JAGAN RAO ADELAIDE, TUESDAY, 3 DECEMBER 2013

Transcription

1 JAGAN RAO ADELAIDE, TUESDAY, 3 DECEMBER 2013

2 Relate to this?

3 Outline 1. Safety & Housekeeping 2. Aim 3. Introduction SKM and Jagan Rao 4. Project Controls Overview 5. Cost Estimating 6. Planning & Scheduling 7. Cost Control 8. Earned Value Management 9. Change Management 10.Q & A

4 Safety & Housekeeping 108 King William Street - Emergency Procedure Turn off mobiles or switch to silent mode Interactive session and questions / discussion encouraged right through the presentation and a formal Q&A at the end (15 minutes) To keep the presentation moving, additional comments / questions will be parked and re-visited if time permits

5 Aim To give an overview of Project Controls and its elements To facilitate exchange of experiences and war stories To share lessons learnt and pitfalls to watch-out for To stimulate further interest which may lead to some of you even considering a career in Project Controls Note: Not intended to be a detailed discourse on Project Controls Not a training course in Project Controls Not about software tools used in Project Controls

6 Introduction SKM Leading projects firm, with global capability in strategic consulting, engineering and project delivery Operates across Asia Pacific, the Americas, Europe, the Middle East and Africa Deploys some 7,500 people from more than 40 offices. In SKM, Project Controls is a core discipline and is applied to all projects regardless of size, type and complexity SKM s Project Controls strategy is based on: People Process Tools

7 Introduction Jagan Rao Position / Experience: SKM Project Services Manager & Global Practice Leader (Project Cost Management) 30 years of Project Controls / Project Management experience with leading companies such as SKM, Fluor, BHP Billiton, BlueScope Steel and Anglo American Experience in a range of industries - Mining, Oil & Gas, Manufacturing, Transport and IT Major projects include Oxide Project (Escondida, Chile), MAC, PACE & Rail (Iron Ore, W.A), Griffin JV (Petroleum), First Priority (HSEC), GSAP (IT), Regional Rail Link Functional Leadership, strategy, policy, procedures, governance, training and mentoring

8 Introduction Jagan Rao (cont.) Qualifications: Master of Business Administration Graduate Diploma (Project Management) Bachelor of Chemical Engineering Professional Affiliations: Engineers Australia AACE International, USA (premier body for Cost Engineering) Project Management Institute, USA Australian Institute for Project Management

9 Project Controls - Context What is a Project? According to PMBOK, a Project is: A temporary endeavour undertaken to create a unique product, service or result Has a definite start and finish Different from Operations which are generally repetitive and ongoing in nature

10 Project Controls Context (cont.) Deliver on Expectations Do not under-deliver on Cost and/or Schedule Schedules and Budgets must be realistic Collectively the market is not sophisticated enough to differentiate between a competitive target that is overrun versus incompetent management JP Morgan

11 Project Controls - Overview What is Project Controls? A core Project Management discipline Includes: Cost Estimating Planning & Scheduling Cost Control Earned Value Management Change Management

12 Project Controls - Importance Why is Project Controls important? Enables and supports a project team to deliver project outcomes: As per approved scope On time Within budget

13 Project Controls - Applicability Where is Project Controls applied? Project Controls can be applied to all projects regardless of type, size and complexity including: Program Management EPCM /EPC Projects Capex, Opex & Asset Closure Design Project Consulting Projects Studies

14 Project Controls - Benefits What are the key benefits of Project Controls? Provides timely and accurate cost, schedule and progress information so that there are no surprises Issues early warnings of potential cost and schedule overruns to enable remedial actions to be taken to either mitigate or minimise the impact of potential over-runs Provides visibility and granularity regarding changes to prevent scope creep Provides timely and accurate resource and cash flow forecasts to help with resource planning and other funding arrangements.

