P&Cc Module3 Cc1

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  • P&Cc Module3 Cc1

    1. 1. PROJECT MANAGEMENT 8 th May 2006
    2. 2. Course Objectives – Module 3 <ul><li>Participants to: </li></ul><ul><li>Apply techniques to a Saipem Ersai project </li></ul><ul><li>Understand more advanced aspects of planning & cost management </li></ul>
    3. 3. Module 3 – Planning & Cost Control <ul><li>Monday - Planners </li></ul><ul><li>9.00 – 12.30 (Tutor) </li></ul><ul><li>Review of Prepared Case Study work </li></ul><ul><li>14.00-17.30 (Tutor) </li></ul><ul><li>Presentation of Prepared Case Study work </li></ul><ul><li>PM in Saipem </li></ul><ul><li>Monday - Cost Controllers </li></ul><ul><li>9.00 – 12.30 (Tutor) </li></ul><ul><li>Review of Prepared Case Study work </li></ul><ul><li>14.00-17.30(Tutor) </li></ul><ul><li>Presentation of Prepared Case Study work </li></ul><ul><li>PM in Saipem </li></ul>
    4. 4. Module 3 – Planning & Cost Control <ul><li>Tuesday – Planners </li></ul><ul><li>9.00 – 12.30 (Tutor) </li></ul><ul><li>Contract Management – Contract types </li></ul><ul><li>Producing subsiduary management plans (schedule management) </li></ul><ul><li>IBIS introduction </li></ul><ul><li>14.00-17.30 (No Tutor) </li></ul><ul><li>Re-estimates </li></ul><ul><li>‘ what-if’ analysis </li></ul><ul><li>Tuesday - Cost Controllers </li></ul><ul><li>9.00 – 12.30 (Tutor) </li></ul><ul><li>Contract Management – Contract types </li></ul><ul><li>Producing subsiduary management plans (cost management) </li></ul><ul><li>IBIS introduction </li></ul><ul><li>14.00-17.30 (Tutor) </li></ul><ul><li>Claims & change management </li></ul><ul><li>Managing cash flow </li></ul>
    5. 5. Project Management in Saipem
    6. 6. Contents <ul><li>Saipem Document Management System </li></ul><ul><li>Roles & Responsibilities </li></ul><ul><li>Roadmap </li></ul>
    7. 7. Contents <ul><li>Saipem Document Management System </li></ul><ul><li>Roles & Responsibilities </li></ul><ul><li>Roadmap </li></ul>
    8. 8. Saipem Documents System: Corporate role and Company role Operating Company Operating Company Operating Company Operating Company Operating Company Corporate SAIPEM GROUP coordinate steer overall vision & strategy define the common rules control
    9. 9. CORPORATE Procedures <ul><li>Mission </li></ul><ul><li>Processes’ Mission </li></ul><ul><li>Policies </li></ul>Standards Guide Lines Saipem Group Companies Work Instruction <ul><li>Mission </li></ul><ul><li>Processes’ Mission </li></ul><ul><li>Policies </li></ul>General Procedures Criteria & Specifications Saipem Documents System: Overview
    10. 10. Mission Specific statement of the main purposes of an organisation and the main objectives to achieve Policies Statement of the procedures the organisation will use in order to achieve the objectives defined in its Missions. Guidelines Documents issued by the Corporate coherently with the relative missions and policies, which define and govern the process and relationships between the Corporate and group companies. Standards Documents issued by the Corporate relating to a given process which contain common rules, criteria and methods to all Group Companies for the application of the Guidelines. Corporate Procedures These are management or technical/operative documents which describe the ways of carrying out the Corporate activities, define the technical and operative details, specific duties and responsibilities These documents aim to establish common rules for the various Operating Companies in the Saipem group Saipem Documents System: Corporate Documents
    11. 11. Example of Procedure and Standards: Procurement Corporate Procedure Describe the overall Procurement Process to be followed by all the Saipem group companies , defining also Corporate activities Standards Describe the single segment of the main Procurement Process or a single transversal process, to be followed by all the Saipem group companies
    12. 12. General Procedure Document schematically describing a company process, indicating the activities, interfaces with other processes, respective responsibilities and reference documents Work Instruction Management or technical-operative document describing the procedures for conducting individual activities, which defines the technical and operative details, forms and specific competencies and responsibilities Specification Complete and referenced definition of technical requirements requested during the bidding stage from Vendors and Contractors depending on the product or service to provide. Criteria Full and referenced definition of the basic technical principles, in accordance with reference standards, in order to organise the correct development of the project’s technical documents Saipem Documents System: Company Documents
    13. 13. Example of Company General Procedure and Work Instruction Company General Procedure Describe the overall Procurement Process to be followed by all the functions within the Operating Company Work Instruction Describe the single segment of the main Procurement Process or a single transversal process, to be followed by all the functions within the Operating Company Both are to be consistent with the Corporate Documents
    14. 14. Contents <ul><li>Saipem Document Management System </li></ul><ul><li>Roles & Responsibilities </li></ul><ul><li>Roadmap </li></ul>
    15. 15. DOCUMENT CONTROLLER PROJECT CONTROL ENGINEER CONTRACT ADMINISTRATOR PROCUREMENT COORDINATOR CLIENT PLANNER ENGINEER COST ENGINEER WORK SITE ORGANISATION Typical Project Organisation PROJECT MANAGER PROJECT QUAL. ENGINEER PROJECT SE ENGINEER PROJECT ENGINEERING MANAGER INSTALLATION ENGINEERS DESIGN (DISCIPLINE) ENGINEERS MEDICAL COORDINATOR
    16. 16. SITE PROJECT CONTROL ENGINEER Typical Worksite Organisation SUPERINTENDENT COMMISSIONING MANAGER LOGISTIC SUPERVISOR QC SUPERVISOR SE SUPERVISOR DOCTOR CONSTRUCTION MANAGER SITE MATERIAL CONTROLLER PERSONNEL ADMINISTRATOR FIELD ENGINEER SITE MAINTENANCE ENGINEER SUPERVISOR TEAM SUBCONTRACTS
    17. 17. Project Manager Key Responsibilities <ul><li>Define the project scope and strategy </li></ul><ul><li>Provide project deliverables to time, cost, performance objectives </li></ul><ul><li>Plan, monitor and control project to handover of deliverables </li></ul><ul><li>Make tactical decisions and recommend/request strategic decisions from Sponsor </li></ul><ul><li>Build, lead and motivate the project team </li></ul><ul><li>Manage the Client and stakeholders’ expectations </li></ul>
    18. 18. Project Engineering Manager <ul><li>Understands the business requirement </li></ul><ul><li>Owns and is responsible for </li></ul><ul><ul><ul><li>Completeness, coherence and integrity of the solution </li></ul></ul></ul><ul><ul><ul><li>Ensuring the solution meets the requirements </li></ul></ul></ul><ul><ul><ul><li>Estimates for technical activities and bought-in (with PM) </li></ul></ul></ul><ul><li>Will often select the key suppliers and products </li></ul><ul><li>Assesses and manages impact of customer change on the solution </li></ul><ul><li>Provides technical consultancy to the team </li></ul>
    19. 19. Typical Yard Responsibilities (Intermare Sarda) Project Manager <ul><li>Representing Intermare Sarda with the Client for all that regards the contract; </li></ul><ul><li>Guaranteeing the interfacing with the Client and the preparation of the reporting documents for him; </li></ul><ul><li>Guaranteeing the general and detail planning and the organisation sides of the Project in cooperation with the other corporate functions; </li></ul><ul><li>Managing and controlling all the contract activities; </li></ul><ul><li>Superintending administration of the contract; </li></ul><ul><li>Preparing and approving the Project Plan in cooperation with the Project Management Team (PMT), providing PROD with all the necessary information and documentation to allow the correct development of the production activities; </li></ul><ul><li>Guaranteeing the control and definition of the Project activity progress and of the relevant costs; </li></ul><ul><li>Submitting the work progress to the Client; </li></ul><ul><li>Guaranteeing the control over the Project purchasing documentation and working together with APGA-RTS Saipem for the carrying out of the necessary expediting activities. </li></ul><ul><li>Approving the technical documentation produced by ATEC for the Project activities; </li></ul><ul><li>Preparing the Quality and Quality Control Plan and all the Project procedures. </li></ul><ul><li>Contributing to single out the corrective actions and to implement them; </li></ul><ul><li>Keeping and coordinating the contacts with the other Project functions as Certifying Bodies for all that regards the execution of the works; </li></ul><ul><li>Managing the Client’s complaints. </li></ul>
    20. 20. Typical Yard Responsibilities (Intermare Sarda) Project Engineer <ul><li>Defining, coordinating and verifying the Project engineering activities; </li></ul><ul><li>Taking part in the contract verification activities, in the formulation of corrective actions; handling, together with the functions involved, the work deviations </li></ul><ul><li>Examining, handling and classifying all the Project technical documentation provided by the Client and produced for the execution of the Project; </li></ul><ul><li>Guaranteeing the coordination of the Project specialized technical resources and of those outside the Company; guaranteeing a continuous control of the interfaces between them ; </li></ul><ul><li>Guaranteeing the preparation of the Engineering Plans and taking part in the preparation of the Construction Plan; </li></ul><ul><li>Taking part in the formulation / preparation of the Purchasing Plan and of the relevant program; </li></ul><ul><li>Managing the control, verification and validation of the Project Engineering; </li></ul><ul><li>Updating and revising drawings and other technical documents in compliance with the contract changes; </li></ul><ul><li>Picking out each step which might prevent or minimize delays in the engineering activity. </li></ul>
    21. 21. Typical Yard Responsibilities (Intermare Sarda) Planning Engineer <ul><li>Managing the Project Control and Planning activities; </li></ul><ul><li>Preparing and handling the Work Progress reports, useful for the necessary cost control actions; </li></ul><ul><li>Preparing and updating the Project Planning documents; </li></ul><ul><li>Preparing the Progress Reports, for the PM and for the Client; </li></ul><ul><li>Monitoring the Project activity progress indicating, when necessary, the corrective actions to be undertaken; </li></ul><ul><li>Monitoring and cooperating with PM in order to avoid possible technical problems, industrial relations, changes and circumstances beyond his control to affect the Project planning. </li></ul>
    22. 22. Typical Yard Responsibilities (Intermare Sarda) Cost Control Engineer <ul><li>Going through the contract in detail, for what falls within his competence, from the estimate cost produced by business departments (basis hypothesis, quantity, productivity standards, cost of labour, equipment, cash flow, plans). </li></ul>
    23. 23. Purpose of Cost Control <ul><li>To achieve or improve the profitability targets defined during the budgeting/commercial phase (not to check actual and forecast economic progress) </li></ul><ul><li>Compare the overall cost budget with the original/revised budget and singles out any potential negative deviation </li></ul><ul><li>The aim is to enable the necessary corrective actions to be taken to achieve goals </li></ul>
    24. 24. Cost Control Steps <ul><li>Issue and Revision of Cost Control Budget </li></ul><ul><li>Accounting and Cost Analysis </li></ul><ul><li>Estimates to Complete and definition of corrective actions </li></ul><ul><li>Reporting </li></ul>
    25. 25. Definitions Standard cost division scheme, adopted by Project Control for cost monitoring activities Cost Breakdown Structure (CBS) <ul><li>Set of activities aimed at keeping to the established project goals. This is achieved with various methods: </li></ul><ul><li>time scheduling and control; </li></ul><ul><li>physical progress and resource commitment scheduling; </li></ul><ul><li>cost control; </li></ul><ul><li>cash flow control; </li></ul><ul><li>control of economic progress and spread forecast </li></ul>Project Control Budget finalized by the Commercial function after the acquisition of the project. This budget, drawn up on the basis of the available project engineering, lists budgeting conditions, physical quantities for implementation and relative costs Commercial Budget PM = Project Manager CE = Cost Control Engineer PCON = Project Control Acronyms
