Federal Democratic Republic of Ethiopia

Report
Ministry of Transport
URRAP-Training of Trainers for Contractors
and Coordinators
Project Management and Planning
DAY 1- Friday August 02, 2013
1
Outline
 Introduction
 Overview
 Project
of the Construction Industry
Management Framework
2
Outline
 The
Role of Effective Project Manager
 Leadership
and Human Resource
Management
3
Outline
 Contemporary
planning
themes of Construction
◦ Scheduling
◦ Resourcing
◦ Monitoring and Control
◦ Cash flow forecast and Control
4
Introduction

The prevailing facts of the road sector
◦ Cost overrun
◦ Time overrun
◦ Quality reduction
5
Introduction
The Three major
stakeholders
contribute significantly
The Client
The Consultant
The Contractor
6
Introduction

Considerable shortcomings are related with
failure of the contractor’s performance in all
over project management
(Abd. Majid and McCaffer, 1998, Frimpong et al. 2003, Assaf and Al-Hejji., 2006).
7
Introduction

Inefficiencies and ineffectiveness are part in day today
activity in the construction sites
◦ weak site organization;
◦ Improper construction method;
◦ Work discontinuity;
◦ Rework: 10-15% contract value;
◦ Improper resource allocation( Human, material, equipment) and
under-utilization;
◦ Poor cash flow: not to utilize advances properly, not to raise sufficient
payment;
◦ Attitude: not being self-contained…in identifying material sources,
inaccurate setting outs, incomplete approval requests, resistance for
changes…etc.
8
Overview of the Construction Industry
Big Firms
Small Firms
9
Overview of the Construction Industry

High work demand in the market… 100s of thousands Kms

Less fragmented ( Specialized firms are growing so slowly)

Loose coupling between the industry and the supply chain

developing financial market

Relay on importation
10
Overview of the Construction Industry

The Public sector is the major Client

Traditional
procurement
predominant

Limited administration capability in most of the
organizations, both private and public

Less focus on Research & Development
approach
is
11
Overview of the Construction Industry

Local Contractors and Consultants are taking
the major share of the construction market

Limited financial and technical capability

Less focus on quality delivery

Less focus on organizational learning
12
What is a project ?
A project is a temporary
endeavour undertaken to
create a unique product,
service, or result.
(Source: Source: Project Management Institute ,PMIBoK)
13
What is Project Management ?
Project management is the application of
knowledge, skills, tools and techniques to
project
activities
to
meet
project
requirements.
(Source: Source: Project Management Institute ,PMIBoK)
14
The Three Main Pillars of Project Management
People
Technology
Process
15
.... and emphasise on people !
“Projects do not succeed just by assiduous
adherence to a mechanistic process”
(BS 6079 Part 1: Guide to project management)
16
Triple Constraints of Projects
Project
Management
Time
Start
End
Project
Management
!
Cost
Scope
What happens if the plan
was based on the wrong
assumptions
17
Another View of the Triple Constraints
Cost
Project
Budget
Contingency
Scope
Contingency
Time
18
Why do we have projects ?
•Profitability
•Market share
•Competitive advantage
Business Goals
Projects
Outcomes
Outputs
Benefits
19
Projects Take up Investment

The Firm:
An organization that bring together different
factors of production such as labor, land and capital to
produce a product or services which it hoped can be sold for a
profit
Firm
Entrepreneurs: Profits are a rewards of the Entrepreneurs to take risks
Managers : hire ,fire , organize the business
Workers
20
Projects Take up Investment

Normal profit :
minimum level of reward to keep/attract the
entrepreneur in the particular economic activity
Profit = total revenues- total cost

Economic profit : considers alternative use of all resources
Economic profit= total revenues – total opportunity cost of
all inputs used
Economic cost= explicit cost and implicit cost
21
Projects take up investment

Opportunity cost of Capital : concerns the rate of return
on the capital as all other business of similar risk are willing to pay
Degree of risk and difficulty involved

Opportunity cost of Labor: concerns rate of return on the
opportunity cost of time of doing similar job

