THEME: BUDGETING & CAPITAL PROJECT MONITORING
AND EVALUATION IN AN ERA OF CHANGE
NIGERIAN INSTITUTE OF QUANTITY SURVEYORS
MR. OLADELE OLORUNFEMI, FNIQS,FRICS
DR. JOSHUA OLORUNKIYA, PHD, MRICS, MCIOB, MCInstCES
Date: 27TH – 28TH July, 2016.
VENUE: Benue Hotels, Makurdi, Benue State
TOPIC: EFFECTIVE PROJECT PLANNING AND SCHEDULING: AN
INDISPENSABLE TOOL FOR SUCCESSFUL CAPITAL PROJECTS DELIVERY
Brief ResumeAcademic QualificationsPh.D., Construction Project Management (University of Auckland, New Zealand)
M.Sc., Construction Contract Management (University of Technology, Malaysia)
B.Sc., Quantity Surveying (University of Reading, United Kingdom)
HND., Quantity Surveying (Ondo State Polytechnic, Owo)
Professional Affiliations/ Certifications Member, Chartered Institution of Civil Engineering Surveyors (MCInstCES)
Member, Association for the Advancement of Cost Engineering (MAACE)
Member, Nigerian Institute of Management -Chartered (AMNIM)
Associate, Australian Institute of Quantity Surveyors (AAIQS)
Member, Nigerian Institute of Quantity Surveyors (MNIQS)
Member, Royal Institution of Chartered Surveyors (MRICS)
Associate, British Institute of Facility Management (ABIFM)
Member, International Cost Engineering Council (ICECA)
Member, Association for Project Management (MAPM)
Member, Association of Cost Engineers (MACostE)
Member, Planning Engineering Organisation (MPEO)
Member, Chartered Institute of Building (MCIOB)
Member, Society of Construction Law (MSCL )
Chartered Construction Manager (CCM)
Presentation Guidelines
Definition of Key Terms
Budgeting
Methods of Capital Budgeting
Capital Projects
Project Planning & Scheduling
Project Monitoring
Earned Value Analysis
Roles of Quantity Surveyors
Training Needs
Introduction
A capital project is a long-term investment made inorder to build upon, add or improve on a capital-intensive project.
A capital project is any undertaking which requiresthe use of notable amounts of capital, both financialand labor, to undertake and complete.
With the increasing demand for capital projects to
transform our national development from a developingnation to an industrialized entity with less fundingavailable (in the current financial climate), EFFECTIVE,EFFICIENT and PROPER capital project monitoring isVERY CRUCIAL.
Examples
N844bn Proposed 4th
Mainland Bridge, Lagos
Definition Of Basic Terms
Budget: Budgets consist of the total estimated effort(or quantities) necessary, and the cash flow required,to complete a project.
Methods of Budgeting
IRR: Internal Rate of Return is a percentage verysimilar to an interest rate, and is used to compare acapital investment against other kinds of investment.
NPV: Net Present Value combines two concepts ofvalue. First, it determines how much cash will flow inas a result of the investment, and compares thatagainst the cash that will flow out in order to makethe investment.
Payback Period: Very simply, the payback periodtells you how long it will take to recover yourinvestment in a project.
Project Planning vs. SchedulingPlanning and scheduling are two terms that are oftenthought of as synonymous. However, they are not.
Project planning …‘‘the process of choosing the onemethod and order of work to be adopted for aproject from all the various ways and sequencesin which it could be done’’ (Antill and Woodhead1990,; Callahan, Quackenbush, and Rowings 1992).
‘‘Those processes performed to establish the totalscope of the effort, define and refine theobjectives, and develop the course of actionrequired to attain those objectives’’ (PMBOK 2008)
It serves as a foundation for several related functions,such as cost estimating, scheduling, project control,quality control, safety management, and others.
Schedule: The Project Schedule is the tool thatcommunicates what work needs to be performed,which resources of the organization(OrganisationBreakdown Structure) will perform the work and thetimeframes in which that work needs to be performed.
Simply puts: Scheduling is the determination of theTIMING and SEQUENCE of operations in the projectand their assembly to give the overall completion time.
A good project schedule can serve as a keymanagement tool for making decisions and predictingwhether the project will finish on time and withinbudget.
WHAT
WHEN
WHO
HOWBY
WHOM
WHERE
WHY HOW
MUCH
THE PLAN
Bottom- Up
Top -Down
Inside-OutStrengthsWeaknesses
Outside-InOpportunitiesThreats
Why Proper Project Planning & Scheduling?
