2003 AACE International Transactions

CSC.12

PEER REVIEWED PAPER

Proactive Project Controls

Nicholas J. Candela

roject controls is used almost as a buzzword in our industrywithout much consideration for its depth or meaning. We all know we need it for our capital projects, but do we understand it? Do we truly know what we need or how we want to control our project? This article is aimed at answering these questions and making a case for the establishment and implementation of a truly proactive project controls system such as that developed by Paragon Engineering Services Inc.

REPORTER VS. FORECASTER There are two main types of project controls people: the reporter and the forecaster. The reporter is the type who comes in after the fact, updates the schedule and cost report with actual data, and, two weeks later, tells you what you already knew two weeks ago. This function meets the criterion of having project controls on your project and gives you the charts and graphs necessary for management reports. In contrast, the forecaster takes a proactive approach by concentrating on the future. Although the past must be reported and analyzed to identify positive and negative trends, the future must be studied and predicted. Although people may try, they cannot change the past. They can, however, greatly affect the future.

PROPER USE OF TOOLS What is necessary to implement a proactive project controls system? Strangely enough, the five main elements of proactive project controls are the same as those used for reporting: schedule, cost, progress, workhours, and change management. The difference is in the way these tools are used.

SCHEDULE Establishment of a schedule starts in the early project planning stage. The task details must be parsed into small bite sizes, or measurable pieces. A good rule of thumb is anytime a deliverable involves a transfer of responsibility, this transfer should be tracked as a new activity. In other words, each activity should have only one responsible person, department, or work group. When you

analyze the schedule, this rule will enable you to know exactly where the deliverable is, who is ahead of schedule, and who is causing delays. While this approach can result in tracking a large number of activities, we must remember that truly proactive project control is not an easy process. The schedule must also be a true critical path method (CPM) document. In a CPM schedule, all tasks are logically tied together, with one start activity and one end activity. All project requirements must be included in the schedule. If one system must start one month prior to another, the schedule should clearly reflect this logical relationship. This level of detail, commonly referred to as Level III, allows accurate calculations of float, which refers to any flexibility in regard to start date and duration for a specific activity. Even though the schedule may only be issued every two weeks, critical progress data must be maintained daily throughout the project life. This continual updating allows the schedule to serve as a proactive tool that will identify potential problem areas immediately. If, for example, the schedule is only updated once a month, and it takes a week for updates to be made and a couple of days to identify a potential problem, that problem may be six weeks old before it is addressed. A proactive schedule requires that each team member continually focus on the future. Each person needs to look at his or her future activities and identify any roadblocks that will prevent progress against the scheduled activities. I like to use a one-month look-ahead schedule and discuss progress and barriers during weekly team meetings with representatives from all involved disciplines. This approach makes every team member aware of other members needs and progress. The project schedule should be built utilizing a standard coding structure, allowing it to roll up to Level II (semi-summary) and Level I (management summary) documents, following the structure of cost reports, progress reports, and workhour reports, which are discussed below (see Figures 1-3). Standard templates can be created and used when building the schedule; however, one must keep in mind that the templates should be built with the assistance of each responsible person. Project controls personnel are the keepers or maintainers of the schedule, not the owners.

CSC.12.1

2003 AACE International Transactions

CONTRACTS REQUIRMENTS

SEMA 4 ACCOUNTING SYSTEM

VANTAGE RPM

RESOURCES

PCM S (COST)

LEVEL I SCHEDULE

BUDGET

NETWORK DIAGRAM PRI MAVERA P3

LEVEL II SCHEDULE

PPM S (EARNED VALUE) DURATIONS

LEVEL III SCHEDULE

DELIVERABLES STATUS

TIME ENTRY LABOR HOURS

Figure 1

PROPRIETARY TOTAL PROJECT ESTIMATES

PARAGON ESTIMATING SYSTEM

PARAGON PROJECT COST REPORTS TIME ENTRY PAYROLL SYSTEM SEMA 4 ACCOUNTING SYSTEM PARAGON COST MANAGEMENT SYSTEM

PROJECT TOTAL $ REPORTS MANHOUR REPORTS PO & SC COMITTMENT REPORTS CHANGE MANAGEMENT REPORTS FORECAST VARIANCE LOG INVOICE LOG

PROPRIETARY DATABASE MANHOUR TRACKING

ACCOUNTING INVOICING

MATERIAL TRACKING

SCHEDULING

PRIMAVERA PROJECT SCHEDULES CLIENT PROJECT COST REPORTS

VANTAGE PRM DATABASE PROCUREMENT EXPEDITING

PROGRESS TRACKING

PROPRIETARY DATABASE ENGINEERING & CONSTRUCTION PHYSICAL PROGRESS BASED ON DELIVERABLES

Figure 2

CSC.12.2

2003 AACE International Transactions

TIME ENTRY LABOR HOURS

DELIVERABLES STATUS

PPMS (EARNED VALUE )