Opportunity cost of land:
concerns the rate of return on
the capital as all other business of similar risk are willing to pay
22
Projects Take up Investment
Return on
Investment
Investment
Project duration
Start
Goal = Finish As Soon As Possible
End
Goal of the firm: Profit maximization is a target
23
Project Management Framework
Project
Procurement
Management
Project
Integration
Management
Project
Time
Management
Project Risk
Management
Project Scope
Management
Project
Communication
Management
Project
Cost
Management
Project
Human
Resource
Management
Project
Quality
Management
24
Project Management Framework– Construction Extension
Slide 25
Project Scope Management
Processes required to ensure that the
project included all the work required and
only the work required to complete the
project
26
Project Manager
Is the single integrative point of
responsibility for the project
27
The Role of Project Manager
The planning and coordination of a project
from inception to completion on behalf of a
client, to deliver the client's objectives in terms
of Function,Time and Cost
28
Project Manager’s Responsibilities
Liaison with the client/sponsor
 Develop and maintain project plans
 Team leadership/Teambuilding ability
 Cost effective work progress control
 Cost control
 Planning and technical decision making
 Quality and safety management
 Business and administrative aspects

29
Higher Order Objectives

Complete all projects efficiently & profitably

Balance long & short term priorities

Supply & allocate resources

Integrate multiple projects with other
activities
30
Balance in Projects
31
Managing Clients
Agree project objectives – deliverables
 Initial start up meeting
 Interim reporting & reviews
 Problem resolution
 Manage the relationship
 Under promise & over deliver
 Always negotiate

32
Establish Client's objectives + priorities
Business aims
Project aims + scope
Priorities - quality, time, cost
Timescales
Understand uncertainty + risks
33
Design an Organisation Structure
participants
 relationships
 decision points, key + operational
reporting
 integrating + coordinating

34
Common forms of structure





Functional
Product based
Geographical
Divisionalised
Matrix
1
Functional
2
Divisional
3
Matrix
4
Teams
Selection + appointment of project team
Scope + terms of reference
 Selection criteria
 PM's own appointment
 Appointment agreements
 Procurement route

40
Develop brief for project team
translate client's objectives
 state in terms of needs + outcomes
 alternatives + evaluation
 clarity + communication

41
Uncomfortable Facts

Left alone people will tend toward;
◦
◦
◦
◦
◦
◦
◦
First come – first served
Enjoyable / familiar tasks first
Easy rather than difficult tasks
Simple vs complex tasks
Gain easy wins –short term rewards
Not favour releasing key resources / people
Provide the answer you want to hear
42
Establish Information and Communication
Structure
Measurement of data + presentation
 Communication channels
 Meetings
 Reporting mechanism

43
Facilitate the Decision Making
What?
 By whom?
 When?
 At what Cost?

44
Question – in groups
Reference the distirbuted ‘direction finder’,
how would you apportion your time (%) on a
project?
45
Projects – Direction Finder
46
P. O. L .C. MODEL
Setting standards and assessing
success in achieving objectives
Establishing objectives &
planning work
PLANNING
CONTROLLING
ORGANISING
LEADING
Influencing and motivating team
members in doing the work
Organising people, materials
and scheduling
Leadership involves:

Challenging the status quo

Inspiring a shared vision

Empowering others to act

Modelling the way

Motivating others
MOTIVATION FACTORS
ENVIRONMENT
MOTIVATORS

Working conditions
 Recognition

Interpersonal relations
 Responsibility

Job Security
 Achievement

Salary

Status

Policy
 Advancement
 Work itself
 Growth
Empowered Individuals:

Take risks

Gain knowledge, and

Develop new skills
Leadership – The 4 Basic Building Blocks
Accountability
Trust
Communication
Goal setting
Communication

Involves the transfer of information and
understanding
o
Are you really communicating when you
talk?
o
How can you be sure?
Communication
Communication breaks down due to:
•
Biases and assumptions
o
Biases predetermine reality of how things or
people are
o
Assumptions are about why people do things
•
The language used
•
Status
•
Not really listening
Overcoming Communication Barriers

Takes time

Involves conscious effort

Requires a structure
Team Communications
Could include:

memos

minutes

circulars

notices

meetings
Why do we have meetings?

