2: Project Management Systems and its Strategic Delivery Tools and Techniques

Contents 2.1 Introduction 2.2 Organisational system design 2.3 Internal project management systems 2.3.1 Internal project management 2.3.2 Functions, levels and boundaries 2.3.3 Project sponsors and interface management 2.3.4 Other organisational structures 2.4 External project management systems 2.4.1 Multidisciplinary teams 2.4.2 Contractual linkages 2.4.3 Non-contractual links 2.4.4 The process of bidding 2.5 Purpose, use and main sections of a strategic project master plan/project execution plan (PMP/PEP) 2.5.1 Generally 2.5.2 Generic or strategic project management plan to BS 6079 2.6 The PMP/PEP and the project planning process 2.6.1 Statement of Work 2.6.2 Work breakdown structure 2.6.3 Organisational breakdown structure 2.6.4 Task responsibility matrix 2.7 Summary

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2.1 Introduction
Learning outcomes from this unit This unit is intended to introduce you to the main delivery approaches for construction related project management and also to familiarise you with its main standards for service delivery and the main tools and techniques used for project management systems delivery. From Unit 2, Project Management Systems and its Strategic Tools and Techniques you should gain an understanding of: 1. organisational systems and the concept of internal and external project management organisational structures and systems 2. concept of project management organisational structures 3. purpose, use and main sections of a strategic project management plan (PMP to BS6079) or project execution plan (PEP) or project strategic plan (PSP). Unit 2 will also develop an understanding of, and a practical ability to, apply learning in simulated project circumstances related to 4. The use of standard project management tools and techniques such as SOWs, OBS, WBS, and TRMs in the preconstruction phase of construction projects Recommended text for unit 2 The reading from the recommended texts for Unit 2 is: Winch GM - Managing Construction Projects, An Information Processing Approach 2nd Edition. Blackwell Publishing, ISBN 1-4051-8457-1 Ch 15 p.409-436 Kerzner, H - A Systems Approach to Planning, Scheduling and Controlling, John Wiley, 10th Edn. ISBN 978-0-470-27870-3, Ch 3, 91-127, Ch. 5, 198- 206; Ch 11 p. 411-444 BS6079: A Guide to Project Management Practice, via Customer Services, British Standards Institution 389 Chiswick High Road, London W4 4AL, Phone: +00 44 020 8996 9001 The reading from the recommended background texts for unit 2 is any of, or combinations of: Burke, R Project Management: Planning and Control Techniques 4th Ed. John Wiley ISBN 0470851244 Ch 2, p.21 Ch 8, p.103-109, Ch 9, p.115130 Ch 20, p.284-301 Smith N J Engineering Project Management, Blackwell Publishing, ISBN 0632 05737-8, Ch 9 p.148, Ch13 p.222-234 Gray, CF and Larson EW - Project Management: The Managerial Process. 4th Edn. McGraw Hill, Boston, 2008 Ch3, p.57-89. Meredith JR and Mantel SJ Project Management: A Managerial Approach. 7th Edn. J Wiley & Sons, Inc. 2010, Ch. 5, p. 189-203.

2.2 Organisational system design This is a crucial aspect of necessary project management skills. At the start of a project, the organisational structure has to be put in place. This involves defining the roles and

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responsibilities of the various members of the multidisciplinary team. The three basic kinds of structure are: (a) Functional (b) Project (c) Matrix

The structure chosen will depend upon a wide range of variables, including the type of project, the stage of evolution of the project (the project might use one type in the early stages and then move into a different type as it evolves). The type of contract will also affect the organisational structure as different forms of contract require personnel within the organisation to do different things, and the required organisational structure is therefore different. (a) Functional organisation In a functional system, the organisation is split up into functional groupings. For example, a construction company might be split up into construction, engineering, finance and administration and other groups, each with a head of department or manager. Most organisations use a functional organisational structure. It keeps lines of command under the control of managers who share knowledge of the discipline, and each section manager can easily see his/her responsibility and is readily aware of the people under his/her control.

client organisation

marketing sales

finance wages accounts

operations planning

buying

advertising

production

Figure 2.1: Functional Organisation (b) Project organisation Under this system, individuals are drawn from the functional grouping to work on the project. A project boundary is established, which sets the limits of authority of the project manager within the overall functional organisation (Figure 2.2). (c) Matrix organisation In a matrix organisation, individuals are selected from the functional groupings to work on a range of individual projects, not necessarily on a full time basis. Authority over these persons is shared between their functional and project managers. The project manager must have a thorough understanding of different types of management organisational structure. This involves knowledge of the literature on organisational theory, including the various approaches of functional, project and matrix structures. In addition, these need to be extended to include knowledge of multi-project programmes and multi-level matrices. The project manager needs to have a thorough understanding of

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contract administration and control, and total familiarity with the likely project life cycle. An additional requirement is to have a clear understanding of the roles and responsibilities of each of the members of the team, and to be able to prepare job descriptions for team members. For a comprehensive treatment of the advantages of the different organisational forms, refer to Meredith and Mantels book pages 189-203.

client board

Project 1 marketing finance operations buying

Project 2 marketing finance operations buying

Project 3 marketing finance operations buying

Figure 2.2: Project organisation

client board

marketing

finance wages accounts

operations planning buying

sales Project

advertising

production

Figure 2.3: Matrix Organisation

2.3 The concept of internal and external project management service delivery systems
Project management services can be delivered either as an internal service, that is from within a client organisation or as an external service, that is, from outside a client organisation typically by a firm of consultant project managers. In the construction industry, with its well established system of sub-contracting and out-sourcing, it is more usual to arrange for project management services to be delivered as an external service. 2.3.1 Internal project management

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Internal project management (IPM) is generally restricted to large organisations with a constant and predictable workload. Typically, all the people in the project management team would be members of the overall organisation. Examples would include large multitrades contractors, local authorities, government departments, hospitals, army, police, colleges and universities. IPM is a solution to the problem of organisational segmentation, which tends to occur in all large and complex organisations. This segmentation occurs because individuals within the organisational system tend to be separated from others within the system. The separation is caused by the functional and power boundaries that permeate the system. A typical internal project management system is shown in Figure 2.4.

