Managing Capital Projects Life Cycle Stages: The Project Construction Stage

The project construction stage is the stage where the final products of the project will be produced for the project owner to use after the project handover to generate the targeted revenue to justify the project investment. It is the stage where the bulk of the project investment will be spent and will carry the highest risks that could cause delayed project completion, budget overrun, failing to meet quality standards among others. The construction stage would usually include an engineering consultant to supervise the project execution, a project management consultant to manage the project delivery including the contractual and commercial aspects, and of course the contractor(s) along with their subcontractors, nominated subcontractors, suppliers among others.

Letter of Award

The letter of award is the formal letter that the project owner will issue to the successful contractor confirming the award of the project. This will enable both parties of the contract to finalize the requirements for signing the contract agreement including providing the performance bond, insurance documents among others. Similar to other standard letters, PMWeb correspondence module will be used to issue this letter of award which is usually created as one of the templates that can be used when needed.

Contract Award

PMWeb will be used to capture the details of the awarded contract including the terms and conditions as it relate to retention on completed works, material on site, advance payment recovery, VAT, Tax Withheld, Zakat among others. The contract will include the bill of quantity line items with the quantity, unit of measure and unit rate.

Using PMWeb report writer module, the organization can create the complete contract agreement template for which the particulars will be captured from contract form. This will ensure that the formal agreement signed with the contractor reflects the terms and conditions and other particulars that have been already added to PMWeb contract module.

To ensure that planned invoicing by the contractor is aligned with the approved planned budget spending, it is highly recommended that anticipated commitment spending be defined for the contract line items. The distribution for each project period could be based on the many default distribution profiles or it can be created manually. Some organizations opt to create this distribution using the project scheduling software which could be either Oracle Primavera P6 or MS Project.

Performance Bonds and Insurances

The organization needs to keep track of time-sensitive documents such as advance payment guarantees, performance bonds, insurance and warranties issued against each contract. PMWeb will be used to have a real-time report to provide alerts when any of those time-sensitive documents expiry date hits a pre-defined threshold.

Change Management

Changes in a capital project could occur because of many reasons and causes. To list a few, changes could result from intent of documents not “reasonably inferable” and corrections required, unknown conditions necessitate changes, project owner’s requirements change, changes in code or changes in interpretation of code, specified product no longer available, consider new product because of cost savings or other benefits, specified product inappropriate, adjust contract sum for difference in actual cost versus allowance, estimated quantity of work for unit prices changes, revision of unattainable requirement among others.

Project owners use PMWeb to enforce contractors and other entities involved in delivering the project to formally submit all potential changes as soon as they are recognized. This by no mean indicates the project owner acceptance of those changes but it is critical to start the process on how to stop this potential change order to become an actual change if it is not a requirement for delivering the project. Even if it is a requirement, the objective is how to implement this change with the least impact on the project approved budget and target completion date. PMWeb potential change order module helps to enforce the early warning notification.

For those potential change orders that have merit and could result in a change order, the project owner needs to create a change event that will capture the impact of this change on both, the approved project budget as well as the awarded project contract.

For those change orders that are either approved, disputed or under negotiation, PMWeb change order will be used to capture their details. Those details will include the cost breakdown as well as the additional delay days associated with this change. In addition, all documents that are related to the change order need to be attached as well as other related PMWeb records like RFI, Daily Reports, etc. as well as email communications need to be linked to the change order. Similar to other project records that require formal submission, review and approval, PMWeb workflow will be used to map those workflows to enforce the needed accountability.

This will enable the organization to keep track of all changes including details on their status, type, reason, amount, impact on project schedule and other needed information. In addition, the organization can have a report that will report on change orders across their complete projects portfolio. This will provide the organization with unmatched knowledge on the reasons of changes and what actions need to be done to reduce the occurrence of change orders on their projects specially changes that were due to errors, mistakes and negligence.

Progress Invoices and Actual Cost

At the end of each month, the contractor needs to submit the progress invoice application for the completed works on site as well as for material delivered to the construction site. The contractor will certify that work covered by application conforms with the contract documents and that previous amounts paid have been properly applied to discharge contractor’s obligations on project. The engineering consultant appointed by the project owner needs to review the application and confirms to the best of his knowledge, work covered by application in conformance with contract documents. PMWeb progress invoice module will be used to capture the details of those invoices along with the approvals for invoiced work.

The actual cost incurred by the organization in delivering the project investment is not limited to the progress invoices issued against the awarded contracts but it could also include miscellaneous invoices and reimbursable expenses incurred by the engineering consultant and project management consultant. Those invoices and similar to all other cost related records in PMWeb can be in any currency. PMWeb currency exchange module will convert those amounts, if required, to the standard currency used on the project.