PRIMAVERA P3

PROGRESS CURVES

MONTHLY REPORT

Figure 3 COST REPORT The basis for the cost report, much like the schedule, must be built during the early project planning stages and should be detailed, with only one owner per activity. Just as just one person should hold schedule responsibility for an activity, budget responsibility should be allocated to the same individual. When management assistance is needed, particular attention should be given to providing management with all necessary information from all applicable areas. The cost report should be traceable to the budget and should cover the entire project scope, including items that may have been missed during the initial estimate or added to the project after this estimate was completed. Such items, naturally, will have zero dollars allocated in the budget, but their cost will be reflected in the project forecast. The cost report should also contain a budget transfer log as well as a forecast variance log documenting all transfers from one budgeted item to another within the project scope as well as any forecast predicting cost overruns or underruns for any line item identified in the project scope. These logs will be critical in identifying how the project evolved from the original estimate phase to the current project phase and through project closure. As with the schedule, the cost report must be maintained on a daily basis. Although actual expenditures may be updated only once a month, commitments and forecasts are everyday realities on a project and should be reflected in the daily cost report, allowing this report to serve as a useful project controls tool. Once again, we want to identify potential problems immediately, allowing us to be proactive rather than reactive. In a proactive status, we must concentrate more of our effort on forecast and less on actual cost collection. With this in mind Paragon Engineering has developed a database cost system that is integrated with our accounting system, allowing time and dollars to be loaded automatically. This eliminates the tedious effort of sorting and manually loading actual cost data; however, it requires a detailed WBS and accurate cost coding.

PROGRESS MEASUREMENT A progress measurement system should be established at a level of detail referred to as Level IV. A Level IV document includes more detail than that shown in the schedule, requiring a list of all deliverables as well as the steps to achieve the acceptable completion of each. Provision should also be made to summarize progress measurement data to the level of detail found in the schedule (Level III). The progress measurement system should be updated periodically and used as an analysis tool that complements the schedule. This system helps to pinpoint the amount of progress that is achieved in each activity. Meanwhile, the schedule itself is necessary to track the status of critical activities, identifying which areas are ahead or behind schedule. As noted above, any available float durations must be managed from the schedule. In our proactive environment, we utilize a database for progress reporting that allows progress measurement to be electronically linked with the cost report. Engineering is forecast at the Level IV deliverables level. This will electronically summarize to Level III and populate the forecast column of our cost report.

WORKHOURS Workhour data must be collected, fed into the cost report, and used to calculate productivity. Collection of this data is helpful in progress analysis and forecasting. Naturally, past productivity plays a key role in forecasting similar future events. In general, one can expect productivity to increase with repetitive functions, but only to a point.

CSC.12.3

2003 AACE International Transactions CHANGE MANAGEMENT Change management is a key to successful projects. Once a change is identified, we recommend generation of a 35% estimate as well as a scenario schedule analysis within 48 hours. These items should be used to decide whether to go forward with the change, continue with a more detailed study of the change, or decide not to pursue the change. This exercise provides the project management team with a decision-making tool that is much more reliable than word-of-mouth or a gut feeling. A change order log must be maintained and linked to the cost report. Pending change orders should be reflected in the cost forecast and approved change orders reflected in the revised budget. The change order log is the third log that is necessary to trace from the original budget to the current cost report.

PROACTIVE MANAGER The project controls manager on any particular project must be proactive, skilled in each of the areas described above, and have the ability to pull all of the individual pieces into a cohesive, functional system. This manager must understand that the schedule is the place to manage time and float, the progress system is the place to manage physical progress, the cost report is the place to manage the dollars, the workhour data is the place to gauge productivity, and the change management system is the place to support decision-making. Although each of these tools has a unique function, they must be used and analyzed together as one function to facilitate successful project controls. The project controls manager must interface with all of the key players and this requires the support not only of management, but also the entire project team. Of course, each team member also plays a critical role: providing timely updates, spotting roadblocks or missing data that could hinder the start or completion of a task, or identifying potential change orders.

roactive project controls is not an easy or automatic task. It involves a detailed, complex system, a proactive project controls manager, and a proactive project team to ensure success.

Nicholas J. Candela Manager of Project Controls Paragon Engineering Services Inc. 10777 Clay Road Houston, TX 77041-5497 E-mail: ncandela@paraengr.com

CSC.12.4