Exchange Information

Discussion on important issues

Make Decision

Team Building

… Management
Planning Meetings:
Conducting a meeting without a plan is much
like trying to build a house without a plan. It
can be done but is likely to take much longer
and have many more problems
Planning Meetings:
1 Determine the objective:
- Why do I want to hold this meeting?
- What do I want to achieve?
- Is it necessary?
Planning Meetings:
2 Determine who should participate:
3 Prepare the Agenda:
. Venue
. Date
.
Start and Finish Times
. Agenda Items - What, Who, Timing
Delegation
Advantages:
•
Builds trust
•
More people can do more things
•
Staff are more involved and committed
•
Staff grow and develop
•
Skills and knowledge of staff are used more fully
•
Individual performance can be measured
•
Opportunity for recognition
•
The manager has time for managing
Delegation
Barriers:
•
I don’t have time
•
I don’t know how
•
I don’t know to whom I should delegate
•
It’s easier to do it myself
•
I don’t want to lose control
•
My staff lack experience and competence
•
My team members resist responsibility
•
My staff are not smart enough
•
My staff cannot be trusted to work on their own
Delegation Principles
1.
Delegate the whole task to one person
2.
Select the right person
3.
Specify the required result
4.
Delegate the responsibility and authority
5.
Check for understanding
6.
Set a date to review progress
7.
Maintain open lines of communication
8.
Don’t take the project back
9.
Evaluate and recognise good performance
Benefits of Effective Work Assignment
For the Individual:
• Has a clear understanding of what is required
in doing the work
• Is motivated and has ownership of the work
• Is able to measure and adjust achievement
towards the goal
Benefits of Effective Work Assignment
For the Manager:
•
Management is more effective due to a disciplined
process of assignment
•
Fewer performance problems
•
A better base of coaching/help staff
•
A better base of monitoring staff performance
Work Assignment
The process:
Step 1
Explain the purpose and relevance… (Why)
Step 2
Explore the current situation
Step 3
Define the work [Description, Scope, Means]
Step 4
Specify authority and responsibility
Step 5
Ensure system and personal capability
Step 6
Agree performance management of the work
Don’t forget to check for understanding and agreement!
Performance Management
Includes:
•
Performance Measures
What is being measured – outputs, outcomes or a mix
•
Performance Standards
Apply to a role or a process eg ‘response within 1 week’
•
Performance Monitoring
How and how often will information on performance be collected
and reviewed
What reporting is required
Work Assessment - Feedback
 The process of providing staff with information
with respect to their actual performance
 Should be used to not only get staff member
back on track but to confirm that they are on
the right track.
7 Reasons for giving feedback
1. Correction and consolidation
2. System improvements
3. Coaching
4. Learning and Development
5. Recognition and reward
6. Discipline
7. Evaluation
Elements of effective feedback
• Be specific
• Be honest
• Stick to the facts
• Maintain self-esteem
• Listen and respond with empathy
• Separate the problem from the person
• Involve the employee
Feedback
Critical, Complex and Difficult:
Because it provides staff with information with which
they can evaluate and modify their performance
You have to
be the task expert managing the
technical aspects and, at the same time, manage a
difficult person-to-person interaction
Main stages of a construction project
Inception
 Feasibility
 Design
 Preconstruction
 Construction
 Commissioning and occupation

71
The project ‘moodograph’
Scale of
enthusiasm
Handover
New Project
Project Timescale
72
Contemporary Themes of Planning
Construction is Complex system
◦ Uncertainty
◦ Interdependency of operations
 Sequencing of activities
 Resource

Construction a Chaotic system:
◦ dynamic
◦ non uniform environment
73
Contemporary Themes of Planning

