1.040/1.401/ESD.018 Project Management, Spring 2007 Lecture 15 Project Control Samuel Labi and Fred...

1.040/1.401/ESD.0181.040/1.401/ESD.018Project Management, Spring 2007Project Management, Spring 2007

Lecture 15Lecture 15

Project ControlProject Control Samuel Labi and Fred MoavenzadehDepartment of Civil and Environmental Department of Civil and Environmental EngineeringEngineeringMassachusetts Institute of TechnologyMassachusetts Institute of Technology

CLOSEOUTDEVELOPMENTDEVELOPMENT OPERATIONS DESIGN,PLANNING

FEASIBILITY

Actual Start of Project

OrganizationEstimationPlanning

FinanceEvaluation

Monitoring & ControlChanges & ClaimsQuality & Reviews

CLOSEOUT

Recall: The 5 Phases of Project ManagementRecall: The 5 Phases of Project Management

Project Control

Monitoring & Control: A Feedback Process

Correct Deviations

Monitoring1. Measurement

2. Performance Analysis)

Detect deviations

Control1. Actions

2. Revised Plans, Cash Flows, Schedules, etc.

Project Control

Project Control: The Big Picture …

Given

Project is Off-track

Project Control


Given


Monitoring indicates that:

- Project is behind time-schedule, and/or

- Project has exceeded budget, and/or

- Quality of materials or finished work is below standard, and/or

- Productivity is lower than as planned, etc.

Project Control


Given

Resources for PC (the 4-M’s)


Project Control


Given



Resources available to the Project Manager for Project Control:- Money- Manpower (labor)- Materials- Machinery (Equipment)

Project Control


Given Mechanism and

Elements of PC


Adjust the resources

Adjust the project characteristics: size, scope, etc


Project Control


Given Mechanism and

Elements of PC


Adjust the resources



More labor? Better labor?Better supervision?More materials? Better materials?More equipment? Better equipment?More money?

Reduce project size? Reduce project scope?Terminate project?

resources

project

Project Control


Given Mechanism and

Elements of PC

output


Project is Off-track Adjust the

resources


Project brought back on-track

Was the Project Control successful? How can we tell?

Project Control


Given Elements and

Mechanism of PC

output


Project is Off-track Adjust the

resources


Project brought back on-track

Project Control

Outline of this Lecture:

1.1. How can we tell when PC is needed?How can we tell when PC is needed?

2.2. What resources are available for PC?What resources are available for PC?

3.3. What are the elements of PC? What are the elements of PC?

4.4. What is the mechanism of PC?What is the mechanism of PC?

5.5. Some important issues in Project Some important issues in Project ControlControl

Project Control

Part 1Part 1

How can we tell How can we tell

when Project when Project Control is needed?Control is needed?

Specific Specific CluesClues

General General CluesClues

Is Project Control is needed Is Project Control is needed now?now?

How can we tell?How can we tell?

““PrimitivePrimitive” ”

IndicatorsIndicators

OtherOtherIndicatorIndicator

ss

Performance Performance and Qualityand Quality

CostCost TimeTime

How can we tell when Project Control is How can we tell when Project Control is needed? needed?

PerformancePerformance- Unexpected technical problems arise- Unexpected technical problems arise

- Insufficient resources are unavailable when - Insufficient resources are unavailable when neededneeded

- Quality or reliability problems occur- Quality or reliability problems occur

- Owner/Client requires changes in technical - Owner/Client requires changes in technical specificationsspecifications

- Inter-functional complications and conflicts arise- Inter-functional complications and conflicts arise

- Market changes that increase/decrease the - Market changes that increase/decrease the project’s valueproject’s value

GENERAL CLUES (Meredith and Mantel, 2006)GENERAL CLUES (Meredith and Mantel, 2006)


CostCost- Technical difficulties that require more resources- Technical difficulties that require more resources

- Scope of work increases- Scope of work increases

- Bid amount (accepted for the contract award) is - Bid amount (accepted for the contract award) is too low too low

- Reporting of the monitoring results are poor/late- Reporting of the monitoring results are poor/late

- Project budgeting for contractor cash flows not - Project budgeting for contractor cash flows not done rightdone right

- Changes in market prices of the inputs- Changes in market prices of the inputs



TimeTime- Technical difficulties require more time to solve- Technical difficulties require more time to solve

- Scope of work increases- Scope of work increases

- Unexpected utilities needing relocation - Unexpected utilities needing relocation

- Task sequencing not done right- Task sequencing not done right

- Required material, labor/equipment unavailable - Required material, labor/equipment unavailable when neededwhen needed

- Key preceding tasks were not completed on time.- Key preceding tasks were not completed on time.