1. Capital projects implementations involve risks.
2. The Financial requirements/commitments are huge.
3. Capital investment decisions are irreversible innature.
4. To avoid PLANNING FALLACY
Psychologists have defined the planning fallacy asthe tendency of people to underestimate task-completion times and costs even when they knowthat the vast majority of similar tasks have runlate or gone over budget (Flyvbjerg, Garbuio &Lovallo 2014)
Monitoring & ControlMonitoring & Control: Monitoring and Controlling aproject is the process or activities whereby the projectmanager tracks, reviews and revises the projectactivities in order to ensure the project creates thedeliverables in accordance with the project objectives.
Unlike a process where habits are formed, projectsare INHERENTLY UNSTABLE.
The primary results of the Monitoring and Controlling
are:
1. The project performance reports , and
2. Implementing project changes.
Proper capital project governance and control processesare essential for spotting problems early and gettingprojects back on track quickly.
The more time and effort project management teamputs in at the outset, the greater the chance they willkeep projects in check throughout the constructioncycle.
Upfront investment in planning, organization design,and systems and processes; in getting robust budgets;in doing risk analysis around budgets and schedules;and in getting the procurement strategy right is thestarting point for successful capital projects delivery.
When these are overlooked, it is difficult to anticipateunforeseen events and build in the necessarycontingency plans.
Checking for Over allocation of Resources
Resources Leveling
Tools and Techniques
Tools and techniques that are used by Project monitoringteam to conduct the Monitoring and Controlling of aproject fall into one of four general categories.
Category A. Project Performance Information.
Pulse Meeting: Pulse meetings are short team statusmeetings where the project management teamis able to gather project performance informationabout the activities that are underway.
Variance Reports : Variance reports compare whathas actually happened on a project against what wasexpected to have happened on the project. It typicallyindicates both the absolute value of the differenceand a percentage representation of the difference.
NOTE: The actual performance achieved on a projectactivity (such as cost or duration) seldom preciselymatches the estimated performance set at the time ofproject planning.
Program Review :Program Reviews are meetingswith the project team members and sub-projectleaders that review the current status of theprogram as compared to the original program plan.
Pulse Meeting vs. Program Reviews
Pulse Meetings focus on day-to-day activities, theProgram Reviews focus on the big picture andemphasize the integration between activities andbetween sub-projects encompassed within theprogram.
Category BTechnical Review: Technical Reviews are formal
meetings conducted with subject matter expertswho are not members of the project team.
Project Forecasting: Project Forecasting consistsof taking the project status information andextrapolating the current project performance to theend of the project.
Forecasts can be made with respect to projectduration, overall project cost, performance/qualitylevel of project deliverables, or any combination ofthese.
A key element in forecasting is to review the RISKEVENTS that occurred and the REMAINING RISKTRIGGERED.
`Category C
Project Management Information System: ThePMIS is used as the clearing house of information onthe project including; project plans, project status,project risks, project changes, project meetings, andany other information that project management teambelieves is relevant to the project team.
Category D
Management Reviews: Project Management Reviewsare formal documented meetings with the project teamand key stakeholders that review the current status ofthe project as compared to the original project plan.
THE PRACTICAL STEPS
1. Develop or Request a detailed and PROPER workschedule LOADED WITH COST AND RESOURCES.The typical bar chart sometimes prepared usingSpreadsheet application or Ms Word are NOTWORK SCHEDULE! as required by differentConditions of Contract.
2. Update your project regularly so you can recordprogress and identify potential problems.
3. Constantly Perform “Claim Diggers”.
Claim Digger provides the capability tocompare two projects, or a project and anassociated baseline, to determine what datahas been added, deleted, or modified from theschedules .
CLAIM DIGGER ANALYSIS WINDOW IN PRIMAVERA
Why Project Monitoring/Control?
The Practical Steps
Key Performance Indicators
Knowing cost allows you to figure out what isgoing on.
If the work is on schedule and fewer hours wererequired than estimated, then people areworking more efficiently than expected.
If work is on schedule but more hours have beenexpended than planned, then this is a sign oftrouble.
If the work is behind schedule and total hoursmore than planned, it means people are notdoing what they are supposed to do.
Seven Key Steps to Build a Solid Schedule
1. Realize the importance of the schedule tosuccessful capital project delivery.
2. Identify the availability of team members.
3. Build the schedule around deliverables. i.e.Project Milestones that are MEASURABLE!.
4. Expect that the schedule WILL CHANGE.
5. Have a process for managing change.
6. Watch for “HANGERS” in the submittedschedule during review.
Qs RolesGet involved in Capital Projects Budget Estimates.