For project owners who are interested in capturing the cost of their own resources spent on managing the project’s delivery, they will use PMWeb timesheet module to capture the manhours of those team members. PMWeb allows the organization to define the cost rate for each resource including the rate for regular hours, overtime hours, prime hours among others. Similar to other PMWeb records, a workflow can be assigned to the timesheet to formalize the submit, review and approve process.

Earned Value Analysis

The data captured from progress invoices, miscellaneous invoices, reimbursable expenses and cost of resources as per the timesheets can be aggregated in a single report to provides transparency against the actual cost incurred to date on the project. This will also enable doing the earned value analysis by comparing the planned budget spending (PV), earned value for completed works (EV) and the actual cost (AC). The earned value metrics including Schedule Variance (SV), Cost Variance (CV), Schedule Performance Index (SPI), Cost Performance Index (CPI) and Variance at Completion (VAC).

Funding Management

Most project owners, regardless if they were private sector or public sector, will be seeking funding for their project investments. Project funding could be through raising debt or through government funding. PMWeb will be used to capture all available funding sources, funding requests and funding authorizations.

Consolidated Financial Reporting

To achieve the desired financial transparency and single version of the truth reporting on the project’s financial status, the organization needs to have a single report that will display all cost and financial transactions that could have affected the project budget, contracts, change orders, progress invoices, funding among other. Usually this report will take the format of a spreadsheet where the rows will represent the cost breakdown structure (CBS) levels while the columns will be for the different type of financial records as well as columns with calculated fields from the captured financial records. There could be different spreadsheets calculated to represent the needed information in the desired layout. PMWeb cost worksheet module will be used to present this information.

Reporting Milestones Performance

One of the requirements for each project is for the contractor to submit the detailed project schedule which details the mobilization, submittal, procurement, construction, commissioning and handover as well as project management activities needed to deliver the project’s scope of work. The project schedule should incorporate the milestone dates that are part of each contract agreement. As this schedule, when approved as the baseline schedule, will become the basis for reporting the project’s performance and assessing the impact of changes and other delay events on the project’s milestone completion dates, a formal review and analysis need to be performed before approving the schedule. PMWeb custom form builder can be used to create a detailed schedule review and analysis template to ensure comprehensive and formal approval of the schedule.

Another template can be created to review and analyze the monthly schedule update submission to ensure that the current schedule is achievable and reflect the true status of the project. Again, PMWeb custom form builder will be used to create the Monthly Milestone Report where the assigned to project team member needs to provide the current milestone actual or forecast date along with the reason for any schedule variance. The report will be attached with the updated schedule reports which could include the Critical Path Report, Delayed Activities Report, 6-Week Lookahead report, Milestone Report among others.

The data captured in the Project Milestone form at the end of each progress period will be used to provide a status report that will detail the milestones performance trend and they are on time, ahead or behind schedule. The report will also detail the delays encountered by those milestones if any. The report will include a visualization to classify the project entity that was responsible for the reported delays. Of course, the report could have been designed in different form and format to display additional information if needed.

With the growing trend of delay, disruption and constructive acceleration claims, the project owner needs to take a formal approach in capturing the particulars of those delays and the analysis that was carried out to determine if the delay was excusable or not, and whether the contractor will be entitled for any costs associated with the excusable delay. Another custom form can be created in PMWeb to capture the delay analysis as well as all project documents and records that are related to this delay analysis. This will enable the organization to have a report to provide immediate visibility on all Extension of Time (EOT) requests and their status.

Maintaining Contract Documents

The construction documents that were part of the contract documents when the project was formally awarded to the contractor need to be maintained. All revisions to those documents need to be documented and made available to project team to ensure that the latest version of each document is what is being used. PMWeb drawings module will be used to capture all those construction documents and the issued version for each document.

BIM Models

For projects that have selected the Building Information Modeling (BIM) for developing the project design, the entities involved in delivery the project would need access to those BIM models to select the BIM objects that could be part of a Request for Information, Change Order, Submittal and any other project management process being implemented on the project. PMWeb BIM model viewer allows the user to select those BIM objects, take a snapshot of those selected objects and then attach to the desired PMWeb record.

Project Request for Information (RFI)

RFIs are initiated by the contractor, asking for interpretation of item in contract documents. The need for interpretation is needed when work not sufficiently described or reasonably inferable from contract documents or for changed or unforeseen conditions. PMWeb RFI module will be used to capture, manage and report on all RFIs submitted during the construction period.

