Project Control Basics

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Project Control Basics

  1. 1. project control basics
  2. 2. Projects j How does a large project get to be a year late? g p j g y …One day at a time. Frederick P Brooks - The Mythical Man Month
  3. 3. jProjects© The Project Company 2006 A01
  4. 4. j y y pProjects – Sydney Opera House “It was not his fault that a succession of Governments and the Opera House Trust should so signally h i ll have f il d t i failed to impose any control or order on th project....his concept was so t l d the j t hi t daring that he himself could solve its problems only step by step....his insistence on perfection led him to alter his design as he went along” The Sydney M i H ld Th S d Morning Herald AU$102 million / 14 yearsAU$7 million / 5 years© The Project Company 2006 A02
  5. 5. jProjects – Scottish Parliament “It is difficult to be precise but something in excess of £150 million has been wasted in the cost of prolongation fl i f t f l ti flowing from d i d l design delays, overoptimistic programming, and uncertain ti i ti i d t i authority” Lord Fraser £414 million / 58 months£195 million / 38 months© The Project Company 2006 A03
  6. 6. pResearch – The Standish Group• The 1994 report stated that the average cost overrun on software projects was as high as p g p j g 189% (this figure is extensively quoted and at the same time questioned by the ICT industry)• Part of the research involved a survey of IT executives for their opinions as to why projects succeed or fail. • Project Success Factors • Project Challenged Factors – User involvement (19%) – Lack of user input (12.8%) – Executive management support (16%) – Incomplete specification (12.3%) – Clear statement of requirements (15%) – Changing requirements (11.8%) – Proper planning (11%) – Lack of executive support (7.5%) – Realistic R li i expectations (10%) i – Technology i T h l incompetence (7%) – Smaller project milestones (9%) – Lack of resources (6.4%) – Competent staff (8%) – Unrealistic expectations (5.9%) – Ownership (6%) – (5.3%) Unclear objectives (5 3%) – Clear vision & objectives (3%) – Unrealistic timeframes (4.3%) – Hard-working, focused staff (3%) – New technology (3.7%) – Other (23%)© The Project Company 2006 A04
  7. 7. y j gResearch - Flyvbjerg• Costs are underestimated in 9 out of 10 transportation infrastructure projects. p p j• For a randomly selected project the likelihood of the actual costs being higher that the estimated costs are 86%.• Actual costs are on average 28% higher than estimated costs.• Cost underestimation exists across 20 nations and 5 continents and would appear to be a global phenomenon.• Underestimation today is in the same order of magnitude as 10, 30, and 70 years ago.• No learning that would improve cost estimate accuracy seems to take place.• Cost estimation cannot be explained by error and seems to be best explained by strategic misrepresentation, i.e. lying.• Transportation infrastructure projects do not appear to be more prone to cost underestimation than other types of projects.© The Project Company 2006 A05
  8. 8. j y pProjects – 2012 London Olympics £?? billion (July 2012)Chairman: So the bid was not a pig in a poke?The i i lTh original cost, we were told, was going to b ld i be£2,992 million. We were also told that private sectorfunding was going to be £738 million, a claim thathas faded into the mist, I understand. The Secretaryof S f State f C l for Culture, M di and S Media d Sport h already has l dannounced a further £900 million of costs. Therefore,the figure is £2,992 million, plus £738 million, plus£900 million and rising, and we still do not have a final, £9.4 billion (15 March 2007)agreed b d t D you not thi k th t you owe it t d budget. Do t think that tothe taxpayers of this country to have your act togetherby now?Permanent SP t Secretary of th D t f the Department f t t forCulture, Media and Sport: A thorough processof cost review is under way…Oral idO l evidence b f before th C the Committee of P bli itt f PublicAccounts 05 March 2007 £4 billion (Nov 2004)© The Project Company 2006 A06
  9. 9. Research - UK Construction Industry KPI’s y© The Project Company 2006 A07
  10. 10. Research – Mott MacDonald• The study reviewed 50 projects implemented over the previous 20 years (with values y p j p p y exceeding £40 million at 2001 prices)• The study highlighted a tendency for hifh levels of optimism in project estimates arising from underestimating project cost and duration or overestimating project benefits.• This tendency was given the name “Optimism Bias)• Optimism bias is expressed as the percentage difference between the cost and duration estimates at project appraisal and the final outturn.© The Project Company 2006 A18