Figure 2.4 A typical internal project management system

2.3.2 Functional, power boundaries and organisational islands Functional boundaries run vertically through the system. Large organisations like these tend to naturally sub-divide into functional specialisations. A university, for example, would typically divide itself into faculties. There might be a faculty of engineering, with further faculties of science, arts, and business. Each faculty would then typically further subdivide into more specific specialisations. The faculty of engineering would typically contain individual departments of electrical, civil, mechanical and other engineering and engineering related disciplines. A police forensics department might include ballistics, DNA, and fingerprinting specialisations. Generally, all large organisations tend to naturally divide into functional specialisations. A functional manager will head each functional group. The extent to which this occurs,

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and the number of levels over which the specialisations develop, depend primarily upon the size and complexity of the organisation. Power boundaries run horizontally throughout the system. The system as a whole tends to develop a power structure that can be represented as a triangle. There are large numbers of individuals at the bottom of the power structure, with diminishing numbers of increasingly powerful individuals above them. At the top of the triangle, there are relatively few individuals in positions of great power. The board of directors of a large multinational company may only comprise of twelve members. However, the whole organisation may employ thousands of people. Taking a university as an example, each department will be staffed by a head of department, senior lecturers, lecturers and research associates. The head of department is the functional manager (at least at department level) and also at the tip of the power triangle. Large organisations therefore tend to be sub-divided by vertical (functional) and horizontal (power) boundaries. Segments are created where two power boundaries and two functional boundaries define a specific grouping. In a university, typical segments would include lecturers in civil engineering, and lecturers in mechanical engineering. These two groups operate at the same power level but within different functional boundaries. Another example could include research associates and senior lecturers in a department of mechanical engineering. These groups operate within the same functional boundaries but at different power levels. Internal project management acts to reduce the barriers to communication and cooperation between these organisational islands. An internal project manager sets up a project team, which comprises several members of different functional groups. In a university, an example might be an inter-departmental degree, which uses lecturers from several different departments. A course in civil engineering project management would include teaching by lecturers from several different departments. These lecturers would teach on their own departments programmes, and on the inter-departmental courses. This approach obviously makes better use of individuals as resources. Individuals in an IPM structure work on both project-based objectives and on functional-based objectives. These individuals have two sets of objectives and two sets of allegiance. They report to two separate section heads. In the project sense, they report to the project manager, while in the functional sense, they report to the functional manager. Their time is usually booked for a combination of project and functional responsibilities. When they are not working on the project, they can work for the functional group, and visa versa. 2.3.3 Project sponsor and interface management In an internal system, the project manager and the functional manager are both using individual employees as a shared resource. This means that there is a risk of direct competition between the project manager and the functional managers over resources. Competition within the organisation, provided it is healthy and constructive, is to be encouraged. However, there is always a risk that this competition over resources could become destructive, especially if either the project or the functional team is put under increased pressure for short-term results.

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It is therefore important that this possible conflict and destructive competition between the project manager and the functional manager is monitored and controlled. This is done, in most internal systems, by introducing a project sponsor. The project sponsor acts as a moderator on the project manager and the facilities manager. In order to do this the project sponsor must have executive authority over the project manager and the functional managers. The project sponsor must be prepared to adjudicate in disputes and to allocate resources and make executive decisions as required. The project sponsor is often a director and usually reports directly to the chief executive officer. The tendency of all large organisations to evolve organisational segments creates a related tendency towards communication restriction. The horizontal and vertical boundaries running through the system act as barriers to communication and co-operation. In a university, there may be no obvious need for communication between lecturers in civil engineering and those in building engineering and surveying. The boundaries of each subsystem act as an interface and as a barrier to communication. These interfaces could be physical, in the sense of a physical distance between two university departments. They could also be psychological, in the sense of the development of professional sentience, or tendency to associate with, and relate to, a specific group. One of the key requirements for an internal project manager is good interface management skill. Interface management is the management of the processes of communication and action across and within the various organisational interfaces. In its simplest sense, it requires that good communication systems be set up so that information flows rapidly and accurately between the various components of the project team. This may sound simple and straightforward. However, it can be a very complex operation on, for example, large international projects where a large project team is physically separated by large distances. The interface management system has to ensure that all information is identified and controls are put in place to ensure that all information goes to the correct people and within a certain predetermined time. The information is then monitored to make sure that any necessary action is taken and the information is sent on to the next stage of the process. 2.3.4 Other organisational structures The divisional and matrix organisational structures (Figure 2.5) are now emerging as recognised organisational approaches within which internal project management services can be delivered. The divisional approach suits many medium and large sized construction organisations in that it reflects the differing specialisms and services that such organisations seek to offer to their clients. As the diagram (see below) indicates it can lead to inefficiencies in that each division could replicate the specialist areas of staff expertise. The matrix system has been developed to gain the benefits of the functional and divisional approaches.

