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Fundamentals of Project Management Part 1d

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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

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 Step 4. Control the Project

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

5 Schedule Control

6 Schedule Control 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 Cost overrun Budget Money Time Now Actual Expenditure Earned Value
NOTES:________________________________________________________ _______________________________________________________________ Earned Value Time Delay

18 Money Budget Ahead of schedule Earned Value Making Money Actual Time
NOTES:________________________________________________________ _______________________________________________________________ Actual Time

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 Step 5 – Close the Project

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

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

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


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? By this example, the Project Manager is protecting his/her rights ie. not waiving their rights by signing off on change orders that pay part of the extra costs. This will enable the vendor to claim at a future date when impact and other costs are known. If you are the owner representative, would you accept this qualification? What are the consequences if you accept?

46 If a change becomes a dispute
Estimate the the impact costs Design changes can be an addition or deletion to scope. In all cases, Project Management needs to be able to identify changes which fall outside the original scope of work and add to project cost and time. Good record keeping and a clear process for change implementation are important: -obtain written authorization before proceeding with extra work -document delays and impacts. Request appropriate time extensions and be clear who is paying for additional cost -if acceleration (speeding up) is needed to overcome delay caused by changes and its impct, clearly identify who is paying for the additional costs of acceleration.

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-17209 Revision 3, dated 28 August 1991. 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 by dated Recommended by dated Ordered by dated Accepted by dated

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 In general, contractors fail to keep a good record, actively administer the contract and to keep proper record. Experience, shows contractors fail in many areas identified in this slide. See also paper entitled “Contractors Construction Claim Avoidance” by George Jergeas and Francis Hartman published by the ASCE Journal Vol. 120, No. 3, Sept. 94. Contractors typically have problems with poor record keeping, such as proceeding with changes without authorization, poor meeting minutes verifications, etc. Records should be kept daily that document the project status, such as temperature, weather and quantities produced. These records could be written, photographs, video, CPM schedules - See also next slides.

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 It is a good practice to have your own personal diary - filled out daily in a concise, clear and factual manners. Attention should be paid to the establishment and maintenance of the above documents.


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 Regularly update CPM schedule and use it as a friendly method of notification of delays occurring on the project. You do not need to write nasty letters if you are experiencing delays. The most important thing is to inform the owner of the delay so that an action can be taken to mitigate the damage of the delay. Schedule update can illustrate the delay and its impact on the project plan. Presenting the CPM Schedule to the owners is a non-adversarial approach highlighting the impact of schedule delays and changes. The contractor should ensure that all notice provisions, such as time limits on filing claims, are satisfied. Contractors should have a thorough understanding of how risk is apportioned on the contract, especially on how claims may arise from the apportioned risk.

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 -Owner’s bias -loss is caused by contractor’s action or inaction -loss is caused by contractor’s mismanagement -loss is caused by contractor’s under estimation -loss is caused by contractor’s strikes, weather - nothing to do with the owner -Contractor’s bias -loss is caused by owner’s mismanagement or interference -loss is caused by owner’s design changes -contractor is not responsible and managed the job properly -contractor did not underestimate the job -Total cost claims -claims are prepared that request the entire difference between actual cost and estimated costs. This means that there is one side responsible for all the cost overrun. This is not true. The above approach is NOT fair and does not lead to a fair and successful resolution of disputes. How do you deal with claims, i.e., how do you prepare or evaluate 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



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 Attacked promptly Ignored 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 This is another useful, economical option available to apply on projects.

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 Mediation involves hearing positions and helping the participants resolve the dispute themselves. The success of mediation is 85% in self motivated mediation (ie both sides wanted mediation, 60% for court-imposed mediation). This is very economical compared to other alternatives. The only drawback is that decision of a mediator is not binding on the parties. Ideally, disputes should be resolved by either negotiation or mediation, not litigation. Mediation is the most cost effective method of disposing of disputes after negotiation.

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 Arbitration was introduced to resolve dispute and reduce cost of litigation. Arbitration provides a binding solution to disputes. However, as the time and costs required to resolve arbitration disputes increases, the costs are beginning to approximate those of litigation.

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

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

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”

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


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