  11. 11. pOptimism Bias• Buildings (Capital Expenditure) g p p – Standard (24%) – Non-standard (51%)• Buildings (Works Duration) – Standard (4%) – Non-standard (39%)• Civil Engineering (Capital Expenditure) – Standard (44%) – Non standard Non-standard (66%)• Civil Engineering (Works Duration) – Standard (34%) ( ) – Non-standard (15%)© The Project Company 2006 A09
  12. 12. Agenda g Organisation Planning COST TIME WBS QUALITY HOW WHEN SC O PE Schedule CHANGE WHAT Process Flow W WBS OBS WHO OBS HOW MUCH Cost Cube Baseline Plan CHANGE Responsibility Assignment Matrix CHANGE Estimating COST Contingency Change h Uncertainty Baseline Plan Control Event Driven Project Risk Control C l TIME© The Project Company 2006 A10
  13. 13. Organisation g …large-scale project agreements should be divided into ‘manageable chunks of work’, g p j g g which are of such scale and scope that project managers can more easily access progress, and alter implementation strategy as required. Comptroller and Auditor General Report into the HSE PPARS project
  14. 14. Work Breakdown Structure© The Project Company 2006 B01
  15. 15. Organisation Breakdown Structure g© The Project Company 2006 B02
  16. 16. Responsibility Assignment Matrix p y g© The Project Company 2006 B03
  17. 17. Control Accounts© The Project Company 2006 B04
  18. 18. Cost Breakdown Structure• Labour• Materials• Plant & equipment• Subcontract costs• Management• Overhead & administration• Fees & taxation• Inflation• Contingency© The Project Company 2006 B05
  19. 19. The Cost Control Cube WBS resource 01 resource 02 OBS resource 03 resource 04 resource 05 CBS© The Project Company 2006 B06
  20. 20. Estimating g© The Project Company 2006 B07
  21. 21. Estimating Bias g• Motivational bias – We know what it is we want to achieve and we are motivated to skew our estimates to make the goal achievable e.g. our client tells us that we have to have a design ready for approval and planning in five months…so how long will it take?• Anchoring or adjustment bias – We start with an initial estimate (an anchor) and adjust it based on our experience to arrive at a value we are comfortable with e.g. if all goes well we could do in g g maybe…three to six months? four to seven months?• Availability bias – N matter h No tt how great our experience, th d t il th t we recall or th t i “ t i the detail that ll that is “available” t us il bl ” to at the moment we perform the estimate may be limited. We tend to remember our more recent projects, our largest projects, our more successful projects.© The Project Company 2006 B08
  22. 22. Estimating Bias - Remedies g• Never do a wild (or even an intelligent) guess g g• Collect relevant historical data• Reality checks• Independent assessment© The Project Company 2006 B09
  23. 23. Estimating - Best Practice g• Define the scope of work…what is to be built? p• Define the project execution basis…how will it be built?• Determine what historical data is available and which estimating methods will be used.• Assign experienced estimators and planners to the work. g p p• Estimate the cost of all major elements.• Include for the cost of design, project management, start-up and owners costs.• Include for future cost escalation.• Include for contingency (we will look at this later)• Check that the overall estimate is reasonable.• Compare the estimated cost and duration with that of similar projects.© The Project Company 2006 B10
  24. 24. Planning g Planning is an unnatural process…it is much more fun to do something. The nicest thing g p g g about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and doubt. Sir John Harvey-Jones
  25. 25. Flowchart the work to be done© The Project Company 2006 C01
  26. 26. Enter activities and logical relationships g p© The Project Company 2006 C02
  27. 27. Resource activities with a suitable unit (€, hours)© The Project Company 2006 C03
  28. 28. Resource level activities to optimise utilisation p© The Project Company 2006 C04
  29. 29. Save schedule and curve as project baseline p j© The Project Company 2006 C05
  30. 30. © The Project Company 2006 C06
  31. 31. 11 April 2008© The Project Company 2006 C07
  32. 32. © The Project Company 2006 C08
  33. 33. 13 June 2008© The Project Company 2006 C09
  34. 34. Uncertainty & Risk y The unexpected has a one-sided effect with projects. Consider the track records of p p j builders, paper writers, and contractors. The unexpected almost always pushes in a single direction: higher costs and longer time to completion. On very rare occasions, as with the Empire State Building, you get the opposite: shorter completion and lower costs – these p g, y g pp p occasions are truly exceptional. Nassim Nicholas Taleb – The Black Swan
