PROJECT MANAGEMENT PROCESS

INTRODUCTION

The Project Management must follow a well-defined Process involving a number of stages. Important stages of Project Management Process are presented in chart PM-04. 

It consists of the following stages:

1)       FEED (Front End Engineering & Design) 

2)       Planning

3)       Development (E & P)

4)       Construction

5)       Monitoring & Reporting

6)       Evaluation

7)     Close-Out

A more detailed view of the project execution process is presented in the following figure.

1.         FEED

FEED, (Front End Engineering and Design) is the starting point for every project and includes conceptual design and basic engineering for the project. The Conceptual Design is a study phase in the life cycle of a project where ideas are generated and alternatives are evaluated. This phase results in development of a basic process concept, a preliminary schedule and a rough cost estimate (ROM).

The conceptual design is followed by Basic Engineering which is the elaboration of the conceptual design into a package, defining the process requirements and the associated equipment and project facilities. A cost preliminary estimate is also developed during this phase.

As this stage determines the nature and scope of development as well as the project cost estimate, it is very crucial for the final success of any project. In case of shortcomings during this phase, it is very unlikely that the project will be successful in meeting the project goals, objectives and needs. At this stage all deficiencies in the basic parameters are duly identified and rectified. This stage includes a cohesive plan that encompasses the following areas:

      
      1)       Conceptual design for the operation of the project

      2)       Clear definition of project scope and objectives.

3)       Detailed process description.

4)       Detailed studies analyzing the business needs and goals.

5)       Major and critical equipment and machinery requirement.

6)       Preliminary cost estimate.

7)       Project Master Schedule.

8)       Financial analyses of the costs and benefits.

9)       Project charter including costs, tasks, deliverables, and milestones.

10)  Many a times, a small prototype of the final product is built and tested. Testing is generally performed by a combination of testers and end users.

 A detailed discussion on FEED will be available in forthcoming blogs.

2.         PLANNING

Planning is the next step in project management process. It is said to be basic to all human activity and the application of common sense. It involves working out the details of what is required to be done, when it is to be done and how is it to be executed. In other words, planning involves identifying needs and opportunities, working out various possible courses of action, identifying the most appropriate actions, evaluating feasibilities to achieve the plans, estimating the resources needed to meet the objectives, anticipating possible road-blocks and fixing targets and milestones for meeting the final objectives. Planning techniques are found to address many organizational problems, opportunities and growth. Whether the priority is an effective design, completion targets, cost optimization, or new initiatives, good planning is bound to increase the chances of the success of a project. It helps to analyze and assess present needs, future challenges and assists in testing various alternatives. Good plans always allow for flexibility to adapt changing circumstances. The basic need of project planning is to increase the likelihood of a project being implemented efficiently, effectively and successfully. A failure to adequately plan meticulously reduces the project's chances of success.

In the case of project execution, planning starts immediately after the development of preliminary Project Business Plan (PBP) and Project Execution Plan (PEP) and continues simultaneously with the development of these documents. As planning is very basic to any project control activity it is done well ahead of most actions being executed.

The basic need of planning is to manage time, cost and resources adequately to estimate the work and to effectively manage risk during project execution. A failure to adequately plan meticulously reduces the project's chances of success. A plan generally consists of:

 

1)     Establishment of the Project Coding Structure. The coding structure needs to be line        with the Work Breakdown Structure (WBS).

2)     Selection of the team members

3)     Establishment of the level of detail required. 

4)     Development of major project milestones after meticulous study and including                   adequate float. 

5)      A clear definition of scope and deliverables

6)      Identification of activities and actions required to complete the deliverables.

7)      Development of interfaces for all deliverables between the project team members           within the boundaries of project milestones.

8)      Networking the activities in a logical sequence taking care of the interfaces.

9)      Development of project schedules

10)   Estimating the resource required for completion of the activities.

11)   Development of realistic cost estimates with adequate contingency reserves.

12)   Meticulous detailing of the structure ensuring single point accountability.

13)   Development of well-defined assumptions towards the development of cost estimate.

14)   Establishment of Risk Management plans

A detailed discussion on Planning will be available in forthcoming blogs.

