MS Power BI enables designing the Document Notification Portal in a format that can be accessed and viewed using smart phone devices. Similar to the full dashboard, the user can filter the documents by any of the attributes shown in the four visuals as well as click and drilldown to the source document in PMWeb. Since PMWeb is a zero-foot print application, the relevant PMWeb record can be viewed using any web browser including those of smart phones.

In conclusion, organizations involved in delivering engineering and construction projects cannot afford taking the risk for delayed project communications. Delaying the right response by the right team member within the right time could result in claiming delays that could affect the project completion date and could result in additional prolongation cost. Having a real-time document notification portal enables project team members as well as their management to respond in a timely manner to all project communications thus reducing the risk of delayed response.

The Balanced Scorecard Projects Performance Dashboard

Those involved in delivering capital project investments are always faced with the challenge on how to have an objective yet comprehensive and meaningful status of their projects’ performance health. Although there could be many ways to report this performance for which some might agree and many others would disagree with, nevertheless, using a globally recognized approach can help in narrowing those differences. The balanced scorecard (BSC) used by many organizations to report and communicate their business performance can be adopted to monitor, evaluate and communicate the projects portfolio performance.

The Extended Balanced Scorecard

The balanced scorecard assesses the performance of an organization or any of its business units from four perspectives: Customer, Financial, Internal Processes and Learning and Growth. The same perspectives will be used to assess a project’s performance plus two additional perspectives that are needed for capital projects. The first is Health, Safety and Environment (HSE) and the second is Sustainability. For each perspective, Key Performance Indicators (KPI) will be identified to report the most important performance results of each project. Those performance results depend on the data captured from the different processes that are implemented to manage the project execution across its complete life cycle stages.

The Financial Perspective

For example, assessing the project’s performance status from the financial perspective requires a number of KPIs including the cost variance (CV) to assess if the project is currently over or under budget, the schedule variance (SV) to assess if the project’s actual spending is in accordance to the planned budget spending and the anticipated cost variance at completion (VAC) to determine if there will be financial loss when the project is completed. Other KPIs can be also added depending on the organization’s performance reporting requirements and the level of control they need to implement when managing the project from the financial perspective.

The Cost Variance (CV) key performance indicator for a specific project period depends on the actual cost (AC) incurred on the project until that date. Those are the actual costs for work completed against the awarded contracts, subcontracts and purchase orders which are submitted using the monthly progress invoice application. In addition, it includes other non-contract related actual costs which are captured using miscellaneous invoices as well as actual cost for resources, manpower and others, that are spent on the project and usually captured using timesheets. The Cost Variance (CV) also depends on the actual project budget performance achieved to date. This value is calculated using the current approved project budget which is inclusive of all approved budget adjustments and the approved percent complete for the project’s scope of work which is detailed in the project’s execution schedule. It should be noted that this approved percent complete is usually the same percent complete used to quantify the project’s actual cost to date.

Using project management information system (PMIS) like PMWeb is crucial to ensure that that the data needed for reporting the project performance results are captured in the right format, by the right team member at the right time. PMWeb default forms and custom-built forms will enable the project team to have input forms to capture the data for each specific process in the right format. In addition, it allows attaching all supportive documents associated to the reported data. The field security and the highly configurable workflow will ensure that the data is captured by the right and authorized project team member in the right sequence. This will provide the project team with real-time access to trust-worthy data that provides the actual results used to calculate the key performance indicators.

The financial perspective dashboard, and similar to other project performance perspective dashboards, will summarize the transactions that where captured from the relevant project management processes needed to generate the performance results for calculating the KPIs. For example, the dashboard shown below summarizes the current project results which are the revised project budget (BAC) and planned budget spending (PV) which are captured from the budget and budget requests modules, schedule percent complete, earned value (EV) which is a calculated by multiplying the revised budget (BAC) by schedule percent complete, work in place from the progress invoices module, miscellaneous invoices from the miscellaneous invoices module, timesheets from the timesheets module, total cost (AC) which is the sum of invoices, miscellaneous invoices and timesheets. Based on those results, the key performance indicators Schedule Variance (SV), Schedule Performance Index (SPI), Cost Variance (CV), Cost Performance Index (CPI) and Variance at Completion (VAC) are calculated.