Utilize qualified estimating personnel in the preparationof Proposed Capital Project Cost estimate.
Ensure projects budget considered all essential factorsand include or adjust for them when applicable.
The essential factors include:
1. the percentage variance between the projectbudget and potential project cost for the variousclasses of estimates used in the preparation.
2. local influences, e.g., a shortage of skilled labourwill cause an increase in the cost of theassociated service(s), whereas an abundance ofskilled labour will result in a more competitivebid;
Emphasize, Champion and undertake EarnedValue Analysis as part of Monthly ProjectProgress Report because EV is keyed to theproject budget.
LEAD and ENSURE Project Cost and SchedulePerformance are constantly tracked andreported.
The ERA of using monthly Certificates alone tomeasure/assess progress achieved on projectsites are most times misleading when comparedwith the baselines schedules.
Training NeedsProper knowledge on how to assess/ evaluate BaselineSchedule including Resource Allocation for proposed capitalprojects.
Adequate knowledge and use of Project Scheduling Softwaresuch as Primavera P6, MS Project is a MUST for effectiveCapital Project Monitoring and Control.
Many government agencies/companies don’t place sufficientemphasis on the schedule management discipline and don’treally understand that schedule planning is a specialized skillset that’s hard to come by.
Hence, there is a need to involve people who not only arevery competent with scheduling software but also bringindustry experience that has taught them how to breakdown the scope of work and understand the approaches toplanning and scheduling.
SummaryCapital projects are critical to NationalDevelopment.
They are capital intensive.
A detailed work schedule loaded with COST andRESOURCES is a fundamental requirement toguarantee proper capital project monitoring &control.
Without a detailed work schedule constantlyTRACKED and UPDATED , We can never be incontrol of Capital Project execution.
Raise the RED FLAG as soon as possible to callattention to potential problems whenever they arediscovered. Perform What-if Analysis and come upwith contingency plans.
Facilitator’s Profile
Dr. Joshua obtained a PhD degree in Construction Project Management from the University of Auckland, New Zealand having won the prestigious International Doctoral
Scholarship awarded by the University for the best brains around the globe. A Chartered Quantity and Civil Engineering Surveyor, Chartered Construction Manager, Certified Cost
Consultant and a member of several professional bodies such as the Society of Construction Law, Australian Institution of Quantity Surveyors, Chartered institute of Building,
Planning Engineers Organisation, Nigerian Institute of Quantity Surveyors, Nigerian Institute of Management and many more. He has served as an Assistant General Manager,
Contracts Administration, Quantity Surveying and Planning with one of the leading Consultancy Organizations in the Middle East where he successfully managed and delivered
multi-million dollars projects within time and budget without a compromise on quality.
Primavera P6 Professional Project Management is an integrated project portfolio management solution that enables project-driven businesses to achieve a competitive edge. Primavera P6, the recognized standard for high-performance projectmanagement software, is designed to handle large-scale, highly sophisticated and multifaceted and multiple projectssimultaneously. It can be used to organize projects up to 100,000 activities, and it provides unlimited resources and anunlimited number of target plans. Primavera P6 is amazing software, which is used not just by planners, but projectmanagers, engineers, schedulers, and anyone else involved in planning, management, reporting of a project. Primavera P6has benefited every industry from aerospace to manufacturing, electronics to IT, Telecom to Civil, and many more.Primavera P6 is the preferred project planning and scheduling software around the globe where state of the artconstructions are being implemented. Don’t be left behind, embrace change, join the train and stayahead of change!
Some benefits of Primavera P6:
It optimizes management of all resources.
It gives clear visibility of what’s going on in the project.
It allows quick and easy forecasting of WBS’s, activities or projects.
Conducts what-if analysis and analyze alternative project plans
It facilitates Earned value analysis with ease
It allows for on-the-spot tracking of work progress and view past period performance for reporting purposes.
The integrated risk management feature enables you to identify, categorize, and prioritize potential risks associated with specific work breakdown structure (WBS) elements and resources
It enables the creation of risk control plan, assign a probability of occurrence and an organizational breakdown structure (OBS) element to each risk
Allows for maintaining project’s document library
It makes delay impact analysis and prolongation claims assessment easy among others
Joshua OlorunkiyaPhD, M.Sc., B.Sc., HND, MRICS, MCInstCES, MACostE, MCIOB, MNIQS,
MPEO, AAIQS, MAPM, MAACEI, MSCL, ICECA, CCM, AMNIM, ABIFM
.S
Stay Ahead of Change: Learn Primavera P6 Today!
For Enquiries email: [email protected]