3.         DEVELOPMENT

Development is the next step in the Project Management Process. During this stage, the project gets developed. This stage is also known EP Stage or the detailed engineering and procurement stage.

A)       Engineering

The detailed Engineering includes the following disciplines:

1)       Process

2)       Piping

3)       Mechanical

4)       Electrical

5)       Telecommunications

6)      Automation/ Instrumentation

7)       Civil & Structural

             A detailed discussion on Engineering will be available in forthcoming blogs.

B)       Procurement

The Procurement includes the following:

1)       Finalization of Purchase Orders of Equipment

2)       Finalization of Module Fabrication & Assembly contracts

3)       Issue of Purchase Orders for Bulk Materials

4)       Inspection and Expediting

 

A detailed discussion on Procurement will be available in forthcoming blogs.

4.        CONSTRUCTION

Construction refers to the process of implementing the project as engineered and procured.  It consists of the processes used to complete the work defined in the project execution plan (PEP).  

A detailed discussion on Construction will be available in forthcoming blogs.

5.         MONITORING & REPORTING

Monitoring

Monitoring consists of those processes performed to observe project execution so that potential problems can be identified in a timely manner and corrective action taken, when necessary, to control the execution of the project. The key benefit is that project performance is observed and measured regularly to identify variances from the project management plan.

Monitoring and Controlling includes:

1)       Measuring the progress of project activities

2)       Monitoring the project cost, manpower and schedule against the project execution     plan and the project control base

3)        Identification of correction and mitigation plans to address issues and                    corresponding risks and applying corrective measures.

Reporting

The purpose of the Progress Reporting and monitoring mechanism is to enable the Project Team, the Project Owners and the Sponsors to follow, monitor and keep informed about the developments on the project. It is a key element of Project Management and projects a qualitative as well as quantitative summary of the project and the actions taken to control the project. It is an effective communication mechanism and is a key to the success of every project. Listed below are some of the important reports and monitoring documents generated:

1)       Monthly Progress Reports  

2)       Weekly Progress Reports 

3)       Milestone Charts 

4)       Schedule Updates 

5)       Manpower & Man-hour Charts 

6)       Needs List 

7)       Look Ahead Schedules 

8)       Critical Issues Reports 

9)       Schedule Critical Activities 

10)   Change Management Reports 

11)   Cost Control Reports 

12)   Financial Reports 

13)   Road Blocks

          A detailed discussion on Monitoring & Reporting will be available in forthcoming blogs.

6.         EVALUATION

The next step in the Project Management Process is the evaluation of all the work that has been done. Once the monitoring (also known as measuring) is done, it is essential to evaluate and analyze the data so collected. Given below are some of the areas of analyses:

 

1)       Progress evaluation

2)       Progress Performance Reports

3)       Monitoring the current status of project against the base line schedule

4)       Monitoring the current status of project against the base line cost estimates

5)       Establishment of Critical Path

6)       Forecasting project milestone completion targets

7)       Forecasting cost to complete each unit

8)       Estimation of progress performance

9)       Estimation of project productivity figures

10)   Identifying trends and change orders

11)   Identification of critical activities likely to impact the project

12)   Evaluation of schedule and cost risks

13)   Forecasting final project completion schedule and cost

Given below is a discussion on some of these topics. A detailed discussion will follow in future blogs:

A)      Progress Evaluation:

Project progress is a key factor in the measurement of project performance, especially in the areas of schedule and cost. It controls the measurement of engineering, procurement and construction costs and schedules. An accurate measurement of progress serves as a basis for the evaluation of performance against the project’s control base on schedule and budget. Progress (percent complete) is measured by using a weighted average method of computing "earned" values.

B)       Earned Value

Earned Value technique is used as a way to accurately measure and manage project performance to enhance project control. It allows simultaneous measurement of budget and schedule conformance, and captures their interrelationship better than most other methods. That is why the Earned Value Technique has found a universal recognition on the evaluation of performance on major projects. It measures the efficiency at which work is performed pin-pointing the project problems at grass root levels.