Other Balanced Scorecard Perspectives

The same approach will apply for the other five perspectives. At the end of each progress period, each project that is part of the organization’s projects portfolio will have the key performance indicators for the six perspectives. For example, for quality, the organization might use the number of pending Non-Conformance Reports (NCR) as whereas for HSE, the Project Significant Injury Frequency Rate (SIFR) could be used. The Total Float (TF) will be used for the Internal Processes as what matters most for the organization is how the project management processes are ensuring on-time project delivery. For learning and growth perspective, the project risk exposure is one of the KPIs to be reported on, why? Because if the project delivery team knowledge and past experience cannot reduce the project’s risk exposure for failure, then the project and the project team are not meeting the organization’s target performance requirements when it comes to learning and growth. The last perspective is the sustainability for which there will be three KPIs to assess the project’s performance against the environmental, social and economic contributions of the project. It should be noted that organization will add more KPIs for each perspective depending on their strategy for reporting projects’ performance. For example, for HSE, the SIFR could be one of the other KPIs that the organization wants to report on as shown in the HSE Performance Dashboard below. Those include Incident Frequency Rate (Per 100,000 Hours Worked), Lost Time Injury Frequency Rate (LTIFR) (Per 100,000 Hours Worked), otal Incidents, Near Misses & Injuries, Incident Causes among others.

The Balanced Scorecard Projects Performance Dashboard

The performance metrics that the organization selects as the KPIs needed to report their projects portfolio performance will become part of their balanced scorecard projects performance dashboard. At the end of each performance period, the dashboard will detail the KPI performance value for each project highlighting whether this performance was favorable or not. In addition, it will provide an overall status of the projects portfolio which will be automatically adjusted depending on the projects or programs selected to be part of the report. Assuming that the organization might have their projects spread over the country or the world, a map will show the location of those projects with the option to display those projects KPIs from the map directly.

Action Management

Getting real-time single version of the truth performance status of your projects portfolio will not eliminate the reasons and causes that caused the unfavorable KPIs performance results. Project executives need to take the actions needed to turnaround non-performing projects back on-track. Having a PMIS like PMWeb provides those executives with the insight to make better and faster informed decisions on not only what have caused those unfavorable results but also what actions must be taken to achieve the desired recovery. With the immediate access to the complete projects’ data, those executives can analyze the causes to what has happened and what options they have to come up with actions to be implemented by their project team to achieve the desired recovery.

PMWeb Action Management Module

PMWeb Action Management module will be used to capture all actions taken by project executives. The action should be linked to the KPI it is associated with. The form should specifically state the action taken so all those who will be involved in this action resolution have no misunderstanding or misinterpretation of the purpose of the action. The action management form will detail the different tasks required from the project team members to resolve the issues associated with this action and by when those tasks need to be performed.

Links to relevant project records like change orders, progress invoices among others need to be provided. In addition, all documents that are related to this action need to be attached. In a nutshell, all records, emails and documents that are part of this action, needs to be associated with the action form. Those documents and records will continue to be uploaded or linked until the action is concluded.

Unlike a project management process where there could be a workflow that will detail the sequence of steps for submitting, reviewing and approving the process record, in action management, it is all about collaborative team effort to successfully complete the action. Accordingly, the project executive who is the action owner needs to invite the needed project team members to be involved in bringing this action into a successful conclusion. The team input will be captured and shared in real-time format among the action resolution participants.

Of course, there could be a need sometimes to involve other parties in the action resolution that might not be part of the PMWeb users. In this case, the project team member can use the Notification option where emails can be sent to other PMWeb users and non-PMWeb users asking their input on the action. The email could include attachments to provide better understanding on the action being resolved. PMWeb notification tab maintains a log of all notifications sent keep track of all notification messages issued by the project team.