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Divisional Structure

Figure 2.5: Other internal project management structures The matrix approach draws staff vertically from the functional specialisms within an organisation and allows for the most flexible deployment of resources. This is because this approach can ensure that the most effective use is made of any specialist knowledge and skills that are within an organisation to achieve a projects declared success criteria. This approach is especially relevant to construction projects as it suits organisations that are involved in projects of short duration and allows more than one project to be undertaken at any one point in time. This capability reflects the working practices of many organisations engaged on construction projects. The capacity of the matrix approach to provide continued opportunities for staff to strengthen their skills and expertise allows them to develop their careers because of the continuity and stability it offers. This matrix approach is often recognised as being the approach that provides for the efficient delivery of any services to clients and it can ensure that the organisation has the capacity to put in place effective knowledge management approaches that would allow it to become a learning organisation. However, it needs to be recognised that individuals working within a matrix structure to deliver project management services can find that they need to respond to two managers and this potential to be pulled in two different directions can cause real tensions to the individuals concerned. This is termed interface management and is something that the skilled project manager needs to be aware of and be able to manage. Students need to read the material in Burke (2003, p.288-295) for a fuller treatment of the advantages and disadvantages of the differing forms of project management organisational systems. Alternatively read the material in Meredith and Mantels book (p.189-203). Students need to be aware that different authors seem to have different approaches or terminologies for different forms. However, the three basic structures of functional, project and matrix is common in most books.

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Self assessment questions: 1. Why do organisations naturally tend to separate into functional sub-divisions? 2. Why do these sub-divisions restrict organisational efficiency? 3. How does internal project management offer a measured solution to this problem? 4. Compare and contrast the functional, divisional and matrix approaches to project management service delivery and recommend an approach that would suit a small sized construction company providing general building contracting services to clients.

2.4 External project management

External project management tends to be more applicable to smaller organisations. It is a far more flexible approach and is much more suited to organisations with variable workloads. This is the approach that is most often adopted to deliver construction projects. Such projects are most often delivered by organisations which are small in size and who undertake only part of the entire project. However, this approach can present problems for project management systems as many construction projects are undertaken in short time periods. This does not allow sufficient time for the projects participants to develop any sense of being part of a team. This aspect of teambuilding and developing a sense of shared objectives is a central theme in successful project management and remains a real challenge for construction project managers to overcome. In an external system, different consultants act as agents on behalf of a client. Some or all of the consultants could work for different organisations. The external project manager, similarly, could work for a specialist project management consultancy, and could offer overall project management services, including control and co-ordination of the design team, as part of the management package. A typical example of a simple external project management system is shown in figure 2.6. This simplified external project management system can be developed and represented as a an organisational breakdown structure (OBS) and included as an information source within the strategic PMP document that consultants can be asked to prepare as part of the bidding process for projects. The OBS can be developed in detail to match the level of information available about a project, in terms of the types and or names of organisations engaged to contribute particular aspects of the project. The key issue to appreciate is that the details included the key project management tools and techniques should match the level of project details available at the time that a SPP is produced. It should be noted that the OBS and its presentation should follow certain accepted conventions. The next section sets out the type of information that needs to be inserted into OBS

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Figure 2.6: A typical example of a simple external project management system

2.4.1 Multidisciplinary and shared loyalty group characteristics An external project management system uses consultants from different professional practices. These groups are put in place for relatively short periods of time, working on relatively complex projects. External project management systems are therefore more susceptible to the problems of differentiation and sentience (see section 2.2) than internal systems are. External project management systems also tend to be subject to more open and competitive fee structures than internal systems. Competition for professional services has reached such levels that it is no longer possible to adhere to fee scales and quotations of fee scales less significant percentages are the norm in fee competitions that some types of clients use to find and appoint their consultants. Negotiated fees are now generally accepted as normal. Fees vary greatly depending on the type of consultancy, the type of project, competition and other factors. Typical European community percentage fees for the most common types of construction consultants could be: Pre-contract 3.0% 0.5% 1.0% 1.0% 1.0% Post-contract 2.0% 0.5% 1.0% 1.0% 0.5% Total 5.0% 1.0% 2.0% 2.0% 1.5%

Architects: Quantity surveyors: Project managers Civil/structural engineers: Building services engineers:

Pre-contract work involves all design work carried out, up to the award of the contract to the main contractor. For the architect this would include all working drawings,

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schedules and specifications. Post-contract work covers all site inspections, additional design works for variation orders, issuing variation orders (in some cases), issuing new design works and so on, right up to the issue of the certificate of practical completion. 2.4.2 Contractual linkages In external systems, there can be a wide range of contractual arrangements linking the whole system together. Typical contractual links would include the links between: Client to project manager, and client to other design team members. Client to main contractor Client to service authorities Client to nominated sub-contractors and suppliers Client to local authority Some of these contractual links are based on standard forms of contract with clear terms and conditions. Others are based on professional commissions that offer professional services based on codes of practice provided and maintained by the relevant professional bodies. 2.4.3 Non-contractual linkages Contractual linkages provide the framework for the operation of the overall system (both internally and externally). However, there are two other primary types of linkage within both systems, namely (i) authority links, and (ii) communications links. Authority links define the power and control structure within the system. Most representations adopt a top-down approach showing authority emanating from the chief executive officer or equivalent down through the system. Communication links define who talks to whom. This may seem trivial, but communication management can be a big problem on major projects, where hundreds of people could all be talking to each other at once. Authority links Authority links define the power and control structure that operates within the system. In most cases, the client would be at the head of the structure. In most internal systems, the functional manager and project manager would operate at the same power level. The project sponsor would usually be one level up: so as to have executive authority over all members of the functional and project teams. Authority links within an external project management structure would normally be vertical in nature. Communication links Communication links are very important. Bad communications is one of the main reasons for failures in projects. Communications and their efficient management is a central task of the construction project manager. Communications in a construction project can be either formal or informal in nature. All formal communications around a construction project team should flow through the project manager. Systems that reflect this characteristic ensure that that the most appropriate person or organisation can then be tasked and their response coordinated and planned for optimum benefit of the project. Communications both formal and informal tend to be horizontal in an external project management system.

