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7 details that construction managers should always know about their project

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7 details that construction managers should always know about their project

Questions that project managers face and their extraordinary capabilities to answer them

Clients and top management expect project managers to be gifted with extraordinary capabilities, to answer their infinitely many questions or queries about the project at any point of time. The orientation and effort involved in answerability is varied depending on whether the project manager is representative of the client or contractor; however, the nature of the questions remain irrespective of the same. Following is an attempt to broadly classify these questions in seven groups:

* Cost-to-completion * Key dates of completion * Organizing & staffing * Contract conditions

* Method Statements * Look Ahead * Forensics

One: Budgeted cost and Cost-to-completion

The concept of budgeted cost varies for different participants in the project. Clients/owners nod for a project based on a ballpark figure presented before them; financiers, investors and other stakeholders also being presented a slightly refined figure called a preliminary estimate. Contractors expect to complete the project profitably at a budget that is appreciably less than the declared bidding cost; subcontractors expect to complete the same at an even lesser cost. The return on investment forms the basis for stakeholders to decide approach of project organization such as sole ownership, partnership, build-operate-transfer and others. Interest of contractors is the profit over and above actual cost. Evidently, every subsequent decision for any participant, albeit staffing, scaling, organizing or controlling, is based on the key factor of budget cost. Besides, the single most important metric that is affected during any deviations in the project is the cost: delays, quality re-works, accidents, design errors – everything ultimately reflect on the project cost.

The subject of costing assumes greater significance when the project manager represents the contractor. The costing depends on the precise methods that may be employed by the contractor in due course of work and seldom coincides with the costing assumptions made by clients’ engineers during tender preparations. Clients expect that the budgeted costs are reasonable and feasible at the same time and that the bids are within a margin of tolerance from the budgeted costs. On the other hand, the contractor is under constant pressure to find cost efficiency to keep the quotes competitive but profitable, through price bargains, improved productivity, reduced wastage, controlled overheads and avoiding untoward events.

Every failure in a project – delays, quality rework, accidents, design-errors, scope-creep, contractual conflicts – ultimately leads to an impact on cost.

Almost all project managers realize the importance of the cost estimation and do produce estimates during project definitions or business development phases, with varying degrees of accuracy. Probably, the one aspect that is overlooked is to have a supporting quantity survey (QS) with the cost estimation. That is to say, in effect, most cost estimates in the industry are parametric, such as based on square meter of built-up area, kilometres of roads or output parameters such as Mega-Watts of power generated. Project managers are incapable of exercising control with this level of detail. On the other hand, estimates that are broken down into different parts of the project, such as cost of foundations or painting, enables the project manager to quantify both the target and the deviations at various stages. Estimates to a greater detail such as foundation cost per footing or painting cost per wall, further reinforces the ability to take corrective actions.

Two: Scheduled and expected key dates of completion

Similar to the cost, universally all projects are characterized by a ballpark figure for the duration. In small organizations or small projects, it is not necessary to refine beyond an approximate parametric estimate of project duration, based on previous experiences. Hence, street-smart entrepreneurs just make sure that not a day is lost over the project duration.

Case is different in larger organizations, where it is necessary to communicate the sequencing of activities among various participants of the project. For example, in an industrial project that comprises of four or five separate facilities, designers and contractors may take up the project one facility at a time. In such cases, the contractor should be aware when the designers are likely to complete the drawings for a particular facility/plant/unit. Similarly, when multiple contractors such as false ceilings, plumbing, electrical and HVAC contractors are working together on a luxury hotel project, the project manager is required to inform when each contractor is required to mobilize workforces on which part of the project.

The first question is always about the progress, delay and completion date

Various tools such as Critical Path Method CPM, Gantt charts and Lines of Balance LOB enable planning engineers to produce a schedule for the project, Classically, schedules are characterized by their level of detail, developed from top-down as Level 1 (Executive Summary for stakeholders), Level 2 (Top Management Summary Schedule), Level 3 (Project Coordination Schedule among different contractors and participants), Level 4 (Execution Schedule, developed by the respective trade contractor) and Level 5 (Detail Look Ahead Schedule for procurement and mobilization on short term). Any change in lower-level schedules is updated and maintained bottom-up in the hierarchy.

Despite advances in techniques of scheduling, there is an inherent reluctance in maintaining project schedule documentations. Primarily this is because even a days’ shortfall in the progress most often renders the schedule document meaningless and futile. After a slip between schedule and actual progress, the schedule no more provides the metrics and workforce for any future date, unless it is rescheduled based on current progress. Hence, it is imperative to track the progress and update the schedule periodically to extract useful target measurements from the schedule.