15 Project Controls Responsibility / Organisation Who performs the Project Controls function?

16 Project Controls Key Drivers What are the key drivers of Project Controls? Scope Resource Time Costs

17 Project Controls Process Overview

18 Cost Estimating Key Themes Purpose: To develop Capital & Operating Cost Estimates Basis: Scope of Work Work Breakdown Structure Project Execution Plan Schedule

19 Cost Estimating Key Themes (cont.) Class of Estimate: AACEI Classification based on level of project scope definition and level of completion of engineering Class 4 (Concept), Class 3 (Pre-feasibility), Class 2 (Feasibility), Class 1 (Definitive Estimate in Execution Phase) Provides Indicative Accuracy Range of Estimate Estimate Accuracy Improves as a Project transitions from Concept through Pre-feasibility and Feasibility to Execution

20 Cost Estimating Key Themes (cont.)

21 Planning & Scheduling Purpose of Planning Why Plan? Failing to Plan is Planning to Fail To enable timely completion of a project To facilitate effective, consistent, accurate and timely communication amongst various stakeholders To enable effective use of project resources To facilitate identification of project risks and strategies for mitigation To provide a basis for monitoring and trending project progress and performance

22 Planning & Scheduling Purpose of Planning (cont.) To provide a basis to initiate alternative actions and solutions to project external influences To permit reporting and management of exceptions To provide a basis for project change management

23 Planning & Scheduling Key Themes Planning is an essential pre-requisite for an effective and robust Project Schedule Planning comprises 2 principal processes: Front End Loading Top-down Planning supported with detail Validation While Planning and Scheduling are closely related, there are clear differences between the two Basis of Schedule (BoS) is the bridge between Planning and Scheduling BoS articulates the Schedule assumptions, qualifications & exclusions

24 Planning & Scheduling Front End Loading (FEL) Process by which a company translates its marketing and technology opportunities into capital projects Good FEL process coupled with good execution - leads to higher value realisation FEL comprises: Establishing an appropriate project team Defining the project objectives and scope to an appropriate level of detail Formulating a project execution plan Developing a detailed resource loaded implementation schedule Establishing rigorous risk and change management processes

25 Planning & Scheduling Front End Loading (FEL)

26 Planning & Scheduling Top-Down Planning Based on the principle of starting a plan with the big picture in mind & progressively adding detail Key Steps include: Articulate the project objectives Define the total scope of the project Identify the statutory and regulatory requirements Define the Schedule KPIs Identify the Key Project Milestones Establish the WBS Define Procurement & Contracting Strategies Identify Key Resources People, Equipment & Materials Identify Major Risks and Constraints Develop the Plan by adding detail Validate the Plan by undertaking a Detail to Summary sanity check

27 Planning & Scheduling Planning vs. Scheduling Planning Scheduling Deals with why (project objectives), what (scope of work or basis of design), how (project execution strategy & plan) and who (project organisation structure & contracting strategy). Provides the basis for time & resource estimation. Involves the setting of goals and objectives Defines the activities to accomplish goals and objectives Defines what resources are needed to undertake activities Involves review of safety, constructability, maintainability and operability of the plant Deals with the development of progress measurement system Deals with when Is a reflection of the plan Involves the mechanics of converting the plan into a time table Involves the timing of activities with estimation of durations and relationships Involves allocation of resources to activities Involves undertaking of Critical Path Method (CPM) & resources analyses including determining the critical path and producing resource histograms Deals with implementation and operation of progress measurement system

28 Planning & Scheduling Class vs. Level

29 Planning & Scheduling Project Schedule Steps: Using CPM technique, undertake: 1. Define Activities 2. Logically Sequence Activities 3. Estimate and Load Resources 4. Estimate Activity Durations 5. Develop, Review and Baseline the Project Schedule 6. Regularly Status and Update the Project Schedule 7. Analyse and Report Progress against Baseline

30 Project Cost Control Key Steps Step 1 Validate Scope, Deliverables & WBS Step 2 Establish Budget & Performance Baseline Step 3 Manage Project Changes Step 6 Undertake Managerial Analysis & Reporting Step 5 Control Work-hours & Costs Step 4 Monitor Progress, Performance & Actual Costs