    26. 26. Typical Yard Responsibilities (Intermare Sarda) Construction Coordinator Engineer <ul><li>coordinating and planning the production activities on the basis of the instructions and technical documentation received, </li></ul><ul><li>organising the working phases for the preparation of the final product, guaranteeing the compliance with the Project Specifications in the different production stages; </li></ul><ul><li>implementing the Quality Control Plans, for what falls within his competence, </li></ul><ul><li>guaranteeing the coordination between the technical-operating personnel and the personnel in charge of special working processes, </li></ul><ul><li>contributing to implementing the corrective actions, in the prescribed times and ways, following up non conformities detected in the production processes; </li></ul><ul><li>preparing, in cooperation with PROG, the general and detail planning of the Project Production activities; </li></ul><ul><li>keeping properly in contact with QUALS, so as to guarantee the quality levels prescribed in the Project; </li></ul><ul><li>putting into effect the safety, prevention and protection measures, verifying their constant and accurate application . </li></ul>
    27. 27. Typical Yard Responsibilities (Intermare Sarda) Other Functions <ul><li>Production Supervisor (PROD) who, with his constant presence in the yard, is responsible for all the operations performed therein, for managing the human resources and for superintending the correct work performance, in compliance with the construction documents </li></ul><ul><li>Construction Coordinators, who act as experts in the different construction disciplines and make use of the specialized support of the yard competent Units </li></ul><ul><li>Project Quality Engineer who, being under QHSE as a function, verifies that the Quality Plan requirements are correctly implemented and, in cooperation with QUALS, carries out the controls in compliance with the Project Quality Control Plan, </li></ul><ul><li>Quantity Supervisor, </li></ul><ul><li>Project Procurement Coordinator, </li></ul><ul><li>Project Expediting Coordinator. </li></ul><ul><li>Subcontractors Control </li></ul><ul><li>Quality Control Inspectors </li></ul><ul><li>Welding engineer; </li></ul><ul><li>Welding Inspector; </li></ul><ul><li>Safety Engineer; </li></ul><ul><li>Document Control (DCC) </li></ul>
    28. 28. Contents <ul><li>Saipem Document Management System </li></ul><ul><li>Roles & Responsibilities </li></ul><ul><li>Roadmap </li></ul>
    29. 29. Roadmap- Bid/Project Management for Project Managers Process extracted from Change Management in Saipem Group (Release ? Versione ?.? - --/--/----) Process Saipem <ul><li>Activity : </li></ul><ul><li>Decision </li></ul><ul><li>Approval / acceptance </li></ul><ul><li>Not Obligatory </li></ul><ul><li>Deliverable : </li></ul><ul><li>Obligatory </li></ul><ul><li>Not Obligatory </li></ul>
    30. 30. <ul><li>Client Request for Bid/Requirements/ Technical Specifications </li></ul><ul><li>Project Mission and Objectives </li></ul><ul><li>Initial Risk Analysis </li></ul><ul><li>Bid Authorization Form </li></ul><ul><li>Appoint Bid Manager </li></ul><ul><li>Complete first analysis of Client Requirements </li></ul><ul><li>Estimate Bid Effort of Engagement </li></ul><ul><li>Qualify bid (is the Client serious/does Saipem want to bid?) </li></ul><ul><li>Request Authorization to Bid </li></ul><ul><li>Tender Kick-off Meeting </li></ul>Bidding PROCESS ACTIVITIES DELIVERABLES Planning & Proposal Preparation Negotiation & Selection <ul><li>Prepare Technical Solution </li></ul><ul><li>Develop Project Scope Statement and WBS </li></ul><ul><li>Develop Project Schedule </li></ul><ul><li>Establish Project Resource Requirements </li></ul><ul><li>Develop Project Risk Management Plan </li></ul><ul><li>Develop Additional Preliminary Project Plans </li></ul><ul><li>Develop Project Budget </li></ul><ul><li>Prepare and Present Client Proposal </li></ul><ul><li>Perform Planning and Proposal Review </li></ul><ul><li>Prepare Procurement Plan/Material Staus Report </li></ul><ul><li>Prepare Request for Bid/Proposal </li></ul><ul><li>Analyse Bids/Proposals and place orders </li></ul><ul><li>Inspect and expeditite </li></ul><ul><li>Plan and manage shipping </li></ul><ul><li>Evaluate Supplier performance </li></ul><ul><li>Confirm Engineering Interfaces </li></ul><ul><li>Develop & manage Engineering plan & Document Progress Register </li></ul><ul><li>Develop detailed engineering design </li></ul><ul><li>Prepare & evaluate requistions </li></ul><ul><li>Carry out Site engineering activities </li></ul><ul><li>Plan and Manage Construction and Commissioning/Startup </li></ul><ul><li>Plan and carry out Constructability reviews </li></ul><ul><li>Site Contractor evaluation and management </li></ul>Engineering Procurement Fabrication/ Installation/ Construction <ul><li>Proposal & Contract (Client) </li></ul><ul><ul><li>Scope of Work </li></ul></ul><ul><ul><li>Project Plan </li></ul></ul><ul><li>Project Baselines (Saipem) </li></ul><ul><ul><li>Estimates & Budget (Costs) </li></ul></ul><ul><ul><li>Resource </li></ul></ul><ul><ul><li>Schedule </li></ul></ul><ul><ul><li>Risk </li></ul></ul><ul><li>Engineering Management Plan </li></ul><ul><ul><li>Document Progress Register </li></ul></ul><ul><li>Drawings/Material Take-off etc. </li></ul><ul><li>Material Requisitions & Supplier Assessments </li></ul><ul><li>Field Engineering & Construction Supervision Documentation </li></ul><ul><li>Procurement/ Material Management Plan </li></ul><ul><ul><li>Procure-ment Schedule </li></ul></ul><ul><ul><li>Material Status Report </li></ul></ul><ul><li>Final Proposal (Scope of Work and Project Plan) </li></ul><ul><li>Contract/Commercial correspondence </li></ul><ul><li>Contract Qualification Document </li></ul><ul><li>Signed Contract </li></ul><ul><li>Revised Project Baseline ( Costs /Resource/Time/Risks) </li></ul><ul><li>Commercial Close-out Report </li></ul><ul><li>Construction Management Plan </li></ul><ul><li>Constructability Plan </li></ul><ul><li>Heavy Lift Schedule… </li></ul><ul><li>Construction Status Report (CSR for the Worksite) </li></ul>Initiation/ Bid/No Bid <ul><li>Produce Final Proposal and Project Baseline </li></ul><ul><li>Reach Agreement on Proposal </li></ul><ul><li>Complete Contract </li></ul><ul><li>Transfer Meeting Commercial/Project Manager </li></ul>Project Management
    31. 31. PROCESS ATTIVITIES DELIVERABLES <ul><li>Project Status Report (PSR) </li></ul><ul><li>Weekly Meeting Agenda/Report </li></ul><ul><li>Risk Register </li></ul><ul><li>Issue/Change Register (Critical Action List/Change Instrucution Register)) </li></ul>Initiation/Interface with Commercial Planning/Re-planning <ul><li>Client Request for Bid/Requirements/ Technical Specifications </li></ul><ul><li>Final Proposal (Scope of Work and Project Plan) </li></ul><ul><li>Contract/Commercial correspondence </li></ul><ul><li>Contract Qualification Document </li></ul><ul><li>Signed Contract </li></ul><ul><li>Revised Project Baseline (Costs Transfer from Control Budget Form /Resource/Time/Risks) </li></ul><ul><li>Commercial Close-out Report </li></ul><ul><li>Provide technical support during bid </li></ul><ul><li>Receive and assess Commercial Documentation </li></ul><ul><li>Transfer Meeting Commercial/Project Manager </li></ul><ul><li>Project Execution Plan </li></ul><ul><ul><li>Engineering </li></ul></ul><ul><ul><li>Procurement </li></ul></ul><ul><ul><li>Fabrication </li></ul></ul><ul><ul><li>Transport & Installation </li></ul></ul><ul><ul><li>Hook-up & Commissioning </li></ul></ul><ul><li>Overall Project Quality Plan </li></ul><ul><li>Project HSE Plan </li></ul><ul><li>Procedures: </li></ul><ul><ul><li>Project Co-ordination </li></ul></ul><ul><ul><li>Planning & Scheduling (Project WBS) (Cost Breakdown Structure (SAP PS WBS)) </li></ul></ul><ul><ul><li>Progress Measurement & Reporting Procedure </li></ul></ul><ul><ul><li>Change Instructions </li></ul></ul><ul><ul><li>Document Management </li></ul></ul><ul><li>Document Progress Register </li></ul><ul><li>Material Status Report </li></ul><ul><li>Review Project Scope Statement and WBS </li></ul><ul><li>Develop Project Schedule </li></ul><ul><li>Review Project Resource Requirements </li></ul><ul><li>Develop Project Risk Management Plan </li></ul><ul><li>Develop Additional Preliminary Project Plans </li></ul><ul><li>Develop Project Budget Baseline </li></ul><ul><li>Resolve Inconsistencies in Project Plan </li></ul>Execution Control <ul><li>Schedule Tracking and Control </li></ul><ul><li>Financial Tracking and Control </li></ul><ul><li>Risk Management </li></ul><ul><li>Issue management & Change Control </li></ul><ul><li>Human Resources Mgt. </li></ul><ul><li>Communications Mgt. </li></ul><ul><li>Quality Control </li></ul><ul><li>HSE Management </li></ul><ul><li>Document/Configuration Mgt. </li></ul><ul><li>Contract and Procurement Mgt. </li></ul>Closure <ul><li>Prepare Quality and ‘As Built’ documents </li></ul><ul><li>De-mobilise resource </li></ul><ul><li>Perform administrative closure </li></ul><ul><li>Prepare Closure Report </li></ul><ul><li>Fulfill Warranty Commitments </li></ul><ul><li>Kick off Checklist/Presentation </li></ul><ul><li>Meeting Agenda/Minutes </li></ul><ul><li>Closure Report </li></ul><ul><li>Perform Kick off </li></ul><ul><li>Implement Solution </li></ul><ul><li>Manage to the Project Plan </li></ul><ul><ul><li>Project Teams </li></ul></ul><ul><ul><li>Client Expectations </li></ul></ul><ul><ul><li>Project Deliverables </li></ul></ul><ul><li>Perform Commissioning/ Client Acceptance </li></ul><ul><li>Transfer to Warranty and Support </li></ul>Initiation Planning Closure Execution Control
    32. 32. Project Procurement Management - PMI Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2004 Edition , Project Management Institute Inc., 2004. Copyright and all rights reserved. Material from this publication has been reproduced with the permission of PMI
    33. 33. What do you need for a Contract? <ul><li>An offer </li></ul><ul><li>Acceptance </li></ul><ul><li>Consideration (something of value, not necessarily money) </li></ul><ul><li>Legal capacity – separate legal parties, competent parties </li></ul><ul><li>Legal purpose – you cannot have a contract for sale of illegal goods </li></ul><ul><li>A contract, offer, or acceptance may be written or spoken. Written is preferred </li></ul>
    34. 34. PMI View <ul><li>A contract is a formal agreement </li></ul><ul><li>All requirements should be specifically stated in the contract </li></ul><ul><li>All contract requirements should be met </li></ul><ul><li>Changes must be in writing and formally controlled </li></ul><ul><li>Most governments back contracts by providing a court system for dispute resolution </li></ul><ul><li>PMI Procurement Management – ‘includes all the processes required to acquire goods or services outside the performing organisation’ </li></ul>
    35. 35. Role of the Project Manager in Procurement <ul><li>Project Manager (PM) is the authority on project risks </li></ul><ul><li>Although procurement, contracting or legal professionals may handle the procurement </li></ul><ul><ul><li>PM can greatly assist in making the contract appropriate to the project </li></ul></ul><ul><ul><li>Contracts are risk allocation and mitigating tools! </li></ul></ul><ul><ul><li>A contract should not be created before a PM is assigned to a project </li></ul></ul><ul><li>A PM must understand and work within the procurement process and contracts </li></ul><ul><li>The Project Management Team should support the PM to ensure appropriate contracts are negotiated </li></ul>
    36. 36. 6 Steps <ul><li>Step 1: Plan Purchases and Acquisitions </li></ul><ul><li>Step 2: Plan Contracting </li></ul><ul><li>Step 3: Request Seller Responses </li></ul><ul><li>Step 4: Select Sellers </li></ul><ul><li>Step 5: Contract Administration </li></ul><ul><li>Step 6: Contract Closure </li></ul>