It demands frame work
◦ To structuring and managing the
complexity of a project
◦ To coordinates activities
◦ To control the interfaces and
delivery
◦ To control effective use of
resources
74
Contemporary Themes of Planning
‘If you fail to plan, then plan to fail’
75
Contemporary Themes of Planning
Planning in management concept
◦ Assists Objective setting and monitoring
progresses
◦ Avoidance of Sub-optimization
◦ Facilitating communication and collaboration
76
Contemporary Themes of Planning
Planning in Construction
Assists PM setting guide line for project
Execution, coordination
Forecast uncertainties
Identify constraints
Monitoring progress
77
Effective Planning Contributes...









a disciplined approach
a crucial communication aid
identification of project risks
preparation of risk mitigation measures
formulation of contingency plans
fundamental project progress monitoring
anticipation of project delivery issues
evaluation of remedial options
confirmation of achievements
78
Planning in Construction

A multi-staged process performed by
different people at different stages for
various purpose
79
Planning in Construction
Three
stages:
• Pre-bid planning : for financial commitment
• Pre-Contract planning: to set alternative
strategies
• Contract Planning: Long term and short term
80
Planning View
schedule
project
view
quality/scope
planning
view
costs
resources
81
Preconditions and stability
Materials
Information
External Conditions
Preceding
Activities
Activity
Space
Safe
environment
Crew
Equipment
82
Preconditions and Stability
Condition
Reliability ?
Reliability
Preceding task
83.3%
95%
ROW cleared site
83.3%
98%
Equipment
83.3%
96%
Crew
83.3%
96%
Information
83.3%
95%
Materials
83.3%
100%
External conditions
83.3%
95%
Overall Reliability
<30%
70-80%
83
Planning Process
Planning
the
planning
process
Planning
process
evaluation
Information
diffusion
Information
gathering
Preparation
of plans
84
Planning Encompasses...

schedule management
◦
◦
◦
◦
recording planned activities and dependencies
testing plan logic
highlighting critical activities
recording activity progress
achievement projections
 resource management
 costs management
 exploring what-if scenarios

85
S.M.A.R.T. goals

develop a series of goals to define a logical sequence
of achievements that, cumulatively, build towards
successfully delivering the required project outcomes

goals should be SMART…






Specific
Measurable
Agreed
Realistic
Time-based
include these goals in the project plan as milestones
86
Preparation of Plan
 Major Steps required to develop a schedule
◦ Establish work breakdown structure (WBS)
◦ Sequencing of activities by analysing their
interrelations / interdependencies
◦ Allocation of resources to activities
◦ deciding time required for each activity
◦ developing the overall time schedule of the
project
NB: The above are not a onetime done activity,
need iterative process till optimal solution is
obtained.
87
Preparation of Plan

Resources planning:
◦
◦
◦
◦
◦
Determining the labour requirement
Determining the material requirement
Determining the number of equipment required
Determining the cash requirement
Schedule the ordering of material, equipment,
recruitment of labour and cash requirement
together with the provision of lead-time for all.
88
Preparation of Plans ….Major components
A) Work method selection
B) Scheduling
 Critical Path Method
 Critical Chain Method
 Location based/Repetitive Scheduling
 The Last planner concept
C) Cash flow forecast
89
Preparation of Plans

Work Method Selection
◦ Analyzing the project scope: including quality assurance
requirements against the time and cost implication
◦ Understanding the whole process: mapping the process
and pin point the required information
◦ Reviewing the construction technique that goes with the
company ability and the work demand
◦ Defining the natural work flow within the sub-sequent
work units
90
Preparation of Plans

The Method Selection needs to provide Efficiency
and Effectiveness, i.e.:◦ Economical: too much focus on least expensive
activity may adversely affect productivity and quality of
works
◦ Site specific
◦ Safe
◦ Reasonably considered social and
environment issues
91
Preparation of Plans

The Selected Method : address issues like:
◦ The What? …. The activities
◦ The Where?..... The location
◦ The When? ….The duration
◦ The How?...... The Construction Technique
Typically done either simultaneously or in a series
of iterations.
92
Preparation of Plan