Action Management Dashboard

The projects action report provides the organization with a real-time status of all actions identified by the projects’ executives to resolve projects’ performance shortcomings. The dashboard has metrics to monitor how many actions still need to be closed, actions by priority, actions by balanced scorecard perspective and actions by KPI measure. In addition, for achieving the purpose of having a real-time monitor and control on implementing identified actions, the dashboard encourages knowledge sharing among the different projects executives by selecting actions taken to resolve specific project KPI performance measure.

Each action entry in the action management dashboard, will have a link to the Action Management form generated for each action. The form, which can be customized and designed in the desired format to match the organization’s branding and reporting requirement will provide the reviewer with the complete details of that action in a format that can be easily understood as well as shared with others if needed.

Conclusion

Having PMWeb as a single platform that is capable of capturing everyday data from the different processes needed to manage a project, enables the organization to have real-time project performance metrics. To have objective yet comprehensive and meaningful status of the overall projects performance, it is recommended to use the best practice of Balanced Scorecard. Due to the specific particulars of projects, the balanced scorecard four perspectives Client, Financial, Internal Processes and Learning and Growth need to be extended to six perspectives to include Health, Safety and Environment (HSE) and Sustainability.

The value of having PMWeb is not limited for providing the organization with real-time single version of the truth projects performance and status reporting, but the ability to couple this with an action management to enforce the capturing of all decisions and actions to bring projects back on track. The PMWeb action module allows project executives to document actions made, tasks needed to implement those actions and providing a collaborative platform for the project team to provide their input and feedback when implementing the tasks to bring the taken action into successful closure.

Why the Percent Complete is Critical in Reporting Projects’ Performance?

Regardless of the project that you are managing, reporting the project’s performance depends on having a robust and documented process on determining the percent complete for the completed project’s scope of work. The Work Breakdown Structure (WBS) and Organization Breakdown Structure (OBS) provides the project team with a logical yet robust approach for decomposing the project’s scope of work to the desired level of control to enable them to objectively quantify the percent complete of what has been achieved. The WBS is where the project scope will be defined while the OBS will define the entity who will be responsible for delivering this scope of work as well as report the achieved performance. This point of intersection is known as the Control Account or Work Package where the project scope of work, schedule and cost are planned and managed.

Defining the Value of Control Accounts

The value of each control account will be determined by mapping the relevant project’s schedule of values line items into the control account. Accordingly, the sum of all control accounts should equal the project’s contract value between the project’s owner and the contractor. This will also ensure that the project scope had been defined and captured in full. Using PMWeb Contract module, the control account reference, description, value and the project’s schedule WBS activity that captures the start and finish dates of the control account will be mapped into the contract’s default input form.

The control accounts’ data captured in PMWeb contract module can be reported on in different forms and formats to provide the project team with a better understanding of the project’s scope of work and the value of this work. Further, the control accounts can be associated with other data tables created in PMWeb using the custom form builder to provide more details on each control account. For example, the OBS levels and categories can be added to each control account to capture and report on the specific particulars of each control account. In addition, the report can display the weight for each control account from the total project by building a formula in the report to calculate this weight factor. Histograms to analyze the breakdown of the project’s value by different control account levels can also become part of the report to provide better visualization on how the project’s value is distributed across the control accounts or any other attribute.

The Control Account (CA) Card

The Control Account Manager (CAM) will be the one responsible for defining the activities and resources needed to deliver the scope of work included in the control account. Based on the scheduled activities, the planned percent complete for completing each control account will be determined. The percent complete values need to be aligned with the project’s financial periods defined in PMWeb as well as used in other applications that might be needed when it comes to reporting project’s performance. The percent complete values could be based the control account’s quantity of work, resources level of effort, milestone dates among other known techniques used in determining the percent complete values. Each control account will usually have two planned percent complete projections, the first is based on the early schedule dates while the second will be based on the late schedule dates. This data along with other relevant control account’s data will be captured in the Control Account Card which is a custom form created in PMWeb.