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2.4.4 The process of bidding With external systems, the most usual way of resourcing project teams is through some form of bidding. Individual project managers are allocated to projects and are invited to develop a resource allocation proposal. In this, the project manager usually has to calculate the approximate costs of the labour, plant and materials required for the project to be executed. This usually involves consideration of availability windows for key staff, and calculation of estimated person hour requirement for individual sections of the project. For example, the project manager might estimate that the preparation of the scheme design drawings would require 250 architect hours, 35 quantity surveyor hours and 12 engineer hours. The project manager will have individual hourly rates for these staff, and can therefore calculate individual and overall fee totals for internal staff. These hourly rates may or may not contain adjustments for overheads and profit. A similar process is applied to materials and plant. The bid is then presented to the project sponsor for relay to the clients. The bid may be accepted or rejected. If rejected, the consultant project managers would need to look elsewhere for their work. A similar process is executed for offering an internal system of project management. If the final bid is rejected by the project sponsor in an internal system then the project manager would have to go back and look at ways of reducing overall costs. This could include reducing overhead and profit allowances or re-estimating person-hour requirements. The internal client would have to consider the bid in terms of internal recharging, and make an evaluation of the attractiveness of the bid in terms of functional and project team objectives. Each individual in the system is a member of both the project and functional teams. It is important that times spent on individual activities (and therefore costs) are charged to the correct project or functional cost centre. Large internal project management systems tend to do this via electronic timesheet recording systems.

Self assessment question: 1. How does external project management differ from internal project management?

2.5 The purpose, use and main sections of a strategic Project Master /Execution Plan (BS 6079)
2.5.1 Generally The significance and use of a strategic project management plan (PMP) or project execution plan was set out in section 1 of this module. This section looks in more details at the principal sections set out in BS 6079 that need to be considered when developing such documentation for construction related project management.

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2.5.2 Generic or strategic project management plan to BS6079 (i) Preliminaries (a) Title page Typical details to include on the SPP title page would include: Project title and code Names of issuing authority, client, project manager Signature block with signatures of client, project manager and any authorising bodies (for authority) Configuration management control information, either printed or bar-code giving:
Unique document number, Date of issue Revision, amendment or update numbers Level of security and restrictions on access Document holder identification code

(b) Foreword This is usually a brief summary of project background information. This could include references to:
Land ownership Previous feasibility report Restrictions on design (such as height) Previous site investigation reports Assumptions Specific considerations (such as roads protestors)

(c) Contents, distribution and amendment record Typically:

Table of contents Glossary of terms List of document holders Amendments List of tables and figures List of documents enclosed Security/clearance classifications

(ii) Introduction Typically:

General works description Overriding timescales and limits Limitations Security systems

(iii) Project aims and objectives This section would typically define the project success/failure criteria. These are the measurable levels of performance by which the success of the project can be judged. Obvious examples would include objectives for time, cost and quality. In most cases, some can be set as contractual terms or conditions (e.g., date for completion) and others can only be aimed at (e.g., tender sum). Typical examples would be: Time limits
Appointment of consultants Date for issue of contract documents Date of possession Defects liability period Date for commissioning and hand over Design period Dates for return of tenders and award of contract Date for practical completion Date of Final completion Provision for later dates (decommissioning etc.) as required

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Design cost limit Individual element cost limit (by WBS elements).

Construction cost limit

Quality requirements
Quality statement Quality plan Quality assurance requirements Specification for workmanship and materials

Others
Sustainability / Environmental Political etc. Legal health and safety

Success and failure criteria can be inherently linked. For example, in most forms of contract, the client can insert separate contractual dates for giving possession of the site to the contractor and also other dates such as the date for practical completion. The amount of time allowed between these limits is a direct function of cost. This period is often knows as the contract period, and generally, the shorter it is, the greater the cost of the project. If the contract period is allowed to extend, the cost for completion will generally decrease to a certain point, after which it will begin to rise again. This kind of cost time relationship will occur on any project where there is some form of fixed overheads. (iv) Project policy The policy should clearly define the aims of the authorising body in terms of specific aims and objectives. The opinions and standing of the authorising body should be clearly stated. Typical specific areas would include:
Environmental policy Health and safety policy Audit and recording policy Dispute handling and resolution policy Personnel policy Quality management policy Security policy Authorisation policy (see below) Other specific policy statements such as status of this project in overall portfolio

(v) Project approvals The project authorisation policy should be defined. This would typically include:
Authorisation procedures and validation Authorisation limits of authorising bodies and individuals WBS elements which require authorisation Levels of expenditure which require authorisation Procedures for external authorisation (e.g. building warrant) Authority of change control panel Authorisation timescales Identities of authorising bodies and individual

Authorisations can be a major element is some projects. Projects where the client is a central or local government department tend to require relatively complex procedures for authorisations. These projects tend to be funded using public finance, and rigorous bureaucratic control and audit procedures may generate complex authorisation procedures.

