ministry of transport urrap-training of trainers for contractors and coordinators project management...

Ministry of Transport

URRAP-Training of Trainers for Contractors and Coordinators

Project Management and PlanningDAY 1- Friday August 02, 2013

1

OutlineOutline

Introduction

Overview of the Construction Industry

Project Management Framework

2

OutlineOutline

The Role of Effective Project Manager

Leadership and Human Resource Management

3

OutlineOutline

Contemporary themes of Construction planning

◦Scheduling

◦Resourcing

◦Monitoring and Control

◦Cash flow forecast and Control

4

IntroductionIntroduction

The prevailing facts of the road sector

◦Cost overrun

◦Time overrun

◦Quality reduction

5


6


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

IntroductionIntroductionInefficiencies 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 Overview of the Construction IndustryIndustry

9


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


The Public sector is the major Client

Traditional procurement approach is predominant

Limited administration capability in most of the organizations, both private and public

Less focus on Research & Development

11


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 ?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 ?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)

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15

The Three Main Pillars of Project Management

.... and emphasise on people !.... 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 ProjectsTriple Constraints of Projects

Cost

Time

Scope

Start End

Project Management

Project Management

What happens if the planwas based on the wrong assumptions

!

17

Another View of the Triple ConstraintsAnother View of the Triple Constraints

Scope

Cost

Time

Project

BudgetContingency

Contingency

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Why do we have projects ?Why do we have projects ?

Business Goals

Projects

Outputs

Outcomes

Benefits

•Profitability•Market share

•Competitive advantage

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Projects Take up Projects Take up InvestmentInvestmentThe 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

Workers20

Projects Take up Projects Take up InvestmentInvestmentNormal 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 cost21

Projects take up Projects take up investmentinvestment

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 InvestmentProjects Take up Investment

Project duration

Start EndGoal = Finish As Soon As

Possible

Investment

Return on Investment

23

Goal of the firm: Profit maximization is a target

Project Management FrameworkProject Management Framework

Project Integratio

n Managem

ent

Project Time

Management

Project Cost

Management

Project Quality

Management

Project Human

Resource Managem

ent

Project Communicati

on Management

Project Risk

Management

Project Procureme

nt Managem

ent

Project Scope Management

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Project Management Framework– Construction Extension Project Management Framework– Construction Extension

Slide 25

ProjectProject Scope ManagementScope Management

Processes required to ensure that the project included all the work required and only the work required to complete the project

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Project ManagerProject Manager

Is the single integrative point of responsibility for the project

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TThe Role of Project he Role of Project Manager 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

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Project Manager’s ResponsibilitiesProject 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

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Higher Order ObjectivesHigher Order Objectives

Complete all projects efficiently & profitably

Balance long & short term priorities

Supply & allocate resources

Integrate multiple projects with other activities

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Balance in ProjectsBalance in Projects

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Managing ClientsManaging Clients

Agree project objectives – deliverables

Initial start up meetingInterim reporting & reviewsProblem resolutionManage the relationshipUnder promise & over deliverAlways negotiate

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Establish Client's objectives + Establish Client's objectives + priorities priorities

Business aims Project aims + scope Priorities - quality, time, cost Timescales Understand uncertainty + risks

33

Design an Organisation Design an Organisation Structure Structure participants relationships decision points, key +

operational reporting integrating + coordinating

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Common forms of Common forms of structurestructure

FunctionalProduct basedGeographicalDivisionalisedMatrix

11 FunctionalFunctional

22 DivisionalDivisional

33 MatrixMatrix

44 TeamsTeams

Selection + appointment of Selection + appointment of project team project team

Scope + terms of reference Selection criteria PM's own appointment Appointment agreements Procurement route

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Develop brief for project Develop brief for project team team translate client's objectives state in terms of needs +

outcomesalternatives + evaluation clarity + communication

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Uncomfortable FactsUncomfortable 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 Establish Information and Communication Structure Communication Structure

Measurement of data + presentation

Communication channels Meetings Reporting mechanism

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Facilitate the Decision Facilitate the Decision Making Making What? By whom? When? At what Cost?

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Question – in groupsQuestion – in groups

Reference the distirbuted ‘direction finder’, how would you apportion your time (%) on a project?