    37. 37. <ul><li>Plan Purchases and Acquisitions – determining what to purchase or acquire and determining when and how. </li></ul><ul><li>Plan Contracting – documenting products, services, and results requirements and identifying potential sellers. </li></ul><ul><li>Request Seller Responses – obtaining information, quotations, bids, offers, or proposals, as appropriate. </li></ul><ul><li>Select Sellers – reviewing offers, choosing among potential sellers, and negotiating a written contract with each seller. </li></ul><ul><li>Contract Administration – managing the contract and relationship between the buyer and seller, reviewing and documenting how a seller is performing or has performed to establish required corrective actions and provide a basis for future relationships with the seller, managing contract-related changes and, when appropriate, managing the contractual relationship with the outside buyer of the project. </li></ul><ul><li>Contract Closure – completing and settling each contract, including the resolution of any open items, and closing each contract applicable to the project or a project phase. </li></ul>
    38. 38. Step 1: Plan Purchases and Acquisitions <ul><li>Make or buy analysis </li></ul><ul><li>Contract types and risks </li></ul><ul><ul><li>Cost plus percentage of cost (CPPC) </li></ul></ul><ul><ul><li>Cost plus fixed fee (CPFF) </li></ul></ul><ul><ul><li>Cost plus incentive fee (CPIF) </li></ul></ul><ul><ul><li>Fixed price plus incentive fee (FPI) </li></ul></ul><ul><ul><li>Firm fixed price (FFP) </li></ul></ul><ul><li>Contract incentives </li></ul><ul><li>Procurement Management Plan – a formal or informal element of project plan describing how procurement will be managed </li></ul>
    39. 39. Make or buy analysis <ul><li>Consider direct and indirect costs (include management of purchase) </li></ul><ul><li>Possible decisions: </li></ul><ul><ul><li>Procure </li></ul></ul><ul><ul><ul><li>all or virtually all (single or multiple suppliers) </li></ul></ul></ul><ul><ul><ul><li>a significant portion </li></ul></ul></ul><ul><ul><ul><li>minor portion </li></ul></ul></ul><ul><ul><li>Make everything </li></ul></ul>
    40. 40. Contract Types and Risks Buyer Risk Seller Risk High Low Buyer Risk High Low Seller Risk CPPC CPFF CPIF FPI FFP Cost Plus Percentage of Cost Cost Plus Fixed Fee Cost Plus Incentive Fee Fixed Price Incentive Firm Fixed Price or Lump Sum
    41. 41. Cost plus percentage of cost (CPPC) <ul><li>Seller obliged only to make best effort to fulfil contract within estimated amount </li></ul><ul><li>Buyer funds overruns </li></ul><ul><li>Prohibited in U.S. federal contracting </li></ul>
    42. 42. Cost plus fixed fee (CPFF) <ul><li>Buyer reimburses allowable costs </li></ul><ul><li>Fixed fee paid proportionately as contract progresses </li></ul><ul><li>Used where effort remains uncertain until project is well underway </li></ul>
    43. 43. Cost plus incentive fee (CPIF) <ul><li>Reimburse allowable cost </li></ul><ul><li>Pay predetermined fee as a bonus for superior performance </li></ul><ul><li>If actual < expected cost, buyer & seller share savings </li></ul><ul><ul><li>Sharing ratio defined (by convention Buyer/Seller) e.g. 80/20 </li></ul></ul><ul><li>Used for contracts with: </li></ul><ul><ul><li>long performance periods </li></ul></ul><ul><ul><li>substantial development & test requirements </li></ul></ul>
    44. 44. Fixed price plus incentive fee (FPI) <ul><li>Pay fixed price plus predetermined fee as a bonus for superior performance </li></ul><ul><li>Risk shared by buyer & seller </li></ul><ul><ul><li>Sharing ratio defined (by convention Buyer/Seller) e.g. 80/20 </li></ul></ul><ul><li>Used for high-value projects with long performance periods </li></ul><ul><ul><li>ship-building </li></ul></ul><ul><ul><li>system development </li></ul></ul>
    45. 45. Firm fixed price (FFP) <ul><li>Seller bears all risk, but has highest profit potential (profit is unknown) </li></ul><ul><li>Most common type of contract </li></ul><ul><li>Must have reasonably definite specifications </li></ul>
    46. 46. Examples of Incentive Contracts <ul><li>Cost Plus Incentive Fee </li></ul><ul><ul><li>Target Cost $100,000 </li></ul></ul><ul><ul><li>Target fee $10,000 </li></ul></ul><ul><ul><li>Target Price $110,000 </li></ul></ul><ul><ul><li>Sharing ratio 80/20 </li></ul></ul><ul><ul><li>Actual cost $80,000 </li></ul></ul><ul><ul><li>Fee Calculation </li></ul></ul><ul><ul><li>20% of $20,000 $4,000 </li></ul></ul><ul><ul><li> $10,000 Fee $14,000 </li></ul></ul><ul><ul><li>Actual cost $80,000 </li></ul></ul><ul><ul><li>Fee $14,000 </li></ul></ul><ul><ul><li>Final Price $94,000 </li></ul></ul><ul><li>Fixed Price Plus Incentive Fee </li></ul><ul><ul><li>Target Cost $100,000 </li></ul></ul><ul><ul><li>Target fee $10,000 </li></ul></ul><ul><ul><li>Target Price $110,000 </li></ul></ul><ul><ul><li>Sharing ratio 80/20 </li></ul></ul><ul><ul><li>Ceiling price $130,000 </li></ul></ul><ul><ul><li>Actual cost $120,000 </li></ul></ul><ul><ul><li>Fee Calculation </li></ul></ul><ul><ul><li>Target fee $10,000 </li></ul></ul><ul><ul><li>20% of ($100,000-$120,000) = -$4,000 </li></ul></ul><ul><ul><li>Fee $6,000 </li></ul></ul><ul><ul><li>Actual cost $120,000 </li></ul></ul><ul><ul><li>Fee $ 6,000 </li></ul></ul><ul><ul><li>Final Price $126,000 </li></ul></ul>
    47. 47. Target Cost & Price <ul><li>Contract target cost </li></ul><ul><li>Total anticipated value of all the negotiated costs in a contract, excluding fee and authorised un-priced work. </li></ul><ul><li>Target profit/fee </li></ul><ul><li>Amount of profit the contractor will receive if its total allowable costs equal total target costs in an incentive contract. </li></ul>
    48. 48. Example <ul><li>A buyer has negotiated a fixed-price incentive contract with the seller. The contract has a target cost of $200,000, a target profit of $30,000, and a target price of $230,000. The buyer has also negotiated a ceiling price of $270,000 and a share ratio of 70/30. If the seller completes the contract with actual costs of $170,000, how much profit will the buyer pay the seller? </li></ul><ul><li>A. $21,000 </li></ul><ul><li>B. $35,000 </li></ul><ul><li>C. $39,000 </li></ul><ul><li>D. $51,000 </li></ul>
    49. 49. Examples of Incentive Contracts <ul><li>Fixed Price Plus Incentive Fee </li></ul><ul><ul><li>Target Cost $200,000 </li></ul></ul><ul><ul><li>Target fee $30,000 </li></ul></ul><ul><ul><li>Target Price $230,000 </li></ul></ul><ul><ul><li>Sharing ratio 70/30 </li></ul></ul><ul><ul><li>Ceiling price $270,000 </li></ul></ul><ul><ul><li>Actual cost $170,000 </li></ul></ul><ul><ul><li>Fee Calculation </li></ul></ul><ul><ul><li>Target fee $30,000 </li></ul></ul><ul><ul><li>30% of ($200,000-$170,000) = $9,000 </li></ul></ul><ul><ul><li>Fee $39,000 </li></ul></ul><ul><ul><li>Actual cost $170,000 </li></ul></ul><ul><ul><li>Fee $ 39,000 </li></ul></ul><ul><ul><li>Final Price $209,000 </li></ul></ul>
    50. 50. Example <ul><li>The buyer has negotiated a cost-plus-incentive fee contract with the seller. The contract has a target cost of $300,000, a target fee of $40,000, a share ratio of 80/20, a maximum fee of $60,000, and a minimum fee of $10,000. If the seller has actual costs of $ 380,000, how much fee will the buyer pay? </li></ul><ul><li>A. $104,000 </li></ul><ul><li>B. $56,000 </li></ul><ul><li>C. $30,000 </li></ul><ul><li>D. $24,000 </li></ul>
    51. 51. Examples of Incentive Contracts <ul><li>Cost Plus Incentive Fee </li></ul><ul><ul><li>Target Cost $300,000 </li></ul></ul><ul><ul><li>Target fee $40,000 </li></ul></ul><ul><ul><li>Target Price $340,000 </li></ul></ul><ul><ul><li>Sharing ratio 80/20 </li></ul></ul><ul><ul><li>Maximum Fee $60,000 </li></ul></ul><ul><ul><li>Minimum Fee $10,000 </li></ul></ul><ul><ul><li>Actual cost $380,000 </li></ul></ul><ul><ul><li>Fee Calculation </li></ul></ul><ul><ul><li>Target fee $40,000 </li></ul></ul><ul><ul><li>20% of ($300,000-$380,000) = -$16,000 </li></ul></ul><ul><ul><li>Fee $24,000 </li></ul></ul><ul><ul><li>Actual cost $380,000 </li></ul></ul><ul><ul><li>Fee $ 24,000 </li></ul></ul><ul><ul><li>Final Price $404,000 </li></ul></ul>
    52. 52. Time and Material (T&M) - PMI <ul><li>Hybrid type of contractual arrangement that contains aspects of both cost-reimbursable and fixed-price type arrangements </li></ul><ul><li>Resemble cost-reimbursable type arrangements in that they are open ended </li></ul><ul><li>But can also resemble fixed-price arrangements </li></ul><ul><ul><li>For example, unit rates are preset by the buyer and seller, when both parties agree on the rates for the senior engineer category, or when the contract contains a not-to-exceed cost clause. </li></ul></ul>
    53. 53. Time and Material – US Govt <ul><li>Description . A time-and-materials contract provides for acquiring supplies or services on the basis of </li></ul><ul><ul><li>direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit and </li></ul></ul><ul><ul><li>materials at cost , including, if appropriate, material handling costs as part of material costs. </li></ul></ul><ul><li>Application . A time-and-materials contract may be used only when it is not possible at the time of placing the contract to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence. </li></ul>No Profit
    54. 54. T&M – PMI Recommendation <ul><li>Only used for small elements of project or small project </li></ul><ul><ul><li>Short duration/ small $ amount </li></ul></ul><ul><ul><li>When definition not possible </li></ul></ul><ul><ul><li>If expertise available to manage supplier </li></ul></ul><ul><li>In this case are less risky than Cost + type contract </li></ul>High Low Seller Risk CPPC CPFF CPIF FPI FFP T&M High Low Buyer Risk
    55. 55. Contract incentives <ul><li>To bring interests of seller in line with buyer </li></ul><ul><li>Can be used with any type of contract </li></ul><ul><li>Usually found to be cost effective </li></ul>
    56. 56. Subsidiary Management Plans
    57. 57. Producing the Project Plan <ul><li>Project planning process </li></ul><ul><li>The Project Plan </li></ul><ul><ul><li>Purpose </li></ul></ul><ul><ul><li>Contents </li></ul></ul><ul><ul><li>Production and Use of the Plan </li></ul></ul><ul><li>Subsidiary Management Plans </li></ul><ul><ul><li>Project Co-ordination </li></ul></ul><ul><ul><li>Planning & Scheduling (Project WBS) (Cost Breakdown Structure (SAP PS WBS) </li></ul></ul><ul><ul><li>Progress Measurement & Reporting Procedure </li></ul></ul><ul><ul><li>Change Instructions </li></ul></ul>Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2004 Edition , Project Management Institute Inc., 2004. Copyright and all rights reserved. Material from this publication has been reproduced with the permission of PMI
    58. 58. Remember - Why Plan? <ul><li>Facilitates effective project management </li></ul><ul><li>Best assessment of how project will be implemented </li></ul><ul><li>Baseline against which to measure performance </li></ul><ul><li>Gains commitment </li></ul><ul><li>‘ THE MEANS IS MORE IMPORTANT THAN THE END’ </li></ul>
    59. 59. BUSINESS AIMS (Why?) PBS (Product Scope) & WBS (Project Scope) RAM RISKS CPM OBS GANTT & MILESTONES S-CURVE PROJECT OBJECTIVES PROJECT STRATEGY SCOPE & ACTIVITIES (What) PLANNING/ ESTIMATES (How) SCHEDULES (When) TOTAL PLAN RESOURCES RESPONSIBILITIES (Who does What) ORGANISATION (Who) RESOURCE/ COST ESTIMATES (How Much)
    60. 60. What is the Overall Definition Process? Plan / implement What will we deliver How will we deliver it Why are we doing it? Problem definition Solution definition Deliverables Performance Priority Time Cost Project Strategy Output Project Charter Scope Statement
    61. 61. PM Documentation <ul><li>Project Charter - Formally authorizes the project </li></ul><ul><li>Project Scope Statement - States what work is to be accomplished and what deliverables need to be produced. May be produced in two steps </li></ul><ul><ul><li>Preliminary Scope Statement </li></ul></ul><ul><ul><li>Final Scope Statement </li></ul></ul><ul><li>Project Management Plan - States how the work will be performed </li></ul>
    62. 62. Project Plan <ul><li>Project management plan defines how the project is executed, monitored and controlled, and closed </li></ul>
    63. 63. Project Plan contains: <ul><li>Project management processes selected by the project management team </li></ul><ul><ul><li>Level of implementation of each selected process </li></ul></ul><ul><ul><li>Descriptions of the tools and techniques to be used for accomplishing those processes </li></ul></ul><ul><ul><li>How the selected processes will be used to manage the specific project, including the dependencies and interactions among those processes, and the essential inputs and outputs </li></ul></ul><ul><li>How work will be executed to accomplish the project objectives </li></ul><ul><li>How changes will be monitored and controlled </li></ul><ul><li>How configuration management will be performed </li></ul><ul><li>How integrity of the performance measurement baselines will be maintained and used </li></ul><ul><li>Need and techniques for communication among stakeholders </li></ul><ul><li>Selected project life cycle and, for multi-phase projects, the associated project phases </li></ul><ul><li>Key management reviews for content, extent, and timing to facilitate addressing open issues and pending decisions </li></ul>