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(vi) Project organisation This section sets out the organisational structure of the project. It should show all relevant external bodies and identify all component interfaces. This section would contain the main Organisational Breakdown Structure (OBS). Typical sections would include:
Full OBS Authority links Contractual links Interfaces with external authorities Staff training facilities and programmes Definition of position of project manager within the overall structure Communication links Interfaces with internal components Essentials of a suitable interface management system (IMS) Meetings structure

(vii) Project harmonisation Project harmonisation is a more clearly defined and structured approach to developing an interface management system. This section would be developed on more complex and/or international projects. Typical sections would include:
Full OBS Authority links Contractual links Interfaces with external authorities Definition of position of project manager within the overall structure Communication links Interfaces with internal components Detailed Interface Management System (IMS) Identification of principal interface members Definition of cross-interface communications

(viii) Project implementation strategy This comprises of a summary of the project management techniques and tools that are to be applied to the project.
Method of preparation of Schedules and networks Estimates and cost plans Quality plans Safety plans Definition of configuration management system Cost account code system WBS structure and operation and links to cost management systems Systems integration Management reporting system (e.g. CAVAR)

(ix) Acceptance procedure This section details the methods by which the project manager demonstrates that work packages have been successfully completed suitable for acceptance by the client. Acceptance procedure may seem straightforward, but it can be a highly complex process in the case of a complex client. Typical examples would include:
Inspection procedure Practical completion acceptance criteria Certificate of MGD acceptance criteria Procedure for pre-hand over inspection Procedure for assembly and correction of schedule of defects Final certificate procedure

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(x) Programme management This section would include all the networks and schedules that are developed in order to allow accurate programme management. Typical levels of schedule control would be:
Draft Master Schedule Draft construction (milestone) schedule Individual supplier schedule Design schedule Services co-ordinator schedule

Note: software packages allow individual schedules to be created and incorporated within the DMS, although they can subsequently be abstracted and viewed in isolation. (xi) Procurement strategy The development of a procurement strategy that covers methods of choosing all the appropriate components for the project. Typical considerations would be:
Selection and appointment of NSCs/ Suppliers Selection and appointment of other external authorities/bodies Arrangements for international working Quality control. Risk management Availability, reliability and maintainability Selection and appointment of design team

(xii) Contract management This section would contain recommendations on contract management such as:
Corporate contracting policy Form of contract recommended or chosen Contractual responsibilities Specific areas of import such as: Payment methods and obligations Warranties Extension of time Direct loss and expense Liquidated/ ascertained damages Determination of contract Indemnities Intellectual property rights Configuration management. Types of contract available/suitable Contractual risks

Award and administration of sub-contract work Testing and acceptance criteria.

(xiii) Communications management This section would summarise the communication system to be used within the project. The communications system should allow for different classifications of information. Typical communications management systems would include provision for:
All formal communications to go through project manager Classification system for status of individual communications

(xiv) Configuration management The configuration management system is the method for ensuring that information flows around the system as efficiently and effectively as possible.

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All system drawings, schedules, specifications and other related material should be formed into a hierarchical structure to the lowest level required (an information breakdown structure or IBS), and be allocated a bar code or other form of unique identifier. Each individual or body within the OBS must also have a unique code and status. Modes and types of communication media should be specified together with procedures for receipts and proof of transmission. (xv) Financial management The financial management system should allow for earned value analysis to be the prescribed cost evaluation and control tool. This section should include at least the following sections:
Estimating methods Financial philosophy (e.g. PFI) Management reporting system (e.g. CAVAR) Sources of finance Cost account code system EVA methods and procedures (e.g. ACWP, BCWP, BCWS)

(xvi) Risk management

Evaluation of the nature of project risk Risk identification What could go wrong? How likely is this to happen? What would be the consequences? Risk quantification and reduction. Risk management plan

Response to risk

Project risk will obviously vary from project to project, and perceived levels of acceptable risk will depend upon numerous factors, including client characteristics. Value and risk management applications, such as value management workshops, are increasingly being seen as basic project management tools. (xvii) Project resource management This section will vary depending on the type of OBS. The management of the project resources will vary as a function of project complexity. Typical details would include:
Personnel resources Material resources (if applicable) Resource costings Lines of authority and accountability Technical management Equipment resources Resource availability windows Project sponsor details (if appropriate) Details on utilisation of scarce resources

This section covers the management of all technical aspects of the project including:
Specifications Prototype evaluation In-service support Design limitations Technical criteria for gateway progression

(xviii) Test and evaluation This section should detail any testing or evaluation of any aspects of the project. Typical construction areas for testing would include:
Concrete crushing strengths Window weather performance evaluation (e.g., Macdata) testing

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 Commissioning of services Low pressure hot water systems Pressurised systems Air conditioning plant Drainage Specific testing requirements Steel/aluminium cladding corrosion Fasteners Potential corrosion cells Pull-out tests for fixings Fire integrity testing/modelling