  35. 35. Making allowance for uncertainty & risk g y© The Project Company 2006 D02
  36. 36. Estimating Uncertainty g y Estimating Uncertainty: An unknown due to inherent lack of knowledge or ambiguity (weather, soil conditions, ability of an unknown contractor, etc). Characterised by a range of potential impact values but b 100% probability of occurrence. N a ‘ i k’ b bili f Not ‘risk’.© The Project Company 2006 D01
  37. 37. Estimate Classification© The Project Company 2006 D04
  38. 38. Estimate Classification© The Project Company 2006 D03
  39. 39. Estimate Classification© The Project Company 2006 D05
  40. 40. Event Driven Risk Event Driven Risk: Uncertain future event that, if it occurs, will affect project objectives either positively (upside) or negatively (downside). There is some probability that it will / will not occur. Opportunity: Upside risk (a favourable condition or situation, a good idea, or a risk response). Often characterised by being time limited. Threat: Downside risk. Always with us it would seem© The Project Company 2006 D01
  41. 41. Risk Register (Qualitative) g© The Project Company 2006 D07
  42. 42. Risk Assessment Matrix© The Project Company 2006 D08
  43. 43. Risk Register (Quantitative) g© The Project Company 2006 D09
  44. 44. Estimating Uncertainty & Event Driven Risk g y© The Project Company 2006 D10
  45. 45. Monte Carlo Simulation
  46. 46. Probability Distribution y© The Project Company 2006 D11
  47. 47. Estimating Uncertainty & Risk S Curve P80 date (12 May) P50 date (30 Apr) Deterministic date (11 Apr)© The Project Company 2006 D12
  48. 48. Schedule Sensitivity Index Schedule Sensitivity Index This i d id tifi Thi index identifies and ranks d k the activities most likely to influence the project duration / finish© The Project Company 2006 D13
  49. 49. Contingency & Management Reserve g y g© The Project Company 2006 D14
  50. 50. Contingency and Management Reserve g y g© The Project Company 2006 D15
  51. 51. Optimism Bias p A B C Commit to Commit to Available invest i t construct t t for f use Planning & Design Construction Gestation Period Works Duration Project Duration Business Contract Construction case award / completion Start on site© The Project Company 2006 D17
  52. 52. Optimism Bias p• Optimism bias is the tendency for a p j p y project’s cost and duration to be underestimated and/or benefits overestimated.• Optimism bias is caused by a failure to identify and effectively manage projects risks.• The Mott MacDonald study identified five common project risk groups containing a number of project risk areas recorded as causing cost and time overruns.• In most instances, the inadequacy of the business case (i.e. inadequate requirements and inadequate project scope definition) was stated to be the cause of project time and cost overruns. overruns© The Project Company 2006 D16
  53. 53. Optimism Bias – Risk Areas p• Inadequacy of the business case (58%) q y• Environmental impact (19%)• Disputes and claims (16%)• Economic (13%) ( )• Late contractor involvement with design (12%)• Complexity of contract structure (11%)• Legislation (7%) g ( %)• Degree of innovation (7%)• Poor contractor capabilities (6%)• Project management team (4%)• Poor project intelligence (4%)© The Project Company 2006 D18
  54. 54. Optimism Bias Risk Factors p© The Project Company 2006 D19
  55. 55. Optimism Bias p© The Project Company 2006 D20
  56. 56. Issues An Issue: A known problem that will affect objectives if not managed. Requires a decision to be made. 100% probability of occurrence. Not a ‘risk’.© The Project Company 2006 D01
  57. 57. Issue review and escalation© The Project Company 2006 D22
  58. 58. Change g It is hard to quantify; a fair degree of irritation and frustration at what one could, at q y g best, describe as Barcelona’s lack of understanding as to the importance of time and cost in the UK construction industry. Hugh Fisher - Davis Langdon and Everest, Quantity Surveyors to the Scottish Parliament
  59. 59. What went wrong - contributory factors g y• The timetable for construction dictated the adoption of a fast track procurement method entailing relatively high risk.• The decision to adopt construction management was taken without an k ih adequate evaluation or understanding of the extent of risk involved.• Whenever there was a conflict between quality and cost, quality was preferred.• Whenever there was a conflict between early completion and cost, completion y p p was preferred without in fact any significant acceleration being achieved.• Costs rose because the client (first the Secretary of S S f State and l d latterly the l h Parliament) wanted increases and changes or at least approved them in one manifestation or another.© The Project Company 2006 E01
