| | Better Project Control by Tracking Production in Schedules
By: Todd Vandenhaak, Senior Associate & Dana Hunter, Senior Consultant
Click here for a PDF version of this month's newsletter! Introduction
This paper provides a methodology for utilization of the project schedule in conjunction with software programs for tracking quantities and progress throughout project execution. Much of the work is done in the planning stages of the project, utilizing resource loading and detailed breakdowns of the activities for location and quantities. Preventative steps are taken to ensure schedules are not constructed from a boiler plate approach, which results in a lack of accurate details to define the activities for proper tracking throughout the project execution. The objective of this paper is to suggest practices of proactive scheduling that will allow the schedule to be utilized as a management tool, as intended, with proper resource loading to allow for more accurate tracking of production and earned value for ultimate control of the project. This paper addresses how project schedules can be structured, how claims could be minimized, work efficiency improved and proof of impact made easier should a claim arise. This approach will also provide suggestions on how to overcome the potential deficiencies of the original schedule and updated schedules to be more cost effective in analyzing change and interferences. The Schedule as a Project Control Tool
In the ever-changing construction industry, the integration and interface of multiple computer driven programs has advanced the ability for more complex project control. These industry advancements have also increased the focus on scheduling during the preparatory stages of the logistical planning. Contractors and owners should view the schedule as a valuable tool to help manage and track the progress through the project. When schedules are structured in adequate detail to clearly reflect the level at which control is achieved, they become a valuable tool to insure fairness in the disputed issues that inevitably become the premise for claims. Additionally, there are advantages when the activities have been cost-loaded and resource-loaded, the tracking of labor and materials to define productivity and forecast the immediate needs of the project can be more readily achieved. During the design phase of a project when the structuring of the specifications is occurring, owners increasingly demand more stringent parameters in the development of the schedule to insure more detail and proper resource loading. This ensures that the contractor has correctly depicted a complete understanding of the workload. When schedules can be properly resource loaded, owners can also identify such practices by contractors as front-end loading. Front-end-loading allows the contractor to capture and utilize a larger percentage of the contract value for the purpose of funding the front end administrative functions, such as development of the schedule, mobilization and procedural implementation. However, this will often create an imbalance within the budget and potentially deprives the critical backend of the project, when activities like commissioning and close-out requirements represent the highest demands to complete the project. In general, when contractors do not utilize the schedule to its fullest potential as a tool, often the potential benefits cannot be utilized through detailed tracking and forecasting abilities. Often the ability is lost to use the schedule as a key management tool to manage the impacts of change associated resulting from issues like errors and omissions within the design. If the contractor utilizes the schedule with other procedures to “Manage Change” on an “as incurred” basis, it can strengthen the partnering between the contractor and owner by allowing them to make adjustments to mitigate the overall exposures to both parties. The owner will also be able to closely and accurately monitor the progress of the project. An opportunity exists in the contract development to specify the schedule requirements that allow sufficient data in the schedule to control and monitor the project. The “Boilerplate” - A Simplified Approach Due To Time / Money Constraints
When tasked with the need to build a detailed schedule for a current project, contractors frequently resort to utilizing an existing schedule. A schedule that had been created for a previous project that was deemed successful becomes the shell for a current project; this is commonly called boiler plating. In this situation, the contractor feels that the similarity of the projects allows the existing schedule to be simply adjusted to meet the new scope of work, which tends itself to a vague yet arguable submission to meet the contract requirements. When front-end cost and time is a factor, this becomes the simplest solution for most contractors, and yet bears the highest cost risk when shadowed with the potential costs associated with a claim. During the estimating phase of the project, the project team is sometimes too optimistic in the allocation of funding to adequately cover the costs for the contractor to properly structure and develop the project schedule. The allocation is often based on management decisions associated with the historical data from successful jobs void of claim issues. If every project was perfect, this optimistic or aggressive approach would be suitable. However, there have been a significant number of projects that fail to follow this scheme and have forced the contractors into very costly and reactive endeavors to substantiate the claim for lost productivity and or compensable time extensions. In some cases the contractor fails to prove its claim due to the vague approaches associated with improper planning and scheduling. The level of detail in most cases is limited to a level 2-3 of top-down structured WBS, which by nature tends to force the bottom activities in to unrealistic durations with near zero float, potentially forcing them near critical at the very beginning of a project. In most projects the contract documents include a provision for the contractor’s submission of a preliminary schedule to ensure the contractors made adequate provision during the initial phase of the project to signify viability. It is during this submission that the contractor has to establish the basis of the schedule, and under the boiler