More Related Content Similar to Project Control Basics Similar to Project Control Basics (20) 2. Projects
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How does a large project get to be a year late?
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…One day at a time.
Frederick P Brooks - The Mythical Man Month
4. j y y p
Projects – Sydney Opera House
“It was not his fault that a succession of Governments and the Opera House Trust should so
signally h
i ll have f il d t i
failed to impose any control or order on th project....his concept was so
t l d the j t hi t
daring that he himself could solve its problems only step by step....his insistence on
perfection led him to alter his design as he went along”
The Sydney M i H ld
Th S d Morning Herald
AU$102 million / 14 years
AU$7 million / 5 years
© The Project Company 2006 A02
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Projects – Scottish Parliament
“It is difficult to be precise but something in excess of £150 million has been wasted in the
cost of prolongation fl i f
t f l ti flowing from d i d l
design delays, overoptimistic programming, and uncertain
ti i ti i d t i
authority”
Lord Fraser
£414 million / 58 months
£195 million / 38 months
© The Project Company 2006 A03
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Research – The Standish Group
• The 1994 report stated that the average cost overrun on software projects was as high as
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189% (this figure is extensively quoted and at the same time questioned by the ICT industry)
• Part of the research involved a survey of IT executives for their opinions as to why projects
succeed or fail.
• Project Success Factors • Project Challenged Factors
– User involvement (19%) – Lack of user input (12.8%)
– Executive management support (16%) – Incomplete specification (12.3%)
– Clear statement of requirements (15%) – Changing requirements (11.8%)
– Proper planning (11%) – Lack of executive support (7.5%)
– Realistic
R li i expectations (10%)
i – Technology i
T h l incompetence (7%)
– Smaller project milestones (9%) – Lack of resources (6.4%)
– Competent staff (8%) – Unrealistic expectations (5.9%)
– Ownership (6%) – (5.3%)
Unclear objectives (5 3%)
– Clear vision & objectives (3%) – Unrealistic timeframes (4.3%)
– Hard-working, focused staff (3%) – New technology (3.7%)
– Other (23%)
© The Project Company 2006 A04
7. y j g
Research - Flyvbjerg
• Costs are underestimated in 9 out of 10 transportation infrastructure projects.
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• For a randomly selected project the likelihood of the actual costs being higher that the
estimated costs are 86%.
• Actual costs are on average 28% higher than estimated costs.
• Cost underestimation exists across 20 nations and 5 continents and would appear to be a
global phenomenon.
• Underestimation today is in the same order of magnitude as 10, 30, and 70 years ago.
• No learning that would improve cost estimate accuracy seems to take place.
• Cost estimation cannot be explained by error and seems to be best explained by strategic
misrepresentation, i.e. lying.
• Transportation infrastructure projects do not appear to be more prone to cost
underestimation than other types of projects.
© The Project Company 2006 A05
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Projects – 2012 London Olympics
£?? billion (July 2012)
Chairman: So the bid was not a pig in a poke?
The i i l
Th original cost, we were told, was going to b
ld i be
£2,992 million. We were also told that private sector
funding was going to be £738 million, a claim that
has faded into the mist, I understand. The Secretary
of S
f State f C l
for Culture, M di and S
Media d Sport h already
has l d
announced a further £900 million of costs. Therefore,
the figure is £2,992 million, plus £738 million, plus
£900 million and rising, and we still do not have a final, £9.4 billion (15 March 2007)
agreed b d t D you not thi k th t you owe it t
d budget. Do t think that to
the taxpayers of this country to have your act together
by now?
Permanent S
P t Secretary of th D
t f the Department f
t t for
Culture, Media and Sport: A thorough process
of cost review is under way…
Oral id
O l evidence b f
before th C
the Committee of P bli
itt f Public
Accounts 05 March 2007
£4 billion (Nov 2004)
© The Project Company 2006 A06
9. Research - UK Construction Industry KPI’s
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© The Project Company 2006 A07
10. Research – Mott MacDonald
• The study reviewed 50 projects implemented over the previous 20 years (with values
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exceeding £40 million at 2001 prices)
• The study highlighted a tendency for hifh levels of optimism in project estimates arising
from underestimating project cost and duration or overestimating project benefits.
• This tendency was given the name “Optimism Bias)
• Optimism bias is expressed as the percentage difference between the cost and duration
estimates at project appraisal and the final outturn.
