Project Management: Techniques in Planning and Controlling Construction Projects, 2nd Edition

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<ul><li><p>PROJECT MANAGEMENT Techniques in Planning and Controlling Construction Projects </p><p>Second Edition </p><p>HlRA N. AIIUJA University of Toronto </p><p>S. P. DOZZl S. M. ABOlURlZK Dept. of Civil Engineering, University of Alberta </p><p>JOHN WILEY &amp; SONS, INC. </p><p>NewYork / Chichester / Toronto I Brisbane / Singapore </p></li><li><p>This text is printed on acid-free paper. </p><p>Copyright O 1994 by John Wiley &amp; Sons, Inc. </p><p>All rights reserved. Published simultaneously in Canada. </p><p>Reproduction or translation of any part of this work beyond that permitted by Section 107 or 108 of the 1976 United States Copyright Act without the permission of the copyright owner is unlawful. Requests for permission or further information should he addressed to the Permissions Department, John Wiley &amp; Sons, Inc., 605 Third Avenue, New York, NY 10158-0012. </p><p>This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting. or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. </p><p>Library of Congress Cataloging in Puh~icotifln Data: Ahuja, H. N . </p><p>Project management : techniques in planning and controlling construction projects I Hira N. Ahuja, S. P. Dozzi. S. M. AbouRizk.- 2nd ed. </p><p>p. cm. Includes bibliographical references and index. ISBN 0-471-59168-8 (acid-free paper) 1. Construction industry-Management. I. Dozzi, S. P. </p><p>11. AbouRizk, S . M. 111. Title. HD9715.A2A418 1994 624'.068-dc20 </p><p>Printed in the United States of America </p><p>1 0 9 8 7 6 5 4 3 2 1 </p></li><li><p>To our wives and families, and many friends in project management and the construction industry. </p></li><li><p>PREFACE </p><p>The need for efficient project management is always continuous. The intro- duction of quantitative analysis cannot itself solve management problems; it is necessary also to form a synthesis of quantitative facts and the human element to achieve professional project management. </p><p>Managing a project involves planning, organizing, executing, and rnonitor- ing that project. Planning often has been construed to mean scheduling, but this is not the case. A significant portion of a project manager's time is spent in planning, which is proactive management. A project consists of many elements, all of which require careful planning-time, cost, material, and organization. </p><p>In this edition, we have de-emphasized CPM scheduling and have intro- duced other planning tools. Construction is a dynamic process-the applica- tion of resources to accomplish a plan for a project. CPM methods are not dynamic and require that resources be added to CPM networks. This add- on of resources is artificial and is perhaps the foremost reason that CPM methods are not universally applied. </p><p>Many contractors use CPM methods to some degree, whereas others resort to simple bar charts with good results. </p><p>The scope of this edition is broader than the first edition, because schedul- ing is treated as only one of several planning areas. Other approaches are also introduced, such as various forms of simulation, which is one of the more promising techniques that deal with the dynamics of a project and resource management. </p><p>During the past decade, the construction industry has begun to embrace the total quality management (TQM) philosophy of continuous improvement </p><p>vii </p></li><li><p>viii PREFACE </p><p>with a customer focus. TQM requires careful planning and implementation, but, again, a plan is required. Although TQM may not be the perfect ap- proach, it has been proven successful in improving competitiveness and in maintaining a competitive edge. </p><p>The organization of this book reflects this broader approach to manage- ment of construction projects. </p><p>Chapter 1 lays the groundwork for the management of a construction project. The dynamic nature of a project, its life cycle, and the project management model are explained. </p><p>Chapter 2 emphasizes the need for planning and the various systems and plans required. </p><p>Chapter 3 looks at "people" planning. Different projects require that organizations tailor them to suit their needs. The types of organizations are discussed, as well as the needs of individuals within organizations. Partnering is one approach that is used to improve project performance and to lessen disputes. </p><p>Chapter 4 introduces the use of bar charts, because they are the initial type of schedules that are usually produced and are preferred for many contractors. In spite of their limitations, they are readily understood and used. </p><p>Chapters 5, 6, and 7 deal with CPM scheduling-both the Activity-on- Arrow (AOA) and the Activity-on-Node (AON) methods. </p><p>Chapter 8 looks at additional techniques that optimize planning proce- dures. Work Breakdown Schedule (WBS), Organizational Resource Chart (ORC), Milestone Networks, Subnets, and Skeltonization are topics that are discussed in this chapter. </p><p>Chapter 9 covers resource allocation and planning. Chapter 10 discusses how to establish