(xix) Reliability management Project components must be available, reliable and maintainable. Availability, reliability and maintainability (ARM) as a combination of characteristics are necessary for the successful delivery of any project. Typical characteristics would be:
Availability Resources currently available (e.g. special bricks) Availability of acceptable alternatives Waiting time Restrictions on competition Reliability Resources are reliable (conform to BS) Proven track record Insurance backed guarantees Warranties Maintainability. Ease of safe access (CDM Regulation) Maintenance costs v Capital costs Projected lifespan (lifespan modelling) Co-ordination of maintenance cycles

(xx) Health and safety management This section would contain all relevant considerations for compliance with current CDM regulations. (xxi) Environmental issues Environmental issues are becoming increasingly important for all projects. Statutes are increasingly requiring clients to allow for use of environmentally friendly materials and for eventual recycling and re-use. Typical areas of consideration would include:
Exclusions Non-renewable source (e.g. Philippine mahogany) Non-biodegradable materials (e.g. PVCu windows) Greenhouse gases (e.g. CFC propellants) Non-recyclable plastics (e.g. thermosetting PVC) Atmospheric pollution (e.g. no fires) Restrictions. Noise pollution (e.g. working hours) Mud and dust (e.g. lorry wheel washers) Disposal (e.g. asbestos and licensed tips) Waste water (e.g. slurry/wash water) Cost implication Land fills (e.g. motorway cut and fill) Recycling

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Recycling preferences/policy (e.g. paper) Design for product recycling (e.g. Volkswagen) Design for change of use (e.g. flexible manufacturing systems)

(xxii) Integrated logistics support Integrated logistics support (ILS) may be required on highly complex projects where dangerous processes are carried out, or where failures or problems during construction or execution could cause an emergency situation. ILS consists of the development and maintenance of emergency facilities, which provide an instant response if an emergency situation arises. Examples would include:
Maintaining rescue diving and resuscitation teams at all times when north sea divers are working under water. Maintaining airport emergency fire services at all operational airports. Maintaining a full accident and emergency team at all central admissions hospitals Maintaining a full emergency containment squad during the commissioning and powering up of a nuclear reactor.

(xxiii) Project Team Organisation Large projects need a Whos Who? guide to all the participating members of the project team. In large projects, this listing can include hundreds of people. Typical entries would include:
Staff directory Project management Architecture Civil and structural engineering Services engineering Landscape architecture Main contractor Engineering services co-ordinator (ESC) Nominated sub-contractors Nominated suppliers Local authority planning highways street lighting. building control Service authorities water drainage and sewerage power gas telecommunications Central Government development grants tax incentives national infrastructure development Staff organisational chart Full OBS for the project Organisational links. Contractual links Internal interfaces External interfaces Task responsibility Matrix Terms of reference (ToR)

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To define specific responsibilities for individual members of staff. For staff: Specific individual responsibilities Delegated powers Accountabilities Personal ToR drawn up and signed by individual and project manager Subject to individual development (staff) review For project management: Specific programme management charter Accountabilities Personal aims and objectives/bonus statement (v. important!) Periodicity for project reviews For committees and working groups Formal meeting structure Individual committee ToRs Periodicity of meetings Management reporting systems This defines the mechanism by which the PM reports to higher management/client. Typical entries would include: Programme status report (PSR) Cost account variance analysis report (CAVAR) Quality status report (QSR) Safety status report (SSR) These reporting systems would be defined in terms of frequency and detail. Project diary This section forms a day-to-day record of individual events that occur in relation to the project. A project diary serves several vital functions: Audit trail Accountability Dispute diagnosis Record of communications and agreements Decision tree analysis Record of what was decided and why Project History The project history reports on the strategic development of the project. This is an on-going section which compares actual progress with planned and reports on variances.

Self assessment questions: 1. What is the purpose and contents of a strategic PMP/PEP, who is responsible for its preparation and when is it likely to be prepared 2. Identify the main sections of a PMP/PEP that address issues related to project success criteria, project organisation, project cost and quality management and indicate the typical issues that need consideration in relation to a project of your choice.

2.6 The PMP/PEP and the project planning process

The strategic PMP/PEP is the first planning document prepared by the consultant project managers for the construction project. This initial document can be prepared as part of the bidding competition for the appointment of consultant project managers for a project.

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It is usually prepared as soon as the main elements of the project brief have been agreed although it may not be completely finalised. The PMP/PEP is often prepared before the initial designs for the project have been completed and is used to address key, strategic issues that are needed for planning purposes, such as, 2.6.1 The Statement of Work (SOW) The Statement of Work (SOW) is the descriptive statement or document that defines the end results or overall content and limits of the project. In effect it starts the process of scoping the project. In practice, nearly all projects have a SOW, as they cannot be efficiently managed or executed unless the managers and administrators can define the boundaries and limits of the project. The SOW includes all the work that has to be done in order to complete the project and is based on the developed brief for the project. However, the project cannot be planned or controlled at this level as it is too big. It is necessary to break the whole down into individual components that can be individually evaluated and managed. This may require the project to generate more than one statement of work to reflect the level of detail required. When preparing a strategic PMP the consultant project manager will develop a statement of work that is similar to a description of works. There is link between the activities necessary to generate a SOW and the activities needed for the briefing process and the activities needed for scope management. The next step in the project planning process is to break this SOW down into smaller units so that eventually it can be used to specify actual works required in separate work trades packages. In planning the project there is a clear relationship between the SOW and the next project management planning tool, namely the work breakdown structure (WBS). Kerzner (2006) p.406-411 indicates that the SOW is one of four elements related to project scope and its management. Such elements address all levels of project detail and can be used to detail specific tasks or groups of tasks, (work package specifications), through to high level narratives used to define the project at initial or high levels of project planning needed at the strategic PMP document preparation stage. 2.6.2 Work Breakdown Structures (WBS) A work breakdown structure (WBS) is simply a representation of how large tasks can be considered in terms of smaller sub-tasks. The WBS is strictly process related to the tasks required to complete the project. It is a fragmented hierarchical diagram showing the inter relationships between the differing tasks required to be executed to deliver the project. A WBS is at the core of a projects control systems, especially its cost control systems. At the start of the planning process for a project, when a strategic Project Master Plan/Project Execution Plan (PMP/PEP) is being produced it is not possible to generate a complete set of tasks required to deliver a construction project. Strictly speaking the initial WBS introduced into the PMP as an initial planning tool is in fact a product breakdown structure (PBS). A PBS is a statement of what needs to be done to produce the construction it is product related and not process related as is a detailed WBS. The WBS used at PMP stage is related to the SOW and fragments the project