plate practice, will instill the inherent problems of continual adjustment and corrections through completion. The contractor’s effort to shortcut the front end costs will inevitably be reflected in continual increased cost exposure through the project, which further demonstrates an ineffective scheduling management tool. The practice of Boiler plating leads to other problems such as improper resource loading of budgeted quantities of material, labor, equipment and plant as determined within the estimate. This becomes one of the first indicators that the planning and scheduling failed to properly reflect the actual schemes that became the basis of the estimate. When all or any portion of an existing schedule has been utilized for a new project, the integration of the portion of the existing estimate may reflect inaccuracies of the new project that may become overlooked if the project is forced into a claim situation. It is these inaccuracies that become the foundation for the owners to depict a flawed schedule within a claim, which can undermine the position of the contractor in his defense to reflect the actual impacts associated with issues. Once the credibility of the scheduled has been questioned, it becomes an up-hill battle to actually quantify the impacts. This practice further impedes the contractor’s ability to accurately cost and resource load the schedule for properly tracking production and quantities, which again exacerbates the credibility of the schedule to be used to further reflect lost productivity associated with the impacting issues. Team Buy-in / Tracking Progress
Initial cost saving actions by minimizing resources at the front of a project may effect the detailed structuring of the schedule and may impact efforts by the contractor to prove lost productivity in the presence of a claim. During the development of the schedule and estimate, it is important to obtain buy-in from the complete project team. Upper management should welcome the experience of field management to insure the project schedule reflects a viable plan to be utilized as the management tool it is intended. When the project team does not “buy-in” to the concept of project schedules as effective project management tools, they are sometimes considered little more than a “picture” fulfilling a contractual requirement and submitted at monthly intervals. A schedule as a picture is simply a graphical representation of activities that may or may not be logically linked and many times are a result of the boiler plate approach. Absent of unusual project situations such as contract change when a contactor may not be able to accurately updated a schedule without proper links between successor and predecessor activities, the sequence of activities may not accurately represent the schedule logic that can be evaluated for float, critical paths, and general schedule elements that control the completion date of the project. Thus, as work progresses it may not be possible to determine strictly from the detailed schedules what activities are driving the completion date (which paths are critical and near-critical) and how delays to any activity would impact the project. This scenario is more likely to become evident when the schedule updates are provided in hard copy (PDF) that does not allow a reviewer of each schedule update to check for logic ties and potential busts in the schedule. Additionally, when delays to specific activities are realized or forecasted, it is difficult to determine their impacts to the overall completion date without the ability to review logic and float. The “picture” representation of the schedule also does not allow the project team to identify mitigation options to accelerate the work by increasing resources on critical activities or changing the sequencing to perform activities concurrently. Taking the schedule development one step further is allowing for more accurate tracking of quantities in the planning stages of the project. This scenario described above where the schedules are simple pictures with no apparent logic or quantity-driven activities may result from inadequate development of contract specifications by an owner as well as a potential lack of resources on the part of the contractor. Thus, one way to potentially avoid any misunderstanding necessitating further clarification is for the owner to develop contract requirements to describe the format of the schedule updates in sufficient detail to prevent this scenario fromoccurring. From a contractor’s perspective, buy-in from the project team will increase awareness of the need for adequate support and resources to use schedules as a management tool. There are a number of advantages realized when the schedule includes the ability for tracking quantities and progress throughout execution. One advantage is the enhanced overall project control by more accurate percent complete for each task and allowing a determination of earned value. One benefit to a contractor is simply the owner’s perception of the contractor’s project management which may provide the project sponsor with a higher level of confidence in the contractor’s abilities. Increased trust from an owner can be beneficial in approving changes or paying for increased quantities that are realized as legitimate changes, since the owner will have the opportunity to monitor quantities installed to-date and will less likely be surprised when the over run or increase is presented. It is common for owners to require supporting documents to demonstrate not just the actual quantity increase but the reason the contractor is entitled to compensation. This demonstration by the contractor may be more difficult without the continuous progress tracking of actual quantities installed. When changes or increases are minimal, gathering supporting documentation may be an insignificant effort. However, when changes are numerous and continuous throughout execution, they may occur at a pace that exceeds the contractor’s ability to process in a timely manner. Yet, the resources expended to track installed quantities during construction will be considerably less than those expended up to a year or more later. This is because project personnel on site are in a better position to efficiently and accurately record actual quantities than a resource that is later relying on multiple data sources such as daily reports and timecards to piece together what