 

The progress reporting system is set up as soon as a reasonable breakdown of drawings, specifications and other activities are available for various engineering disciplines. This occurs soon after the availability of basic designs, execution approach and the initial cost estimate. The Control Level Schedules provide a listing/grouping of all deliverables (drawings, specifications, etc.) and activities required for the completion of a project. The weighted value is determined for each item by allocating the estimated hours to each line item based on the respective discipline control budget. By determining the "percent complete" for each item at the end of a reporting period, the earned hours are calculated as follows:

P=E/H

Where

P= Progress

E= Earned Hours and

H= Estimated or Budget Hours

In other words, the total earned hours from work completed divided by the total control (estimated or budget) hours determines the physical progress for each item. A roll-up of all items and disciplines results in the physical progress for the unit or the whole project.

C)       Home Office Performance

 The home office performance is calculated using the expended hours and is a measure of work accomplished versus actual expenditures and is calculated on both an incremental and cumulative basis at the end of each reporting period. Performance of greater than 1.0 represents efficiency better than control budget and would result in under-run in home office work hours. Whereas, a performance figure of less than 1.00 is an indication of lower efficiency and would result in over-run in the work hours.

D)      Construction Performance

Construction progress is calculated using the "unitized progress reporting" system. Estimated work hours are established in the control base for each defined "unit" to be built or installed. Physical progress against each defined unit is measured and input into the progress system.

7.         CLOSE-OUT

As the name refers, Project Close-out is done at the completion of the project. A discussion under this includes:

1)       Why Close-Out

2)       Close out detail

3)       As-Built drawings and documents

4)       Final Cost Package

A detailed discussion on Project Close-Out will be available in forthcoming blogs.

WHAT IS A MAJOR EPC PROJECT

INTRODUCTION

In my blogs I have been talking about the management of major projects. Though there is no specific criteria, but it is a generally accepted that a Major Project can be identified as a project with a minimum estimated total installed cost (TIC) of US$ 250 million and accompanied by a high level of complexity. A major project is a large-scale investment project and generally attracts a lot of public interest due to substantial impact on communities and environment. There are a variety of major projects and each project requires a distinct management approach and execution strategy requiring specialized technical skills, execution strategies and the adoption of strategic management philosophy. For example a project to construct a highway may require a different set of skills and execution strategies as compared to a large airport. Similarly the development of a housing complex may require a totally different skills and execution strategies as compared to an offshore oil drilling project.

It is observed that Oil & Gas, Energy, Process and Power projects form a distinct group requiring a common platform of project management techniques. This blog focuses on the management of this group of projects.

With the increase in technological growth and globalization of industry, the scale and complexity of projects continue to increase. The owners have started to realize that aggregating the processes, power, technology and infrastructure generally leads to significant improvements in project profitability. Only a few project managers hold the skills and processes required to plan and deliver these projects. In the following blogs, we will discuss the required skills, processes and procedures to successfully deliver these major projects in an increasingly challenging project delivery environment.

1.         What is EPC

EPC stands for Engineering, Procurement and Construction.  It is a common form of contracting arrangement for the execution of Oil & Gas, Chemical and Process industry. Under an EPC contract, the contractor takes complete responsibility of engineering the facility, installation, procuring the necessary equipment and materials; installing and constructing, either through its own labor or by subcontracting a part of the work.

E

E stands for engineering only. Such contracts are awarded in the initial phases of the project to carry out the basic design or FEED work. FEED stands for Front-End Engineering and Design. For major projects, it is becoming a common practice to split the project into two phases; in the first phase the contractor sets the design parameters that define the work scope, prepare WBS, estimates, and break the work down into work packages to a level sufficient for the award of a detailed EPC contract. The second phase consists of the EPC or EPCM phase.

EP

When the execution scope is restricted to engineering and procurement only; this is referred to as an EP contract. This is often done in situations where the Owner has a preference for doing the construction through its own resources or intends to award the construction work to a third party.

EPCM

When scope is restricted to engineering, procurement and construction management only, this is referred to as an EPCM contract.

