Exam 4 (EGS4625 - Fundamentals of Engineering Project Management)

Project Controls are a ...

- proactive method to ensure meeting project constraints

- they monitor project status and measure performance

Project Controls accurately answers two important questions:

"Where are we now?" and

"Where are we going?"

Importance of Project Controls

> Projects over budget at only 15% complete usually overrun at completion

> Actual completion costs will rarely improve by more than 10%

> Need to take action early and "stop the bleeding"

Questions to ask when measuring Project Status:

What...

When... and

How do you measure?

Common Metrics of Project Success

- Financial performance

- Process adherence and operational performance

- Project team and customer satisfaction

Other measures of project performance include...

> Compliance with the Contract

> Health & Safety Performance

> Delivered Quality against Targets

> Satisfactory Risk Management

> Baseline progress

> Taking Appropriate Preventive/Corrective Actions

KPI

Key Performance Indicator

Key Performance Indicators

The quantifiable metrics a company uses to evaluate progress toward critical success factors

SMART Metrics (KPI's)

- Specific: Targeted to the objective

- Measurable: Data are accurate and complete

- Actionable: Good vs bad, so action is clear

- Relevant: Measure things that are important

- Timely: You can get the data without delay

Financial KPI Components

> Technical completion of scope

> Measurement of performance against budgets

> Measurement of performance against schedule

When do you monitor/measure?

1. Pick a point in time to measure

- Design and Consulting Projects - at least monthly

- Construction and similar projects - major milestones

2. Align and compare to Project Plan (Baseline, Risk Register)

- Progress (actual work performed)

- Costs actually incurred; costs to complete the project

- Risks that materialized or passed and impacts

Watch out for "Tricks"

> 'Rubber' baselines - (changing the baseline without change control)

> Client Milestones - (omitting their milestones)

> Contractor Constraints - (Front loading and Inserting tight third party constraints to excuse contractor schedule slips)

Fundamental Cost Management Concepts

During project delivery , you need to answer:

- What work was scheduled to have been completed?

- What was the cost estimate for the work scheduled?

- What work has been accomplished?

- What was the estimated cost for the work completed?

- What costs have been incurred?

- What are the variances from the planned budgets?

PJTD Costs

Project to date costs

ETC

Estimate to Complete (future costs)

**One of the most difficult tasks for PM

EAC

Estimate at Completion: your estimate of either the project's costs [labor and expense] or price at the end of the project

= PJTD Costs + ETC

Forecast Variance at Completion

= Cost Budget - EAC

% Complete =

= (PJTD Cost) / (EAC Cost)

% Spent =

= (PJTD Cost) / (Cost Budget)

Percent Complete Determination via milestones (Statusing Methodology)

- milestones with weighted values

- % complete is additive when each milestone is met

- each milestone weighted by budgetary value

- requires short duration tasks

- requires a WBS with milestones incorporated

Fixed Formula (Statusing Methodology)

- tied to start and finish of tasks

- purchased materials work well with this method

- requires short-span duration tasks

Percent Complete Estimate

- most subjective but easy to use

- 'pressure' to claim more progress than actually done

- not recommended

Percent Complete with Gate milestones

- Gates tied to hard milestones placed intermittently that contain preset values on what can be earned

- Gaining acceptance

Level of Effort (LOE) Tasks

ex: project management, contract administration

- required tasks but with few deliverables

- can be budget eaters

- Quantify (hold accountable) and Quarantine (keep separate from other tasks)

Best way to estimate the percent complete...

- a bottoms-up estimate of all remaining work

- estimate the balance of work to be done for only the tasks that are underway and not yet finished

- EAC = sum of completion estimate for tasks underway + the budget for the remaining tasks

Importance of the EAC

cost forecasting and budget variance

- enables troubleshooting and timely fixes

- can be used to determine revenue

EAC is NOT ....

1. Static

2. Based on project duration or available resources

3. Determined by subtracting the PJTD costs from the budget

4. Equal to the direct cost budget

What is Earned Value Management?

> Earned Value Management (EVM) evaluates different components of accomplishment of work.

1. Technical performance (accomplishment of planned work)

2. Schedule performance (behind/ahead of baseline schedule)

3. Cost performance (over/under baseline budget)

Steps for Implementing EVM

1. Develop a "Cost Loaded Schedule"

2. Determine How Progress Will Be Tracked

3. Measure Progress and Determine Earned Value = EV = (% C x Budget)

4. Determine the Budgeted Cost of Work Scheduled: Planned Value = PV

5. Determine the Actual Cost of Work Performed = AC

Step 1 (of EVM)

Develop Cost-Loaded Schedule

(tasks and associated resources)

Step 2 (of EVM)

Determine How Progress Will Be Tracked

(Establish a consistent method for tracking the progress for each of the scheduled tasks)

Step 3 (of EVM)

Determine Earned Value

(Measure each task on a periodic basis)