happened and when it happened. Despite the advantages to tracking quantity installation and progress over time, it does come at a cost, which is the reason that many organizations decide not to perform these tasks even though many of them are aware of the benefits. However, it is the authors’ experience that the cost of additional resources during project execution is not the most prevalent deterrent preventing companies from implementing this as a schedule control too. Instead, it is often the lack of effort during schedule development that often occurs during the planning stages when time is short and budgets are not yet approved and results in an early decision to forego resource allocation for additional schedule control. Essentially, the thought is that these efforts will not be absolutely necessary. Once that determination is made, the schedule is developed without a breakdown of activities that allow for adequate tracking in an efficient manner, as described below. After the schedule is developed, it is more difficult to modify the basic framework in a way that enables efficient progress tracking. Important Steps for Implementing Progress Tracking
Progress tracking begins in the planning stage of the project. As the Work Breakdown Structure (WBS) is being developed, consideration must be given to structuring tasks in a measurable format. The level of detail should be indicative of the nature of the project and the sub-components thereof and visually should reflect definable units that can be easily measured. For example, in typical linear projects such as roadway or rail, the activities can be broken down by station ranges or specific lengths of roadway between milestones. This simplifies the progress reporting as it enables an accurate update by quantity or percent complete as the task is being performed. Furthermore, when an identifiable activity, as described above, is segmented in to smaller sections, the tracking of production and resource allocation is simplified in the presence of unforeseen issues and will allow the smaller segments to reflect the applicable impacts. In projects that are not linear such as an industrial building facility, it is more difficult to identify a measurable length of material installed. However, if the WBS includes an adequate level of detail for each task, materials can still be tracked by activity. For example, many facilities can be broken into areas geographically (units or buildings, functional areas, etc.) or by system (power center / distribution, process group, manufacturing function) that allows definable, measurable quantities for both estimating during the bidding phase and tracking throughout execution. The key here is “measurable” tasks or activities. If cable or piping can be estimated by area or system, the installation of material can be tracked in the same manner as long as the activity breakdown in the schedule supports the same breakdown and level of detail. The WBS should, whenever possible, mirror or exceed the estimated level of breakdown, which strengthens management’s ability to track progress, identify impacts and project future resource requirements. The larger, more broad the activity the more difficult it will be to determine or measure the percent complete, and subjects the contractor to broad range assumptions that fail to substantiate an accurate representation of completed work. It has been the experience of the authors that under lump sum contracts there is a tendency to consider tracking actual quantities installed not absolutely necessary, yet the ability to track quantities can provide better project control. This can also assist in demonstrating impacts, productivity rates and even delays when scope changes and interference are not recognized equally by all parties. With a cost reimbursable contract, it is assumed that all quantities installed will be reimbursable per the contract. Unfortunately for some contractors, it is not realized until claim situations that the interpretation of the contract may differ and entitlement for reimbursement is questioned. In a claim situation, tracking quantities in the schedule during the project will enable a more clear demonstration of impacts and entitlement as follows: - To demonstrate how much was installed, when the installations occurred, and measure productivity rates for each specific installation
- Validates actual dates for beginning and completing work in an as-built schedule
- Allows for linking of scope changes, interferences, impact events to rate of quantity installation
The ability to track quantities and progress begins with the WBS and should ideally enable a seamless comparison of estimate items and schedule activities. The estimator utilizes the historical data from past projects as bench marks to develop the levels of his estimate, so this should be the basis for the structuring the WBS for the schedule. When the WBS has not been structured with a consistent approach between the estimate and schedule, it is difficult to compare the quantities installed per the schedule progress (percent complete) with those estimated in the bid. This can lead to a time-consuming, expensive analysis of cost growth to determine when it occurred, the impacts potential quantity increases as they were realized during execution, and the extent of the growth for specific bid quantities compared to those actually installed. Furthermore, when the schedule activities and progress are not consistent with the structure of the bid items, the focus during the claim process may be on the validity of the cost growth (quantities installed) and reasonableness of the bid. This can be a distraction when the real issues that need to be addressed are the causation for the growth in quantities and actual productivity rates in comparison with what was assumed for estimating purposes. Resource Loading For Accurate Project Tracking