Scheduling Techniques:
◦
◦
◦
◦

Tools for construction planning and control
Used to estimate of overall duration
Basis for resources allocation & cost estimation
Control timing of activities thereby ensuring the
timely completion of project
Principal scheduling techniques
◦ Bar chart
◦ Network Methods
◦ Time-space diagram
93
Preparation of Plan
 Bar
chart
◦ Easiest to understand
◦ Most commonly used
◦ List of activities shown as “bar”
plotted against time scale (start,
duration, Finish)
94
Preparation of Plan
Activity
A
Duration
(days)
4
B
8
C
4
D
4
E
2
F
2
G
2
0
4
8
12
Duration (days)
EXAMPLE OF SIMPLE BAR CHART
16
20
24
95
Preparation of Plan

Advantages of bar charts
◦ Very simple presentation, easily understood
◦ Good form of communication to nontechnical personnel
◦ Requires little training to use
◦ Suitable to be used for planning time-phased
resources (labor, material, equipment, budget)
96
Preparation of Plan

Disadvantage of bar charts
◦ Can not show interdependencies among the various
activities
◦ Critical activities that need attention and floats for
non-critical activities are not shown (complex projects).
◦ Change in schedule requires redrawing of the chart.

Despite its disadvantages the bar chart is the
most commonly used tool for planning and
control
97
Preparation of Plan

Network method
◦ Suitable for large complex projects having many
interdependent activities

Two commonly used network methods are
◦ Arrow-diagram
◦ Precedence-diagram

Main difference
◦ Arrow diagram represents activities on arrows and the
node represents the event at a time
◦ Precedence diagram shows activities on nodes and the
logical sequence of activities with arrows
98
Construction Planning(Cont.)
1
ACT.1
ACT. 2
2
ACT.3
3
4
EXAMPLE OF ARROW DIAGRAM (ACTIVITY ON ARROW)
Act. 1
Act. 2
Act. 4
Act. 5
2weeks
5weeks
3weeks
6weeks
SS 2 weeks
Act. 3
5weeks
EXAMPLE OF PRECEDENCE DIAGRAM (ACTIVITY ON NODE)
99
Preparation of Plan

Steps in developing a network diagram
◦ Listing all project activities using WBS
◦ Prepare an arrow-diagram following the
logical sequence of activities
◦ Estimate activity duration
◦ Calculate the time for events and determine
floats and critical-path (time analysis using
forward and backward pass)
100
Critical Path Method: Scheduling concept

Predecessor
•

controls the start or finish of another activity
Successor
•
depends on the start or finish of another activity
101
Activity relationships
Finish to Start (FS)
when A finishes then B can start
(this is the default relationship type)
A
B
Predecessor
Successor
102
Activity Relationships
Start to Start (SS)
when A starts then B
can start
A
Predecessor
B
Successsor
103
Activity Relationships
Finish to Finish (FF)
A
Predecessor
when A finishes
then B can finish
B
Successor
104
Activity Relationships
Start to Finish (SF)
B cannot complete
until A starts
A
Predecessor
B
Successor
105
Activity Relationships
Finish to Start with Lag/lead
A
Predecessor
....days
B
Successor
Should be carefuly reveiewed inorder to avoid miss use / overl
It may bes better to deffine the activity itself inorder to avoid
And better control…specially for people who are not familiar
The hidden structure Concerete cure time
106
Activity Relationships
Start to Start with
Lag/lead
A
predecessor
Excavation and pipe laying
B
...days
successor
107
Scheduling concept
Forward Pass
 calculates the early dates for each activity

early dates are the earliest times an activity can
start and finish once its predecessors have been
completed

the calculation begins with the activities
without predecessors
(Early Start + Duration) - 1 = Early Finish
108
1
5
11
1
25
10
109
Scheduling concept
Backward Pass
•
calculates the late dates for each activity
•
late dates are the latest times an activity can
start and finish without delaying the end date
of the project
•
the calculation begins with the activities
without successors
(Late Finish – Duration) + 1 = Late Start
110
6
10
11
1
25
10
111
Float- definitions
Float generally is the amount of time an activity
can slip from its early start without delaying the
project