© The Project Company 2006 A18
11. p
Optimism Bias
• Buildings (Capital Expenditure)
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– Standard (24%)
– Non-standard (51%)
• Buildings (Works Duration)
– Standard (4%)
– Non-standard (39%)
• Civil Engineering (Capital Expenditure)
– Standard (44%)
– Non standard
Non-standard (66%)
• Civil Engineering (Works Duration)
– Standard (34%)
( )
– Non-standard (15%)
© The Project Company 2006 A09
12. Agenda
g
Organisation Planning
COST TIME WBS
QUALITY
HOW WHEN
SC
O
PE
Schedule
CHANGE
WHAT
Process Flow
W
WBS
OBS
WHO OBS HOW MUCH
Cost Cube Baseline Plan
CHANGE
Responsibility Assignment Matrix
CHANGE
Estimating COST Contingency
Change
h
Uncertainty Baseline Plan
Control
Event Driven Project
Risk Control
C l
TIME
© The Project Company 2006 A10
13. Organisation
g
…large-scale project agreements should be divided into ‘manageable chunks of work’,
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which are of such scale and scope that project managers can more easily access progress,
and alter implementation strategy as required.
Comptroller and Auditor General Report into the HSE PPARS project
18. Cost Breakdown Structure
• Labour
• Materials
• Plant & equipment
• Subcontract costs
• Management
• Overhead & administration
• Fees & taxation
• Inflation
• Contingency
© The Project Company 2006 B05
19. The Cost Control Cube
WBS
resource 01
resource 02
OBS resource 03
resource 04
resource 05
CBS
© The Project Company 2006 B06
21. Estimating Bias
g
• Motivational bias
– We know what it is we want to achieve and we are motivated to skew our estimates to
make the goal achievable e.g. our client tells us that we have to have a design ready for
approval and planning in five months…so how long will it take?
• Anchoring or adjustment bias
– We start with an initial estimate (an anchor) and adjust it based on our experience to
arrive at a value we are comfortable with e.g. if all goes well we could do in
g g
maybe…three to six months? four to seven months?
• Availability bias
– N matter h
No tt how great our experience, th d t il th t we recall or th t i “
t i the detail that ll that is “available” t us
il bl ” to
at the moment we perform the estimate may be limited. We tend to remember our
more recent projects, our largest projects, our more successful projects.
© The Project Company 2006 B08
22. Estimating Bias - Remedies
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• Never do a wild (or even an intelligent) guess
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• Collect relevant historical data
• Reality checks
• Independent assessment
© The Project Company 2006 B09
23. Estimating - Best Practice
g
• Define the scope of work…what is to be built?
p
• Define the project execution basis…how will it be built?
• Determine what historical data is available and which estimating methods will be used.
• Assign experienced estimators and planners to the work.
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• Estimate the cost of all major elements.
• Include for the cost of design, project management, start-up and owners costs.
• Include for future cost escalation.
• Include for contingency (we will look at this later)
• Check that the overall estimate is reasonable.
• Compare the estimated cost and duration with that of similar projects.
© The Project Company 2006 B10
24. Planning
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Planning is an unnatural process…it is much more fun to do something. The nicest thing
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about not planning is that failure comes as a complete surprise, rather than being
preceded by a period of worry and doubt.
Sir John Harvey-Jones
34. Uncertainty & Risk
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The unexpected has a one-sided effect with projects. Consider the track records of
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builders, paper writers, and contractors. The unexpected almost always pushes in a single
direction: higher costs and longer time to completion. On very rare occasions, as with the
Empire State Building, you get the opposite: shorter completion and lower costs – these
p g, y g pp p
occasions are truly exceptional.
Nassim Nicholas Taleb – The Black Swan
36. Estimating Uncertainty
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Estimating Uncertainty: An unknown due to inherent lack of knowledge or ambiguity (weather, soil
conditions, ability of an unknown contractor, etc). Characterised by a range of potential impact values
but
b 100% probability of occurrence. N a ‘ i k’
b bili f Not ‘risk’.
© The Project Company 2006 D01
40. Event Driven Risk
Event Driven Risk: Uncertain future event that, if it occurs, will affect project objectives either positively
(upside) or negatively (downside). There is some probability that it will / will not occur.
Opportunity: Upside risk (a favourable condition or situation, a good idea, or a risk response).
Often characterised by being time limited.