    64. 64. Subsidiary Management Plans <ul><li>These confirm how different aspects of the project will be managed, typically include: </li></ul><ul><ul><li>scope management plan </li></ul></ul><ul><ul><li>schedule management plan </li></ul></ul><ul><ul><li>cost management plan </li></ul></ul><ul><ul><li>engineering management plan </li></ul></ul><ul><ul><li>constructability plan </li></ul></ul><ul><ul><li>procurement management plan </li></ul></ul><ul><ul><li>construction plan </li></ul></ul><ul><ul><li>risk management plan </li></ul></ul><ul><ul><li>communications management plan (include interfaces, meetings, document management, reporting) </li></ul></ul><ul><ul><li>quality management plan </li></ul></ul><ul><ul><li>staffing management plan/ human resource management plan </li></ul></ul><ul><ul><li>HSE Plan </li></ul></ul><ul><ul><li>configuration management plan </li></ul></ul><ul><li>Other components include, but are not limited to </li></ul><ul><ul><li>Milestone list </li></ul></ul><ul><ul><li>Resource calendar </li></ul></ul><ul><ul><li>Schedule baseline </li></ul></ul><ul><ul><li>Cost baseline </li></ul></ul><ul><ul><li>Quality baseline </li></ul></ul><ul><ul><li>Risk register </li></ul></ul><ul><li>A small project may have a single document as a Project Plan </li></ul><ul><li>A Large Project usually has separate documents. Care to be taken </li></ul><ul><ul><li>to avoid repetition </li></ul></ul><ul><ul><li>have documents that can be managed by different people and be reviewed/‘authorised’ separately to speed review/acceptance process </li></ul></ul>
    65. 65. Production of the Plan <ul><li>The first elements of the plan are produced iteratively during the definition/feasibility phase of the project </li></ul><ul><ul><li>Project charter </li></ul></ul><ul><ul><li>Description of the project management approach or strategy </li></ul></ul><ul><ul><li>Scope statement, which includes the project deliverables and the project objectives </li></ul></ul><ul><li>Other elements should be in place before or soon after the project is authorised </li></ul>
    66. 66. Introduction to IBIS
    67. 67. IBIS and Project Management Tools
    68. 68. <ul><li>IBIS </li></ul><ul><li>(Integrated Business Information System) </li></ul><ul><li>From Rules to Tools </li></ul>“ NESSUN VENTO E’ BUONO PER CHI NON SA IN CHE PORTO VUOLE ANDARE” Seneca
    69. 69. IBIS Program The IBIS Program is a major component of a wider Saipem initiative, called Change Management. The IBIS Program had the aim to redesign processes, procedures and applications at Group level, through an integrated approach, leveraging the implementation of an information system. <ul><li>Increases the degree of processes and data standardization. </li></ul><ul><li>Addresses strong requirements for integration and communication among processes , with attention on their distribution. </li></ul><ul><li>Allows for process distribution and relocation (total or partial) , while keeping overall visibility and control (Network company) </li></ul>
    70. 70. The IBIS program works on 3 levels of integration. <ul><li>Process Integration </li></ul><ul><li>Company Integration </li></ul><ul><li>System Integration </li></ul>
    71. 71. <ul><li>Standardisation of company processes </li></ul><ul><li>Integration in order to reduce “walls” inside the processes </li></ul><ul><li>Authorisation of operative decentralisation, keeping overall monitoring and control </li></ul>Process Integration Purchase Request Materials and services acceptance Invoice verification Purchase Order
    72. 72. Information sharing and visibility across processes and companies Accounting, Finance & Controlling Revenue cycle Logistics & Operating management Project management Company Integration Engineering On site construction Human Resources
    73. 73. Information sharing and visibility consolidating data from different companies Management Cosolidation Group/Project Integration and consolidation Accounting, Finance & Controlling Company B Project Cosolidation Accounting, Finance & Controlling Company C Accounting, Finance & Controlling Company A
    74. 74. IBIS Processes and Systems (Rules) (Tools) Enterprise Mgmt Time/Costs Mgmt Design & Engineering Procurement Construction Mgmt Asset Mgmt HR Mgmt Business Consolidation Financial Risk Mgmt Financial Accounting Management Accounting Resources planning and staffing HR transaction Mgmt Time & Attendance Warehouse Mgmt Asset planning & allocation Maintenance Mgmt WBS definition and project budgeting Project cost mangt. Catalogue Mgmt. & Material requirements Design integration Document Mgmt Vendor Mgmt RFQ & Awarding PO & Contract issue Expediting & Transportation Fabrication / Operation Mgmt Site Material Mgmt Reporting & Analysis Good receipt & Invoicing Project Time mangt . Technical deliverables Mgmt Project Management SAP Peoplesoft Marian DMS Primavera BW Data Analysis
    75. 75. IBIS specific coverage on Project Management activities PHASES Procurement Fabrication / Installation / Construction Project Management ✓ Scheduling and Time Management Integrated Passive Cycle for Goods and Services. From Request to delivery at final destination WBS - Scope Management ✓ ✓ Engineering Data Analysis ✓ Project Cost Management (budget, control, forecasting) Timesheet management ✓ ✓ ✓ ✓ Document Management integration Document management Automated workflow ✓ IBIS coverage ✓ MTO management Project material master record Progress calculation Purchase requisition ✓ ✓ ✓ Service acceptance ✓ Goods receipt ✓ Specific Engineering appls. (Design, etc.) ✓ Site material management & tracking (constructability,etc) Bidding
    76. 76. IBIS and EPIC projects complexity <ul><li>In addition to Engineering and Technological challenges, EPIC projects typically presents the following complexities: </li></ul><ul><li>Organizational – One Project with one Company and one task force is a wishful thinking. The standard now are projects involving many companies and branches , in many countries with different fiscal and legal regulations. </li></ul><ul><li>Logistic – Stakeholders are geographically dispersed in many location around the globe, often in remote and harsh conditions (many offices, vessels, yards, logistic bases, construction sites) </li></ul><ul><li>Cultural – Stakeholders come from different organizations and countries with a very different cultural background . </li></ul><ul><li>IBIS tools support complex project execution: </li></ul><ul><li>Intercompany integration – many companies exchanging structured information </li></ul><ul><li>Decentralization but Co-ordination - real-time access to information from the most decentralized locations, global monitoring and processes integration </li></ul><ul><li>Standard rules and tools – common way of working, common meaning of data, guaranteed audited data, common and integrated reporting </li></ul>IBIS supports SAIPEM Network Company Model
    77. 77. IBIS Areas of Improvement <ul><li>Our Tools are among the best in class / best in industry </li></ul><ul><li>We probably have more tools than we can use </li></ul><ul><li>We don’t need more tools </li></ul><ul><li>We need to know and to use better what we already have </li></ul>
    78. 78. IBIS in numbers Managed Companies WAN connected locations Managed Vessels Engineering catalogue items Procurement Departments Purchase order per year Managed Employees Connected countries Major equipment maintained World-wide users Managed Vendors/Strategic eProcurement catalogue items 28 IBIS full /120 custom 85 12 550.000 16 120.000 15.500 25 350 (int./ext.) 7.500 1.200 600.000
    79. 79. BUDGET PBCC SPS-PC SIPS Custom Systems Quickly Solution The Packages SAP BW SAP SEM BCS GHRS AMOS SIPS Magazz SIPS GELE R/3 SD FI CO AM TR PS CFM MM PM CPC Payroll Services E-Proc S I E C O Document Management Integrated Solution
    80. 80. Commissioning WIN PC’s Interface Aggreg.by Job-C.Center-Wbs GHRS (home office) PEOPLE SOFT ENG. MTO’s (CADD MTO ) MARIAN Project Control Systems : Link with other Company’s Information Sys. Construction Progress & Dates Wbs / P.O.’s & Sub-Contracts + total SAL Administration & Finance Procurement Human Resources Recorded Cost(FI) Accruals(CO) & Revenues(SD) SPS -PC (remote sites) Wbs/ Budgets & Upd ated Forecast Engineering Designed Qty’s DPR Deliverables-Progress Windchill / Documentum Progress & Dates Site MAt.MNGT. (site workshop) MARIAN Site Estimating Bid estimate Details Excel SAL details Local P.O. Assets Managmt (sites) Excel Mhs by: WBS - Discipl. -Act.code Dates Mhs FLOW SYS.rev.08-2005.ppt Tiime sheets Material Satus Report MHR’s report Eng. external services Progress Certificate (SAL) Mat. Availab. Prefabricabilty mod. FI / CO / SD SAP FLEXY (remote sites) SIPS GePe FLEXY GePe ( MANSIS ) (remote sites) Mat. Manag. SAP Project Control Department Legend: Data transfer Automatic Manual Wbs P.O.’s & Qtys DWG’s Mhs Loc.P.O.’s ENG. CAD (DWG’s/ MTO ) Autocad / PDS Dates Mat. By Comm.Code Project As built Data Excel Job Card Project Sch. – PRS Interface (aggreg.by unit-WBS-matcod ) mod. PS SAP Cost Control Planning & Progress Control Dates Construction Monitoring Qty’sProgress/Mhs-Productivity (sites) Excel ALL IN ONE* (to be implemented) cost details Excel Subcontracts Administration (sites) Excel B.Explorer- B.Object DATA WAREHOUSE SEM consolidate Scheduling Main Network - Resource Load Progress - Forecast PRIMAVERA Progress & Dates Eng.Control Progress (Mhs & Productivity) ECS PSR Project Status Rep. Excel Custom Reports Progress & Dates ProgressMhs & Dates Accounted Qty Cost & Planning PWBS – WBS - CBS OBS – DOW Change Control Progress Payment FLEXY PS (r emote site) ProgressMhs & Dates HOLD Risk Mgnt . Pertmaster Hook-up Mgnt- HMS Installed QTY cost details Excel ProgressMhs & Dates FLEXY PS (r emote site)
    81. 81. SAP-PS Project System
    82. 82. SAP-PS PROJECT COST CONTROL
    83. 83. PROJECT ARCHITECTURE <ul><li>Typical for each project </li></ul>WBS di progetto Revenues Labor Vdc 1 Vdc n Materials Vdc 2 Subcontract Vdc 3 Piano dei conti <ul><li>Fixed </li></ul>Project Phase 2 Soc. 2 Vdc 1 Vdc 2 Vdc.. Phase 1 Vdc 3 Vdc q Vdc… Soc. 1 VdC n VdC p VdC ... Phase 3 Administration Accounting Cost Codes Project Control WBS Project Phase 1 Phase 2 Phase3
    84. 84. PROJECT ARCHITECTURE – WBS CODING JOB N°. CBS Job type: Lump sum Reimbursables Changes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Area: Jacket Deck Flare Piles .......... Site/home office (for Management) General cost (for other cost) Phase: Management Engineering Project Material & transport Fabrication Transportation to Site Construction/Installation Hook-up Commissioning Start-up Warranty period cost Other cost Contingences Discipline: Civil Electrical Mlechanic Insulation Structural ........... Other level CBS: WBS
    85. 85. WBS & SYSTEM INTEGRATION Engineering PROJECT Proj. Mngt. SASP Procurement Transport Fabrication Installation Others RdA OdA SAL Fatt SP ALTRI PROCESS CIVIL MECHAN. ELECT. ... PROCESS CIVIL MECHAN. ELECT. ... ... INLAND SEA AIR SEALINES PLATFORM SYST. PACK. MECHANICAL . MACH. STEEL STRUCTURE PIPING ... SEALINES MANPOWER CONSUMABLES SERVICES SUBCTR. ... PLATFORM ... ... ... TOPSIDES DECK JACKET SYST. PACK. MECHANICAL . MACH. STEEL STRUCTURE PIPING ... TRIPS & MISSION INSURANCE TRAINING ... CO PLATFORM RdA OdA EM Fatt RdA OdA SAL Fatt SEALINES ... ... 962XXX … ... 964000 BRANCH Time sheet – accrued ( work-in-progress ) - SD : Sales & distribution FI : Financial TR : Treasury AA : Asset Accountancy MM : Material Management PM : Program Management CO : Controlling PS : Project System PS FI MM SD FI TR AA PM MM CO PS
    86. 86. Materials Consumables Subcontract Services Other costs Labor Gross margin Revenues Costs COST CONTROL ANALYSIS
    87. 87. COST CONTROL ANALYSIS
    88. 88. Statutory exchange Converted at fixed exchange rate Controlling view Actual: converted at hedging rate or accounting rate. ETC: converted at hedging rate, remaining amounts at Eni rates COST CONTROL ANALYSIS