the most economical duration of a </p><p>project. Chapter 11 looks at estimating and project estimates, because these form </p><p>the basis for cost control, which is the topic of Chapter 12. Chapter 12 discusses the cost center and cost breakdown, and explains </p><p>cost coding. Chapter 13 remains as it was in the first edition and discusses cash flow, </p><p>forecasting. Chapter 14 deals with the remaining procedures for project cost and sched- </p><p>ule control, as well as project performance. Chapters 15.16, and 17 consider the dynamic aspects of a project, stochas- </p><p>tic methods, and simulation. Some of the material in these chapters requires a knowledge of the mathematics of probability and statistics. </p></li><li><p>Chapter 18 is important for the planning and control of material and equipment resources. </p><p>Chapter 19 deals with effective communication. </p><p>Planning is useful only if the plans and requirements are communicated accurately and on time. There is a considerable amount of information that is required to execute a project successfully, and it is imperative that there exist a plan for the gathering and dissemination of this information. </p><p>Chapter 20 expands on the topic of claims. A plan of action is required to control changes and the resulting claims. Some claims result in disputes, and the mechanisms for handling disputes are discussed. </p><p>Chapter 21 looks at the corrective action process and the actions that are required to remedy a situation. Sometimes, in spite of planning, things go off track, and a project manager should be able to recognize the signs of distress and take corrective action. </p><p>Chapter 22 discusses the concept of TQM of projects. This is a philosophy that should be applied to all projects in order to create win-win situa- tions. </p><p>Chapter 23 examines the concept of constructability, which must be part of the overall plan. </p><p>Chapter 24 examines the impact of computers in construction. An under- standing of the potential of computers and software is essential for a project manager. In addition, relational databases, expert systems, and neural networks are briefly explored. </p><p>Most calculations and examples presented are to be manually computed for the sake of learning and practice only, whereas in reality most planning, scheduling, and cost control would be canied out by the use of computers. </p></li><li><p>ACKNOWLEDGEMENTS </p><p>In the first edition, the following contributors were acknowledged: Victoria Warford, Rodney Pike, Rupinder Rangar, V. Arunachalan, V. Nandakaman, Terry Dwyer, Dave Oliver, Marilyn Warren, Maureen Kenny, Brenda Young, K. C. Thayar, and Bros. Ltd. of New Delhi. </p><p>The following people contributed to the completion of this second edition. Word processing was ably performed by Norma Odore at Purdue University and Donna Salvian at the University of Alberta. Word processing and proof- reading assistance also was provided by Christina Dozzi and Agnes Dozzi. Nader N. Chehayeb, Anil Sawhney, Jingshang Shi, and Rod Wales of the University of Alberta provided assistance in many aspects of this work. </p><p>The author:^ also would like to thank their colleagues' contributions to this edition. It1 particular, we wish to thank Professor James R. Wilson of North Carolina State University for many discussions on the statistical as- pects of simulation, many of which are reflected in material presented in Chapter 16. We also wish to express our sincere appreciation to Professor Daniel W. Halpin of Purdue University for his contributions to Chapter 17. Mr. Barry McIntyre of Economic Development, Edmonton, contributed to Chapter 22. We also would like to thank NRC for allowing us to use some material from the book Productivity in Construction in Chapter 18. </p><p>Finally, we wish to thank the following software developers for providing us with the eclucational versions of their software that have been used in many illustrations in this book: Pritsker Corp. (SLAMSYSTEM), Learning Systems Inc. (MicroCYCLONE), and Primavera (P3 and PARADE). </p></li><li><p>CONTENTS </p><p>1 CONCEPTS </p><p>2 PLANNING </p><p>3 PROJECT ORGANIZATION </p><p>4 BAR CHARTS (GANTT) </p><p>5 CPM: ACTIVITY ON ARROW (AOA) </p><p>6 AOA CRITICAL PATH ANALYSIS </p><p>7 PRECEDENCE NETWORKS: ACTIVITY-ON-NODE (AON) </p><p>8 PLANNING METHODS, TOOLS, AND PROCEDURES </p><p>9 RESOURCE ALLOCATION </p><p>12 C O ~ T BUDGETING 209 </p><p>xiii </p></li><li><p>X ~ V CONTENTS </p><p>13 CASH FLOW FORECASTING 221 </p><p>14 PLAN IMPLEMENTATION, MONITORING, AND CONTROL 250 </p><p>15 PROGRAM EVALUATION AND REVIEW TECHNIQUE (PERT) 291 </p><p>16 AN INTRODUCTION TO SIMULATION 31 4 </p><p>17 AN INTRODUCTION TO SYSTEMS SIMULATION 346 </p><p>18 MATERIAL MANAGEMENT 379 </p><p>19 PROJECT MANAGEMENT INFORMATION SYSTEM 392 </p><p>20 CLAIMS 403 </p><p>21 CORRECTIVE ACTION 41 6 </p><p>22 TOTAL QUALITY MANAGEMENT OF PROJECTS 436 </p><p>24 COMPUTERS IN CONSTRUCTION 450 </p><p>GLOSSARY 484 </p><p>APPENDIX A: MASTERFORMAT, BROADSCOPE SECTION TITLES 493 </p><p>INDEX 501 </p></li><li><p>CHAPTER 1 </p><p>Projects re becoming progressively larger and more complex in terms of physical