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Projects – Direction FinderProjects – Direction Finder

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P. O. L .C. MODELP. O. L .C. MODEL

PLANNING

LEADING

ORGANISINGCONTROLLING

Establishing objectives & planning work

Setting standards and assessing success in achieving objectives

Influencing and motivating team members in doing the

work

Organising people, materials and scheduling

Leadership involves:Leadership involves:

Challenging the status quo

Inspiring a shared vision

Empowering others to act

Modelling the way

Motivating others

ENVIRONMENT

Working conditions

Interpersonal relations

Job Security

Salary

Status

Policy

MOTIVATORS

Recognition

Responsibility

Achievement

Advancement

Work itself

Growth

MOTIVATION FACTORS

Take risks

Gain knowledge, and

Develop new skills

Empowered Individuals:Empowered Individuals:

Goal setting

Communication

Trust

Accountability

Leadership – The 4 Basic Building Blocks

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

Takes time

Involves conscious effort

Requires a structure

Overcoming Communication Barriers

Team Communications

Could include:

memos

minutes

circulars

notices

meetings

Why do we have meetings?Why do we have meetings?

Exchange Information

Discussion on important issues

Make Decision

Team Building

… Management

Planning Meetings: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


1 Determine the objective:

- Why do I want to hold this meeting?

- What do I want to achieve? - Is it necessary?

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 Main stages of a construction projectproject

InceptionFeasibilityDesignPreconstructionConstructionCommissioning and occupation

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Handover

New Project

Project Timescale

Scale of enthusiasm

The project ‘moodograph’

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Contemporary Themes of Contemporary Themes of PlanningPlanningConstruction is Complex system

◦Uncertainty ◦Interdependency of operations

Sequencing of activities Resource

Construction a Chaotic system: ◦dynamic ◦non uniform environment

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Contemporary Themes of Contemporary Themes of PlanningPlanning

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

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Contemporary Themes of Contemporary Themes of PlanningPlanning

‘If you fail to plan, then plan to fail’

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Contemporary Themes of Contemporary Themes of PlanningPlanningPlanning in management concept

◦Assists Objective setting and monitoring progresses

◦Avoidance of Sub-optimization

◦Facilitating communication and collaboration

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Contemporary Themes of Contemporary Themes of PlanningPlanningPlanning in Construction

Assists PM setting guide line for project

Execution, coordinationForecast uncertaintiesIdentify constraintsMonitoring progress

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Effective Planning Effective Planning Contributes...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

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Planning in ConstructionPlanning in Construction

A multi-staged process performed by different people at different stages for various purpose

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Planning in ConstructionPlanning in Construction

80

Planning ViewPlanning View

81

schedule

costsquality/scope resources

planningview

projectview

Space

Preceding Activities

Materials

EquipmentCrew

Information

Activity

Preconditions and Preconditions and stabilitystability

Safe environment

82

External Conditions

83

Preconditions and StabilityPreconditions and Stability

Condition Reliability ?

Preceding task

ROW cleared site

Equipment

Crew

Information

Materials

External conditions

Overall Reliability

Reliability Reliability

83.3% 95%

83.3% 98%

83.3% 96%

83.3% 96%

83.3% 95%

83.3% 100%

83.3% 95%

<30% 70-80%

Planning ProcessPlanning Process

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Planning Encompasses...Planning Encompasses...schedule management

◦recording planned activities and dependencies

◦testing plan logic◦highlighting critical activities◦recording activity progress

achievement projectionsresource managementcosts managementexploring what-if scenarios

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S.M.A.R.T. goalsS.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

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Preparation of PlanPreparation 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.

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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.


Preparation of Plans ….Preparation of Plans ….Major Major componentscomponents

A) Work method selection

B) Scheduling

Critical Path Method Critical Chain Method Location based/Repetitive

Scheduling The Last planner concept

C) Cash flow forecast89

Preparation of PlansPreparation of PlansWork 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 PlansPreparation 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

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Preparation of PlansPreparation 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.

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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


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Bar chart◦Easiest to understand◦Most commonly used◦List of activities shown as “bar” plotted against time scale (start, duration, Finish)


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ActivityDuration

(days) A 4 B 8 C 4 D 4 E 2 F 2 G 2

0 4 8 12 16 20 24 Duration (days)

EXAMPLE OF SIMPLE BAR CHART


Advantages of bar charts◦Very simple presentation, easily

understood◦Good form of communication to non-

technical personnel ◦Requires little training to use◦Suitable to be used for planning

time-phased resources (labor, material, equipment, budget)

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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


98

Network method◦ Suitable for large complex projects having

many interdependent activitiesTwo 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


Construction PlanningConstruction Planning(Cont.)(Cont.)

