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1 Fundamentals of Project Management Part 1d APEGGA Annual Conference April 24 & 25, 03 Dr. George F. Jergeas PEng. University of Calgary.

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Presentation on theme: "1 Fundamentals of Project Management Part 1d APEGGA Annual Conference April 24 & 25, 03 Dr. George F. Jergeas PEng. University of Calgary."— Presentation transcript:

1 1 Fundamentals of Project Management Part 1d APEGGA Annual Conference April 24 & 25, 03 Dr. George F. Jergeas PEng. University of Calgary

2 Schedule Day 1a  Introduction  5-Step PM  Planning and definition Day 1b  Estimating cost and time  Video  Organize project team  Selecting PM and team  Effective teams Day 2 c  Project procurement  Bidding process  Building & sustaining project team  Contract administration Day 2 d  Schedule control  Cost control  Project Close-out  Claims and disputes

3 3 Step 4. Control the Project

4 5-Step Project Management PLANNING IMPLEMENTATION DEFINE Identify project activities Estimate time and cost Quality and Communicat ion management Write Project Proposal ORGANIZE CONTROL PLANCLOSE State the Problem Identify Project Goal List the Objectives Determine Preliminary Resources Identify Risks and stakeholders Success criteria Determine Personnel Needs Recruit Project Manger Recruit Project Team Organize Project Team Bidding Assign Work Packages Define Management Style Establish Control Tools Prepare Status Reports Review Project Schedule, cost, team report Issue Change Orders Obtain Client Acceptance Install Deliverables and Commissioning Document the Project Issue Final Report Conduct Post- Implementation Audit Project charter WBS Recruit Criteria Variance Reports Final Report Project network Define Work packages Status Reports Audit Reports Project proposal Assign Work Packages Decision

5 Schedule Control

6  Use »Regularly update Gantt chart –Frequency »Performance reports, change requests, time management plan, corrective action, lessons learned »Control techniques e.g. meetings, 1:1

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

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

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

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

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

12 Cost Control

13 Cost Control System (Earned Value)  Any cost control system should enable a project manager to observe current perfomance levels, compare them with budget levels and institute corrective actions to keep performance, and ultimately costs, within acceptable range

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

15 Cost Control System  Compares actual man-hours expended to earned hours »Actual man-hours come from contractor’s daily time sheets »Earned hours are calculated by multiplying the completed quantities during a period by estimated man-hours per unit quantity »See figure following as an example

16 Labour Productivity Report

17 17 Money Delay Budget Time Now Earned Value Time Actual Expenditure Cost overrun

18 18 Budget Time Actual Earned Value Ahead of schedule Making Money Money

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

20 20 Step 5 – Close the Project

21 5-Step Project Management PLANNING IMPLEMENTATION DEFINE Identify project activities Estimate time and cost Quality and Communicat ion management Write Project Proposal ORGANIZE CONTROL PLANCLOSE State the Problem Identify Project Goal List the Objectives Determine Preliminary Resources Identify Risks and stakeholders Success criteria Determine Personnel Needs Recruit Project Manger Recruit Project Team Organize Project Team Bidding Assign Work Packages Define Management Style Establish Control Tools Prepare Status Reports Review Project Schedule, cost, team report Issue Change Orders Obtain Client Acceptance Install Deliverables and Commissioning Document the Project Issue Final Report Conduct Post- Implementation Audit Project charter WBS Recruit Criteria Variance Reports Final Report Project network Define Work packages Status Reports Audit Reports Project proposal Assign Work Packages Decision

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

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

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

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

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

27 Termination Process  Project termination can be complicated  A systematic approach  Stay in close contact with the client and administration to ensure close down meets with the client’s satisfaction.