    89. 89. Single entries Invoice # 222 Eur. 1.000 Invoice # 33 Eur. 870 Orders N° 1 Servicies Eur. 1.000 N° 2 Materials Eur. 2.500 PROJ. WBE WBE COST CONTROL ANALYSIS : Drill-down reporting MM FI PS
    90. 90. COST CONTROL ANALYSIS AND COMPANY BUDGET
    91. 91. PROJECT CONSOLIDATION – SEM-BCS 400 Cons. BW WBS Report x WBS Flexy-JC Excel 260 Price Escalation 600 ETC 420 Residuo ordine 240 Change Orders 220 Internal Transfer 100 Original Budget hISTORICAL Agg. Forecast SEM Passaggio dati per progetto SAP-PS Data-Warehouse
    92. 92. Saipem – Claims Management Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2004 Edition , Project Management Institute Inc., 2004. Copyright and all rights reserved. Material from this publication has been reproduced with the permission of PMI
    93. 93. Definitions Any request for project variations not recognised by the Client Claim Any revision / variation to the contract accepted and approved by the Client Contract Change / Variation Any deviation from contract specifications or conditions Project Change / Variation
    94. 94. Project Control Department Change Control Project variation Change Alert H.O. Site Project Manager decision Change notice Client decision Prepare change estimate Change Order request Client approval Change Order release
    95. 95. Project Control Department Claim management Project variation Originator Change Alert H.O. Site Project Manager decision Change notice Client decision Change status identified stop cancelled notified stop cancelled No change (& exec.) rejected Claim Management Exec. Exec. (own risk) Deviation evaluation ( from budget) Hold exec.
    96. 96. Project Control Department Change Orders Client decision Prepare change estimate Change Order request Client approval Change Order release Under estimate requested stop cancelled approved revise Approved Budget change Contract schedul. change
    97. 97. Project Control Department Change Documentation Documents Home Office Site Change alert Change notice Change order Deviation Log Change Log Claim Log ( rejected) Extrawork order E.W.O. E.W.O. Log
    98. 100. Saipem – Cash Flow Management Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2004 Edition , Project Management Institute Inc., 2004. Copyright and all rights reserved. Material from this publication has been reproduced with the permission of PMI
    99. 101. Objectives of Cash Flow control <ul><li>Define generated or absorbed financial flows to optimize the expenditures/takings plan. This is done during the initial budget development and in subsequent updates </li></ul><ul><li>During execution to control Project self-financing conditions or to improve the financial surplus/deficit conditions indicated in the original/revised budget </li></ul><ul><li>Determine the effective profitability of the job </li></ul><ul><li>Support the activity ensuring financial coverage </li></ul>
    100. 102. Cash Flow Definitions Estimate of costs (expenditures) trends. (Depreciation and contingencies are also included in costs). Cash out Estimate of revenues (takings) trends. Cash in Forecast of revenues (takings) and costs (expenditures) updated by Project Control after contract changes and/or internal transfers carried out during the Project lifecycle. Revised Cash Flow (Revised Control Budget) Cash Flow in which revenues (takings) and costs (expenditures) have been established in contract clauses or internal agreements but still might not be realized. Estimated Cash Flow Forecast of expenditures and takings issued by the Commercial function after Project acquisition on the basis of the works to be carried out. Initial Cash Flow (Initial Control Budget) Cash Flow of entire Project revenues (takings) and costs (expenditures) in contract currencies and in corporate reference currency. Cash Flow Estimate of cash balance trends (difference between Cash-in and Cash-out). Cash Balance
    101. 103. Responsibilities
    102. 104. Example Reports/Tables <ul><li>“Cash Flow Curves - Balance&quot; (Form: COR-PCON-014-E) </li></ul><ul><li>“Cash Flow Table - Currency Details&quot; (Form: COR-PCON-020-E) </li></ul>
    103. 114. Saipem – Introduction to Currency Exchange Management Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2004 Edition , Project Management Institute Inc., 2004. Copyright and all rights reserved. Material from this publication has been reproduced with the permission of PMI
    104. 115. <ul><li>Cost controller must monitor currency exchange impact every phase of the project </li></ul><ul><li>Costs/Benefit are maintained : </li></ul><ul><ul><li>using the contract exchange rate ( Acquisition Rate) and Accounting Rate for accounting purposes </li></ul></ul><ul><ul><li>using the Company Reference Rate for Project Reporting </li></ul></ul><ul><li>The Company Reference rate ensures that Cost/Benefit analysis is carried out at a single consistent rate throughout the project </li></ul><ul><li>Estimates to complete use the Forecast Rate for the elements not covered by company hedging </li></ul>Project Control Department Currency Management
    105. 116. Currency Definitions Exchange rate communicated by Financial Manager for financial coverage. It is used for detailed items as a fixed rate for both budget issue and revision and for financial accounts and estimates to complete. The hedging will be managed by Financial department according to the information by Commercial function. During the project execution, hedging data will be checked and updated according to the Current Forecast information. Plafond Rate Exchange rate communicated quarterly by ENI, used for estimates to complete (except for the covered currency part) Forecast Rate Official daily exchange rate used by Accounting for final accounts (except for the covered currency part) Accounting Rate Rate used for the commercial budget and during the project execution in order to evaluate Euro equivalent without the effects of any rate variation. It is equal to the rate for the first plafond (if available) or to the acquisition rate Reference Rate Exchange-rate fixed at contract acquisition and communicated to PCON by the Commercial Manager. It is used for detailed items such as fixed rate for budget issue and revision Acquisition Rate
    106. 118. Saipem – Risk & Opportunity Management Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2004 Edition , Project Management Institute Inc., 2004. Copyright and all rights reserved. Material from this publication has been reproduced with the permission of PMI
    107. 120. In the SAIPEM Group, the use of the term RISK corresponds to a negative effect on the project… … and a potential positive effect on a project objective is referred to as an OPPORTUNITY. A CONTINGENCY is an element of time, cost or deviation from specification that the project, or part of it, carries to potentially mitigate an unresolved uncertainty. Risk or Opportunity have a cause, and if they occur, a consequence RISK OPPORTUNITY CONTINGENCY Risks and Opportunities (R&O) are uncertain events or conditions that, if they occur, have an effect on a project or a function objective. Saipem Definitions
    108. 121. É Risk & Opportunity Management in Saipem R&O IDENTIFICATION R&O EVALUTATION R&O CONTROL R&O MONITORING AND REPORTING QUALITATIVE BASIC QUANTITATIVE ADVANCED QUANTITATIVE PROJECT R&O RATING Estimating Negotiation Project Close-Out EPIC/ Project Execution Bid/ No Bid KNOWLEDGE MANAGEMENT Closure Prospect selection R&O management process R&O Management is a continuous process along the project lifecycle Type and level of analysis are adapted to each phase PROSPECT PHASE COMMERCIAL PHASE EXECUTION PHASE
    109. 122. Qualitative analysis Impact Impact Probability Probability THREATS OPPORTUNITIES <ul><li>Possible Quantitative analysis of risks (detailed Impact x Probability evaluation) </li></ul><ul><li>Control (mitigation vs contingency allocation) </li></ul><ul><li>Monitoring and Reporting </li></ul>COMPLETED ACTIVITIES NEXT STEPS <ul><li>Monitoring and Reporting </li></ul>N° of Identified Risks <ul><li>Completed Qualitative analysis for the pilot project </li></ul><ul><li>Need to complete the Quantitative Analysis </li></ul>
    110. 123. Example Risk Register
    111. 124. Example R&O Sheet
    112. 125. Project Manager <ul><li>To be responsible for ensuring that all the risks to the project are effectively and efficiently identified and managed. </li></ul><ul><li>To chair the project risk management team meeting. </li></ul><ul><li>To allocate risks to risk owners. </li></ul><ul><li>To decide upon suitable corrective action and the initiation of contingency plans when particular project risks are realised. </li></ul><ul><li>To inform the customer about his risks </li></ul>
    113. 126. Risk & Opportunity Animator <ul><li>To work within the Saipem project team, reporting directly to the project manager. </li></ul><ul><li>To manage the task of collating, integrating and analysing project risk data. </li></ul><ul><li>To facilitate the initial identification of the risks that influence the project. </li></ul><ul><li>To set-up and maintain the risk register. </li></ul><ul><li>To facilitate the development and implementation of suitable and appropriate project risk responses. </li></ul><ul><li>To provide an objective and independent opinion on the project programme and the estimating process upon which it is based. </li></ul><ul><li>To assess the results of the risk analysis/assessment, producing a report at regular intervals, to support the decision making process. </li></ul><ul><li>To act as secretary to the project risk management team meetings, and to progress corrective actions arising from this meeting. </li></ul><ul><li>To produce a risk status report at regular intervals. </li></ul><ul><li>To ensure the risk management process satisfies the requirements of the project manager. </li></ul><ul><li>To advise the project manager on all matters relating to project risk management. </li></ul>
    114. 127. <ul><li>Project Risk or Opportunity : is an uncertain event or condition that, if occurs, has an effect on a project objectives </li></ul><ul><li>Project Risk & Opportunity Management : is the systematic process of identifying, analyzing and responding to project risks & opportunities </li></ul><ul><li>Risk & Opportunity Management Policy : is the strategy to address project risks before they become problems </li></ul><ul><li>Risk & Opportunity Management Plan : is the document which states how to approach and plan the risk management activities for a project. </li></ul>Risk & Opportunity Management Definitions
    115. 128. Risk & Opportunity Owner <ul><li>To manage the risk. </li></ul><ul><li>To work with the risk manager in completing the assessment, the development and the implementation of suitable risk mitigating strategies. </li></ul><ul><li>To regularly maintain risk information in their area. </li></ul><ul><li>To promptly inform the project manager of any change in the risk status. </li></ul><ul><li>To be pro-active in identifying new risks in their area. </li></ul><ul><li>To implement contingency plans and corrective actions on direction of the project manager. </li></ul>
    116. 129. Risk and Knowledge Management Function Risk Management System Principles and Guidelines and Process Step
    117. 130. System’s Structure Prospect Phase Corporate Standard: Risk Management in Execution Phase Risk and Knowledge Management Process Corporate Procedure: Risk Management Corporate Policy: Risk Management Corporate Manual: Risk Management Methodology Corporate Standard: Risk Management in Support Function / Entities Describe the overall Saipem Risk & Knowledge Management Process and Documents’ System, providing Picture of the Overall Macro - process of the Risk Management, in terms of activity responsibilities and actors Describe the mission and the principles of the Risk & Knowledge Management Culture to be followed and implemented by the Saipem group Describe sequentially each sub-process of the macro Risk & Knowledge Management process in terms of activities, functions / positions involved, input and output, deliverables and tools Describe transversal sub-process of the macro Risk & Knowledge Management process in terms of activities, functions / positions involved, input and output, deliverables and tools Corporate Documents to be followed by all the Saipem group companies / entities Proposal Phase Corporate Standard: Risk Management in Commercial Phase
