Construction Cost Management & The Impact of the Project Schedule on Cost

Part 1: Fundamentals of Project Management By Ted Garrison Garrison Associates www.TedGarrison.com www.StrategicPlanningforContractors.com www.NewConstructionStrategies.com

Introduction
Whose fault are the problems in construction? The real problem is:

You!
In reality it s not about fault but accountability!

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Too Many People In Construction Are Insane!

Albert Einstein: Doing the same thing over and over and expecting to get different results. Therefore, we need to do something different!

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The Program
Part 1 Fundamentals of PM Part 2 Defining the Project Part 3 Cost Managements of Fundamentals

Part 4 How Schedule Impacts Costs Part 5 Risk Management Part 6 Procurement and Subs Part 7 Summary
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Part 1: Fundamentals of PM
Module 1: Challenges to the Industry Module 2: Role of Project Management Module 3: Information Measurement Theory Module 4: What is the Key to Effective Project Manager?
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Module 1: Challenges to the Industry

The way to achieve success is first to have definite, clear, practical ideal a goal, an objective. Second, have the necessary means to achieve your ends wisdom, money, materials, and methods. Third, adjust your means to that end. -Aristotle
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Typical PM Process
Enthusiasm. Disillusionment. Panic. Search for the guilty. Punishment of the innocent. Praise for the non-participants.
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Are You the Obstacle to Change?

#1 Failure to see the need for change: #2 Fail to take action: (It takes courage)
Fear of loss of control Uncertainty about the future Loss of competence Loss of familiarity Surprises

#3 Fail to finish:
Harder than anticipated

Takes longer than anticipated.

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Obstacles to Change
Our beliefs determine how we think and act. Our beliefs may be in conflict with good ideas. Successful people are more resistant to change. Often intelligent individuals attempt to solve problems themselves. Traditional ways are breaking down therefore need change. Instead: Need greater collaboration through dialogue!
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Industry Challenges
Rosabeth Moss Kanter
Secrecy Blame Isolation Avoidance Passivity Turf battles Feelings of helplessness

Solution
Better communication More collaboration Greater respect
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Module 2: Role of Project Management

Project Management is a collection of skills that when used effectively produces better results. But you must understand that planning is more an art than a science. One of the key roles of an effective project manager is being a decisive planner. Objectives:
Optimize the use of resources Deliver high value Minimize risk
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PM is a Management Process That

Creates structure and purpose. (Planning) Identifies & focuses resources. (Planning) Identifies & sequences activities. (Planning) Monitors and controls progress. (Execution)
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A Few Benefits of PM

A system that focuses on priorities.

20% of what you do generates 80% of the results.

Better management techniques. Better tracking techniques. Effective structures for communications. Adds value for the customer.
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Functions of Management
(In reverse order of importance)

#1 - Planning #2 Organizing #3 Staffing #4 Directing # 5 - Controlling

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5 Phases of PM
D e f in e

P la n

E x e c u te The Loop A d ju st M o n it o r

C o m p le t e

E v a lu a t e

Key Elements of a Project Plan

Project requirements (Defining-Part 2) Work Breakdown Structure (WBS Part 3) Schedule (Part 4)
Gantt Chart Network Diagram

Budget (Part 3) Organizational chart (Planning) Operating Procedures (Execution)

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Project Management Myth

Project Management is about tools!
Instead:

People problems cause difficulty in applying tools. Without people skills difficulty in completing projects. Leadership is needed instead of abusing, manipulating, or beating on people.
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Project Management Myth

The workers aren t as good as they need to be. Managers tends to attribute problems to workers instead of looking at systems
Instead:

6 Sigma statistics indicate that people are the problem on 5% to 15% Systems failures are the problems
(Materials, machines, measurement, methods, and mother nature)
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Causes of Problems
Too much work for available resources Constantly changing priorities Estimates based on guesswork In other words Insufficient planning
Best positive way to eliminate variability is through inclusive planning & empowerment. When people participate in planning they tend to restrict behavior to behaviors & activities agreed upon.
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The Answer
Must examine the system Project manager s role is to offer solutions We need to give project managers greater responsibility (of course need to be qualified) Must listen to workers
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SMART GOALS
v Specific v Measurable v Approved v Realistic v Time-bound
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Collaboration with Clients

It creates an environment of open dialogue through trust and mutual respect. Allows you to learn more about your clients the more you know about them the more valuable you are to them. It allows you time to learn and develop innovations that add value. Collaboration is not about partnering or sharing risk But more on collaboration in Part 2
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A Few Trade Secrets of Effective Project Management

A plan must be realistic don t promise what you can t deliver. A good plan manages the expectations of all the stakeholders. Make sure your plan has a way to measure the success of every thing the plan promises often the schedule and budget are easier to measure than softer issues.
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A Few Trade Secrets of Effective Project Management

Get buy in from the key team players. It is just as important to eliminate unnecessary tasks, as it is to make sure you don t miss any focus on the most important 20%. Develop task lists for different types of projects it will save time and avoid mistakes.

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Project Checklist
Valuable tool to avoid forgetting especially under pressure. Should have one for each type of project.

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Module 3: Information Measurement Theory (IMT)

(The material on IMT is copyright material of the Performance Based Studies Research Group at Arizona State University and is provided with their permission.)

IMT is a deductive logical explanation of an event. It includes the use of relative and related data to create information that produces the future outcome of an event.
Dean Kashiwagi, Ph.D. @ ASU

Lessons Learned Through IMT

Don t trust anyone!!! Experience or information has value How we look at life is subjective and may not always be in our best interest It is important to know what we don t know It is important to be able to predict the future outcome
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Lessons Learned Through IMT

You can put yourself in a position where you have no way to win Even though you control your own destiny, it may seem as if you do not if you are not using the right information When you are in a bad spot, it really doesn t matter if you didn t understand, had a bad day, got caught in the wrong place at the wrong time, or deserved it, you are in a bad spot
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Objectives of IMT
Minimize subjective decision-making Minimize data required to accurately transfer info Identify relationships between information usage, processing speed, and performance Identify structure that minimizes the requirements for management Optimize processes by identifying and removing entities which add no value or bring risk
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Deductive Logic
Deductive logic is the redefining or reordering of existing information to define an outcome. It simplifies complex situations, allowing individuals to understand what is going on with minimum information, or without a tremendous amount of education or technical training.
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An Event
Initial conditions Laws Time

Final conditions Laws

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 The more information we have before the event, the easier it becomes to predict the final outcome. The less information we have before the event, the harder it becomes to predict the final outcome. However, the lack of information will never change the final outcome. The information system should minimize decision making and surprises need to do with minimal amount of info since too inefficient to collect all info.
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Cycle of Learning
Perceive

Change

100% Information

Process

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Apply

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Learning Speeds
All Individuals Learn At Different Speeds
Perceive

Change

100% Information

Process

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Apply

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 Typesof Individuals
Perception of Information Perceive
100%

A B C
Time

100% Information

Apply

Process

Change

0%

The Reality
The more perceptiveindividual perceive at a faster rate, changes at a faster rate, and makes more accurate predictions.

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Exercise on Individuals (Type A or Type C)

Type A Type A Type A Type C Type C Type C Type A Type C Type C Type A Type C

Perceives more information Knows their constraints Measures performance Controls other people Manager Emotional Long term planning Works harder Gets surprised Prepared Decision Making

How Does This Relate to Effective PM?