On monthly basis, the control account manager needs to update the control accounts assigned to him/her by providing the approved percent complete for the period using the Control Account Card. It should be noted that the reported percent complete is the same percent complete used in the monthly payment requisition submitted by the contractor to the project owner. It is also highly recommended to add a narrative to explain the progress achieved during this progress period. In addition, CAM needs to assess the planned Estimate to Complete (ETC) to complete the remaining scope of work for each control account. The control account manager is required to attach the updated CPM Schedule and other documents needed to justify the reported progress for the control account. When all completed, the control account manager needs to formally submit the CA Card using the workflow assigned for the form to ensure formal review and approval of the reported performance.

Reporting the Project Performance

The captured progress data will be used to create the control account performance report for which the planned, actually earned and estimate to complete performance percent complete will be reported on. The report will include S-Curve to display those values as well as a histogram to display the schedule performance index (SPI) for each progress period. The tabular section of the report will include the progress details of each period including schedule variance in value and weight as well as the details of the progress narrative.

This performance data will be aggregated into a single report to provide the overall project’s performance status at the end of the reported performance period. The report will display a histogram for the schedule variance (SV) and schedule performance index (SPI) for each control account. In addition, the tabular section will include the performance details for those control accounts. The report reader can drilldown to the control account performance report shown above by clicking on the relevant control account in the tabular section. Of course, the project team can create additional reports to analyze and reports on the project’s performance in other form and format that could be needed by them.

Reporting Project Financial Performance

The performance data captured for each control account can also be used to assess the project’s financial performance. The actual cost for each control account will be captured in PMWeb Progress Invoices and Miscellaneous invoices modules with the option to also include the data from the Timesheet module if it is used to capture actual resources hours. For each commitment between the contractor and the subcontractors, suppliers, vendors, company business units among others, the cost should be distributed against the same control account levels used in defining the project’s scope of work. This will ensure complete financial transparency between the revenue earned and the actual cost spent in delivering the scope of work for each control account and the project as an overall. Of course, it will also allow comparing the total project revenue, actual cost commitments to deliver the project scope and all changes to the revenue and actual cost commitments whether those were potential, approved, pending or disputed.

With this additional data becoming available, performance reports can be generated to report the actual cost, cost variance (CV) and cost performance index (CPI) for each control account. Of course, should the organization have the project’s actual cost captured at their head office using one of the ERP solutions like MS Dynamics, Oracle EBS, SAP among others and the organization does not want to integrate PMWeb with those applications, the same report and analysis can still be produced as long as the same control account ID and financial periods are used by the ERP application. Today, most business intelligence and data visualization tools allows extracting, loading, transferring, associating, blending and reporting on multiple data sources as long as there are common fields between those different applications.

From this summary progress report, it is possible to drilldown to a specific control account to get the details of both schedule and cost performance. The report can be designed in different forms and formats to include the performance trends of schedule and cost variances. The report can be also expanded to include details of changes whether they were for the contract between the contractor and project owner or the contractor and his subcontractors, suppliers among others. Those could include potential, approved, pending and disputed changes. Again, all of this data is captured on a single database repository by PMWeb using the appropriate cost management template for each process. The forms used for those processes can be attached with the supportive documents as well as linked to other related PMWeb records. In addition, all those forms can be assigned workflows to formalize the processes for submitting, reviewing, sharing and approving the data being transmitted through those project management processes.

How About if The Performance Reporting Needs to Be Done from the Project Owner Perspective?

All of the above will be applicable but with only one modification and that is instead of using the PMWeb Contract module to capture the agreement between the project owner and the contractor, the project owner will use the Project Budget module which details the target investment approved by the project owner for delivering the project. PMWeb Budget Module and Budget Requests Module will be used to create and maintain the project budget. Of course, the contract agreement between the project owner and the contractor(s) and other entities will become now the commitments.

Conclusion

In conclusion, the percent complete provides an excellent and proven method for reporting the planned and actual projects performance. Nevertheless, for the percent complete to be of value, it needs to be assessed against a well-defined and approved scope of work. The WBS and OBS techniques are used to create the project’s control accounts where the project scope of work, schedule and cost are planned and managed. This will enable the control account manager to determine the planned progress percent complete based on the planned activities and resources needed to deliver the control account as defined in the project baseline schedule. When the project commences, each control account manager needs to assess the actual percent complete for the accomplished work and report the details of this performance. This will enable the project team to have real-time single version of the truth project’s performance and status report

Why Earned Value Method Is Important for Capital Projects’ Investors?