Total float: Time available before being critical
◦ Late Dates - Early Dates = Total Float

Free float: Time delay without delaying subsequent

Independent float: Time delay without impact on

Activities with zero total float are critical
activities
preceding or succeeding activities
112
5
0
0
113
Preparation of Plan
Activity
A
Duration
(days)
4
B
8
C
4
D
4
E
2
F
2
G
2
0
FLOAT
4
8
12
16
Duration (days)
ACTIVITIES A, B, C, E, F and G are critical
ACTIVITY D is non critical and has a float of 8 days
20
24
114
Preparation of Plan

Advantages of network methods
◦ shows the logical interdependencies among activities
and the effects of their changes on one another
◦ shows critical activities and floats for non-critical
activities
◦ estimates project duration more accurately by splitting
the project into smaller activities (work contents)
◦ doesn't require redrawing for changes
◦ Resources levelling can be done by shifting around
non-critical activities
115
Preparation of Plan

Disadvantages of network methods
◦ Requires proper skill & training
◦ Difficult for supervisors on site to easily
understand and get necessary information. This
normally leads to the use of network based bar
charts on construction sites.
116
Preparation of Plan

Time space diagram
◦ Suitable for linear construction projects like highways,
cannels, tunnels, sewer lines
km
100 Legend:
Cut & Fill
Drainage
Sub-base
Base course
AC
80
Protection Works
Bridge B
60
Culvert 2
40
Culvert 1
20
Bridge A
0
5
10
15
20
25
Time (Months)
TIME CHAINAGE DIAGRAM
30
117
Preparation of Plan

Advantages of the method
◦ Easily understood by all levels
◦ Good means of communicating information to nontechnically trained personnel
◦ Varying performances can be clearly seen from the
diagram i.e. change in slope
◦ Location of the work along the project length can easily be
seen at any given time
118
Preparation of Plan

Disadvantages of the method
◦ Interdependencies among activities are not shown
◦ Critical and non-critical activities are not shown
◦ Its use is limited to linear construction projects
119
Plan Information Diffusion

Plans have to be communicated clearly and ‘no
doubt should be left as to what is to be done
and when’.

A well informed employee is committed to the
plan which facilitates the monitoring and
controlling process.

Clear information also increases commitment
of subcontractors.
120
Cost Flow Forecasting

Cash is a life-blood of any business

Cash inflow is not an income:
money entering -money leaving the
firm

.
121
Cost Flow Forecasting …. Cont

Helps to :

To provide timely warnings…to take corrective
actions

They also allow you to analyze whether a
project will be sufficiently profitable to justify
the effort put into it.

Be useful for analyzing owners’ personal
finances. This is useful when making difficult
financial decisions.
122
Cost Flow Forecasting …. Cont

The Process of Cash flow forecast is similar to
the process of production(Single Project)
Working capital
Cash operation
expense
Operations
( break into
manageable size)
Revenue
Operation Income
123
Cost Flow Forecasting …. Cont

The basic steps in cash flow forecasting are:
Set the period of forecast
Prepare manageable activity break down
Prepare a spreadsheet identifying revenues, costs and
total cash flow
Estimate/forecast the corresponding values and
calculate
124
Factors affecting project cash flow

Revenue factors
◦ Advance payment: proper utilization to support the cash flow
◦ Progress payment: timely delivery of the work and timely collect the
payments
◦ Interest on Payment: Sub clause 60.8
◦ Retention release
◦ Acceptable cost claims

Cost factors
◦
Direct cost of factors of production: ( labour, material, equipment,
finance...)
◦
Indirect cost

◦
◦
Overhead and Profit, (Performance and other payment guaranties)
Subcontractors
Escalation...etc
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Factors Affecting Project Cash flow

Time
◦ Project schedule: delays/ accelerations, change of work
◦ Holidays and non-working days

Terms of the contract
◦
◦
◦
◦
◦
Minimum amount of payment for IPC
Retention deduction
Advance recovery
Payment on remaining % for General Provisions
Unbalanced bids and the BoQ quantity changes
126
Factors affecting project cash flow