    118. 131. Principles Guide Lines <ul><li>Risks are those uncertainties which could influence the achievement of business objectives. Risks are characterized by the combination of the probability to occur and the consequences or impact if they were to happen </li></ul><ul><li>The Proposal / Project Team must identify potential risks and analyse them to identify the negative risks and the positive ones ( opportunities) </li></ul><ul><li>Golden Rules and Silver Guidelines are the good rules to be followed in the acquisition and management of a project in order to create opportunities and avoid risks both in commercial and execution phase </li></ul><ul><li>Golden Rules are mandatory to be followed by the Project Team. Exceptions must be approved by the relevant Business Unit. </li></ul><ul><li>Silver Guidelines are strongly recommended to be followed by the Project Team </li></ul><ul><li>Signing the contract implies binding the Company. The Risk Management is a renewed approach to Project Management , not an isolated additional process </li></ul><ul><li>The whole Project Team is in charge of all risks that can affect the project. </li></ul><ul><li>The Project Team must give to Risk Management the same emphasis given to all other strategic activities of the Project Management, following the Risk Management principles as a tool to achieve the project goals and not a tool in itself and keeping a proactive behaviour </li></ul><ul><li>High attention and care has to be paid by all Saipem business to Health, Safety and Environment aspects and impacts </li></ul><ul><li>The involvement of the HSE function is strongly recommended already during the prospect phase </li></ul>Policy Corporate “Saipem Group Risk management Policy (1/2)
    119. 132. Policy Corporate “Saipem Group Risk management Policy (2/2) Principles Guide Lines <ul><li>Risks Management addresses the future but often requires actions to be taken in the present </li></ul><ul><li>This requires a proactive behaviour which is by nature not «natural» </li></ul><ul><li>The whole Proposal / Project team must grant an overview on all potential risks & opportunities (not only technical), investigating the most probable ones, through an analysis within the competent function during the proposal phase and through a collective brainstorming during the project execution </li></ul><ul><li>There are Project Risks , strictly related to a specific project, others arising from the support activities/entities. There are internal risks (technical, competencies, resources) and external risks (environment, socio-politics, client related). Each aspect of the proposal / project can be a potential risk or opportunity </li></ul><ul><li>Many information about potential risks & opportunities are present already during the first contacts with the clients </li></ul><ul><li>A first risk assessment must be implemented by each Company function (business or support) during the prospect and the proposal phases, using the relevant control systems </li></ul><ul><li>Many risks & opportunities are related to the areas where the project will be located, either commercial, engineering, procurement and constructions phases </li></ul><ul><li>During the prospect, proposal and execution phase, the GRAM involvement is recommended to provide useful information / indications </li></ul><ul><li>More potential risks & opportunities can arise during the project execution as a consequence of changed scenarios </li></ul><ul><li>A project risk review & monitoring process must be implemented by the Project team during the project execution </li></ul>
    120. 133. Prospect Phase Close Out Major Risks Identification & Assessment Bid / No Bid Meeting Information to Proposal Task Force Risk Management in Commercial Phase - Prospect <ul><li>Contribute, if required </li></ul><ul><li>HSE opinion, is recommended </li></ul><ul><li>Contribute, according to the relevant Standard </li></ul><ul><li>Fill the ROBS for Prospect according to the information available </li></ul><ul><li>Collect, if required, additional information / clarification from the functions </li></ul><ul><li>Identify non acceptable risks with particular focus on Golden Rules </li></ul><ul><li>Propose an Action Strategy, if applicable, to the identified risks </li></ul><ul><li>Calculate the Prospect Macro R&O Rating </li></ul><ul><li>Consider the R&O analysis results in the decisional process </li></ul><ul><li>Ensure handover of the ROBS for Prospects and of all the considerations, if any, to the Proposal Task Force </li></ul><ul><li>Participate, according to the relevant Standard </li></ul>Business Unit / Commercial Department GRAM / Managing Director Other Functions RIKM Function <ul><li>Provide tools and methods for the R&O identification and assessment. </li></ul><ul><li>Provide assistance and participate to the meeting, if required </li></ul>Prospect Evaluation <ul><li>Participate, according to the relevant Standard </li></ul>
    121. 134. Kick Off Meeting Estimating Negotiation Contract Award Initial R&O Update R&O Identification Assessment and Control R&O Analysis Update Handover to Execution Phase Risk Management in Commercial Phase - Proposal <ul><li>Analyze the ROBS for Prospect and update the rating </li></ul><ul><li>Identify any new unacceptable Risk </li></ul><ul><li>Distribute the documents to all the leaders </li></ul>Business Unit Commercial / Proposal Manager & Proposal Team GRAM / Managing Director Other Functions RIKM Function Provide tools and method for the R&O identification and assessment Provide assistance and participate to the meeting, if required Provide coordination with the relevant function, if required For the relevant area of responsibility propose solutions, if required Participate into the discussion for all the relevant areas, if required HSE Opinion is Recommended <ul><li>Finalize The Risk Register </li></ul><ul><li>Update the Project quantitative R&O rating </li></ul><ul><li>Prepare the documents to ensure effective handover and relevant consideration to the Project Task Force </li></ul>Provide additional information and considerations on proposed actions strategy Provide information for the relevant area and participate into the discussion, if required or on his own decision <ul><li>Organize a full proposal team meeting for R&O identification and assessment involving BU Management: </li></ul><ul><ul><li>Select the potential critical risks only </li></ul></ul><ul><ul><li>Define probability </li></ul></ul><ul><ul><li>Evaluate cost of impact </li></ul></ul><ul><li>Activate Golden Rules </li></ul><ul><li>Propose Action Strategy: </li></ul><ul><ul><li>Qualification </li></ul></ul><ul><ul><li>Mitigation </li></ul></ul><ul><ul><li>Resolution / Insurance </li></ul></ul><ul><ul><li>Propose contingency </li></ul></ul><ul><li>Calculate the Project quantitative R&O rating </li></ul><ul><li>Update the risk register, following the negotiation output </li></ul><ul><li>Recalculate the overall cost of the risks </li></ul><ul><li>Update the contingency to be included in the project price </li></ul><ul><li>Check Golden Rules Compliance, and get BU Approval if required </li></ul>Pre-Closure Closure R&O Management Results <ul><li>Decide the contingency to be included in the project price following the risk assessment results </li></ul><ul><li>Decide extra analysis if required before the proposal validation </li></ul><ul><li>Check Final Golden Rules Compliance, and get BU Approval if required </li></ul><ul><li>Update the Project quantitative R&O rating </li></ul>
    122. 135. Contract Review / Project Plan EPIC / Project Execution Project Closeout R&O Management System Organization & Implementation R&O Review, Update, Monitor, Control and Reporting Project R&O Final Collection Risk Management in Execution Phase Project Team GRAM/ Managing Director Other Functions RIKM Function <ul><li>Provide additional information and considerations on proposed actions strategy </li></ul><ul><li>Participate into the discussion for the area / Company / project, if he retains as opportune </li></ul><ul><li>Provide tools and method for the R&O identification and assessment, participate to the meeting, </li></ul><ul><li>Provide assistance / consultancy, if required, during the periodic reviews. </li></ul><ul><li>Collect and catalogue lessons learned and best practices from the Project Closeout for the improvement of corporate knowledge </li></ul>Project Manager Risk Animator Risk Owners Op.Co.’s / B.U.’s <ul><li>Nominate the risk animator </li></ul><ul><li>Distribute the R&O register </li></ul><ul><li>Organize and participate to the project R&O review meeting (brainstorming) </li></ul><ul><li>Participate to the brainstorming as required </li></ul><ul><li>Drives the R&O management system and update the risk register </li></ul><ul><li>Provide additional information and considerations on proposed actions strategy </li></ul><ul><li>Participate into the discussion for the area / Company / project, if required </li></ul><ul><li>Participate, if required, to the risk management plan definition </li></ul><ul><li>Approve the project risk management plan </li></ul><ul><li>Prepare the project risk management plan (PRMP) </li></ul><ul><li>Regularly update the risk register </li></ul><ul><li>Expedite the risk treatment status </li></ul><ul><li>Organize periodical meeting reviews according to PRMP </li></ul><ul><li>Report the required information to the project control </li></ul><ul><li>Verify the risk register update for the closeout </li></ul><ul><li>Organize the project debriefing </li></ul><ul><li>Provide Feedback through the closeout debriefing </li></ul><ul><li>Participate to the R&O management, if required </li></ul><ul><li>Support the risk owners during the treatment of the relevant risks </li></ul><ul><li>Are elected for the control and monitoring of each critical risk and relevant action </li></ul><ul><li>New documents analysis </li></ul><ul><li>Update the project risk sheets </li></ul><ul><li>Implement the actions </li></ul><ul><li>Monitor R&Os </li></ul><ul><li>Report to the BU and provide copy to RIKM </li></ul><ul><li>Participate to periodical R&O meetings </li></ul><ul><li>Participate, if required, to the final debriefing providing feedback and best practices </li></ul><ul><li>Approve risk register, owners and relevant actions </li></ul><ul><li>Prepare relevant project risk sheets </li></ul><ul><li>(qualitative/ quantitative information) </li></ul><ul><li>Facilitate and support the R&O management </li></ul>
    123. 136. Process Execution Risk Review R&O Management System Organization & Implementation R&O Review, Update, Monitor, Control and Reporting Risk Management in Support Functions Process Owner Function Manager RIKM Function <ul><li>Provide tools and method for the R&O identification and assessment, participate to the meeting, </li></ul><ul><li>Provide assistance / consultancy, if required, during the periodic reviews. </li></ul><ul><li>Collect and catalogue lessons learned and best practices from the Project Closeout for the improvement of corporate knowledge </li></ul><ul><li>Nominate the risk animator </li></ul><ul><li>Distribute the R&O register </li></ul><ul><li>Organize and participate to the project R&O review meeting (brainstorming) </li></ul><ul><li>Participate to the brainstorming as required </li></ul><ul><li>Drives the R&O management system and update the risk register </li></ul><ul><li>Participate, if required, to the risk management plan definition </li></ul><ul><li>Approve the project risk management plan </li></ul><ul><li>Prepare the project risk management plan (PRMP) </li></ul><ul><li>Regularly update the risk register </li></ul><ul><li>Expedite the risk treatment status </li></ul><ul><li>Organize periodical meeting reviews according to PRMP </li></ul><ul><li>Report the required information to the project control </li></ul><ul><li>Verify the risk register update for the closeout </li></ul><ul><li>Organize the project debriefing </li></ul><ul><li>Provide Feedback through the closeout debriefing </li></ul><ul><li>Participate to the R&O management, if required </li></ul><ul><li>Support the risk owners during the treatment of the relevant risks </li></ul><ul><li>Are elected for the control and monitoring of each critical risk and relevant action </li></ul><ul><li>New documents analysis </li></ul><ul><li>Update the project risk sheets </li></ul><ul><li>Implement the actions </li></ul><ul><li>Monitor R&Os </li></ul><ul><li>Report to the BU and provide copy to RIKM </li></ul><ul><li>Participate to periodical R&O meetings </li></ul><ul><li>Participate, if required, to the final debriefng providing feedback and best practices </li></ul><ul><li>Approve risk register, owners and relevant actions </li></ul><ul><li>Prepare relevant project risk sheets </li></ul><ul><li>(qualitative/ quantitative information) </li></ul><ul><li>Facilitate and support the R&O management </li></ul>