Capital projects investors are always keen on ensuring that their approved project budget, which represents the approved investment, is always respected and the project actual cost should never exceed this budget, otherwise the project’s return on investment (ROI) will be negatively affected. The Earned Value Method (EVM) is one of the proven project management techniques used for monitoring and controlling the project performance budget as well as provide a trusted technique to forecast the expected cost at completion.

The concept of EVM is based on managing four variables, the project approved budget, the actual project cost for completed scope of work to date, the earned budget performance for completed scope of work to date and the expected additional cost for completing the balance of the project’s scope of work.

Using project management information systems (PMIS) like PMWeb provides the organizations with a single integrated platform not only to monitor, evaluate and report the project’s earned value performance but to ensure that the right data for the EVM is captured in the right format, right time by the right team member. Unlike traditional earned value analysis used by contractors which is mainly driven by the cost-loaded project execution schedule, the earned value analysis for a project investor requires capturing the budget, actual cost and cost to complete data using specific project management processes. Those include project budget and budget adjustments, progress invoices, miscellaneous invoices, timesheets, potential change orders, change orders and claims.

All those project management processes will be formalized using PMWeb. There will be an input form that will capture the needed data along with the supportive documents and records. This form will use a workflow to formalize the process for submitting, reviewing, approving and sharing the content. The workflow will take into consideration the level of approval authorities when it comes to financial transactions. This real-time captured data will then become available for the needed earned value analysis.

Managing the Project Budget

The project approved budget is based on the direct and indirect cost estimate for the approved project’s scope of work. The approved budget, also known as Budget at Completion (BAC), needs to be aligned with the project’s execution schedule to provide the planned budget value for each project period. This is also known as the planned value (PV). Linear, front-loaded, back-loaded, bell and other types of distribution curves are usually use to help in matching the way those funds will be spent.

To be able to effectively manage the project budget performance, the budget needs to be decomposed to the level where better monitor and control can be achieved. The Work Breakdown Structure (WBS) is a proven project management technique that helps in subdividing the project scope of work into smaller, more manageable components. This will enable the organization to estimate the direct and indirect costs needed to execute each one of those components. For projects that involve scope of work for which the budget cost is based on currency other than the project’s currency, PMWeb allows multi-currency at line item level. In addition, those WBS levels will be the same levels used to capture the actual project’s cost and earned performance.

It is important that project budget is updated to reflect the current status of the project. It is important to differentiate between in scope and out of scope changes. The in-scope changes are those changes that although could affect the project’s actual cost but they should not change the current approved budget as those are changes that are increasing or decreasing the project’s original scope of work. Those could be changes that could be attributed to design issues, unforeseen conditions among others. On the other hand, out of scope changes are changes that could increase or decrease the current approved project’s scope of work. For example, it could include adding additional rooms, upgrading the facility, changing originally specified materials among others. It is usually assumed that out of scope changes could also have an impact on the project’s operations revenue. All those budget changes need to be formally managed using what is known as budget requests.

Managing the Project Actual Cost

The project actual cost (AC) is the actual cost paid by the organization for the approved completed project’s scope of work. Actual cost is usually captured from the monthly progress invoices issued against each awarded contract for the outsourced project’s scope of work. Those contracts could be for professional services, design and supervision services, construction works, material supplies among others.

The actual cost for the approved completed project’s scope of work will also include the actual cost for approved change orders whether those changes were for in-scope or out-of-scope work. Those change orders could also have an impact on the project’s completion date and the actual cost could include compensation for the contract prolongation.

In addition, actual cost could be for miscellaneous invoices that are not part of an awarded contract. In addition, actual cost could be for the organization’s own resources spent on managing the project’s delivery which are usually captured using timesheets.