Resource loading schedules is an application of a time management process: Activity Resource Estimating. As defined by the PMBOK: Estimating schedule activity resources involve determining what resources (persons, equipment, or material) and what quantities of each resource will be used, and when each resource will be available to perform project activities(PMBOK, Third edition, Page 135). If this has been performed, it would enable the schedule to contain resource information for each detailed activity. When this process of time management is not implemented, difficulties in tracking costs relative to the estimate may result. These costs are generally indicative of a single entry, for example, “ Excavation of Building Foundation - $180,000." Where an activity as such becomes completed work bridging multiple pay applications periods, the accuracy of the contractor’s applied methodology to determine percent compete for each period could be questioned. Moreover, it could also make the owner’s justification for quantify and approval of the contractor’s request a more difficult task. This may place both parties into a trust only relationship. If a questionable issue occurs when performing this particular activity that delays the project, it may limit the avenues for both parties to substantiate and differentiate the issue. During the drafting of the contract specifications, the owner may include the requirement for detailed resource loading for each activity to include quantities, labor, materials, equipment, plant and OH&P as individual layers that when compiled develops the aggregate values for each activity. This might require the contractor to expend the expertise of the entire team to define and properly resource load the activities, a potentially cumbersome task for the front end of a project. However, the effort can be beneficial when the project starts to experience impacts. The contractor’s management team could realize the potential value of this effort when reflecting on the criticality associated with past projects where the schedule was void of such detail. Unfortunately, if a contractor has no previous experience of impacts resulting from inherent problems associated with a lackluster approach to scheduling, it may appreciate the proactive efforts of the current project schedule structure after a claim situation arises. As discussed below, schedules that can define a location, specific quantities, and defined allocation of labor and equipment can properly assist in the development of an earned value tracking procedure that can benefit the project as a whole. Benefits of Tracking Quantities
While the applications and benefits for progress tracking extend well beyond the narrow scope of this paper, several specific situations can demonstrate how valuable this exercise can be in saving cost and time. This section presents a simple claim situation that could have been improved, if not partially eliminated, had adequate progress and quantity tracking been performed throughout execution. Consider a hypothetical but common claim situation where a cost analysis is required to demonstrate actual costs incurred by work item and also calculate productivity rate for quantities installed, also by work item. If the quantities have not been tracked or recorded, or if the project was not set up with tasks that relate directly to the estimate and schedule, significant efforts may be required to do the following: - Demonstrate how many units were installed for each bid item by location on project
- Determine when the work was performed
- Determine the labor and equipment efforts required to install one unit (for productivity rate)
Absent schedule updates that contain the units installed, timing and labor expended per each activity or work task (resource loaded schedules), the methods to obtain the data for a cost analysis may have to rely on whatever contemporaneous project documents are available. In many cases, the project record does not contain documented quantities listed per work area or with cost codes that can be applied to timecard entries. Thus, manhours may not be easily assigned to installed quantities for work areas in question. Furthermore, many projects do not have data in electronic tabular format that can be sorted and modified quickly. Instead, the laborious task of data entry may require the development of a database of information described above from cumbersome documents such as daily reports, foreman timecards, material receipts, inspector reports, etc. This data is often pulled from handwritten reports after deciphering shorthand recordings of work progress that may or may not include quantities, location, or extra work items. Not only can this task be time-consuming and expensive, it also might require the personnel performing the exercise to posses a certain degree of knowledge of the project to efficiently review timecards, reports, and receipts together and develop a reliable database. Ideally, the project would be set up as described previously with a WBS that incorporates bid items and schedule activities in the breakdown. If this was not done, steps can still be made to improve the quantity and progress tracking process that eliminates the situation described above. For example, by considering the final application for data recorded to require a quantity, cost, location, time and to the extent possible expended labor manhours, the format and data used for tracking progress can at least be entered electronically with each category of information included. Performing this task during construction and having the data entered in the correct form can still reduce the future efforts to re-create the information database by deciphering data, even if the WBS was not developed as suggested previously. Even if it is not anticipated that a claim situation will arise, tracking progress and percent complete with the data listed supports earned value calculations and can be a good tool for managing change. Extra work orders and schedule impacts can be more clearly supported with the progress tracking that allows contemporaneous records of quantities and percent complete for individual activities. The suggestions above provide a very brief view of how proper scheduling tools can be used for the benefit of the project. It is important to note that to be more effective, both the owner and contractor can support these practices and be aware of the benefits. With concentrated efforts in the planning stages of a project, minimal expenditures in time and money might pay off substantially. Unfortunately, this is sometimes realized after an owner or contractor has been exposed to bad experience that may have otherwise been prevented by exercising better project control tools. References
A Guide to the Project Management Body of knowledge, Project Management Institute, Third edition Page 135 Click here for a PDF version of this months newsletter! | |
