John Buecheler & Associates, Engineering & Construction Project Management
Project Controls
including
Change Orders & Claims Management
Developed by the Project Manager, the Project Execution Plan provides the guidelines for a smooth and cost-effective project execution. It is to contain, as a minimum, a summary of the contractual requirements that are specific to the project, the scope of plant(s) with a plant description and the scope of services, the project organization plan with a description of the duties of the key project personnel, and the controls and reporting requirements.
As a finely orchestrated project execution is a key to a project’s success, the project organization set-up is to enable just that.
A typical organization schematic is shown below.
In practice, a physical task force concept and the electronic means of communication enhance overall effectiveness of the project team.
Further, as Project Controls require continuous attention, some highlights are being provided hereafter. Areas which are out of our control, such as the political and economic climate, are to be carefully monitored and dealt with accordingly, especially in a foreign environment.
Project Controls
The classic view of Project Controls focuses on the control of “time & money.” This is, of course, an imperative requirement, and to assure the ultimate success of a project we need to address all the factors that may directly or indirectly have an effect on the final project figures. With this in mind, we shall indicate below some fundamentals about the control of schedule, costs, cash flow, quality, security and safety.
Scheduling
Overall progress recording, such as “S” curves, and milestone diagrams are very useful for managerial purposes and for progress payments, but the “devil is in the details”. Thus, a timeline for all project activities is to be established early, highlighting critical path(s) and bottlenecks. To that end, manpower-loaded sequential network diagrams are generally an appropriate approach, flagging deviations of actual progress from the plans and calling for corrective actions.
Further, let us never loose out of sight that “time is money.” Indeed, each single day of delay on the project does not only add the costs of the delinquent object, but along comes the additional burden of overhead costs and inefficiencies.
A further word of caution: Beware of the “Just in Time Delivery Fad.” It bears a resemblance to playing Russian Roulette with the schedule.
Cost Control
Cost control is also accomplished against a base-line, which is an estimate as good as can be of all project costs. Noteworthy is that the accuracy of the original estimate is a function of the available scope definition details and its completeness at the time the estimate is performed. Sophisticated and reliable methodologies are presently available to deal with this aspect and with “contingencies” which are, by their very nature, subject to contention.
Then, dealing with cost deviations requires often some creativity, of which the positive effects of “value engineering” may not be underestimated.
Quality Assurance and Quality Control (QA/QC)
Quality Control is the control of work, equipment and materials against the specifications and drawings. It is an integral part of Quality Assurance: it deals with all aspects of quality, including the incorporation of quality criteria into the specifications.
ISO 9000 provides guidance on methodology and administration.
Security
Security against theft of equipment and materials and damages at the plant site during project execution is a serious matter and must be addressed accordingly.
Another security matter is about the protection of confidential material. With the advent of electronic communications, leakage of such material has become an object of great concern as its prevention has become ever-increasing challenge.
Safety
Although listed last, concern about safety is for most obvious reasons to be of top priority. Many codes and regulations deal with safety aspects. Compliance with the OSHA occupational standards are mandatory in the USA. In underdeveloped countries, however, there might still be a lot of room for improvement and we may be in a position to help when building new plants.
The Nature of Change Orders
The nature and the scope of changes cannot be predicted except that, in general, they are quite likely to draw upon additional resources. However, it is a safe practice to set up a procedure for dealing with changes and to promptly agree upon a clear and complete definition of a change to the original scope as well as upon its impact on schedule and costs, and, to immediately integrate the changes into the overall project plans.
Nevertheless, although many changes are inevitable and tend to be disruptive to smooth operations, they may, when addressed properly, represent a substantial source of additional income to the contractor.
When Changes Keep Increasing
When the nature and the size of the adjustments to the original plans reach a point at which they become excessively disruptive, the entire project execution strategy may have to be re-addressed and the project re-negotiated. This has also been recognized on the construction side by the Construction Industry Institute.
An example is from a multi-office project on which successive changes increased the home-office man-hours from 0.5 million hours to 2.5 million hours. These engineering changes turned an already large project into a new challenging undertaking. Of course such an addition of technical hours dramatically impacted on the allocation of resources, on the project completion time, reshuffled costs and correspondingly increased the TIC (Total Installed Cost) of the project.
Non-compliances to contracts and changes, as they relate to scope, schedule, costs,
and/or terms and conditions, are normally brought to a resolution through common
negotiation of change orders. If this fails, negotiations, mediation, arbitration
or court hearings are common means to bring such issues to an equitable resolution.
For appropriate legal support, the qualifications and success records in similar instances of the attorney(s) are of paramount importance when it comes to the selection of a legal firm. Referrals and ratings by pier attorneys may be the start in a good direction.
Typical Areas of Claims
- Claims against engineering, procurement and construction errors and
omissions.
- Claims against faulty equipment and materials and/or faulty delivery.
- Claims against delays.
- Claims against negligence and/or failures to act.
Our domestic and/or international support experience ranges from claims for modest amounts up to $ 30 million.
Our Support
We can help by taking the burden of mastering the change orders and claims from your shoulders, thereby contributing to a smooth and financially safe project execution.
In this respect, our technical and commercial expertise, as well as with our project management experience, may be helpful to:
- Manage and implement change orders.
- Assist you in the preparation of claims.
- Support you as expert witness.
JBinFlorida@hotmail.com
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Cash Flow
All progress payments are to be agreed upon and performed in such a manner as to always ensure a positive project account balance.