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

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

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

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

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

33 Concluding Remarks  Projects - an increasingly important way of working  Project management is challenging, rewarding  Keep it simple, use aspects of project management that make sense  Don’t be an Accidental Project Manager  Its OK to make mistakes…learn from them to improve project management practices

34 Claim and Disputes on Projects

35 Agenda  Claims  Causes of claims  Dealing with changes  Claim avoidance and resolution  Quantification workshop  Summary

36 Is CONFLICT INEVITABLE? Is CONFLICT INEVITABLE?

37 Claim is  “The assertion of a right”  “A demand for something due”  Filed by Contractor or Owner »A claim need not become a dispute »A dispute need not develop into litigation

38 Causes of Claims  Claims Pertaining to Quantity  Claims Pertaining to Quality  Claims Pertaining to Methods or Schedule of the Work

39 Claims Pertaining to Quantity  Change In Design  Change In Site/subsoil Conditions  Increased Quantities  Extra Work  Measurement Of Work Performed

40 Claims Pertaining to Quality  Ambiguous Specification  Unreasonably Demanding Inspection  Design Enhancement Via The Shop Drawing Approval Process  Deficiencies

41 Claims Pertaining to Methods or the Schedule of the Work  Delay  Disruption  Interference  Acceleration

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

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

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

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

46 If a change becomes a dispute  Estimate the the impact costs

47 Electrical And Mechanical Work

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

49 Basic Principles in Handling Change Orders  The contractor should submit its proposal to execute a change order as soon as possible after receiving the request and the owner’s approval or rejection should follow as soon as possible.  The proposal should be fair. It should recognize the contractor’s right to include: »overhead and profit percentages »compensation for legitimate time-delay claims »compensation for legitimate impact costs if any

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

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

52 Sample of a change order PROJECT TITLE PROJECT NO.CONTRACT NO.CONTRACT DATE CONTRACTOR The following changes are hereby made to the Contract Documents: Construction of access bridge abutment No. 1 drainage system; and Reset two penstock bearing plates. All in accordance with revised DWG S Revision 3, dated 28 August Justification: Unforeseen soil conditions CHANGE TO CONTRACT PRICE Original Contract Price: $ Current contract price, as adjusted by previous change orders: $ The Contract Price due to this Change Order will be (increased) (decreased) by: $ The new Contract Price due to this Change Order will be: $ CHANGE TO CONTRACT TIME The Contract Time will be (increased) (decreased)by calendar days. The date for completion of all work under the contract will be Requested bydated Recommended bydated Ordered bydated Accepted bydated

53 Avoidance Of Claims 1. Contracting Strategies 2. Risk Allocation 3. Project Administration

54 1. Contracting Strategies  Partnering  Design Build

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

56 2. Risk Allocation  No Time Extension  No Damage For Delay *  Changed Soil/Soil Conditions *  Engineering Work *  Quantity Variation  Notice Provisions

57 Disclaimer Clauses  No damage for delay  Examination of the work  Examination of engineering work

58 No Damage for Delay “....., the contractor shall not have any claim for compensation for damages against the owner for any stoppage or delay from any cause whatsoever.”

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

60 Examination of Engineering Work “Any representations in the tender documents were furnished merely for the general information of bidders and were not in any way warranted or guaranteed by or on behalf of the Owner or the Owner’s consultants’ and its sub-consultants’ employees, and neither the Owner nor its consultants or its employees shall be liable for any representations, negligent or otherwise contained in the documents”

61 Changed soil/site conditions  Most common claims  Innocent misrepresentation  Duty of contractor to ascertain if practical to execute work  Contractor cannot abandon the contract  Disclaimer clause bind contractor  Compensation within framework of contract

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

63 3. Project Administration 3.1 Planning/Scheduling 3.2 Record Keeping 3.3 Project Monitoring

64 3.1 Planning  What?  When?