Threat: Downside risk. Always with us it would seem
© The Project Company 2006 D01
47. Estimating Uncertainty & Risk S Curve
P80 date (12 May)
P50 date (30 Apr)
Deterministic date (11 Apr)
© The Project Company 2006 D12
48. Schedule Sensitivity Index
Schedule Sensitivity Index
This i d id tifi
Thi index identifies and ranks
d k
the activities most likely to
influence the project duration /
finish
© The Project Company 2006 D13
51. Optimism Bias
p
A B C
Commit to Commit to Available
invest
i t construct
t t for
f use
Planning & Design
Construction
Gestation Period Works Duration
Project Duration
Business Contract Construction
case award / completion
Start on
site
© The Project Company 2006 D17
52. Optimism Bias
p
• Optimism bias is the tendency for a p j
p y project’s cost and duration to be underestimated and/or
benefits overestimated.
• Optimism bias is caused by a failure to identify and effectively manage projects risks.
• The Mott MacDonald study identified five common project risk groups containing a number
of project risk areas recorded as causing cost and time overruns.
• In most instances, the inadequacy of the business case (i.e. inadequate requirements and
inadequate project scope definition) was stated to be the cause of project time and cost
overruns.
overruns
© The Project Company 2006 D16
53. Optimism Bias – Risk Areas
p
• Inadequacy of the business case (58%)
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• Environmental impact (19%)
• Disputes and claims (16%)
• Economic (13%)
( )
• Late contractor involvement with design (12%)
• Complexity of contract structure (11%)
• Legislation (7%)
g ( %)
• Degree of innovation (7%)
• Poor contractor capabilities (6%)
• Project management team (4%)
• Poor project intelligence (4%)
© The Project Company 2006 D18
56. Issues
An Issue: A known problem that will affect objectives if not managed. Requires a decision to be made.
100% probability of occurrence. Not a ‘risk’.
© The Project Company 2006 D01
58. Change
g
It is hard to quantify; a fair degree of irritation and frustration at what one could, at
q y g
best, describe as Barcelona’s lack of understanding as to the importance of time and
cost in the UK construction industry.
Hugh Fisher - Davis Langdon and Everest, Quantity Surveyors to the Scottish Parliament
59. What went wrong - contributory factors
g y
• The timetable for construction dictated
the adoption of a fast track procurement
method entailing relatively high risk.
• The decision to adopt construction
management was taken without an
k ih
adequate evaluation or understanding of
the extent of risk involved.
• Whenever there was a conflict between
quality and cost, quality was preferred.
• Whenever there was a conflict between
early completion and cost, completion
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was preferred without in fact any
significant acceleration being achieved.
• Costs rose because the client (first the
Secretary of S
S f State and l d latterly the
l h
Parliament) wanted increases and
changes or at least approved them in one
manifestation or another.
© The Project Company 2006 E01
60. What went wrong – change
g g
• There was no requirement to assign changes in
cost to any category as they occurred, to allow
the underlying reasons to be summarised and
understood.
• The change control process ensured the
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financial commitment for each contract stayed
within the overall financial limit for that contract
at any time although the limits for almost every
contract could and did increase.
• An estimated 10,000 proposed change orders
were issued over the course of the project.
• Estimated cost of the 58 individual trade
contracts rose from £129 million at tender
approval stage to a final cost of the some £220
million.
• A month-by-month analysis of the most critical
package on th project (th assembly f
k the j t (the bl frame) )
shows substantial variation taking place months
after the original planned completion date.
© The Project Company 2006 E02
61. Change
g
• During the execution phase of a project all changes are disruptive.
g p p j g p
• A good change control process is designed to drive out change.
© The Project Company 2006 E03
62. What constitutes a change?
g
• A change is anything that affects one or more of the following project attributes:
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– Business Case
– Scope of work
– Cost
– Duration
– Organisation
– Working methods
– Contractual arrangement
– Operability
– Environmental, Health, and Safety
© The Project Company 2006 E04
63. Change Control
g
• The purpose of change control is to ensure that all changes to a project are
p p g g p j
– Identified
– Communicated
– Assessed
– Controlled
ll d
– Documented
• In order that
– Environmental, Health, & Safety is not compromised
– Technical integrity is not compromised
– Proposed changes are considered before being committed to
p g g
– Impacts are assessed and forecasted as early as possible
– Undesirable changes are eliminated
© The Project Company 2006 E05
64. What constitutes an acceptable change?
p g
• An acceptable change is one that:
p g
– Is essential to maintain environmental, health, and safety standards
– Is essential to comply with conditions of law
– Is essential for system or component functionality
y p y
– Is essential due to external influences
• An acceptable change might be one that
p g g
– Secures a significant improvement in functionality
– Results in a significant cost reduction
– Results in a significant schedule duration advantage
– Provides some other significant material advantage to the project
© The Project Company 2006 E06
65. Change Control Process
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• Identified
– Any member of the project team can propose or highlight a change
• Communicated
– The change should be documented as early as possible
– The impact of the proposed change should be estimated and the need to draw down on
contingency identified if appropriate.