  60. 60. What went wrong – change g g• There was no requirement to assign changes in cost to any category as they occurred, to allow the underlying reasons to be summarised and understood.• The change control process ensured the g p financial commitment for each contract stayed within the overall financial limit for that contract at any time although the limits for almost every contract could and did increase.• An estimated 10,000 proposed change orders were issued over the course of the project.• Estimated cost of the 58 individual trade contracts rose from £129 million at tender approval stage to a final cost of the some £220 million.• A month-by-month analysis of the most critical package on th project (th assembly f k the j t (the bl frame) ) shows substantial variation taking place months after the original planned completion date.© The Project Company 2006 E02
  61. 61. Change g• During the execution phase of a project all changes are disruptive. g p p j g p• A good change control process is designed to drive out change.© The Project Company 2006 E03
  62. 62. What constitutes a change? g• A change is anything that affects one or more of the following project attributes: g y g gp j – Business Case – Scope of work – Cost – Duration – Organisation – Working methods – Contractual arrangement – Operability – Environmental, Health, and Safety© The Project Company 2006 E04
  63. 63. Change Control g• The purpose of change control is to ensure that all changes to a project are p p g g p j – Identified – Communicated – Assessed – Controlled ll d – Documented• In order that – Environmental, Health, & Safety is not compromised – Technical integrity is not compromised – Proposed changes are considered before being committed to p g g – Impacts are assessed and forecasted as early as possible – Undesirable changes are eliminated© The Project Company 2006 E05
  64. 64. What constitutes an acceptable change? p g• An acceptable change is one that: p g – Is essential to maintain environmental, health, and safety standards – Is essential to comply with conditions of law – Is essential for system or component functionality y p y – Is essential due to external influences• An acceptable change might be one that p g g – Secures a significant improvement in functionality – Results in a significant cost reduction – Results in a significant schedule duration advantage – Provides some other significant material advantage to the project© The Project Company 2006 E06
  65. 65. Change Control Process g• Identified – Any member of the project team can propose or highlight a change• Communicated – The change should be documented as early as possible – The impact of the proposed change should be estimated and the need to draw down on contingency identified if appropriate. – The proposed change is communicated to the change control coordinator as a change request• Assessed (level 1 level 2 level 3) 1, 2, – Level 1: Affects budget over P50 contingency, which is above the project managers approval limits. – Level 2: Requires P50 contingency draw down, which is within the project managers approval limits – Level 3: Does not require contingency draw down q g y• Controlled – Level 1: Reviewed and approved / rejected by the project steering committee – Level 2: Reviewed and approved / rejected by the project change panel – Level 3: Reviewed and approved / rejected within the project team• Documented – Update the change register / project execution plan / business case and communicate to all.© The Project Company 2006 E07
  66. 66. Control I love deadlines… I love the whooshing noise they make as they fly by. g y y y y Douglas Adams
  67. 67. Capture the weekly p g p y progress© The Project Company 2006 F01
  68. 68. Capture the weekly actual spend p y p© The Project Company 2006 F02
  69. 69. Calculate the percentage values p g© The Project Company 2006 F03
  70. 70. Calculate the variance (delta) values© The Project Company 2006 F04
  71. 71. The Earned Value Curve© The Project Company 2006 F05
  72. 72. Calculate and chart the performance indices p© The Project Company 2006 F06
  73. 73. Prepare composite performance indices chart p p p© The Project Company 2006 F07
  74. 74. Possible causes of good / poor performance g p p© The Project Company 2006 F08
  75. 75. Establish and manage the critical path g p© The Project Company 2006 F09
  76. 76. 13 June 2008© The Project Company 2006 F10
  77. 77. 20 June 2008© The Project Company 2006 F11
  78. 78. © The Project Company 2006 F12
  79. 79. © The Project Company 2006 F13