Delays on activities that are not on the critical path with magnitude within the float, do not affect the overall delivery of the project. In other conditions, the individual delays affect key dates of project completion or parts thereof. Delays in non-critical activities may sometimes also put these activities on the critical path. Project delays are detrimental because clients permanently lose revenue on the completed facility and pay interest on the invested capital. Contractors lose cost of idle plant during the period of delay. Traditionally, the overall delay is calculated periodically by revising the original construction schedule with the input of current progress.

Three: Organizing and staffing

The various works in a project are distributed sequentially and consequentially over different periods of time, as represented by the project schedule. Activities are also spread over space, such as the extent of roads, location of facilities, function of the facility and floors of high-rise structures. Most projects comprise of works diversified into civil, architectural, mechanical and electrical disciplines. Some projects require specialist vendors such as rolling stocks, or highly specialized equipment. The entire project could, therefore, be broken down into various packages, collectively called a Work Breakdown Structure (WBS), based on the time, location, discipline and extent of specialization. Similar to cost and schedule, the WBS is also characterized by a level of detail depending on the participant of the project. For the clients and stakeholders, it is important to understand the work packages, locations and their phasing, because large works are typically executed in Phases and/or Packages. For contractors, on the other hand, an execution level detail is important in terms of disciplines and specialization.

The packages are tendered and assigned to different contractors under the control of different project management or supervisory teams as required. Supervisory organizations in large and medium establishments is based on functions such as quality, safety, inventory and supply chain. Quality control or supervisory cadres may further be diversified based on disciplines such as civil or mechanical. Contractual relationships are almost universally on the basis of industrial trades such as concrete, plumbing or ceilings, sometimes sheltered under an umbrella turnkey contractor. Every construction site shall be documented with an organization chart, representing the flow of authority (top-down and/or side-ways) and information (bottom-up and/or side-ways).

Motivation, training, facilitation, assessment and leading turns into essential project management skills, as the corollary to organizing and staffing. Therefore, it becomes important to assess the strengths and weakness of contractors and supervisory staff. Whereas human resources functions on supervisory staff is at large similar to other organizations, relations with vendors and contractors in projects are short-lived. Unless project managers are associated with a vendor or contractor for more than one project for quite long periods of time, such an assessment is difficult. Reliability is perhaps the primary desirable attribute among vendors, in being able to supply or execute the required deliverable at appropriate timing. Cooperation between contractors and clients is equally vital successful accomplishment of project objectives. Moreover, most cases of cost over-run is apparent in projects impaired by terminated contracts. Contract terminations can be frequently traced to financial/technical weakness of contractors, although coercive and extortive behaviour among contractors and clients are not uncommon.

Four: Scope of Work, and Conditions of all contracts

Well defined contractor-client relationships are characterized by (1) clear scope of works explaining what works are or are not expected from the contractor, with what materials or facilities may be provided by the client or others, (2) the technical specifications and drawings based on which the works are to be executed and (3) special/general commercial conditions of contract, relating to the stage, procedures and quantum of payments. These clauses are usually drafted by contract managers in accordance with national and international guidelines such as FIDIC.

The project manager is required to know the principles behind contractual association with each contractor (or client) on the project, because of three reasons.

Firstly, as contract administers are pre-occupied with the commercial terms of the contract, one predominant objective of the project manager is to materialize as few change orders as possible. From the perspective of the client, the emergence of change orders after award of contract impairs the negotiating ability as there is no more competitive bidding.

Secondly, variations do emerge in projects on account of scope creep from the client or due to site conditions or even unfortunate omissions in the contract agreement. Project manager should indeed take up the role of controlling client aspirations, if required. Variations from contract conditions in forthcoming works, if any shall be approved by concerned authorities in advance to avoid embarrassing surprises during the execution, costly bargains after the event and unnecessary contractual conflicts.

Contract management is essentially conflict management. Scope management is essentially client management.

Third, before the approval of subcontractor or vendor payments (or raising invoices to clients), the project manager should make sure that all conditions prerequisite to payment are fulfilled satisfactorily. For instance, contractor rates for some main works (such as tiled floors) are usually inclusive of some subsidiary works (such as the supply of maintenance spares) according to the agreement. This is particularly significant during project closeout where a snag list of conditions needs to be cleared.

Oversimplified work orders or contractors offers are used as contract definitions in specialized works such as the installation of elevators. In this approach, contractors provide their proposals to clients’ requirement and one of the contractors is accepted by the client vide a purchase order. Project managers should be cautious about such contract definitions which are unfortunately sometimes even far-fetched for complete building contracts, such as Pre-Engineered Buildings. Risks associated with such contracts include hidden strings in the contractor’s offer, inability to compare offers from two or more contractors due to non-uniformity of contract conditions and incomplete scope understanding from contractor to contractor.