– The proposed change is communicated to the change control coordinator as a change request
• Assessed (level 1 level 2 level 3)
1, 2,
– Level 1: Affects budget over P50 contingency, which is above the project managers approval limits.
– Level 2: Requires P50 contingency draw down, which is within the project managers approval limits
– Level 3: Does not require contingency draw down
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• Controlled
– Level 1: Reviewed and approved / rejected by the project steering committee
– Level 2: Reviewed and approved / rejected by the project change panel
– Level 3: Reviewed and approved / rejected within the project team
• Documented
– Update the change register / project execution plan / business case and communicate to all.
© The Project Company 2006 E07
66. Control
I love deadlines… I love the whooshing noise they make as they fly by.
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Douglas Adams
83. to bear in mind…
• Earned value management techniques used in association with critical path analysis provide best practice
in the management and control of projects. Although critical path analysis is essentially a backward
looking technique, it accurately records the status of the project as it is now. The technique is
complemented by earned value management which can not only identify the slippage of work which is off
the critical path, but also can predict where the project is going once sufficient time has elapsed to
establish trends (after approximately 15% of the project duration).
• The design and implementation of a large project control system requires significant effort on behalf of
the project controls team. It also requires understanding and support from the project team as a whole,
especially senior management. Accurate and timely information is the lifeblood of the system; if left
unsupported by project team members the system will fail. If properly supported, it will accurately record
progress and trends throughout the life of the project; encouraging those teams that are doing well and
ensuring timely help for those teams that are experiencing difficulties.
© The Project Company 2006 F17
88. Projects – some best practice
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When good project plans are prepared in advance by experienced project managers, it is
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surprising how often the circumstances of projects fit in with the plans. This is no
coincidence as this comes as a result of good project management.
Mott MacDonald
89. Best Practice - People
p
• Appointing quality people to manage a project is a low-cost / high impact procurement decision
• Team members with clearly defined roles, goals, and direction
• At
team th t h worked t
that has k d together b f
th before
• Good project team morale - be watchful for personalities and politics
• “We had a problem with x but I sorted it out”…the type of thing one wants to hear from project team
members
• Create a sense of hustle
fh l
© The Project Company 2006 G01
90. Best Practice - Process
• Clear definition and agreement of scope
• Senior management support and commitment
• End user ownership and involvement
• Uncertainty appreciated and managed
• Risks identified and mitigated
• Good planning & control practice
• Sufficient resources – money, people, time
• 80 / 20 rule – understand, and focus on, the core project deliverables - lower level requirements should
not be completed at the expense of more important ones.
• Drive
D i out change
h
• Open communication – project-wide visibility of project plans and performance
© The Project Company 2006 G02
91. Time, Cost, Quality…pick any two?
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quality
(good)
defined
d fi d
scope
time cost
(fast) (cheap)
© The Project Company 2006 G03
92. The Project Company
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The Project Company is a provider of project management support services. We help
project t
j t teams manage projects with th provision of specialist project management
j t ith the i i f i li t j t t
personnel and best practice project control methodologies. If you have a project to
deliver, we can supply both the people and process to help you deliver it successfully.
People: A
P l Appointing quality people to manage a project i a l
i i li l j is low-cost / hi h i
high impact
procurement decision which is often critical to the success of the venture. A project
management team with relevant sector experience, and the knowledge to implement
and employ the key project management tools and techniques, is better placed to
deliver a project successfully The Project Company provide specialist personnel for both
successfully.
project management and project management support roles.
Process: The Project Company assists with the implementation of best practice cost,
schedule,
schedule and risk methodologies to help project teams plan monitor and control
plan, monitor,
projects. Working closely with the management team, we employ critical path method,
earned value management, and Monte Carlo analysis techniques to develop and
maintain realistic and achievable plans, highlighting critical activities and resource
co st a ts ad a ce, a d gu d g t e p oject tea
constraints in advance, and guiding the project team from project conception through to
o p oject co cept o t oug
completion.
1-800-PROJECT (7765328) project@management.ie