Managing the Project Earned Value

The earned value (EV) for each WBS level or project component is the current budget value for that level multiplied by the approved percent complete for the same level. The percent complete is usually the approved percent complete reported in the current project schedule for the same WBS level. PMWeb will import the updated project schedule at the end of each progress period to capture the percent complete as reported in the approved updated project schedule.

Of course, PMWeb also provides the option of creating and maintaining the project schedule within PMWeb itself and without the need to import the updated schedule at the end of each progress period from either Oracle Primavera P6 or MS Project. This will be achieved using PMWeb scheduling module.

Estimated Additional Cost

The organization needs to capture all additional cost the could affect the completion of each WBS level or project component. Those additional costs could be as a result of potential change orders that the contractors, suppliers, vendors and other project organizations have submitted to the project owner or his/her authorized representative.

Additional cost could be also attributed to pending or disputed change orders as well as claims submitted by the contractors, suppliers, vendors and other project organizations. In addition, the project owner or his/her authorized representative could also include allowances for additional costs that they anticipate could be impact the project’s cost to complete. Those could include allowance for inflation and other possible sources for additional cost. PMWeb custom form builder will be used to create those additional forms to capture those additional cost types which are not available by default in PMWeb.

The sum of those additional costs and the balance committed cost that are part of each awarded contract will represent the estimated cost to complete each WBS level or project component (ETC). The sum of this ETC and AC to date will be the estimated cost at completion (EAC) for the relevant WBS level or project component.

The Earned Value Metrics Calculations

The first metric that earned value provides is the schedule variance (SV) metrics which is a metric that details if the actual budget spending (EV) is aligned with planned budget spending (PV). A negative value will indicate a delay in spending the allocated budget which is not favorable. Another related metric is the schedule performance index (SPI) which reflects the efficiency in spending the allocated budget as of today.

The third metric is the cost variance (CV) which is the variance between the earned budget value (EV) for completed works and the actual cost for completing the same works (AC). A negative value indicates that the cost for completing the relevant WBS level or project component exceeds its value which is not favorable. Another related metric is the cost performance index (CPI) which reflects the efficiency in maintaining the project’s value.

The last metric is the variance at completion (VAC) which is the difference between the current approved budget (BAC) and the forecasted estimated cost at completion (EAC). A negative value indicates that the project’s actual cost will exceed the approved project budget which will have direct impact on the project’s return on investment (ROI).

Reporting the Project’s Earned Value Performance

The captured project’s performance data can be designed in different form and format to fulfill the organization’s reporting requirement. Nevertheless, the one that is used most is a report that details the earned value method key values for each period which include the approved budget at completion (BAC), planned budget value for the current period (PV), earned value for completed works (EV), total actual cost to date (AC), estimated cost to complete the balance of the works (ETC) and project estimate at completion (EAC). In addition, the report will display the variances at each period those being the schedule variance (SV), cost variance (CV) and the estimated cost variance at completion (VAC). Further, the report will display the schedule performance index (SPI) and cost performance index (CPI) for the same periods. The report will also display the variances and performance indices trend charts.

In addition, the organization could have a report to monitor, evaluate and report on the variances and indices across the organization’s complete projects portfolio or selected projects that could be part of a program or any other attribute like location, type, sponsor among others. The organization might display the earned value as a scorecard or link it to a map that will display the location of the selected projects as well as the performance indices. The size of the bubble on the map could be used to reflect the project’s approved current budget.

Can Project Management Procedures Manual Help in Reducing the High Risk of Projects’ Failure?

Organizations who are keen on delivering their projects successfully, understand that one of the key requirements for achieving this is having standard project management procedures to be followed by the project delivery team. The procedures which need to be aligned with project management and engineering and construction projects delivery best practices will be also need to be aligned with the contract agreements that govern the formal relation between the different parties of the contract. Those parties could be the project owner, project management consultant, engineering consultant, supervision consultant, contractors among others.

The project management procedures manual will identify the many processes that need to be executed during the project life cycle and how to enforce the best practices of governance, transparency and accountability in delivering those processes. For each process, the manual will detail the document templates to be used, the workflow steps to be followed in executing the process, the reports to be generated to maintain register of transactions, the key performance indicators (KPI) used to measure the process performance among others.