    124. 137. Workshop Organization Training Organization Prospect Phase Training and Workshop Risk & Knowledge Management Process <ul><li>Provision of tools & methodologies </li></ul><ul><li>Database of identified R&O and their management </li></ul>RIKM Function (from) Execution Phase Close Out Phase Commercial Phase <ul><li>List of identified risks </li></ul>RIKM Function (to) <ul><li>Provision of tools & methodologies </li></ul><ul><li>Proposal Support on Demand </li></ul><ul><li>Database of identified R&O and best practices for effective Action Strategy </li></ul><ul><li>Final Risk Register (at the end of the commercial phase) </li></ul><ul><li>Provision of tools & methodologies </li></ul><ul><li>Project Support on Demand </li></ul><ul><li>Database of identified R&O and best practices for effective Action Strategy </li></ul><ul><li>Provision of tools & methodologies </li></ul><ul><li>Debriefing support on Demand </li></ul><ul><li>Improvement of the corporate database and tools through the Projects feedback </li></ul>Project Support <ul><li>Risk Register (Periodical and Final Reviews ) </li></ul><ul><li>Risk Sheets </li></ul><ul><li>Final Risk Register </li></ul><ul><li>Project Risk & Opportunities Feedback </li></ul><ul><li>Training session for projects </li></ul><ul><li>Periodic Workshop about: </li></ul><ul><li>Company / BU’s risk profile and strategy </li></ul><ul><li>Highlights of Best Practices and lessons learned </li></ul>
    125. 138. R&O Management in Support Functions <ul><li>The process owner is responsible to implement a risk management process to mitigate or resolve the risk typical of that function. </li></ul><ul><li>The methodology will be taken from the projects’ one but will consist of four steps only: </li></ul><ul><ul><li>Identification: Periodical identification of the risks typical of the process </li></ul></ul><ul><ul><li>Evaluation: the impact of all the identified risk shall be calculated </li></ul></ul><ul><ul><li>Action Plan: definition and implementations of some actions (with relevant scheduling) </li></ul></ul><ul><ul><li>Monitoring & Updating: periodical update and monitoring of the action implementation </li></ul></ul>
    126. 139. Risk & Opportunity Breakdown Structure
    127. 140. Contents <ul><li>Problems with Risk Analysis </li></ul><ul><li>What is the ROBS? </li></ul><ul><li>How to use the ROBS </li></ul>
    128. 141. Problems with Risk Analysis <ul><li>Identification produces an unstructured list of risks </li></ul><ul><li>Quantification considers one risk at a time </li></ul><ul><li>Often difficult to see patterns and interdependencies </li></ul><ul><li>Question is: ‘ How do we get useful information from all the data?” to expose </li></ul><ul><ul><li>areas of the project which require special attention </li></ul></ul><ul><ul><li>recu r ring themes </li></ul></ul><ul><ul><li>concentrat i ons of risk or &quot;hot-spots' of risk exposure </li></ul></ul>
    129. 142. Can we adapt the WBS approach to structure risks? <ul><li>Work Breakdown Structure (WBS) – PMI Definition : </li></ul><ul><ul><li>A deliverable-oriented grouping of project elements that organizes and defines the total scope of the project. </li></ul></ul><ul><ul><li>Each descending level represents an increasingly detailed definition of the project work </li></ul></ul><ul><li>Suggested RBS definition (source Hillson PMI Europe 2002) </li></ul><ul><ul><li>&quot;A source-oriented grouping of project risks that organises and defines the total risk exposure of the project. Each descending level represents an increasingly detailed definition of sources of risk to the project.&quot; </li></ul></ul>
    130. 143. How to use the ROBS <ul><li>Many examples exist </li></ul><ul><ul><ul><li>each is different, reflecting the range of possible sources of risk exposure for projects in various sectors and industries </li></ul></ul></ul><ul><ul><ul><li>organisations should develop tailored ROBS </li></ul></ul></ul><ul><ul><ul><li>these are used as a starting point, but must be modified according to project </li></ul></ul></ul><ul><ul><ul><li>large projects may require their own specific ROBS </li></ul></ul></ul><ul><li>Can be used for </li></ul><ul><ul><li>Risk identification aid </li></ul></ul><ul><ul><li>Risk Assessment </li></ul></ul><ul><ul><li>Comparison of projects and bids </li></ul></ul><ul><ul><li>Reporting </li></ul></ul><ul><ul><li>Lessons learned </li></ul></ul>
    131. 145. Risk identification aid <ul><li>Upper levels of the ROBS used to ensure complete coverage e.g.work through the first or second levels during identification workshop </li></ul><ul><li>Provide agenda for risk identification interviews </li></ul><ul><li>Develop Risk identification checklist can also be developed based on the ROBS e.g &quot;Yes&quot;, &quot;No&quot;, &quot;Don't know&quot; or &quot;Not applicable” </li></ul><ul><li>Reveals possible gaps or blind spots in risk identification, and exposes any double-counting </li></ul><ul><li>Always consider &quot;Other risks&quot; not covered by the ROBS </li></ul>
    132. 146. Risk Assessment <ul><li>Prioritise (risk score for each element) and and categorise to: </li></ul><ul><ul><ul><li>Understand the type of risk exposure on the project </li></ul></ul></ul><ul><ul><ul><li>Expose the most signif i cant sources of risk to the project </li></ul></ul></ul><ul><ul><ul><li>Reveal root causes of risk, via affinity analysis </li></ul></ul></ul><ul><ul><ul><li>Indicate areas of dependency or correlation between risks </li></ul></ul></ul><ul><ul><ul><li>Focus risk response development on high-risk areas </li></ul></ul></ul><ul><ul><ul><li>Allow generic responses to be developed for root causes or dependent groups of risks </li></ul></ul></ul>
    133. 147. Comparison of projects and bids <ul><li>Compare using common framework </li></ul><ul><li>Ease understanding by senior management </li></ul><ul><li>Prioritises projects by level of risk </li></ul>
    134. 148. Reporting <ul><li>Reporting to senior management </li></ul><ul><ul><li>Roll-up risk information on an individual projects </li></ul></ul><ul><ul><li>Drilling down into the detail required to report on project team actions </li></ul></ul><ul><ul><li>Total numbers of risks or total risk score in each higher-level ROBS area (metrics or trend analysis presented graphically) </li></ul></ul><ul><li>Project teams notified of risks by selecting relevant ROBS areas </li></ul>
    135. 149. Lessons learned <ul><li>Common format for analysing risk-related information from each post- project review </li></ul><ul><ul><li>reveal risks which occur frequently </li></ul></ul><ul><ul><li>risk identification checklists can be updated </li></ul></ul><ul><li>Develop company/division wide solutions for frequent risks </li></ul>
    136. 161. Reporting in Ersai Ersai Input
    137. 162. Project Control Department Structure of Cost Report
    138. 182. Company Project Status Report
    139. 183. Sub-Contractor Management Spec. no. WI-SPA-PCON-004-E-A
    140. 184. WBS <ul><li>The WBS, developed by the Contractor, must be in line with the Client's project specifications and consistent with the basic structure provided by Saipem: </li></ul><ul><li>Level Description Responsibility </li></ul><ul><li>Level 0 Overall Contractor </li></ul><ul><li>Level 1 Master Contract Schedule </li></ul><ul><li>(area/product, milestones) Saipem (Network) </li></ul><ul><li>Level 2 Summary (phases: Eng., Proc., </li></ul><ul><li>Constr. or disciplines) Contractor </li></ul><ul><li>Level 3 Detailed Schedule (activities) Contractor (Network) </li></ul><ul><li>Level 4 Data Base (deliverables, hours, </li></ul><ul><li>output, etc.) Contractor </li></ul>
    141. 185. Planning Levels <ul><li>Total, phases, areas or products, disciplines </li></ul><ul><li>Histograms and “S” curves (Lev. 0 &1) </li></ul><ul><li>Summary Bar charts and milestones (Lev. 2) </li></ul><ul><li>Detailed program Network and bar chart (Lev. 3) </li></ul><ul><li>Data bases Registers, lists and tables (Lev. 4) </li></ul><ul><li>The focus is on Level 3 </li></ul>
    142. 186. Progress and Monitoring Evaluation <ul><li>Weightings are typically in line with Clients requirements </li></ul><ul><li>Sub-contractor Daily Report </li></ul><ul><ul><li>Number of daily presences for each job and each activity </li></ul></ul><ul><ul><li>List of activities in progress </li></ul></ul><ul><ul><li>Any interruptions and accidents </li></ul></ul><ul><li>Sub-contractor Weekly Report </li></ul><ul><ul><li>Outstanding facts of week </li></ul></ul><ul><ul><li>Weekly progress </li></ul></ul><ul><ul><li>Forecasts for the next week </li></ul></ul><ul><ul><li>Weekly quantities, hours and productivity for each activity (Production Report) </li></ul></ul><ul><li>Sub-contractor Monthly Report </li></ul><ul><ul><li>Outstanding facts of month </li></ul></ul><ul><ul><li>Histograms and “S” curves divided by disciplines and work areas </li></ul></ul><ul><ul><li>Summary program (bar chart with updated and planned values) </li></ul></ul><ul><ul><li>Detailed program (bar chart: actual and forecast vs. baseline); </li></ul></ul><ul><ul><li>Report of monthly and accumulated progress </li></ul></ul><ul><ul><li>Production report with emphasis on: </li></ul></ul><ul><ul><ul><li>Quantities (planned, actual and forecast); </li></ul></ul></ul><ul><ul><ul><li>Man/hours (planned, actual and forecast); </li></ul></ul></ul><ul><ul><ul><li>Productivity (estimated, actual and forecast expressed in Qty/Mhrs) </li></ul></ul></ul><ul><ul><li>Forecast for the next month </li></ul></ul><ul><ul><li>Invoicing situation </li></ul></ul>
    143. 187. Saipem - Contingency Management
    144. 188. Contingency Allocation to WBE Contingencies/mitigation costs are allocated to specific WBE (only generic contingencies, e.g. penalties, allocated to “central” WBE)... RISK REGISTER WBS/ABS
    145. 189. Contingency Allocation to WBE/Milestones ...and to control milestone in order to monitor them during the project life-cycle CONTINGENCY PLANNING/ MILESTONE RISK REGISTER
    146. 190. Risk Contingency <ul><li>In cases where there is reliable historical information consider using quantative risk analysis techniques (Monte Carlo) </li></ul><ul><li>For selected cases consider using simplified approach to find mean/standard deviation of each variable </li></ul>
    147. 191. Controlling Contingency <ul><li>Control Changes to the Contingency by maintaining a ‘Contingency Register’ to move funds in or out of contingency: </li></ul><ul><ul><li>Move funds from ‘contingency’ to cost account which must be increased </li></ul></ul><ul><ul><li>Move cost savings into the contingency fund </li></ul></ul><ul><ul><li>The right-hand column will track cumulative contingency and will show current totals. Individual columns by cost account will tell status of individual cost accounts </li></ul></ul><ul><li>Forecast Contingency </li></ul><ul><ul><li>Periodically (at least quarterly or when any major cost account has been forecast) </li></ul></ul><ul><ul><li>This reassessment of the risks and should generally result in depletion of contingency </li></ul></ul><ul><ul><li>Forecast techniques will remain the same as used in establishing contingency </li></ul></ul><ul><ul><li>May mean a change in indicated total costs </li></ul></ul><ul><li>Educate Task Force Members </li></ul><ul><ul><li>To be aware of the concepts and basis of contingency </li></ul></ul><ul><ul><li>Eliminate the notion that inadequacies in design etc. are covered by contingency </li></ul></ul>
    148. 192. Contingency Monitoring
    149. 193. Contingency Monitoring Report
    150. 194. Contingency Monitoring Graph Analysis of planned contingencies vs actual cost ILLUSTRATIVE
    151. 195. Saipem – Project Control WI-SPA-PCON-006-E <ul><li>Trend analysis </li></ul><ul><li>Estimate to complete </li></ul>
    152. 196. Purpose of Cost Control <ul><li>To achieve or improve the profitability targets defined during the budgeting/commercial phase (not to check actual and forecast economic progress) </li></ul><ul><li>Compare the overall cost budget with the original/revised budget and singles out any potential negative deviation </li></ul><ul><li>The aim is to enable the necessary corrective actions to be taken to achieve goals </li></ul>