99

1

2 3

Act. 1

2weeks

Act. 2

5weeks

Act. 4

3weeks

Act. 5

6weeks

Act. 3

5weeks

EXAMPLE OF ARROW DIAGRAM (ACTIVITY ON ARROW)

EXAMPLE OF PRECEDENCE DIAGRAM (ACTIVITY ON NODE)

ACT.3

SS 2 weeks

ACT.1 ACT. 2 4

100

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)


Critical Path Method: Critical Path Method: Scheduling Scheduling conceptconcept

101

Predecessor• controls the start or finish of another

activity Successor

• depends on the start or finish of another activity

ActivityActivity relationships relationships

Finish to Start (FS)

when A finishes then B can start

(this is the default relationship type)

A

Predecessor

B

Successor

102

ActivityActivity Relationships Relationships

103

Start to Start (SS)

when A starts then B can start

A

Predecessor

B

Successsor


104

Finish to Finish (FF)

when A finishes then B can finish

A

Predecessor

B

Successor


105

Start to Finish (SF)

B cannot complete until A starts

A

Predecessor

B

Successor


106

Finish to Start with Lag/lead

....daysB

Successor

A

Predecessor

Should be carefuly reveiewed inorder to avoid miss use / overlapsIt may bes better to deffine the activity itself inorder to avoid confusionAnd better control…specially for people who are not familiar withThe hidden structure Concerete cure time


107

Start to Start with Lag/lead

A

predecessor

B

successor...days

Excavation and pipe laying

Scheduling conceptScheduling concept

108

Forward Passcalculates 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

109

55

1010

1111 2525

11

11

Scheduling conceptScheduling concept

110

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

111

25251111

101011

101066

Float- definitionsFloat- 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 activities

Independent float: Time delay without impact on preceding or succeeding activities

Activities with zero total float are critical

112

113

Critical

Critical P

ath Path

00

00

55

114

ActivityDuration

(days) A 4 B 8 C 4 D 4 FLOAT E 2 F 2 G 2

0 4 8 12 16 20 24 Duration (days)

ACTIVITIES A, B, C, E, F and G are criticalACTIVITY D is non critical and has a float of 8 days


115

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


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


Time space diagram◦ Suitable for linear construction projects like highways,

cannels, tunnels, sewer lines

117

km Cut & Fill Protection Works 100 Legend: Drainage

Sub-base80 Base course

AC Bridge B60

Culvert 240

Culvert 120

Bridge A

0 5 10 15 20 25 30Time (Months)

TIME CHAINAGE DIAGRAM


Advantages of the method◦ Easily understood by all levels◦ Good means of communicating information to

non-technically 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


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 DiffusionPlan 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 ForecastingCost 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 …. Cost Flow Forecasting …. ContCont

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


The Process of Cash flow forecast is similar to the process of production(Single Project)

123

Operations

( break into manageable

size)

Revenue

Cash operation expense

Operation Income

Working capital


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 Factors affecting project cash flowcash flowRevenue 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 12

5

Factors Affecting Project Factors Affecting Project Cash flowCash flowTime

◦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

changes126

Factors affecting project cash Factors affecting project cash flowflow

Material related variables◦ Storage, lead time of procurement,

credit terms, discount rate

Depreciation◦Helps to recover fixed capital early

127

Implementation of Plan and Implementation of Plan and ControlControl

128

◦ Planning facilitate project implementation control

◦ Firms has to Methodically and Continuously measure and evaluate the performance

Implementation of Plans and Implementation of Plans and ControlControl• 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 Implementation of Plan and ControlControl

130

◦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.

Dynamics of PlanningDynamics 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

132

Dynamics of Dynamics of Planning…….Planning…….Cont.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:

133

Implementation of Plans and Implementation of Plans and ControlControl

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 variances throughout the life of a project

forecast its completion date and final cost

Value is “earned” as it is completed, based upon the WBS budgeted cost of work completed

134

Earn Value ManagementEarn Value Management

Time

Cost

Timeoverrun

Costoverrun

ACWP

BCWPBCWS

EAC

BAC

Now

SVCV

• ACWP – Actual Cost of Work Performed (spent cost)

• BCWP – Budgeted Cost of Work Performed (Earned Value/Achieved Cost)

• 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

EAC

135


• 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.

136


• 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

Securing Smooth Cash Flow Securing Smooth Cash Flow At Tender stage:Having as accurate estimate as

possible Load money into early items such as excavation and substructures

Construction stage: from project activities Submit interim application on time Deal with defective work quickly to avoid

delayed payment 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 Keep good records and submit claims early

137

Securing Smooth Cash Flow 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: agree on final account and collect outstanding retentions

on time

138

Thank you

139

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