Five: Method statement for each work

Before the commencement of each activity in the project, the virtue of technical competence lies in formulating or assessing a method statement for the activity. Method statements are usually produced by the contractor describing (1) the machinery that will be used to execute the activity (2) identify storage locations for raw materials and finished goods (3) method of processing and location of yards such as fabrication or batching (4) techniques of transportation, assembly, erection or placement and (5) alleviation of typical difficulties in execution such as access,  availability of work front, transportation of materials and workforce and also issues regarding security. It is necessary that the project managers and contractors be on the same page regarding the adopted methods of construction. For the project managers, the method statement acts as a tool of constructability review. For the contractors, method statement provides a potential method of value engineering, as well.

It should be emphasized that it is not always necessary to make documented method statements for each activity in the project. However, it is invariably necessary to mutually understand the methodology by way of discussions and deliberations.

Two additional purposes or accompaniments of method statements are (1) quality assurance plans (QAP) and (2) safe operating procedures (SOP) for every item of work. The quality assurance plan agrees on the checklists that would be used for routine and final inspections and the frequency of inspections and sampling. Contractor is required to intimate the methods that are planned for control of geometry and workmanship of the proposed activity. If quality control testing procedures are not contained in the technical specifications, the same has to be included in the quality assurance plan. Besides, for manufactured items, QAP also describes approval of manufacturers, brands and/or sources, test reports and other documents of manufacturers specifications.

Safe operating procedures analyses potential safety risks by following or simulating the likely construction sequence preferably on a brainstorming session. Thereafter, list of PPEs (personal protection equipment) is generated for the work, precautionary measures are suggested for each identified risk and an organization chart or protocol that should be followed in cases of unsafe incidents is established. Likewise, the frequency of random inspections, the procedure to address non-compliance, methods of addressing safety observation reports are also agreed upon.

Six: Level 5 Look Ahead

Level 5 Look Ahead is the detailed analysis of a construction project that is used to determine the cash flow requirements of the project and intents of the project. This is obtained by transposition of original or baseline project schedule with the current achieved progress.

As the project progresses, at any generic moment, the project manager should be aware of two types of financial information. The immediately significant details are the net amount payable to vendors and funds available. If there is a deference period between vendors invoice and payment disbursal, this information may be provided by the project accounts department. If there is no such deference, such as in ad-hoc labour payments, project management is required to forecast the likely amounts payable.

The other detail which is significant in planning is the cost-incurred-to-date and expected-cost-to-completion. This information includes all actual and expected change orders and cost overruns. The project manager should be able to calculate the funds required on the project for next one quarter and next one year, in addition to the cost of completion, in order to enable the top management or CFO to arrange for the required fund or plan the cash flow.

Procurement failures – including land, legalities and labour – is the primary cause of delay in most projects. Whereas a limited proportion of procurement failures are due to non-availability of the resources, most of them are related to intents being later than the lead time of supply or mobilization. The project manager should necessarily assess all requirements well in advance (against available stock, in case of materials and plant) and review the intents and supply chains periodically. The bill of materials is calculated by an amalgamation of construction schedule and bill of quantities (BOQ). Forthcoming activities on the construction schedule, preferably revised for current project progress, are listed and the quantities for the activities are summed up from the BOQ. The bill of materials is thereafter evaluated from the cost composition relationships. The intent is calculated by comparing the requirements against the stock available on inventory.

All projects have a list of small things to be attended such as minor faults and making good temporary arrangements such as scaffolding tie backs, touch up paintings and patchworks. Snag lists are larger towards the end of the project than at the beginning and often extends beyond project completion into the defects liability period of the contractors. Snag lists are generated during inspection by architects, engineers or other technical teams, and eventually, each item on the list are struck off as they get completed or cleared. Project manager is required to carry the copy of the snag list, facilitate the quick clearance of the items and be cognizant of the status of each item on the snag list.

Seven: Precise reasons for practically everything

As a matter of fact, the project manager is required to know the precise reasons for all unexpected events in the project with rigorous skills in forensics. These unexpected events include delays, cost impact, changes in drawings, reworks, construction errors, unsafe incidents, third party breaches, security threats, litigations, claims, conflicts and arbitrations. Primarily the reason is important to prevent repetitions of the event in future, whereas, on a lighter side, the reason is important for answerability to the client and/or to frame an explanation to get away with if the true reason is to be covered up. Explanations for non-compliance reports on quality and safety issues are routinely documented in projects that are not managed exceptionally well. Nevertheless, almost all projects require to provide documented reasons for delays while applying for Extension of Time or Currency of contract.

Concern about delay lasts until the project is complete and concern about over-expenditure lasts for a few years after the project. What lasts forever is the concern about quality.

Foregoing discussion may seem to suggest that project managers are indeed required to know omnisciently everything about the project from all perspective angles and that it is formidable to achieve all the objectives of project management. However, with the advent of modern computational tools, the control gained on the project by the implementation of measurable performance indices is definitely worth the additional efforts and sophistication employed in systematic management.

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