What Processes to Manage?

Assuming that the project management procedures manual will be developed by the project management consultant (PMC) who have been appointed by the project owner to manage the project’s delivery, the manual should cover the processes for the complete project life cycle including design, procurement and construction phases and stages.

To ensure that all processes are covered, it is highly recommended to use the Work Breakdown Structure (WBS) approach for identifying all those processes. This approach will also enable the PMC to determine the project control level. The chart below explains how this approach is used to identify change order processes which are a must on every project.

The list below is an example of the project management processes that a PMC needs to implement during the project delivery life cycle. Of course, the list of processes can be expanded to include other processes that are specific to the project to be managed or the approach followed by the organization in managing projects delivery.

Who Will be Involved in Executing the Processes?

Projects in general and engineering and construction projects in particular involve many organizations in delivering the project. Those could be the project owner, project management consultant, engineering consultant, supervision consultant, contractors among others. Similar to the project management processes, the Organization Breakdown Structure (OBS) will be used to detail the specific project team members who will be involved in delivering the different project management processes.

The Responsibility Assignment Matrix (RAM)

Integrating the WBS for the project management procedures and the OBS for the project team members will produce what is known as the Responsibility Assignment Matrix (RAM). The RAM is used to clearly define the responsibilities of the project Team Members in performing those processes, lines of authority and flow of approvals and information among the Team Members. The RAM or as generically known as RACI chart identifies for each project management process the team member responsible for their performance, review, comments and who to be informed.

The specific role types needed to execute each project management process could vary depending on what is the organization is used to have as well as what could be best understood by the project team members. Regardless of the roles types used, there should be clear definition of what each role should entail. The example below, details the roles associated with the RACI chart.

Responsible: Those who do the work to achieve the task. There is at least one role with a participation type of responsible, although others can be delegated to assist in the work required.

Accountable (also Approver or final approving authority): The one ultimately answerable for the correct and thorough completion of the deliverable or task, and the one who delegates the work to those responsible. In other words, an accountable must sign off (approve) work that responsible provides. There must be only one accountable specified for each task or deliverable.

Consulted (sometimes Consultant or counsel): Those whose opinions are sought, typically subject matter experts; and with whom there is two-way communication.

Informed (also Informee): Those who are kept up-to-date on progress, often only on completion of the task or deliverable; and with whom there is just one-way communication.

The chart below is an example of how a project RAM will look like. The WBS and OBS levels of details depend on the governance, transparency and accountability level the organization wants to enforce on their projects delivery.

The Document Template

For each project management process, there should be a document template that details the data that needs to be captured for each process. This data could be filled by different project team members depending on their specific roles as defined in the RAM. The document template will also include all the approvals needed to perform the process as well as the list of documents and other project records that need to be attached to the document template. The document template will be usually customized to reflect the organization branding requirements such as logo, colors, fonts among others.

The USA Construction Specification Institute (CSI), American Institute of Architects (AIA) and other professional organizations have developed document templates that are aligned with the best practices for delivering engineering and construction projects. Those can be used as a guidance for developing the organization’s own document templates that also need to take into consideration the conditions of contracts that are used to identify the contractual obligations and responsibilities of those involved in delivering the project.

The Project Management Process Workflow

Using the RAM roles and the document template, the organization needs to map the steps for submitting, reviewing, approving and sharing the data captured for each project management process. The workflow for each process will map the sequence for performing those steps along with the conditions that could affect the authority for approving the process like for example change orders, or even the team members who will be involved in the review process like for example submittals for mechanical works compared to those of electrical works. It therefore no wonder that the project management procedures manual could have thousands of workflow scenarios depending on the data recorded in the relevant document template.

Project Management Processes Logs and Registers

The details of each project management process transaction need to be captured in a register or log for the project team members to have understanding of the status of those transactions in terms of approved, pending or newly submitted. The chart below shows as an example the Request for Interpretation (RFI) document template and the log for all RFI transactions that have occurred on the project. The layout of the report depends on the document template fields and what are needed to share the information on how a specific process is performing. The report will also display the key performance indicators (KPI) associated with the project management process. Those could include number of days delayed, status, value, severity among others.