All individuals are necessary in an event No individuals are betteror more important Clients must understand that they have individuals at different levels. All are important. All are necessary for the event. Those who change at a slower rate are constrained by their capability. The rate that an individual changes is always the right rate for that individual. Information System must not threaten any individuals (or they will resist the system)

IMT Review
Events happen only one way Events are predictable with all information. More information results in more accurate predictions (but too inefficient to collect all information) An Information System should pass the minimal amount of information There is no wrong event and everyone is needed in the event Reality is reality regardless of someone s bias or perception (c) 2008 Garrison Associates

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IMT Review
Measure yourself and your organization performance Efficiency is doing less work Don t make decisions (minimize decision ) Minimize the Type Ccharacteristics to become more efficient
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Module 4: What s the Key to Effective Project Manager?

Project Management is about leadership, not about tools! It s about being proactive not waiting for things to happen. It s about being a visionary!
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7 roles of a Project Manager

1. 2. 3. 4. 5. 6. 7. Charismatic leader. Proactive change agent. Effective communicator. Decisive planner. Committed administrator. Creative problem solver. Dynamic entrepreneur.
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Self-Evaluation
# Option A Check A Option B Check B 1 2 3 4 Do you administer? Do you copy? Do you maintain? Do you focus on systems and structures? Do you worry about how and when ? Do you always worry about the bottom line? Do you maintain the status quo? Do you do things right? Total # of A checks Or do you innovate? Or do you originate? Or do you develop? Or do you focus on the longrange perspective and people? Or do you worry about what and why? Or do you look for the horizon?

Or do you challenge the status quo? Or do you do the right things? Total # of B checks

Strategic vs Tactical Thinking

Strategic thinking looks at the big picture and therefore focuses on the what.
The opposite of sub optimization Focuses on doing the right thing Improved effectiveness

Tactical thinking focuses on the how

Focuses on doing things right Improved efficiency
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What It Takes to Be a Leader.

What is leadership? Leadership: the art of getting someone else to do something you want done because he wants to do it. General Dwight Eisenhower

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Why Is Leadership Important?

Leadership is no longer the domain of top executives but virtually every management position. People don t like to be managed. They want to be lead. When it s done right it s a competitive advantage. Project intensity has made in a necessity.
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Difference Between Leadership and Management

Leadership is about aligning people instead of controlling. Management focuses on maintaining systems and processes through control.

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Necessary Skills of PM s
Basic tools of project management. Advanced PM skills. People skills. Human resource skills. Business skills. Other skills.
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Project Manager s Responsibilities

Understand and insure the establishment of the Strategic Goal .
Make sure all stakeholders are identified. Understand all stakeholdersrequirements. Resolve any conflicts or contradictions in those requirements. Become a Rainmaker .
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Project Manager s Responsibilities

Develop a motivating climate:
Create a vision. Develop mutual trust insure fairness. Build rapport through mutual respect. Create win-win environments

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Project Manager s Responsibilities

Develop a productive climate:
Insure team goals exist and are clear to everyone. Insure individual goals are established and understood.
Meaningful work

Be a supportive leader.
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Who Is the Most Important Person in Your Company?

The person standing in front of the customer at that moment! Why? Because at that moment that person is the company!
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PM s Role Is to Add Value for the Client

Understand the client Understand the client s true needs Act like the expert you are suppose to be Properly define the project
More than specifications and plans Providing added value stops you from being a commodity provider
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Project Manager as a Rainmaker

Teach clients to want what they need Deliver your product the way the client wants Deliver your product when the client wants it Give your client a little more than they expect Remind client of the value received Almost be a client advocate Ask to do it again
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The Ability to Lead

The ability to lead requires three elements:
Competence Credibility Relationship

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Review Your Planning Skills

1. I meet with others to coordinate plans, activities, and priorities. 2. I schedule for unexpected events and interruptions. 3. I involve the work group to establish goals that support our project s direction. 4. I plan ahead to ensure that sufficient resources are available? 5. I establish deadlines to review progress toward accomplishing goals.
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Action Steps

Please turn to the inside of the front cover of the resource guide. Write down 1 to 3 action steps that you want to immediately implement from Part 1 of this program.