2 .        EPC AGREEMENTS

The EPC (or EP or EPCM) agreements are of four major types:

a)         LSTK CONTRACTS

LSTK stands for Lump Sum Turn Key. It combines the Lump Sum (LS) part that refers to the payment of fixed fee under the EPC contract. The second part TK stands for Turn Key. TK specifies that the scope of work includes the commissioning and start-up of the facility to operational status.

b)         LUMP-SUM CONTRACTS

Under Lump Sum Contracts, the EPC contractor’s responsibility is limited to satisfying the agreement terms (generally till the Mechanical Completion) for a fixed fee. Some agreements cover the pre-commissioning activities as well. The owner takes over the charge of project and completes the rest of the work including commissioning, trial runs and plant operations.

c)         COST PLUS CONTRACTS

Under Cost Plus Contracts, the EPC contractor is provided a specified percentage profit over and above the actual cost of Engineering, Procurement and Construction work. These contracts are quite popular with the Oil & Gas and Petrochemical projects. Under these agreements, the owner has a good presence in the project team with most of the decisions being taken jointly.

3.         COST PLUS PROJECT TEAM

Under the Cost-Plus contracts, project team consists of the Owner, the EPC Contractor and third parties engaged on specific jobs. On account of the complex responsibility, decision making and approval process, the formation of the project team under such agreements needs a great deal of effort. It is therefore necessary to develop a detailed responsibility matrix to define the responsibility and approval process of each team member.  A detailed discussion on this subject will be done under RASCI blog.   

4.         ALLIANCE AGREEMENTS

Alliance agreement is a model of co-operative work model that had become very popular in the EPC industry during 1990’s.  Excessive cost over-runs and project delays started a re-thinking in the industry leading to the alliance agreements. The alliance contracting concept evolved as a response to two perceived failings in the traditional model of EPC business. The first was the excessively adversarial nature of the EPC contracts, driven by the traditional LSTK agreements with liquidated damages. The second was the barrier to outstanding project performance that was the need of the day.

PROJECT MANAGEMENT COMPONENTS

INTRODUCTION 

The management of most of major Projects is generally contracted out by owners to organizations having expertise in the field. With this in view, owner satisfaction becomes an important criterion for the project management team. The management team focuses on the following five major components leading to the owner satisfaction:

 

1.       Scope

2.       Time

3.       Cost

4.       Quality and

5.       Performance 

 

1.    Project Scope

Project scope describes the work required to deliver the product or service with the intended requirements to the satisfaction of owner. It describes the intended quality, features, and functions of a product or a service often in minute detail. Every project produces a unique product that is either a tangible item or service. Project owners usually have some expectations about the features and functions of products which are detailed out in the project scope document. Documents that outline this information are generally called product specifications. A service or event usually has some expected features as well.

A Scope document identifies the requirements to achieve the defined end results. The document is expected to define what the project is supposed to accomplish, and a specific description of the end result expected be accomplished. A major component of scope is the quality and performance of the end product.

The scope document is meant to ensure that everyone on the project team understands what is expected of them during the execution of the project. In addition, all work that can be reasonably predicted must be ascertained and reported in the document. Suitable scope definition is essential for the success of the project and needs to be given due consideration and thought.

The scope and objectives are always project specific. Most of the major projects do have common features on the scope document which is generally broken down under the following Sections:

1)       Project Description

2)       Project Controls
3)    Engineering that includes

      a)       Process

      b)       Mechanical

      c)       Piping

      d)       Civil & Structural

      e)       Electrical

      f) Automation/Instrumentation & Controls
     g) Telecommunications

4)       Procurement

5)   Environmental & Regulatory

6)   Construction Logistics

7)   Operations & Maintenance 

A description of the above follows:

1.1              Project Description

Typically this section contains: 

1)       A detailed description of the project

2)       Project Location Details

3)       Project Units

4)       Facilities

5)       Accommodation requirements (permanent)

6)       Construction Camps

7)       General infrastructure

8)       Power Generation

9)      Waste Disposal

10)   Warehouse & Storage requirements

11)   Other project specific items

1.2              Project Controls:

The Project Controls include:  

1)       Preparation of Cost Estimate at different stages

2)       Preparation of DBM (Design Basis Memorandum)

3)       Prepartion of Project schedules through initial stages to start-up and commissioning

4)       Progress Reports

5)       Progress Evaluation Reports
6)   Man-hour forecast and consumption Reports

