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KARIM EL‐DASH www.projacs.com 1

Training Program

Contract Management

16-18/01/2011

WORKBOOK

Presented by

Karim El-Dash PHD; CCE; PMP; RMP; AVS


Table of Contents Karim M. EL‐DASH; ...................................................................................................................... 3

REQUIREMENTS DOCUMENTATION ............................................................................................ 4

ECONOMICS BASICS .................................................................................................................... 5

CASH FLOW .............................................................................................................................. 5

EQUIVALENT ANNUAL PAYMENT ............................................................................................ 7

PROJECTS COMPARISON ......................................................................................................... 8

PROJECT SCOPE MANAGEMENT ............................................................................................... 10

PROJECT SCOPE STATEMENT ................................................................................................. 10

WORK BREAKDOWN STRUCTURE (WBS) ................................................................................... 11

WBS DICTIONARY .................................................................................................................. 12

PROJECT TIME MANAGEMENT .................................................................................................. 13

NETWORKS ............................................................................................................................ 13

PERT ....................................................................................................................................... 14

PROJECT COST MANAGEMENT .................................................................................................. 15

RESOURCE ALLOCATION ........................................................................................................ 15

CRASH COST ........................................................................................................................... 17

PROJECT RISK MANAGEMENT ................................................................................................... 18

PROBABILITY IMPACT MATRIX .............................................................................................. 18

RISK REGISTER ....................................................................................................................... 19

PUZZLE ....................................................................................................................................... 20


KARIM M. EL‐DASH; PhD; CCE; PMP; RMP; AVS

Professor of Construction Management 10-11-1961

PhD, Structural Engineering, North Carolina State University, USA (1995).

CCE, Certified Cost Engineer, Association for Advancement of Cost

Engineering International (AACEI), USA, (2009-2012).

PMP, Certified Project Management Professional, Project Management

Institute (PMI), USA (2000-2016).

PMI-RMP, Certified Risk Management Professional, Project Management

Institute (PMI), UAS (2010-2013).

AVS, Certified Associate Value Specialist, (2008)

Certified Consultant Engineer, Design of Reinforced Concrete Structures,

Egypt.

Delivered more than 30 technical and managerial academic courses in USA,

Egypt, and Kuwait.

Participated for more than 26 years in the management, structural design,

and building assessment and repair of many mega construction projects in

Egypt, Kuwait, and Saudi Arabia.

Lecturer and facilitator; prepared, delivered, and participated in more than

4000 training hours including more than 30 training subjects in the fields of

project management and construction. For example; facilitator for the

Cambridge University Project Management Diploma; facilitator for preparation

of Project Management Professional (PMP) certification and for certification

from International Project Management Association (IPMA).

Produced 28 research papers in the field of construction management, project

management, and structural engineering. Papers were published in

international recognized journals or presented in international conferences in

USA, GB, France, Canada, Spain, China, Norway, Greece, Nigeria, Jordan,

UAE, Qatar, and Egypt.


REQUIREMENTS DOCUMENTATION

Project Title:______________________ Date Prepared: __________________

Stakeholder Requirement Category Priority Acceptance Criteria


ECONOMICS BASICS

CASH FLOW

A project consists of an investment of KD100 million in capital for the construction of the manufacturing operations. Each year after the completion of the construction, the project will sell product worth KD70 million. The costs of manufacturing this product are expected to by 60% of the value of the sales.

The taxes are expected to be 30% of taxable income. No deductions, such as those for depreciation or capital allowance, are permitted for the determination of the taxation charge. The working capital is 15% of the fixed capital.

The working capital charge is incurred in the first year of operation and is recovered in the fifth year. Determine the free cash flow for the first five years of operation.


PAYBACK PERIOD A new capital project has the following cash flow profile:

Year Cash flow

0 −10,000

1 −5,000

2–9 3,000

10–14 2,000

15 3,000

Determine the payback period.


EQUIVALENT ANNUAL PAYMENT

An engineering consultancy wishes to purchase an office for KD300,000. The current interest rate for mortgages is 5% over a 25‐year term. What are the monthly repayments?


PROJECTS COMPARISON

Compare the NPV for the shown data of projects A, B, and C. Assume that all expenses are incurred at the end of the year. (i=10%)

Project A Project B Project C Cash Flow Cash Flow Cash Flow

Year 1 (10,000) (4,000) (1,000) Year 2 (2,000) (4,000) 1,000 Year 3 5,000 3,000 2,000 Year 4 12,000 10,000 3,000


A company owns office buildings that it lets to tenants. A particular building that cost KD 40 million has 7,500 m2 of office space. The building is expected to last for 30 years. The maintenance costs are KD 2 million each year. If the company’s discount rate is 15%, determine the annual revenue that the company must make from rentals in this building in order to meet its investment criterion that the NPV must be greater than KD 1 million. Determine the minimum rental per square meter that the company must charge to meet this investment criterion.