Material related variables
◦

Storage, lead time of procurement, credit terms,
discount rate
Depreciation
◦ Helps to recover fixed capital early
127
Implementation of Plan and Control
Cost
◦ Planning facilitate project
implementation control
◦ Firms has to Methodically
Time
Scope
and Continuously measure
and
evaluate
the
performance
Sustainability
128
Implementation of Plans and Control
•
Project performance measurement should
evaluate
◦ Productivity(efficiency)
◦ Effectiveness of how the activities were done, i.e.
no rework
◦ Improved relations and communication
◦ Overall satisfaction
129
Implementation of Plan and Control
◦ The performance monitoring system:
 Timeliness
 Standard,
 Honest and
 Clearly showing divergence
◦ managers must evaluate the performance,
and take corrective action when the
project runs away from the plan.
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Dynamics of Planning
The employed performance measurement must lead
to plan revision when there is divergence:
Project plans are subjected to re-planning either
due to project goal change by the client or
plan change by site management due to influence
of project micro and macro environment.
131
Dynamics of Planning…….Cont.

Planning needs timely and frequent updating
during construction due to following reasons:
◦
◦
◦
◦
◦
◦
◦

Resources not available as planned
Productivity may be less than assumed
Unanticipated extra quantities
Design changes etc.
Unusual weather conditions
Differing site or soil conditions
Untimely payment for completed works
In such ever changing and dynamic environment plans age
early:
132
Implementation of Plans and Control
Earn Value Management has become an industry
standard way to Performance management and
forecast
measure the progress of a projects if
accomplished is as planned in terms of Cost &
Schedule of the work performed
identify schedule and budget
throughout the life of a project
variances
forecast its completion date and final cost
Value is “earned” as it is completed, based upon the
WBS budgeted cost of work
133 completed
Earn Value Management
•
Now
EAC
Cost
ACWP – Actual Cost of
Work Performed (spent
cost)
•
BCWP – Budgeted Cost
Cost
of Work Performed
overrun (Earned Value/Achieved
Cost)
EAC
BAC
BCWS
BCWP
ACWP
SV
Time
overrun
•
BCWS – Budgeted Cost
of Work Scheduled
(Elapsed Cost/Baseline
Cost to Date)
•
BAC – Budget at
Completion
•
EAC – Estimate cost at
Completion
•
CV – Cost Variance
•
SV – Schedule Variance
CV
Time
134
Earn Value Management
• SPI: Schedule Performance Index (“Did a month’s of schedule
produce a month of progress?”)
– SPI=BCWP/BCWS
– SPI<1 means project is running behind schedule
• CPI: Cost Performance Index (“Did the progress we made cost what
it should?”)
– CPI= BCWP/ACWP
– CPI<1 means project is going over budget
• CSI: Cost Schedule Index (CSI=CPI x SPI)
– The further CSI is from 1.0, the less likely project recovery
becomes.
135
Earn Value Management
• Predicting future cash flow
Simple extrapolation
Final cost = cost of work done + (work left/past performance)
Assumes future performance is same as past (generally true)
EAC=ACWP + (BAC-BCWP)/CPI
EAC=ACWP + (BAC-BCWP)/CSI
How far is the
Completion
predictable
136
Securing Smooth Cash Flow

At Tender stage:Having as accurate estimate as possible

Construction stage: from project activities
Load money into early items such as excavation and
substructures
 Submit interim application on time
 Deal with defective work quickly to avoid delayed pay
ment
 Delay some activities
 Value materials on site
 Frequent inventory to spare parts and idle resources
 Manage maintenance and other expenses
 Agree in the value of variations as soon as possible
137
 Keep good records and submit claims early
Securing Smooth Cash Flow
◦ Timely avail finance from other sources
 Long term borrowing: has to be invested in capital assets
 Short term borrowing: should be invested as working capital
 Bank loans,
 Bank overdrafts
 Trade creditors: make maximum use of credit facilities..etc
◦ Post-construction stage : to assure profit is maximized: ag
ree on final account and collect outstanding retentions
on time
138
Thank you
139

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