1.3              Engineering:

Engineering for any project. Engineering is sub-divided into the following major disciplines:

a)       Process

b)       Mechanical 
c)       Piping

d)       Civil & Structural

e)       Electrical

 f)   Automation/Instrumentation & Controls
g)   Telecommunications

Process

The process development for a project includes:  

a)       Process Description

b)       Process Studies to be done during the course of project execution

c)       Process Models to be prepared and tested during the course of project execution

d)    Process Deliverables. This section details out the process deliverables, though this list is project specific, but typically contains:

e)       PFDs (Process Flow Diagrams)

f)        Heat and material balances

g)       Utility load lists

h)       Line list

i)         Design philosophy

j)         Tank schedule with basis of usage, volume and time between refills

k)       Expected Fuel Consumptions during the operation phase

l)         A list of chemicals with estimated quantities required during the operation phase.

m)     P & IDs

 n)       Initial start-up and black-start philosophies

 o)       Safety and operability analyses

 p)       HAZOP analysis

 q)       Flow assurance and mitigations plans

 r)        Systems Criticality list

 

Mechanical:

This section represents the mechanical details of the project and includes:

 

1)       A description of Mechanical Equipment

2)       Mechanical Studies to be done during the course of project execution. Some typical studies include:

3)       RAM (Reliability Availability and Maintainability) study

4)       Vessel location study

5)       Vessel design code optimization Study

6)       Inlet piping design coding study

7)       Noise Study

8)       Refrigeration compressor driver selection Study

9)       Gas compression selection Study

10)   Equipment design temperature study

11)   Mechanical Deliverables

12)   The Mechanical Deliverables are project specific and include:

13)   Mechanical equipment list

14)   Mechanical equipment data sheets

15)   Identification of Long Lead Equipment

16)   Stress analysis

17)   Material selection diagrams

18)   Piping Specifications

19)   Heating Ventilation and Air Conditioning design philosophy & Calculations

20)   Equipment Requisitions & Tender documents for Long Lead & Critical Equipment

21)   Utility supply plan

Piping

This section represents the Piping details of the project and includes: 

1)       A description of Piping Network

2)       Plot Plan

3)       3D PDS generated model

4)       Smart P&IDs

5)       Site plan

6)       Construction Site Plan

7)       Facility Egress and Access Plan

 

Civil & Structural 

This section describes the civil & structural items and includes:

1)       Civil & Structural Studies to be done during the course of project execution. These are project specific.

2)       Civil & Structural Deliverables. Again these are project specific and may include items like:

a)       Basis of Civil & Structural Design

b)       Soil and geotechnical evaluation

c)       Site location plan

d)       Site grading plan

e)       Foundation design and drawings

f)        Structural design methodology

g)       PDS Framework

h)       List of Buildings

i)         Building layouts

 

Electrical

This section describes the Electrical Engineering items and includes:

 

1)       Electrical Studies:

2)       Though most of the project studies are led by other disciplines, but these need input from the electrical department.

3)       Electrical Deliverables generally include:

a)       Preparation of electrical specifications

b)       Critical single line diagrams

c)       Equipment interface philosophy

d)       Area classification drawings

e)       Electrical load list

f)        Electrical equipment list

g)       Electrical data sheets

h)       Electrical design basis

i)         MCC building layouts

j)         Emergency power system design basis

k)       Packaged Cable routing study

l)         Construction Plan for Power

Automation/Instrumentation & Control

Instrumentation and Controls Deliverables include:  

1)       Communication study

2)       Field Bus Study

3)       Common control center study

4)       Instrumentation and controls equipment specifications

5)       Controls philosophy/measurement philosophy

6)       Instrument index/ I/O list / specialty valve list

7)       Instrument data sheets (in-line instruments and specialty items only)

8)       SIL philosophy

9)       Control room location and layout

10)   Preliminary ESD and PSD keys

11)   Long lead items list

12)   Constructability review

13)   Preliminary design risk assessment

14)   PCS and PSS equipment lists

15)   Control system architecture and layout

16)   Process operations surveillance system

17)   Security functional requirements documents

Telecommunications

1)   Telecommunications philosophy

2)   Communications scope of work and interface matrix

3)   Communications equipment specifications

4)   Communications equipment lists

5)   Communications block diagrams

6)   Communications block diagram

 

 

1.4              Procurement

Procurement supports the following:

1)       Procurement Plan

2)       Contracting Plan

3)       List of Purchase Orders

4)       List of Contracts & Sub-Contracts

 

1.5          Environment and Regulatory

Environmental and Regulatory supports the project with the regulatory process including:

1)       Regulatory application support

2)       Update the waste management plan

3)       Prepare a spill containment plan

4)       Noise survey

5)       Support to Community Consultation

6)       Emissions inventory and monitoring requirements

7)       Spill containment plan

8)       Environmental evaluation of winter construction and logistics

9)       Input and support to Operations and Maintenance

10)   Regulatory Compliance Plan

 

1.6          Construction Logistics

This section provides construction planning and logistic support including:  

1)       Modularization study (supported by Mechanical/Piping)

2)       Gravel placement methodology and cost (work with Civil)

3)       Advance emergency preparation/response plan

4)       Testing and pre-commissioning plan

5)       Construction Execution plan

6)       Construction/fabrication quality surveillance plan

7)       Lead Constructability reviews and prepare reports as part of model review

8)       Logistics scope definition

9)       Infrastructure support

10)   Geotechnical winter work program

11)   Construction Demobilization Plan

12)   Construction Plot Plan

13)   Plan for Communications During Construction 

 

1.7          Operations & Maintenance

This section provides the a plan for operations & Maintenance

2.    Time Component

 2.1              Introduction 

Every project has to have a start date and an end date as no project can be expected to continue indefinitely. Every project has some element of a time constraint and most major projects also have many well-defined milestones to be met. As an example a project may have the following contractual milestones:

1)       Completion date Basic Engineering

2)       Ordering of Major Equipment

3)       Substantial completion of detailed engineering

4)       Start of Construction work

5)       Mechanical Completion

6)       Project commissioning

7)       Handing over

While developing the project schedules, time required to complete each and every activity is estimated. Depending on the interrelations and dependencies, the time required to complete a task on the Work Breakdown Structure is estimated. Through the scheduling techniques, project activities are prioritized, critical paths are identified and the dependencies between activities are re-worked and the resource requirements are estimated.  The schedules are rolled up using the schedule networking techniques to arrive at the project milestones.

Schedule management is a critically important skill for any successful project manager. It is observed that the Project Managers who succeed in meeting their project schedule have a good chance of staying within their project budget. One of the common causes of budget over-runs is the lack of proper schedule management. 

2.2              Project Schedules 

Project schedule is simply a graphical illustration of a project’s execution plan.  It organizes the activities and tasks into a fixed time frame taking into account the inter-dependencies among each other. Each task and activity is allotted a completion time duration. The schedule represents the project plan and is vigorously monitored to ensure that work is being performed within the allotted time frame.

The project schedule is the core of the project plan and is used by the project manager to commit people to the project. Schedules are also used to communicate final deadlines and to determine the resource needs and serve as a checklist to make sure that every task necessary is performed. 

Project Schedule is an invaluable tool for organizing, evaluating, and forecasting how a project is to be executed and provides project team members with an understanding of the interrelationships between activities and serves as a vehicle for achieving buy-in from all of the team members. Each team member has a role and commitment for meeting the objective. Its greatest value is its ability to identify the Critical Path i.e. those tasks, activities, and duration that dictate the overall duration of the project. As problems arise, the schedule can be used to evaluate alternative paths for achieving success.  The schedule can provide guidance in identifying problems early in a project.  If, for instance, a project activity was scheduled for three months, and in the first month only twenty percent of the task was completed, the team can entertain methods to recover the lost time.

There are numerous methods and paths of achieving the project goals; the project schedule illustrates one such method for achieving the stated objective within the required time frame.  There could be many other execution plans that can result in a successful project but different plans result in changes in duration, cost and quality of the project.

 

3.    Cost Component

3.1              Introduction

Every project has to have a budget and it is one of the critical responsibilities of the project manager to ensure that the project cost remains within the pre-assigned budget and preferably remains under-run. Budget over-runs always reflect very poorly on the management team. This is where the cost control system comes to the rescue of project manager.