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down into increasing levels of detail. Most WBS generated at the PMP production stage are generated from level 1 to level 3 in terms of detail (see Figure 2.4). For example if you want to redecorate your house, you might want to work out in advance how long it is going to take and how much it is going to cost. You cannot do this by considering it simply at the highest level. You therefore split the large element up into smaller ones. The most obvious second level split is by room. You might then go down to the next obvious level of the WBS and isolate individual decoration elements such as paint and carpets. You now have a WBS which goes down three levels (1-3) as shown below:

Figure 2.4: A simplified high level WBS arrangement (levels 1-3) You can now measure up individual sizes and (if you are cost planning) by using unit rates, you can calculate the cost of each element at WBS level 3. Obviously, the cost of any element at level 2 should equal the sum total of the individual costs that emanate from it in level 3. This is the basis of roll-up analysis on more complex projects. Most WBS arrangements operate down to about six levels. The project manager operates within whatever level is most appropriate for the job in hand. For preparing detailed estimates of variation order costs for example, it may be necessary to operate at level 6. For general valuation purposes, it may be possible to measure and operate at level 3. Different authors recommend different levels of WBS breakdown, and use different terminology. Kerzner (pp. 415) identifies the individual levels as: Level 1: Total programme Level 2: Project Level 3: Task Level 4: Sub-task Level 5: Work package Level 6: Level of effort

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Some authors indicate that the WBS should start at level 0 and others at level 1. The principal is that the that the WBS at the stage of PMP preparation needs to focus on the main elements or products included in the project and be in sufficient detail to match the level of project detail available. A WBS is clearly an important project management tool. It identifies discrete work packages that can then be considered separately in terms of time, cost and quality control. Kerzner (p.415) indicates that the WBS can be used as the basis of the task responsibility matrix Network scheduling Costing Risk analysis Organisational breakdown structures Coordination of objectives Contract, budgetary and programme control A further example of how to break a project down into its constituent parts is shown below. Note this example of a WBS does not contain any coding. This is an essential element of a WBS if it is to be a central planning document for the project. Students may like to devise and insert a numerical coding system for the WBS shown for the construction of a bicycle shown below.

Figure 2.5: An example of a WBS (levels 1-3) for the construction of a bicycle It should be noted that the example WBS shown above is missing some essential features. You should pause and reflect a moment to identify what the missing features could be? In construction projects it is always necessary to commission a design for the project and the construction project manager always needs to consider the implications for health and safety factors related to the execution of the project. It is expected that Heriot-Watt University Unit 2-23

most WBS for construction projects would reflect these issues at the strategic project management planning (PMP) stage. 2.6.3 Organisational Breakdown Structures The strategic PMP document takes the SOW and the overall procurement approach for the project and produces a diagram that shows the relationship between the different organisations involved in the design and execution of a project. The diagram recognises the principal parties in a contract, namely, the client organisation and the principal contractor and interjects the lead consultant, namely the project manager. Around that core the diagram develops a design team, other consultants, other client advisors, other stakeholders, other specialist sub contractors and specialist supplier organisations. At the stage of the PMP document preparation all information related to the individual organisations contributing to the project may not yet be established. The approach of the practitioner must be to match the level of project detail available to the project managers to the detail generated in the OBS for the strategic PMP. All OBS diagrams need to reflect (i) the lines of direction (power, authority or responsibility), (ii) the lines of contract, and (iii) the lines of communication.

Figure 2.6 Simplified OBS for a typical project using a traditional procurement approach (excluding project stakeholders, other consultants, and differing types of design team organisations) In the UK the normal contractual approach is route all contracts for professional services and building works to the client organisation directly. The project managers may advise on the appointment of other design team members and contractors but do not normally hold direct contractual links to any other organisation than the client. Fig. 2.6 provides an example of a simplified OBS for a project using a traditional procurement approach. It should be noted that the above OBS diagram is in simplified form and the student needs to appreciate that it is essential to match the level of

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project detail available needs to match the details included in the OBS included in the strategic PMP. 2.6.4 The Task Responsibility Matrix A further planning tool that is firstly developed during the preparation of the strategic PMP is the task responsibility matrix (TRM). Again this can only be attempted at a high level (i.e. less detailed) at the strategic PMP document preparation stage and it needs to be appreciated that this planning tool can be re visited to reflect the emergent levels of detail as the planning processes for a project become increasingly more complex. The TRM contains elements such as, general management responsibility, operations management responsibility, specialised responsibility, who must be consulted, who may be consulted, who must be notified, who must approve. This TRM chart provides an essential reference point for relevant project authority/role responsibilities and assists in general communication flows of information around a project. The TRM is a combination of information contained in the WBS (activities/tasks) and the OBS (individual(s) / organisations involved in execution of the identified tasks) that have been developed for the strategic PMP. It has differing formats but typically it can be presented in a simple linear format as follows,
Activity (Ref Nr) Consult stakeholders Prepare brief Develop Conceptual Design Project Manager R R Architect Engineer Contractor Client I I A