    153. 197. Cost Control Steps <ul><li>Issue and Revision of Cost Control Budget </li></ul><ul><li>Accounting and Cost Analysis </li></ul><ul><li>Estimates to Complete and definition of corrective actions </li></ul><ul><li>Reporting </li></ul>
    154. 198. Definitions Standard cost division scheme, adopted by Project Control for cost monitoring activities Cost Breakdown Structure (CBS) <ul><li>Set of activities aimed at keeping to the established project goals. This is achieved with various methods: </li></ul><ul><li>time scheduling and control; </li></ul><ul><li>physical progress and resource commitment scheduling; </li></ul><ul><li>cost control; </li></ul><ul><li>cash flow control; </li></ul><ul><li>control of economic progress and spread forecast </li></ul>Project Control Budget finalized by the Commercial function after the acquisition of the project. This budget, drawn up on the basis of the available project engineering, lists budgeting conditions, physical quantities for implementation and relative costs Commercial Budget PM = Project Manager CE = Cost Control Engineer PCON = Project Control Acronyms
    155. 199. Definitions It is the monthly analysis performed by Controlling department regarding the economic situation of the project to date (till the last day of the month). The following data will be taken into consideration: 1) accounted revenues and accounted costs, including accruals 2) for revenues an accruals will be added equal to the difference between the calculated revenues (cost * K factor) and the accounted revenues as “work in progress”. This operation will be done in order to align every month the current balance of the project with the expected final balance. In case of project with negative balance, this loss has to be added in the year of identification and the accruals will be defined according to this rule. Accounting closure Project Profitability index as division of total project revenues and total project costs K Factor Control budget revised with contract changes and/or with internal transfer carried out during the project life. Revised Control Budget Revision of the Commercial Budget finalized by PM with the collaboration of the Project Control function. It includes the re-aggregation, for entire project lifecycle, of physical quantities, relevant costs and final commercial budget according to the cost breakdown structure items. In case of hedging instruments, every costs/revenues data has to be converted using the plafond rate. Original Control Budget
    156. 200. Definitions Best overall lifecycle estimate of physical quantities and relative Forecast costs expected to completion; it is given by the sum of the committed and estimate to complete Current Forecast Forecast and exploitation of quantity/costs still to be implemented; it can refer either to actual costs or costs to be committed Estimate to Complete Part of costs which cannot be altered, since these are actual or accrued costs, except for materials where the overall procurement order amount is considered (it can be considered as sum of actual + accruals + residual for material PO) Committed Costs for external services executed but not yet booked in Accounting. These data will be accounted according to the information provided by Cost Control Engineer. All accruals will be equalized to zero at the beginning the following month, so costs not yet booked in the following months have to be re-accounted as accruals. For the closure of December, these accruals have to be calculated according to the instructions from Accounting department. Accrued / Accruals Sum of booked costs (e.g. external invoices, internal man/hours, local payrolls, misc. charges, etc. detectable from administrative forms) and accruals Actual
    157. 201. Issue and Revision of Cost Control Budget <ul><li>issue of the original control budget </li></ul><ul><li>revision of the original control budget for contract changes </li></ul><ul><li>revision of the original control budget for internal transfer </li></ul>
    158. 202. Original Control Budget & Variations <ul><li>Cost Control Engineer and the project team will assist the project manager in order to verify the validity of the hypothesis in the commercial budget within two months from the receipt of the commercial budget </li></ul><ul><li>Variations can be </li></ul><ul><ul><li>scope of work </li></ul></ul><ul><ul><li>contract clauses </li></ul></ul><ul><ul><li>quantities, prices, internal costs relative to vessel, hourly rate relative to personnel </li></ul></ul><ul><li>The result of this analysis is the Original Control Budget , complete of the new total revenues, new total costs, new balance in Euro equivalent and the project K factor </li></ul><ul><li>The revision of the Original Control Budget is necessary in case of: </li></ul><ul><ul><li>contract changes; </li></ul></ul><ul><ul><li>changes in the original operative planning </li></ul></ul>
    159. 203. Commitment Analysis <ul><li>Cost Control Engineer analyses all Commitments, defined as: </li></ul><ul><li>for the internal services, hours will be multiplied for the rates defined by the Controlling (excluding the actual data) </li></ul><ul><li>for the engineering services assigned to external organizations (vendors) the amount of the order will be multiplied by the physical progress to date, excluding the reimbursable contract for which the job is defined according to the unit prices </li></ul><ul><li>for the amount of travels and missions it is added to the relative actual costs the part matured (but still not booked) to the date </li></ul><ul><li>for the materials the amounts of the issued orders has to be considered </li></ul><ul><li>for the jobs of construction and assemblage in the yard, the available actuals are considered adding costs maturated available up to the date of the situation of the Cost Report </li></ul><ul><li>for the contracts and rentals of construction and assemblage in the yard the value of the Service entry / verification is considered matured to the date </li></ul><ul><li>for the other costs the available actual to the date are considered </li></ul>
    160. 204. Cost Performance Analysis <ul><li>Cost Controller verifies that the costs is in line with the estimate and with the physical progress. In particular verifies: </li></ul><ul><li>the quantities of ordered materials and the relative costs correspond to the quantities and the anticipated costs in the procurement plan </li></ul><ul><li>the costs of the performances for services (engineering, management) are in line with estimates/orders </li></ul><ul><li>the actual costs for the construction activities by Saipem S.p.A. or by third parties, are in line with the progress </li></ul>
    161. 205. ETC Definition and Corrective Actions <ul><li>Cost Controller carries out </li></ul><ul><li>ETC definition, gap/variation analysis and Current Forecast definition </li></ul><ul><li>analysis of claims and variations, in order to determine the updated value of costs and revenues </li></ul><ul><li>analysis of the results of the cost control analysis and definition of possible corrective actions </li></ul><ul><li>ETC re-definition, final current forecast definition </li></ul><ul><li>risks and the opportunities analysis </li></ul>
    162. 206. Use of Earned Value <ul><li>Five valuable numbers (PV or BCWS , EV or BCWP , AC or ACWP , BAC, EAC) </li></ul><ul><li>Earned value: the most rudimentary building blocks </li></ul><ul><li>Cost variance </li></ul><ul><li>Schedule variance </li></ul><ul><li>Cost performance index </li></ul><ul><li>Schedule performance index </li></ul><ul><li>Budget at completion </li></ul><ul><li>Estimate to complete </li></ul><ul><li>Estimate at completion </li></ul><ul><li>Variance at completion </li></ul><ul><li>The 50/50 rule of progress reporting </li></ul>
    163. 207. Five valuable numbers <ul><li>BCWS Now using PV (Planned Value) </li></ul><ul><ul><li>Budgeted Cost for Work Scheduled </li></ul></ul><ul><ul><li>How much work should be done? </li></ul></ul><ul><li>BCWP Now using EV (Earned Value) </li></ul><ul><ul><li>Budgeted Cost for Work Performed </li></ul></ul><ul><ul><li>How much work is done? </li></ul></ul><ul><li>ACWP Now using AC (Actual Costs) </li></ul><ul><ul><li>Actual Cost for Work Performed </li></ul></ul><ul><ul><li>How much did the work we have done cost? </li></ul></ul><ul><li>BAC </li></ul><ul><ul><li>Budget at Completion </li></ul></ul><ul><ul><li>What is the original predicted cost of the work to be done? </li></ul></ul><ul><li>EAC </li></ul><ul><ul><li>Estimate at Completion </li></ul></ul><ul><ul><li>What do we currently think the work will cost? </li></ul></ul>
    164. 208. Earned value: the most rudimentary building blocks <ul><li>Planned Value (PV) was Budgeted Cost for Work Scheduled (BCWS) </li></ul><ul><li>Actual Cost (AC) was Actual Cost for Work Performed (ACWP) </li></ul><ul><li>Earned Value (EV) was Budgeted Cost for Work Performed (BCWP) </li></ul><ul><ul><li>This task was scheduled to cost £1.000. I have done 75% of the task. I have done £750 worth of the work. I have ‘earned’ £750 of the budget. </li></ul></ul>
    165. 209. Cost variance <ul><li>Cost Variance (CV) = EV – AC </li></ul><ul><li> = BCWP – ACWP </li></ul><ul><ul><li>I have done £750 worth of work but it has actually cost me £800. </li></ul></ul><ul><ul><li>CV=£(750-800)= -£50. </li></ul></ul><ul><ul><li>Always put ‘BCWP’ or ‘Earned Value’ first </li></ul></ul>
    166. 210. Schedule variance <ul><li>Schedule Variance (SV) = EV – PV </li></ul><ul><li> = BCWP – BCWS </li></ul><ul><ul><li>I should have done £900 worth of work but I have actually done £750. </li></ul></ul><ul><ul><li>SV=£(750-900)= -£150. </li></ul></ul><ul><ul><li>Always put ‘BCWP’ or ‘Earned Value’ first </li></ul></ul>
    167. 211. Cost performance index <ul><li>CPI = BCWP = EV </li></ul><ul><li>ACWP AC </li></ul><ul><li>I have done £750 worth of work but it has actually cost me £800. Each £ I have spent generated £(750/800)=£0.937 worth of work </li></ul><ul><ul><li>Always put ‘BCWP’ or ‘Earned Value’ first </li></ul></ul>
    168. 212. Schedule performance index <ul><li>SPI = BCWP = EV (always 1 at end of project) </li></ul><ul><li>BCWS PV </li></ul><ul><li>I should have done £900 worth of work but I have actually done £750. Each £ I have spent generated £(750/900)=£0.833 worth of work </li></ul><ul><ul><li>Always put ‘BCWP’ or ‘Earned Value’ first </li></ul></ul>
    169. 213. CPI, SPI <ul><li>CPI > 1 </li></ul><ul><li>SPI > 1 </li></ul>
    170. 214. Budget at completion (BAC) & Estimate to complete (ETC) <ul><li>BAC = what was the project supposed (originally) to cost </li></ul><ul><li>ETC = EAC-ACWP = EAC - AC </li></ul><ul><ul><li>Note EAC=Estimate at Completion, not BAC </li></ul></ul>
    171. 215. Estimate at completion <ul><li>EAC is the amount we NOW expect project to cost </li></ul><ul><li>PMBOK gives 3 formulae: </li></ul><ul><ul><li>EAC= AC + Remaining PV (considers trend) </li></ul></ul><ul><ul><li>CPI </li></ul></ul><ul><ul><li> = AC + BAC – EV = AC + BAC - EV x AC </li></ul></ul><ul><ul><li> CPI CPI EV </li></ul></ul><ul><ul><li> = BAC </li></ul></ul><ul><ul><li> CPI </li></ul></ul><ul><ul><li>EAC = AC + ETC </li></ul></ul><ul><ul><li>EAC = AC + Remaining PV </li></ul></ul>
    172. 216. Variance at completion <ul><li>Comparing original budget BAC </li></ul><ul><li>To current budget EAC </li></ul><ul><li>Gives variance at completion VAC </li></ul><ul><li>VAC = BAC - EAC </li></ul>
    173. 220. The Rule of Progress Reporting <ul><li>When evaluating progress for Earned Value, different rules are used to simplify subjective estimates </li></ul><ul><li>Rule Assumed Task progress </li></ul><ul><li>In progress Completed </li></ul><ul><li>50-50 50% 100% </li></ul><ul><li>20-80 20% 100% </li></ul><ul><li>0-100 0% 100% </li></ul>
    174. 221. Decision Analysis & Quantitative Risk Analysis
    175. 222. Decision Analysis & Quantitative Risk Analysis <ul><li>What this session is not </li></ul><ul><ul><li>Designed to make you and expert in statistics </li></ul></ul><ul><li>This session is to familiarise you with </li></ul><ul><ul><li>Decision analysis </li></ul></ul><ul><ul><li>Some definitions and techniques </li></ul></ul><ul><li>Remember - these techniques are helpf
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