ize and cost. In the modern world, the execution of a project requires t 1 e management of scarce resources; manpower, materials, money, and mach'nes must be managed throughout the life of the project-from conceptio to completion. </p><p>Numer 1 us endeavors can be categorized as projects. In this text the emphasis 's on construction projects, but the management principles apply equally w Il to any project. Although the objectives are different, the princi- ples of p ject management apply to construction, manufacturing, social, and pers al projects. However, the details and jargon vary according to the type 4 f project. Construction of a building, bridge, or highway requires different drades and knowledge but the management, scheduling, costing, and contr I of these projects utilize the same tools and techniques, and are subject to constraints of time, cost, and quality. </p><p>Except for a few people who report directly to him, the project manager (PM) man ges resources indirectly. Essentially the PM is managing informa- tion and tilizing systems to achieve the project objectives. There is an hierarchy of systems (Kerzner, 1987), but in project management the systems that a P 1 utilizes directly are the business, organization, and employee systems. These and others are ongoing entities which facilitate the execution of a proje t; they provide information for decision making and control. In a business b ntity, projects come to an end but systems remain for the next </p><p>systems are the strength of the prominent project manage- they are the strength of major engineering, procurement, (EPC) contractors. If systems do not exist for the project, </p></li><li><p>2 CONCEPTS </p><p>they must be created. Systems subsets include financial and accounting, cost and schedule control, marketing, personnel, communications, computing, production, and other lower tier systems. A successful project requires the integration of these systems to achieve the desired resuits and objectives. Therefore, the PM must have a clear understanding of the systems and their interrelationships. Systems are discussed further in Chapter 2. </p><p>As our society becomes more knowledgeable and sophisticated, the de- mands placed on a project will increase. No longer is it the case that "what's good for General Motors is good for the USA." In some developing coun- tries perhaps the project is justified on the basis of limited economic assess- ment, that is, the short-term benefits. In the developed countries, especially North America, Europe, and Japan, it is now necessary to consider the cultural and ecological aspects of a project. A few years ago, for example, impact assessments were not required. Today it is inconceivable to initiate larger projects without considering the impacts on the environment and economy. </p><p>Formerly, projects were required to comply with local bylaws only. To- day, projects experience serious cost and schedule implications due to in- creased environmental regulations and the need to consider broader rather than just local public opinion. The larger the project, the greater is the environmental impact on the neighborhood and on the project itself. </p><p>1.1 DESCRIPTION OF A PROJECT </p><p>The emphasis of this book is on construction projects, although the treatment can be very broadly applied. In construction the general scope of a project can be readily described as residential, building (i.e., other than residential), industrial (processing plants, refineries, mills, etc.), and heavy construction, which require a large engineering content. Bridges, tunnels, airports, rail- ways, and harbors are a few that fall into this category. With the increasing concern over the environment, another group can be classed as environmen- tal projects. These broad categories serve to delineate niche markets within the scope of construction projects. Projects can be looked upon in a more generic sense as follows. </p><p>A project (construction or otherwise) is a unique undertaking for essen- tially a single purpose which is defined by scope, quality, time, and cost objectives. The scope could be to provide a facility or a bridge, revise an organization, produce a study, and so on. The cost and quality objectives are met by the use of limited resources. </p><p>A construction project is characteristically a capital venture which there- fore requires a well-defined start and end point. The next section describes the life cycle within such time constraints of a project. </p></li><li><p>1.2 PROJECT LlFE CYCLE 3 </p><p>1.2 PROJECT LlFE CYCLE </p><p>A project occurs over an identified period of time during which a changing level of effort is required to complete each stage. The life of the project can be viewed as consisting of pre- and postfund authorization phases. Final approval of funding is the demarcation event which separates these two phases. This event is an all-important milestone. The prefund phase consists largely of planning activities; the postfund phase is the execution phase. Figure 1 . l shows the components of a project. The figure is intended to show relationally an approximate period over whi...</p></li></ul>