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’.

1. Managing the Complexity of Change
Order d Cl i
O 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. ‫ﻣﺮﺣﺒﺎ‬
‫ﺎ‬
Menyambut
M b t t
Welcome
ःवागतम
Willkommen Welkom
歡迎
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3. Change Management
1) 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.
g
3) 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.
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4. Change Management
4) 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 success
6) 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.
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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
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6. Popular Change Management Techniques !
6

7. Typical Components of Changes
ORGANIZATION
COST SCHEDULE
SCOPE
RISK
QUALITY ALLOCATIONS
REGULATIONS
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8. Change and Productivity
1. 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.
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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
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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.
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11. Need for Design Endorsement by Contractor
Owner s
Owner’s Vision
Engineer’s Design
Contractor Delivery !
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12. Change Management Framework
Owner Contractor
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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.
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14. Project Control Department
Typical 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
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15. Effective Change Management
It is essential that Parties (Client & Contractor) include Change
Management provisions in the Agreement. The provisions shall
address the following:
1. Promote a Balanced Change Culture
2. Articles/Provisions and Formal Change Management Procedure
/ g g
Template in the Agreement
3. Mechanism for identification of Change
4. Analysis and Notification Mechanism
5. Review and Adhoc Approval
6.
6 Formalization of Change O d /A
F li ti f Ch Order/Amendment
d t
7. Regular Monitoring of Changes
8.
8 Dispute Resolution Mechanism for Claims
9. Time Limits
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16. Typical Structure of Variation Provision
1. Right to Vary
2. Value Engineering
3. Variation Procedure
4. Payment in Applicable Currencies
5. Provisional Sums
6.
6 Day
D work
k
7. Adjustments for Changes in Legislation
8.
8 Adjustments for Changes in Cost
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17. Typical Variation Provision (Case A)
Variations may be initiated by the Owner at any time prior to issuing
the Taking-Over Certificate for the Works, either by an instruction or by
a 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, or
3. 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.
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18. Typical Variation Provision (Case B)
Variations may be initiated by the Owner at any time prior to issuing the Taking-Over
Certificate for the Works, either by an instruction or by a request for the Contractor to
submit a proposal. The Contractor shall execute and be bound by each Variation, unless
the 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. Upon
receiving this notice, the Owner shall cancel, confirm or vary the instruction. Each
Variation 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, or
6. Changes to the sequence or timing of the execution of the Works.
The Contractor shall not make any alteration and/or modification of the Permanent
Works, unless and until the Engineer instructs or approves a Variation.
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19. Typical Variation Provision (Case C..)
Owner may make any change to the form, quality or quantity of
Work, or any part thereof, that may in Owner’s opinion be
necessary or desirable and for that purpose Owner shall have
and, purpose,
power to order Contractor to do and Contractor shall do any of the
following:
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 y
c. Change the levels, lines, positions and dimensions of any part
of Work; and
d. Execute additional work of any kind necessary for the
completion of the Work.
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20. Typical Change/Variation Provision (C…)
It is agreed that Agreement Price and/or Schedule and/or other affected
provisions of the Agreement shall be adjusted to the extent necessary as a
result of any of the following:
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a. 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 ITT
d. Changes in the laws/Specifications/Codes until date of submission of
Price Bid. 20

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 a
combination of variations shall be considered only if the Project
critical path is affected.
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22. Typical Change Proposal/Notice Template
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23. Project Control Department
Typical 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
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24. Responsibilities for Managing Change
Client
• Approval
pp of Change
g Management
g
Plan/Procedure
• Review and approval of Changes.
• Issue Change Order/Amendment to Agreement
Contractor
• Client Interface and Communication
• Development of the Change Management
Plan/Procedure
• Identification and managing Change
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25. Benefits of Effective Change Management
Effective Change Management occurs when early identification
of the source of Change and its effect on a project are realized and
managed.
managed
Next, a Framework to manage change is developed,
communicated to all parties, and implemented. If these steps
have all taken place, the following is likely:
1. Enhanced Customer Relationships
2. Improved Financial Performance
3. Optimized Schedule
4. Better Teamwork
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26. Thank you for your
ou our
attention.
Q&A
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27. Copyright: Pankaj K Sinha
Pankaj K Sinha
00971-50-1223861
pankajsinha1964@hotmail.com
Presenatation and content Copyright: Pankaj K Sinha
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