PROJECT SCOPE MANAGEMENT

PROJECT SCOPE STATEMENT


Product Scope Description:

Project Deliverables:

Project Acceptance Criteria:

Project Exclusions:

Project Constraints:

Project Assumptions:


WORK BREAKDOWN STRUCTURE (WBS)


WBS DICTIONARY


Work Package Name: WBS ID:

Description of Work:

Milestones:

1.

2.

3.

Due Dates:

ID Activity Resource Labor Material Total

Cost Hours Rate Total Units Cost Total

Quality Requirements:

Acceptance Criteria:

Technical Information:

Contract Information:


PROJECT TIME MANAGEMENT

NETWORKS

For the shown activities, durations, and relationships, it is required to construct a network showing the logic of the activities, early and late starts and finishes of the activities as well as the total float of each one.

ACTIVITY PREDECESSOR DURATION

A ‐ 4

B A 8

C A 7

D A 8

E B,C 6

F D 9

G C,E 7

H C,F 9

J E,F 10

K H,J,G 4


PERT

Given the following project activities and estimates of activity duration, determine the mean project duration and project duration variance. Assume all relationships are finish to start.

ACTIVITY Duration

OptimisticMost Likely

Pessimistic

A 2 4 5

B 3 5 8

C 5 8 11

D 4 6 9

E 2 5 11


PROJECT COST MANAGEMENT

RESOURCE ALLOCATION

Draw a bar chart for the network diagram (early and late dates) shown below. Hence, assuming constant rate of work for each activity, find the daily required labor for each activity, then, allocate the required labor for the project given the total (man.day) requirements for each activity (draw a histogram based on the early dates):

Activity Labor

Start 0

A 10

B 24

C 24

D 36

E 20

F 8

Finish 0

660

B

166

110

C

100

550

A

111

165

D

211

211

E

201

000

START

000

141

F

261

202

FIISH

202


CRASH COST

Given the following information about a project and the network diagram (normal duration), compress the network from its normal duration of 9 days to its expedited duration. List those activities that are expedited and the costs associated with each compression. Plot the duration‐cost curve for this project.

Activity ND CD NC CC/day

A 4 3 100 25

B 4 3 250 150

C 2 1 150 150

D 4 1 450 150

E 1 0.5 200 400

F 5 2 200 50


PROJECT RISK MANAGEMENT

PROBABILITY IMPACT MATRIX

Project Title: Date Prepared:

Ver

y H

igh

Hig

h

Me

diu

m

Lo

w

Ver

y L

ow

Very Low Low Medium High Very High


RISK REGISTER

Project Title: Date Prepared:

Risk ID

Risk Statement Probability Impact Score Response

Scope Quality Schedule Cost


PUZZLE

SCHEDULE RESOURCE REQUIREMENTS

BREAK EVEN ANALYSIS

ACTIVITY SEQUENCE

ACTIVITY COST EARNED VALUE CRASHING ACTIVITIES EXPECTATIONS

RATE OF RETURN PAYMENT RECEIVED DELIVERABLES ACCEPTANCE

BUDGET SCOPE DEFINITION SCOPE STATEMENT CHARTER

VERIFICATION REQUIREMENTS RESOURCE RATES ACTIVITY DURATION


1 2 3 4

5 6 7 8

9 10 11 12

13 14 15 16

17 18 19 20

Appendix F

Discrete Compound Interest Tables

Symbols

The following symbols are used in the following tables:

A Periodic payment (i.e. Annual amount). A uniform series of end-of-period payments or receipts,$F Future value, a single lump sum value occurring at the end of the last of n time periods, $i Interest rate per period, decimaln Total number of compounding periods, decimal P Present value, a single lump sum occurring at time zero, the first of n time periods, $G Uniform or arithmetic gradient amount, a constant increase in funds flow at the end of each peri-od, $

General Notification of Compound Interest Factors

Compound interest factors were developed to facilitate economic analysis before the advent of the pro-grammable calculator and personal computer. Today, many engineering economic evaluations are per-formed using spreadsheet at great ease. However, the ability to use compound interest factors willdemonstrate the true skill of performing basic economic analysis. The compound interest factor followsa general format:

(X/Y, i, n)

In this notation, X and Y denote two sums of money, and X/Y denotes the ratio of X to Y. The letters iand n denote the interest rate and the number of interest periods, respectively. When the value of Y isgiven, the unknown variable X is calculated from the following;

X (X/Y, i, n) = X * Compound Interest Factor

For example, given the present value P, find the future value F

F = P (F/P, i, n) or simplified as F = P (F/P)

Compound interest factor is applied to a known variable with monetary value of $1 to calculate theunknown variable.

F.1

Appendix F Discrete Compound Interest Tables

Table F.2—5% Interest Rate

F.3



F.4



F.5



F.6



F.7



F.8



F.9


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