Project Submittal Management

Submittals are a very important process of every capital project as it helps to demonstrate the contractor’s understanding of contract documents and how the contractor intends to execute project requirements by identifying products selected from acceptable products in specifications, detailing how items constructed and interface with adjacent construction and Certifying that products meet or exceed specified requirements. PMWeb submittal items will be used to manage all types of project submittals. For each submittal, shop drawings, catalogues, manuals, certificates among others will be attached to the submittal. The workflow will be used to formalize the submission, review and approval for each submittal. Conditions will be added to the workflow to ensure that the right submittal review team is involved in the workflow process depending on the submittal attributes.

This will enable the organization to have a complete real-time visibility of all submittals made and their status. The submittal log report lists all submittals that the contractor needs to submit for approval. The log will detail the submittal particulars as well as the date that the submittal needs to be approved. This date will be picked from the project schedule where it is important to include each submittal item as an activity in the project schedule which in turn will be assigned to the submittal item in PMWeb.

Of course, graphical reports and dashboards can be created to provide an overall status summary of the submittal process. For example, the dashboard shown below has each submittal type shown as a donut chart for which it shows submittal still not made, submittal made and approved, submittal need to be resubmitted and rejected submittals.

Site Inspection Requests

Contractors will be required to submit a formal request for the engineering consultant to inspect the completed works on site. The content of the site inspection can be designed to meet the requirements of each engineering consultant using PMWeb custom form builder. If the form is accessed using a smart phone like iPad, when the user clicks on attachment, PMWeb will give the option to take a picture or video. Similar to other PMWeb forms, a workflow can be assigned to the site inspection to formalize the submit, review and approve the inspection.

Non-Conformance Report

A Non-Conformance Report is a document that keeps track of deviation and work that fails to meet standards and specifications. The common situations that will require the issuance of an NCR include Work that was not built as indicated in the approved Issued for Construction Drawings, work that fails to meet specified tolerances as established in the project specifications, work that is being performed using non-approved methods or standards. when the testing and inspection plan is not followed as agreed, when testing results demonstrate that the product does not meet established and approved standards, when a material is used and has not been approved as a substitute (equal or similar), when design is not accurate and does not represent actual field conditions and when the approved procedure was not followed, and quality defects have been identified by the project team.

PMWeb custom form builder will be used to design the NCR in any desired format as shown above. Capturing the NCRs and corrective actions will enable the organization to maintain a report listing the status of all NCRs including pending and closed ones. The report could include visuals to provide quick visualization of the volume of NCRs issued to date and those that are still pending rectification.

Capturing Daily Events

Daily report is an important project formal communication that a contractor must submit on daily basis to report on was achieved during that date, resources, labor and equipment, employed on the project, weather conditions, progress photographs and other important incidents occurred on that particular day. PMWeb daily report module will be used to capture those details.

Safety Incidents

The contractor is responsible for conducting investigations of safety accidents and the engineering consultant or the project management consultant will witness the accident but should not investigate and will only record facts as observed. PMWeb Safety incident form will be used to capture the details of all those accidents.

In addition, PMWeb custom form builder can be used to create additional forms that could be needed for a comprehensive HSE process. For example, the custom form builder can be used to create safety and environment checklists as well as hot permits, confined space permits and other type of permits that could be needed when constructing a project. Capturing the data from this different forms, will enable the organization, to have a comprehensive HSE dashboard that provides analysis of the project’s HSE performance.

Snag List

When the contractor completes the project scope of work, snag list or punch list is an important process used to enable the project owner to issue the Substantial Completion Certificate. The contractor will prepare the Punch List which will list incomplete items or items in need of remedial work and submit to the engineering consultant who will review and add any other items after inspection. This punch list will be attached to certificate of substantial completion which will include time limit to perform the outstanding work. PMWeb punch list module will be used to create the list. The location breakdown structure helps the contractor and consultant to clearly locate and describe items of work to be corrected along with the responsibility for correcting and when.

Substantial Completion Certificate

Substantial Completion Certificate is a document verified by the engineering consultant, or project owner that the project is substantially complete and is approved for payment by the general contractor on the date of final payment. Substantial completion is in essence means that the project owner can use the building as intended. It usually indicates that only minor, punch list type work remains. The date of substantial completion triggers the releasing half of the retention, ending the contractor’s liability for liquidated damages and signifying the beginning of the defects liability period. Similar to all other letter templates, PMWeb correspondence module will be used to create those templates and use them as needed.