Project cost has a broader meaning and includes all of the resources that are required to complete the project. It includes the people, the machinery and equipment that do the work, the materials they use, and all of the other events and issues that have a monetary impact or need someone’s attention in the project. The project cost may have the following components which need to be monitored and controlled:

   

1)       Home-office man-hour cost

2)       Home-office overheads

3)       Bulk material costs

4)       Equipment costs

5)       Construction direct labor costs

6)       Construction material costs

7)       Contractor costs

8)       Indirect costs

9)       Other misc. costs

3.2              COST CONTROL

Project cost control is comparing actual and committed project cost against the control cost or the budget. It is refers to knowing exactly what is committed, what remains to be committed, what is incurred, invoiced, approved for payment, paid and analyzing the variance. This makes cost control very critical to the success of a project. No major project is initiated without first establishing an effective cost control system. When it comes to project management, cost control can make or break a project’s budget. Cost control can best be achieved by setting up a budget which is consistent with plans for actual spending. Another important aspect of cost control involves collecting the actual and committed cost and preparing and analyzing reports for the cost management.

 

COST CONTROL PROCESS

The approved budget estimate is categorized into the Cost Code of Accounts and loaded into the project cost system. This serves as the control budget. Actual costs are continuously recorded in the cost system from accounting transactions. Cost reports will be generated by cost code for the total project. By using this system, a budget versus actual expended comparison is made by account.

Deviations are identified and project management alerted so that timely corrective action may be taken.

The Cost Control Process involves the following steps:

1)       Budget Finalization

2)       Cost Control Tools

3)       Cost Coding & Loading

4)       Cost Capture

5)       Cost Schedule Relationship

6)       Change Management

7)       Data Evaluation

8)       Risk Analyses

9)       Forecasting

10)   Contingency Management

11)   Cash Flow

12)   Cost Reporting

These topics will be discussed in detail in other blogs.

4.    Quality Component

4.1              Introduction

Quality is a measure of fitness for use and represents meeting or exceeding the needs and expectations throughout the life-cycle of the project or what-ever is being delivered. The items being delivered may include the designs, drawings, equipment or the complete plant.

Quality is an important aspect of Project Management. Every major project has to have systems in place for proper quality management. Quality Management is the management of systems and procedures that determine the quality policies, objectives, and responsibilities so that project outputs are delivered fit-for-purpose. The purpose of a project Quality Management Plan is to define the overall quality philosophy for the Project, the organization and responsibilities for achieving the desired quality, and the general quality management activities to be performed.  It addresses the quality requirements for Engineering, Procurement, Construction, sub-contracts and related project management activities.

The quality requirements for a project apply to:

1)       Project Management

2)       Project Controls

3)       Engineering

4)       Procurement

5)       Project Administration

6)       Objectives

4.2              Quality Evaluation

From the project point of view, the quality is judged on the following criteria:

1)       Meeting the project schedule and targets

2)       Project completion within the Budget

3)       Meeting the product specifications

4)       Operational suitability

5)       Proper and accurate documentation

6)       Compliance with standards

7)       Acceptable maintenance costs

4.3               Quality Plan

 

All major projects have a Project Quality Management Plan, the purpose of this plan is to define the overall quality philosophy for the Project; the organization and responsibilities for achieving quality; and the general quality management activities to be performed by the project team. 

Quality Management Plan will be discussed in future blogs.

5.    Project Performance Component

 

Successful project managers control projects by carefully monitoring, measuring, and managing the project performance. Usually performance is measured in the fundamental areas of budget and schedule, but the performance of major projects includes areas like project’s scope, quality and owner satisfaction along with schedule and budget.

Performance Evaluation

Once the monitoring (also known as measuring) is done, it is essential to evaluate and analyze the data so collected. Given below are some of the areas of analyses:

 

1)       Progress evaluation

2)       Progress Performance Reports

3)       Monitoring the current status of project against the base line schedule

4)       Monitoring the current status of project against the base line cost estimates

5)       Establishment of Critical Path

6)       Forecasting project milestone completion targets

7)       Forecasting cost to complete each unit

8)       Estimation of progress performance

9)       Estimation of project productivity figures

10)   Identifying trends and change orders

11)   Identification of critical activities likely to impact the project

12)   Evaluation of schedule and cost risks

13)   Forecasting final project completion schedule and cost

Project Performance will be discussed in detail at a later stage.