Why do we need Project Controls? The financial decision to execute a project implies a given investment completed at a given time and owners need to get the most out of the amounts of capital invested. In today’s business climate, “real time” information is essential to make better decisions.

1. PROJECT
CONTROLS
PROCESSES
Jerry Klanac
Managing Director
PMA Consultants

2. Why do we need Project Controls?
• Owner always has limited financial
resources.
• Owner wants to get the most out of the
amounts of capital invested.
• Financial decision to execute a project
implies a given investment completed at a
given time…the classic “return on
investment model.”
• Owner wants to know of problems in such a
time to be able to take appropriate
corrective actions.
• In today’s business climate, “real time”
information is essential to make better
decisions.
Owner’s Perspective Slide 1 of 2
-2 -1 0 1 2 3 n - 1 n
$8m
$7m
$10m
$60m
$80m
$75m
$60m $60m
Capital investment of $25 million
over three year period .
Positive cash flows (revenue
streams) for “n” periods.
Return on Investment Model

3. Why do we need Project Controls?
• Return of Investment Model becomes
successful when:
– Estimated costs for capital outlays and
future cash flows are accurate.
– NPV (net present value) for future cash
flows is greater than NPV of capital
outlays.
– Project Controls efforts are needed to
ensure the actual capital outlays stay
within the bounds of the estimate used in
the Return on Investment Model. If cost
overruns or schedule delays occurs, it can
erode the financial benefit of the project.
Owner’s Perspective Slide 2 of 2
-2 -1 0 1 2 3 n - 1 n
$8m
$7m
$10m
$60m
$80m
$75m
$60m $60m
Capital investment of $25 million
over three year period .
Positive cash flows (revenue
streams) for “n” periods.
Return on Investment Model

4. Project Life Cycle
• Kerzner: “Every program, project or product has certain
phases of development known as life-cycle phases.”
• Project Management – A Systems Approach to Planning,
Scheduling and Controlling, Harold Kerzner, PhD, 10th Edition,
pg. 68
• Bennett: “Every project, not just those in construction
industry, goes through a series of identifiable phases,
wherein it is ‘born’, it matures, it carries through ‘old
age’ and it expires.”
• The Management of Construction – A Project Life Cycle
Approach, F. Lawrence Bennett, PE, PhD, pg. 7
Aka Project Management Process

5. Examples of Project Life Cycles
Oil & Gas Industry
ImplementationDefinitionFeasibilityConceptual01 02 03 04
Choose the right project Develop the project right Deliver the project right
Plan the work 
Start-up/
Close Out05
ExecuteDefinitionSelectAppraise01 02 03 04 Operate05
Work the Plan 
COMPANY A
COMPANY B

6. Detailed
Design
Comm.Constr.
Examples of Project Life Cycles
Pharma Industry Slide 1 of 2
Basic DesignPre-Justify
Front-end Loading
CAPITAL MANAGEMENT PROCESS
Plan the work 
Close Out
DeliverApproveDevelopAllocation01 02 03 04 Asses05
Work the Plan 
PROJECT MANAGEMENT PROCESS
01 02 03 04 05
Justify
Feasibility /
Concept Design

7. Examples of Project Life Cycles
Pharma Industry Slide 2 of 2
Feasibility Concept
Gate
(Capital Plan)
Preliminary
Design
Detailed Design
Construction
Startup
Commissioning
Qualification
Validation
Project Turnover
Gate
(Project Close)
Administrative
Close
FRONT-END PLANNING
EXECUTION
PROJECT CLOSURE

8. Project Planning & Control System
Kerzner Perspective
Source: Project Management – A Systems
Approach to Planning, Scheduling and Controlling,
Harold Kerzner, PhD, 10th Edition, pg. 413
Management
of Change
Management
Decision-making
Strategies, states of nature,
payoff tables
BudgetsSystem Reports
Time, cost, performance,
reliability, maintainability,
effectiveness
Time/Cost/
Performance
Tracking
Feedback
Network Scheduling
PERT/CPM
Goals/Objectives
System and company level
Work Descriptions
Specs, SOW, WBS
Master Detailed
Schedules
Change procedure, review &
approval of changes

9. Project Controls Process
Hollmann Perspective

10. Hallmarks of Good Project Controls Process
• Organization of data (structure)
• Ongoing cost and schedule data collection systems that is near “real-time”
• Establish appropriate baselines, with contingency, that considers possible effects of risks
– Project targeting is doable; scope of project is what is needed
• Application of earned value concepts
• Sufficient time for trend analysis and developing forecasts
– Going beyond reporting data, but also suggesting corrective actions
• Effective Reports/Graphics (use of dashboards)

11. Owner’s Project Control Specialist
View of Distribution of Time

12. Project Cost Forecasting Process
Theoretical Best Practice
Project
Schedule
Update
Contractor
Progress
Reports
Contractor
Cost
Reports
Project
Accounting
Change
Management
System
Part of Ongoing Project
Controls Function on Project;
Sub-Processes Interlinked
Initial Cost
Baseline
Approved
Change Orders
Current Cost
Baseline
Cost Forecast
Based on
Above Analyses
Vendor Invoices
Contractor Invoices
Payroll (timesheet systems)
Project Purchasing (POs) &
Contract Awards
Resource Use During
Reporting Period
Starting Point
for All Analysis
Deviations that
become trends
Variation
Analysis
Trend
Analysis
Review
Actual Costs
Review
Committed
Costs
Earned
Value
Analysis

13. THANK YOU
Jerry Klanac
Managing Director
PMA Consultants
info@pmaconsultants.com