31 Project Cost Control 5 Key Actions 1. Review actual progress and performance against plan and identify deviations from the plan 2. Forecast work-hours and costs required to complete the remaining scope of work 3. Compare the forecast work-hours and costs with the budget work-hours and costs and identify deviations 4. Manage contingency including draw down from contingency to offset any cost overruns and assess the to-go contingency requirement based on outstanding risks and uncertainties 5. Implement the recovery / corrective action plan

32 Project Cost Control Cost Report Template WBS Package Original Approved Current Commitments Actual Costs Forecast Variance Budget Changes Budget Period Cumulative Period Cumulative To-complete At-completion (1) (2) (3) (4)=(2)+(3) (5) (6) (7) (8) (9) (10)=(6)+(9) (11)=(4)-(10) Project Management - xxxxxx - xxxxxx - xxxxxx Sub-total for Project Management - Engineering - xxxxxx - xxxxxx - xxxxxx Sub-total for Engineering - Procurement - xxxxxx - xxxxxx - xxxxxx Sub-total for Procurement - Construction - xxxxxx - xxxxxx - xxxxxx Sub-total for Construction - Contingency - TOTAL - -

33 Earned Value Management Key Themes Earned Value (EV) combines Scope, Cost and Time Provides a common basis for combining progress EV = Actual Physical Progress x Current Budget (hours or $) Planned Value (PV) = Planned Physical Progress x Current Budget Actual Cost (AC) Total Costs Incurred (Paid + Accrued) Cost Performance Index (CPI) = EV AC (> 1 is good) Schedule Performance Index (SPI) = EV PV (> 1 is good)

34 Earned Value Management Key Themes The better a project is measured, the better it can be controlled. How do you measure Progress? Method 1 Start / Finish Method 2 Incremental Milestones Method 3 Units Completed Method 4 Weighted Average / Equivalent Units

35 Earned Value Management Key Themes Incremental Progress (Progress Gates) Incremental Milestone Progress Cumulative Progress Design basis completed 5% 5% Concept approved 15% 20% Drafting started 10% 30% Issued for project review 25% 55% Issued for client review 5% 60% Approved by client 15% 75% Issued for bids 5% 80% Issued for construction 20% 100%

36 Earned Value Management Key Themes Units Completed Progress = Actual Quantity Installed / Total Quantity Note: Total Quantity must be based on the latest Forecast and not on the Budget. Example: If the budget quantity is 8K metres and latest forecast is 10K meters and 4K metres of cabled have been pulled, then Progress is 40% and not 50%.

37 Earned Value Management Key Themes Weighted Average / Equivalent Units Deliverable / Task Unit of Deliverable Task Task Weighting Deliverable Deliverable Measure Quantity Quantity Quantity Quantity Progress (Total) (Total) (Installed to-date) (Earned Equivalent) (1) (2) (3) (4) (5) (6) (7) =(6) x (3) x {(5) / (4)} (8) = (7) / (3) DELIVERABLE - PAD FOOTING m 3 2, TASK - Excavate m 3 n/a % Blinding Concrete m 3 n/a % Rebar tonne n/a % Form m 2 n/a % Embedded Steel kg n/a % 60 - Pour m 3 n/a 2,000 1,000 30% Strip Form m 2 n/a % 23 - Backfill m 3 n/a 2, % 17 - Turnover % n/a % 20 Total for Pad Footing 100% 1, %

38 Earned Value Management Key Themes

39 Earned Value Management Key Themes PV To-date EV Forecast EV AC FTC Time Now Forecast Cost Over-run at Completion Cost or Work-Hours CV Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Forecast Delay at Completion SV Actual Delay Time

40 Change Management Source

41 Change Management Types and Impact Potential Pending Approved Budget Forecast Budget Forecast Budget Forecast Scope Change No No No Yes Yes Yes Budget Transfer (see the note) No No No Yes Yes Yes In-scope Change No No No Yes No Yes

42 Change Management Process Flow Chart

43 Conclusion Project Controls is a core Project Management discipline and comprises: Cost Estimating Planning & Scheduling Project Cost Control Earned Value Management Change Management Applicable to all project types, sizes and complexity Enables & supports project teams to deliver as per approved scope, on time and within budget

44 Q & A?

45 v