65 Scheduling  Who?  How Long?

66 Planning/Master Schedule  Design  Site Availability  Purchase/Delivery of Process Equipment  Purchase/Delivery of Owner-supplied Materials  Interfacing of Various Packages

67 Planning/Master Schedule  Tender Call for Various Packages  Contract Award of Packages  Completion of Packages  Commissioning  Commercial Operation

68 3.2 Record Keeping  Do not proceed with the extra work and changes without written authorization  Object to biased minutes  Document delays and impacts  Request appropriate extension of time and make clear who pays for additional cost  Make clear who pays for acceleration  Respond to complaints

69 Records to Keep  Daily job reports  Photographs and video films and digital pictures  All correspondence  Minutes of site job meeting  Schedules and updates  Change orders  Cost/labour reports  Diaries

70 BUILDER OR BUSINESS PERSON

71 3.3 Project Monitoring Updating Schedules  Non-adversarial notification tool  Illustrate and quantify cost and schedule impact of changes or other delays to the plan  Watch for: »Early completion schedule »Your commitment

72 3.3 Project Monitoring: Usual Pitfalls  Defective (Ambiguous) Specifications  Incomplete/Unclear Drawings  Design Enhancement Throughout The Shop Drawing Approval Process  Failure To Provide Proper Instructions

73 3.3 Project Monitoring: Usual Pitfalls  Use of Inapplicable Standard Drawings  Ineffective Expediting  Ineffective Store Management

74 3.3 Project Monitoring: What to Watch Out For  Timely Response to Queries  Shop Drawing Turnaround Time  Unduly Harsh (Demanding) Inspection  Personality Conflict  Payment for Changes and extras  Front-end loading

75 3.3 Project Monitoring: Active Interference  Improper Rejection of an Equally Suitable Alternative  Interference with Method of Construction  Interference with Sequence of Construction

76 3.3 Project Monitoring: Constructive Acceleration  Contractor is Entitled to Extension of Time  Contractor Requested Extension in a Timely Manner  Owner Refused Request

77 Claims by Owners: Contractor Refuses to Sign The Contract  Mistake in Bid  Cannot be Bonded  Left Too Much on the Table

78 Claims by Owners: Contractor Late in Completion  Liquidated Damages  General Damages

79 Obstacle to Resolution  Owner’s bias  Contractor’s bias  Total cost claims

80 Owner’s Bias Loss is vastly overstated by contractor  Underbidding  Inadequate supply of resources  Mismanagement  Strike, inclement weather, default of subs...

81 Contractor Bias Causes of loss  Late supply of equipment, drawings  Changed conditions  Acceleration  Design changes

82 Total Cost Claims  Contractor submits without notification a claim for additional costs  Actual minus estimated »This means: –no underbidding –all causes owner’s responsibility –damages were mitigated –no other practical method

83 Successful Settlement  Get the facts »Keep good records »Know your contract »Preserve your rights

84 CLAIM COMPONENTS CLAIM COMPONENTS ENTITLEMENT (CONTRACT) CAUSE FACTSFACTS LINK OF CAUSE TO EFFECT EFFEC T DAMAGE / COST INCURRED

85 UNWILLINGNESS TO RESOLVE IT IS HAVING AN HONEST DISPUTE IS NOT SHAMEFUL

86 Resolution of Disputes  During Construction  Post-Construction

87 During Construction Negotiation  Face to face by parties themselves  Cheapest & quickest method

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

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

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

91 Problem Resolution Mechanism

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

93 During Construction Dispute Resolution Board (DRB)  Three members  Established at the beginning of project  Non-binding

94 Post-Construction  Negotiation  Mediation  Mini-Trial  Arbitration

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

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

97 Arbitration  Provisions for arbitration are included in most contracts »May or may not require mandatory arbitration »Most contracts stipulate that the process will be governed by the “arbitration act”

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

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

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

101 COST OF A $100,000 CONSTRUCTION LITIGATION: Fees & Disbursements * Plus $6,000 for Transcripts ** Plus $15,000 for Experts $1,500 per day

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

103 “BE FAIR” “BE FAIR”

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

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

106


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