I R

Legend: R Responsible I Involve A Approve C Consult The activities listed in the initial TRM included in the strategic PMP document would reflect the activities indicated in the high level WBS and OBS developed as planning tools for the project and should include the code numbers developed in the WBS. The inclusion of such codes aids the coordination of the document and strengthens the emergent communication process for the project.

2.7 Summary
Unit 2 has brought together the concepts, tools and techniques at the core of project management practice. The unit has examined the concept of internal and external project management organisational structures and systems. The unit has looked at the purpose, use and main sections of a strategic Project Management Plan (BS6079) and it has developed develop an understanding of and a practical ability in the use of standard project management tools and techniques such as SOWs, OBS, WBS, and TRMs. Self assessment questions: 1 Evaluate the effectiveness of the hierarchical, divisional or matrix approaches to the delivery of internal project management services for a large

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scale client organisation that employs in-house several differing types of built environment professionals and make a recommendation on which approach would be best to adopt. 2. Explain the following terms and illustrate your answer with appropriate diagrams, (i) Organisational breakdown structure (OBS) (ii) Work breakdown structure (WBS) (iii) Task responsibility matrix (TRM) 3. Scenario A construction project involves the construction of an out of town shopping mall that comprises a main central building over three floors with a central atrium. The main building is to be sub divided into retail outlets and will be heavily serviced. The remaining structures will be adjacent to the main shopping mall and will include (i) a leisure complex with a gymnasium and swimming pool at low level, (ii) a cinema and (iii) a bowling alley with fast food outlets at upper levels. The existing roads and sewers will need to be altered to accommodate the new development and there will be a petrol service station, car parking and hard and soft landscaping incorporated into the scheme. Question Develop an initial SOW that could be incorporated into a strategic PMP to indicate the scope of the work and develop an OBS, WBS, TRM and draft master plan for the scheme. The draft WBS shown in Figure 2.7 has been developed as an aid to help you start the self assessment task. It is not complete and contains errors so use it as a base from which to develop your own WBS.

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Figure 2.7 A partly completed WBS for the project set out in the self assessment exercise question 1

4. A Mini-Case Study (Construction related)**

You are an assistant project manager working for a construction project management consultancy that has been asked to make a bid for the professional project management services on a large project for an international banking organisation. The banking organisation wishes to build its own world headquarters building and other accommodations on an extensive site it owns on the edge of a city. The banks headquarters building will be a three storey steel framed building with glazed facades and a central atrium. The building will be finished to high specification levels. The bank also wishes to develop accommodation for other retail outlets and additional office space. This accommodation will be in two separate two storey steel framed buildings that are linked to the main building by a high level covered walkway. In addition the project will involve the restoration and refurbishment of an existing Georgian two storey grade II listed building that is located away from headquarters building. This building has been unused for some time and has extensive dry rot and asbestos based materials within its structure and fabric. This existing building is to be retained and it will be renovated, refurbished and extended on two floors to accommodate leisure facilities and a crche for the banks employees. Indoor tennis court facilities and a heated swimming pool, sauna, gymnasium and appropriate changing facilities are also to be developed as separate buildings to the new leisure complex. The proposed projects location is immediately adjacent to a wildlife sanctuary and it is in a previously declared green belt around the city. However, the local authority is

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supporting the proposed project and is seeking permission to reclassify the site for development. The site is low lying and is prone to flooding due to the presence of a well established watercourse. The existing road and sewer network will need to be altered to accommodate the project and the local authority are insisting that separate road and pedestrian bridges are also constructed across the existing roads to facilitate entry and egress from the site. Given the nature of the client and the projects location it is likely that sustainability will be one of the success criteria for the project. The initial budget for the project has been informally assessed as being in the region of 400 million. As part of your organisations bid preparation process you have been asked to consider issues related to the development of a draft strategic Project Master/Execution Plan (PMP/PEP). The proposed project is expected to take 45- 48 months to construct on site. Given the limited in-house expertise it is clear that a complete design and construction team will need to be assembled. It is not proposed to use design and build as a procurement strategy and so the client is looking to your firm to recommend an alternative procurement strategy for project delivery. Notes You can make any assumptions that you wish, provided that any such assumptions are reasonable ** Students on the module following courses other than construction management need to substitute a project from within their own discipline area in order to develop the practical skills required for the module

(a)

(b)

(c) (d)

Self Assessment Questions: Explain what is meant by the term strategic project master/execution plan (PMP/PEP) and discuss the main issues that such a plan would normally address. Illustrate your answer by reference to the project circumstances set out in the mini-case study. Produce a diagram that shows an organisational breakdown structure (OBS) for the project set out in the mini case study and include all communication, authority and contractual links together with all organisational boundaries and interface Develop a high level work breakdown structure (WBS levels 1-3) for the proposed scheme set out in the mini-case study. Develop an initial task responsibility matrix (TRM) for the proposed scheme set out in the mini-case study.

Heriot-Watt University

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