How Can Technology Help in Maximizing the Value of Project Management Procedures?

Project Management Information Systems (PMIS) like PMWeb can help organizations in automating their project management processes and maximize the value from the data captured through the different project management processes. PMWeb comes ready with most of the input forms needed to manage the project management processes. In addition, PMWeb custom form builder allows creating unlimited number of additional input forms to capture the details of newly created project management processes. PMWeb allows setting role-based access rights to limit access for those forms as well as specific fields within the form itself.

In addition, it allows the form user to attach all supportive documents, link emails and link other project management records to the selected form. Those documents are usually uploaded and stored on PMWeb document management repository. The document management repository allows creating folders and sub-folders to match the organization’s project filing structure. PMWeb administrator can also limit access to those document folders to only authorized project team members.

Each input form could be assigned with the workflow that maps the process for submitting, reviewing, approving and sharing the project management process. The workflow will usually include branches and conditions to match the authorities and approval levels associated with each process. The workflow could include multiple reviewers for specific steps with the condition that all must approve or only one can approve. Comments made at each step will be captured to keep track of the workflow team input. PMWeb allows creating notifications and reports to identify those who are delaying the review and approval of a document as per the workflow steps duration and actions.

The organization can design the output form in any desired form and format not only to match the organization’s branding in terms of logo and colors but also to match the output requirement for each specific project. This is very possible as each project could involve different organizations in the project delivery for which it might impact the layout of the output form.

Real-time reports and logs will become automatically available for the project team members to help them to report on and analyze the performance of each project management process. Being an enterprise solution, PMWeb allows visualizing those reports for a single project as well as a portfolio of projects which could be needed to benchmark, compare the performance or even leverage the knowledge gained from one project with another.

Nevertheless, what is more interesting is that using PMWeb the organization can produce reports and dashboards that combine data from different but interrelated processes. For example, to have a better understanding on the project’s cost status, the organization might need a single dashboard that reports on the project cost estimate, budget, budget adjustments, awarded contracts, potential change orders, approved change orders, disputed change orders and claims, progress invoices for completed work in place, actual payments made for approved progress invoices, forecast to complete the balance of the project scope among others.

For those who are keen on having a single version of the truth on how the overall project is performing, then a project dashboard will be needed. This dashboard could be designed to capture details from the cost management, schedule update, quality, safety, risk, communication and other processes that are critical for monitoring and evaluating the project’s performance. The project dashboard could be linked to progress photographs and site cameras to provide live report on the project’s site performance.

As mentioned earlier, being an enterprise solution, the organization can also monitor, evaluate and report the performance across a portfolio of projects. Usually, there will be specific key performance indicators that each project’s performance will be assessed against. Those usually are KPIs that relate to schedule, cost, quality and safety performance of each project. The enterprise dashboard could also include a map to display the location of each project being reported on.

In conclusion, if you are an organization who is involved in delivering projects, and in particular engineering and construction projects, the absence of a documented comprehensive project management procedures manual will drastically increase the likelihood of incurring the risks of lack of governance, transparency and accountability. The project management procedures manual, accompanied with the organization’s leadership support, will enforce adopting the best practices in managing projects thus reducing the high risk of projects failure. The Project Management Institute (PMI) has reported that organizations on average, risk $122 million in losses for every $1 billion spent on delivering projects.

The recent development in digital transformation as it relates to managing projects’ delivery, will massively increase the value of having documented project management procedures. The benefits are generated from ensuring that the right projects’ data are captured in the right format, by the right team members at the right time. This will enforce the best practices of governance, transparency and accountability. In addition, this BIG DATA will not only ensure real-time monitoring, evaluation and reporting of projects performance but will provide unmatched insight for the knowledge gained and lessons learnt in delivering those processes. This will provide the wisdom to enable decision makers and other executives to make better and faster informed decisions.