  80. 80. © The Project Company 2006 F14
  81. 81. 20 June 2008© The Project Company 2006 F15
  82. 82. 27 June 2008© The Project Company 2006 F16
  83. 83. to bear in mind…• Earned value management techniques used in association with critical path analysis provide best practice in the management and control of projects. Although critical path analysis is essentially a backward looking technique, it accurately records the status of the project as it is now. The technique is complemented by earned value management which can not only identify the slippage of work which is off the critical path, but also can predict where the project is going once sufficient time has elapsed to establish trends (after approximately 15% of the project duration).• The design and implementation of a large project control system requires significant effort on behalf of the project controls team. It also requires understanding and support from the project team as a whole, especially senior management. Accurate and timely information is the lifeblood of the system; if left unsupported by project team members the system will fail. If properly supported, it will accurately record progress and trends throughout the life of the project; encouraging those teams that are doing well and ensuring timely help for those teams that are experiencing difficulties.© The Project Company 2006 F17
  84. 84. Reports p
  85. 85. © The Project Company 2006 F18
  86. 86. © The Project Company 2006 F19
  87. 87. © The Project Company 2006 F20
  88. 88. Projects – some best practice j p When good project plans are prepared in advance by experienced project managers, it is g p j p p p y p p j g , surprising how often the circumstances of projects fit in with the plans. This is no coincidence as this comes as a result of good project management. Mott MacDonald
  89. 89. Best Practice - People p• Appointing quality people to manage a project is a low-cost / high impact procurement decision• Team members with clearly defined roles, goals, and direction• At team th t h worked t that has k d together b f th before• Good project team morale - be watchful for personalities and politics• “We had a problem with x but I sorted it out”…the type of thing one wants to hear from project team members• Create a sense of hustle fh l© The Project Company 2006 G01
  90. 90. Best Practice - Process• Clear definition and agreement of scope• Senior management support and commitment• End user ownership and involvement• Uncertainty appreciated and managed• Risks identified and mitigated• Good planning & control practice• Sufficient resources – money, people, time• 80 / 20 rule – understand, and focus on, the core project deliverables - lower level requirements should not be completed at the expense of more important ones.• Drive D i out change h• Open communication – project-wide visibility of project plans and performance© The Project Company 2006 G02
  91. 91. Time, Cost, Quality…pick any two? y p y quality (good) defined d fi d scope time cost (fast) (cheap)© The Project Company 2006 G03
  92. 92. The Project Company j p y The Project Company is a provider of project management support services. We help project t j t teams manage projects with th provision of specialist project management j t ith the i i f i li t j t t personnel and best practice project control methodologies. If you have a project to deliver, we can supply both the people and process to help you deliver it successfully. People: A P l Appointing quality people to manage a project i a l i i li l j is low-cost / hi h i high impact procurement decision which is often critical to the success of the venture. A project management team with relevant sector experience, and the knowledge to implement and employ the key project management tools and techniques, is better placed to deliver a project successfully The Project Company provide specialist personnel for both successfully. project management and project management support roles. Process: The Project Company assists with the implementation of best practice cost, schedule, schedule and risk methodologies to help project teams plan monitor and control plan, monitor, projects. Working closely with the management team, we employ critical path method, earned value management, and Monte Carlo analysis techniques to develop and maintain realistic and achievable plans, highlighting critical activities and resource co st a ts ad a ce, a d gu d g t e p oject tea constraints in advance, and guiding the project team from project conception through to o p oject co cept o t oug completion. 1-800-PROJECT (7765328) project@management.ie

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