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Project Change Management-Pankaj K Sinha


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Pankaj participated as faculty in Construction Risk Lifecycle Management Conference (17th & 18th April 2011 AT Abu Dhabi, UAE) organised by Marcus Evans. He gave his presentation on ‘Managing the Complexity of Change Order and Claims in Major Projects by establishing a Change Management Framework’.

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Project Change Management-Pankaj K Sinha

  1. 1. Managing the Complexity of ChangeOrder d Cl iO d and Claims i Major Projects by in M j P j t b establishing a Change Management Framework F k Pankaj K Sinha Abu Dhabi, UAE 18thApril, 2011 April,
  2. 2. ‫ﻣﺮﺣﺒﺎ‬ ‫ﺎ‬ Menyambut M b t tWelcome ःवागतमWillkommen Welkom 歡迎 2
  3. 3. Change Management1) Change is an inevitable part of any project. Even the most project. carefully planned project encounter changes. Inability to y p p j changes. g y manage change effectively is a key contributor to the inconsistent results. results.2) Projects do not suffer due to changes but due to lack of recognition of change and of clear and consistent business p process to manage the changes. g changes. g3) Not only Change Management is a key factor in project success but also a root cause of much of the litigation in g Construction Industry. Industry. 3
  4. 4. Change Management4) Change Management process shall acknowledge that each project has certain risks or uncertainties that cannot be specified i advance and shall h ifi d in d d h ll have mechanism f equitable h i for uit bl risk sharing. sharing.5) Planning for Change Management by developing guidelines and processes is crucial to the successful execution of a project. project. The changes, if not dealt with swiftly and equitably, lead to disputes and can ruin Project’s chances of ‘success’. Project s success6) Change Order Management is still performed in an adhoc manner. manner. There is tremendous scope for improving Change Management practices by establishing a Change Management Framework right from Project inception to completion. completion. 4
  5. 5. Current Practice• The contracting environment i t is i competitive and scopes are complex. complex.• Often Risk Allocation is Client through “Aversion”• Inappropriate entities are Contractor often burdened with risks they can’t manage or survive. survive. Subcontractor 5
  6. 6. Popular Change Management Techniques ! 6
  8. 8. Change and Productivity1. The more change experienced on a project, the greater the negative impact on productivity. productivity.2. Changes that occur late in a project are implemented less efficiently than changes that occur early in the project. project. 8
  9. 9. Common Causes of Changes 4. Site Acsess 1. Agreed Scope Changes 2. Enactment of new Laws 5. Differing Site Conditions or R l i Regulations 6. Errors, omissions, inconsistencies 3. Force Majeure or discrepancies in the Specifications/Scope 7. Change in Rely-upon Information Rely- 8. Acceleration or disrupton by Client 9. Delay or Suspension by Client 10. Special Risks 11. Delayed Approvals 9
  10. 10. Causes of Changes• Regardless of the origin, a Change may g g g y often trigger additional changes, resulting in various combinations of the types of Changes described earlier.• Once this ripple effect begins, it becomes increasingly complex to manage Change Therefore a proactive Change. Therefore, proactive, disciplined approach to Change Management is vital to the health of the Project. 10
  11. 11. Need for Design Endorsement by Contractor Owner s Owner’s Vision Engineer’s Design Contractor Delivery ! 11
  12. 12. Change Management Framework Owner Contractor 12
  13. 13. Integrated Change Control• Project Management Institute recommends Integrated Change Control g g Mechanism.• Integrated Change Control is the process of reviewing all Change Requests, approving Changes and managing changes to the Deliverables, Process, P j t d P Project documents and th t d the Project Management Plan.• The Integrated Change Control process is conducted from project inception through completion. 13
  14. 14. Project Control DepartmentTypical Change Management Framework 2. 1. 5. Recognize g Change Promote Improve a from Balanced 3. Lessons Change Learnt Culture C lt Evaluate Change ITT Agreement Project Procedures 4. Implement Change g 14
  15. 15. Effective Change ManagementIt is essential that Parties (Client & Contractor) include ChangeManagement provisions in the Agreement. The provisions shalladdress the following:1. Promote a Balanced Change Culture2. Articles/Provisions and Formal Change Management Procedure / g g Template in the Agreement3. Mechanism for identification of Change4. Analysis and Notification Mechanism5. Review and Adhoc Approval6.6 Formalization of Change O d /A F li ti f Ch Order/Amendment d t7. Regular Monitoring of Changes8.8 Dispute Resolution Mechanism for Claims9. Time Limits 15
  16. 16. Typical Structure of Variation Provision1. Right to Vary2. Value Engineering3. Variation Procedure4. Payment in Applicable Currencies5. Provisional Sums6.6 Day D work k7. Adjustments for Changes in Legislation8.8 Adjustments for Changes in Cost 16