Total % C= EV/Budget X 100

Step 4 (of EVM)

Plot the Cost-Loaded Schedule (PV), add the earned value (EV), find schedule variance (EV-PV)

Step 5 (of EVM)

Determine the Actual Cost of Work Performed (AC), plot AC, -> cost variance = EV - AC

CPI

Cost Performance Index

= EV/AC

* if >1 under budget

SPI

Schedule Performance Index

= EV/PV

* if >1 ahead of schedule

Project Forecasts using CPI and SPI

> Final Project Cost = Budget/CPI

> Final Project Duration = Budgeted Duration/SPI

EVM Summary

> Five steps to implementing EVM

> Enables identification and corrective action for areas of concern

> Simple linear forecast tools help guide you

> Key is the corrective actions you take, not in the calculations you make

Managing Change

- Managing change is the #1 desire of many customers

- Change can be an opportunity or a risk

- PM must manage change for your firm's self-preservation

- PM is the Leader in proactively resolving changes

Change Management Midset

- Think ahead

- Communicate effectively

- View as an opportunity

Sources of Changes

- Client

- External (laws, regulations, strikes, recessions)

- Internal

- Subcontractors/consultants

Types of Changes

- Staff

- Scope/Schedule Creep

- Quality Creep

- New Technology Creep

Why do people resist change?

- Not Included in Change Effort

- Self-Interest

- Misunderstanding

- Belief That Change Isn't Needed

- Low Tolerance for Change

Strategies to manage change

From highest leverage to lowest...

- Education

- Participation

- Support

- Negotiation

- Persuasion

- Direction

Rule of Thirds (Change Management)

- one third embraces change

- one third can be persuaded to accept change **

- one third will resist change

*focus on the persuadable third

Foundations of Change Management Planning

- Identify changes early

- Baseline of scope, schedule, cost, resources

- Assess the impacts

Change Management Tools between Firm and Client

> Project Change Notice (PCN) - Standard format for recording a change

> Project Change Notice Log (PCN Log) - Tracks current information on each PCN

> Use similar processes with subcontractors

How does effective planning and document management affect change management?

> Organized baseline = easily detected change (THINK PxP)

> Sloppy document management = errors, hidden changes, and analysis problems

> Document management requires discipline - Assign the responsibility to a Team member

Basic Cash Flow Concept

- Firms want the money owed to them to reside in their own bank account as quickly as possible!

Because...

- There is a time value to money (sooner is better)

- Like everyone, your firm has bills to pay

- Firms also like to train their staff, engage in new initiatives, and increase shareholders' value

Accrued Cost

- Costs to the project before subcontract invoice processed

- Placeholder

- Follows Generally Accepted Accounting Principles (GAAP)

Purpose of accruals

Accruals enables identification of subcontractor costs not yet in accounting system

Why Communicate Project Status?

- Good information drives decisions

- Team informed and inspired

- Company informed of progress

- Clients and stakeholders updated on progress, issues, and concerns

Project Performance reports cover...

Scope, schedule, cost, risk register, resources, quality, H&S, KPIs, and more

Closeout Goals

- Learn & Improve

- Reaches Closure With The Customer

- Demobilize the Team

- Archive

First Step to Closeout Plan

Develop a Closeout Plan

Ongoing Closure During the Project

Misconception: Closeout activities only at project completion

- There should be incremental closure throughout project guided by WBS

How does a well-planned project closeout benefit involved parties?

- The customer receives value of completed project

- Project Manager completes administration - The organization benefits from preserved budgets

- The team learns and is recognized

What Happens When The Project Is "Complete," But Not Closed?

Continued Fix-up: "Refining" designs; Labor/expenses continue; eroding margin

Extended maintenance of site infrastructure

Start of warranty delayed, lengthened exposure

Insurance, bonding continue

PM's Close Out Responsibilities

1. Develop Close Out Plan

2. Ensure the Plan is implemented throughout Project

3. Manage the Final Close Out

Steps to Final Closeout

> Ensure deliverables are completed to specified quality

> Conduct Client Closeout meeting(s)

> Conduct Project Team Closeout Meeting

> Contractually close the project

> Financially close the project

> Archive remaining project information

Document Management

Essential

Archiving Considerations:

- Tailor archiving to specific needs

- Coordinate "who will keep what"

- Comply with company-specified practices

The Project Post Mortem Technique

Examines...

- Financial factors

- Success measures compliance

- Risk identification and management

- Effectiveness of change management plan

- Technology applications

- Use of proper tools and equipment

- Team performance

Closeout with the Team

- Recognize the Contributions

- Celebrate the Performance

- Share the Lessons Learned

- Assure the Rewards and Career Growth Recognition

Client Closeout Meeting

- Agreement that all requirements have been met

- Compare initial objectives with final results

- Review changes for mutual lessons learned

- Communicate project successes

- Solicit feedback

- Explore opportunities for follow-on work or other collaboration