  17. 17. Typical Variation Provision (Case A)Variations may be initiated by the Owner at any time prior to issuingthe Taking-Over Certificate for the Works, either by an instruction or bya request for the Contractor to submit a proposal Variation shall not proposal.comprise the omission of any work which is to be carried out by others.1. Contractor shall execute and be bound by each Variation, unless the Contractor promptly gives notice to the Employer stating (with supporting particulars) that Contractor cannot readily obtain the Goods required for the Variation,2. It will reduce the safety or suitability of the Works, or3. It will have an adverse impact on the achievement of the p Performance Guarantees. Upon receiving this notice, the Employer shall cancel, confirm or vary the instruction. 17
  18. 18. Typical Variation Provision (Case B)Variations may be initiated by the Owner at any time prior to issuing the Taking-OverCertificate for the Works, either by an instruction or by a request for the Contractor tosubmit a proposal. The Contractor shall execute and be bound by each Variation, unlessthe Contractor promptly gives notice to the Owner stating ( h l h (with supporting particulars) h l )that the Contractor cannot readily obtain the Goods required for the Variation. Uponreceiving this notice, the Owner shall cancel, confirm or vary the instruction. EachVariation may include:1. Changes to the quantities of any item of work included in the Contract (however, such changes do not necessarily constitute a Variation),2. Changes to the quality and other characteristics of any item of work,3. Changes to the levels, positions and/or dimensions of any part of the Works,4. Omission of any work unless it is to be carried out by others,5. Any additional work. Plant, Materials or services necessary for the Permanent y , y Works, including any associated Tests on Completion, boreholes and other testing and exploratory work, or6. Changes to the sequence or timing of the execution of the Works.The Contractor shall not make any alteration and/or modification of the PermanentWorks, unless and until the Engineer instructs or approves a Variation. 18
  19. 19. Typical Variation Provision (Case C..)Owner may make any change to the form, quality or quantity ofWork, or any part thereof, that may in Owner’s opinion benecessary or desirable and for that purpose Owner shall have and, purpose,power to order Contractor to do and Contractor shall do any of thefollowing:a. Increase or d I decrease the quantity of W k i l d d i the h i f Work included in h Agreement;b. Change the character or quality of any such Work; g q y yc. Change the levels, lines, positions and dimensions of any part of Work; andd. Execute additional work of any kind necessary for the completion of the Work. 19
  20. 20. Typical Change/Variation Provision (C…)It is agreed that Agreement Price and/or Schedule and/or other affectedprovisions of the Agreement shall be adjusted to the extent necessary as aresult of any of the following: y ga. Additions, deletions or changes to the Work requested by one Party and agreed by the other.b. Work delayed or suspended by Owner excluding concurrent delay y p y g y attributable to Contractor.c. Additions, deletions or changes to the Work required as a result of Owner approved variances from basic design conditions as set forth in pp g Agreement. The basic design conditions shall be limited only to the following: • Feedstock to be provided by Owner • Overall Battery Limit Conditions • Subsurface Geo-technical Information • Site Climatic Data for design purposes as specified in ITTd. Changes in the laws/Specifications/Codes until date of submission of Price Bid. 20
  21. 21. Typical Change/Variation Provision (C….)e. Impact of Force Majeure.f.f Remedial work resulting from Special Risk (Non insurable (Non-insurable Risks).g. Additions, deletions or changes to the Work as a result of errors, omissions, i i i inconsistencies or di i i discrepancies or changes i the i h in h Rely-upon Information.h. Any other provision of the Agreement, which expressly entitles y p g p y the Parties to a Variation.Any adjustment to Schedule as a result of a Variation or acombination of variations shall be considered only if the Projectcritical path is affected. 21
  22. 22. Typical Change Proposal/Notice Template 22
  23. 23. Project Control DepartmentTypical Change Management Process Variation Change Alert g Contrator’s Decision Change Notice Client Adhoc Decision Detailed Change Estimate Change Order/Amendemnt Request Client Approval Change Order/Amendemnt 23
  24. 24. Responsibilities for Managing ChangeClient• Approval pp of Change g Management g Plan/Procedure• Review and approval of Changes.• Issue Change Order/Amendment to AgreementContractor• Client Interface and Communication• Development of the Change Management Plan/Procedure• Identification and managing Change 24
  25. 25. Benefits of Effective Change ManagementEffective Change Management occurs when early identificationof the source of Change and its effect on a project are realized andmanaged.managedNext, a Framework to manage change is developed,communicated to all parties, and implemented. If these stepshave all taken place, the following is likely:1. Enhanced Customer Relationships2. Improved Financial Performance3. Optimized Schedule4. Better Teamwork 25
  26. 26. Thank you for your ou our attention. Q&A 26
  27. 27. Copyright: Pankaj K Sinha Pankaj K Sinha 00971-50-1223861 Presenatation and content Copyright: Pankaj K Sinha 27