1. How can we tell when PC is needed?1. How can we tell when PC is needed?

““Primitive” Primitive” indicators:indicators:– More resources or less More resources or less

resources haven been resources haven been used than planned used than planned

– Activities are taking Activities are taking long than plannedlong than planned

– Cost of activity (or of Cost of activity (or of project to date) is project to date) is higher than expectedhigher than expected

actual

actual

actual

planned

planned

planned

0 500 1000 1500 2000

Amt of concrete used (tons)

Total Man-hours

Equipment-hours

Amount input to date

SPECIFIC CLUESSPECIFIC CLUES




– Activities are taking long Activities are taking long than plannedthan planned

– Cost of activity (or of Cost of activity (or of project to date) is higher project to date) is higher than expectedthan expected

actual

actual

actual

planned

planned

planned

0 500 1000 1500 2000

Amt of concrete used (tons)

Total Man-hours

Equipment-hours

Amount input to date




resources haven been resources haven been used than plannedused than planned



JAN FEB MAR APR MAY JUN

Activity 1

Activity 2

Activity 3

planned

actual

NOW

Legend

planned actual



Program (schedule)

Progress (actual)

Program (schedule)

Progress (actual)

now time

50%

70%





$



Why are they “primitive”?Why are they “primitive”?- May be biased.May be biased.- Do not consider that progress may be Do not consider that progress may be

overestimated or underestimated due overestimated or underestimated due to:to:

- execution of unscheduled work done, or execution of unscheduled work done, or - execution of more work of low value and less execution of more work of low value and less

work of high valuework of high value



Work Schedule

(WS)

Work Performed

(WP)

Budgeted Cost (BC)

Actual Cost (AC)

BCWS BCWP

ACWS ACWP

Used for plotting the Program S-curve

Used for plotting the Progress S-curve

Used for plotting the EVA S-curve



$max

t

BCWS

ACWP

BCWP

Time

SCHEDULE VARIANCECOST VARIANCE

RESOURCE FLOW VARIANCE

TIME VARIANCE

tmax

ACWPt

BCWSt

BCWPt

t-p

now



So we know Project Control is needed So we know Project Control is needed (at time (at time tt) particularly when:) particularly when:

- - RVRVtt is –ve, is –ve, - - RIRItt < 1 < 1- - CVCVtt is –ve is –ve- - CICItt <1<1- - SVSVtt is –ve is –ve- - SISItt is < 1 is < 1- - TVTVtt is –ve is –ve- - TITItt is < 1 is < 1

Part 2Part 2

Resources Resources

for for

Project ControlProject Control

2. Resources for Project Control2. Resources for Project Control

MoneyMoney

Machinery (Equipment)Machinery (Equipment)

Materials and SuppliesMaterials and Supplies

Manpower (Labor and Manpower (Labor and Supervision)Supervision)

Money as a PC ResourceMoney as a PC Resource

Not a direct resource Not a direct resource Rather, used to influence the Rather, used to influence the

amounts or quality of the amounts or quality of the other resourcesother resources

Using Equipment for PCUsing Equipment for PC

Often used to augment labor Often used to augment labor in order to speed up projectin order to speed up project

Can be expensiveCan be expensive

May involve renting or May involve renting or purchasingpurchasing

Materials and Supplies as a PC ResourceMaterials and Supplies as a PC Resource

Increase in quality or quantity Increase in quality or quantity may be necessary to enhance may be necessary to enhance project controlproject control

Improved inventory systems for Improved inventory systems for materialsmaterials

Manpower as a PC ResourceManpower as a PC Resource

Project problems (time delays, excess Project problems (time delays, excess costs, poor performance, etc.) are costs, poor performance, etc.) are partly due to the human element partly due to the human element (action or inaction)(action or inaction)

In using Manpower as a tool for In using Manpower as a tool for project control, PM encounters project control, PM encounters human emotions (anger, fear, human emotions (anger, fear, frustration, etc.)frustration, etc.)

Part 3Part 3

ElementsElements

of of


Project-relatedProject-relatedResources-Resources-relatedrelated

Elements of Project Elements of Project ControlControl

3. Elements of Project Control3. Elements of Project Control

Manpower-related controlManpower-related control

Machinery-related controlMachinery-related control

Money-related controlMoney-related control

Material-related controlMaterial-related control

3A. Resource-related3A. Resource-related

Re-allocate resourcesRe-allocate resources

Elements of Project ControlElements of Project Control

ManpowerManpower

MachineryMachinery

MoneyMoney

MaterialsMaterials



Also referred to as ”Human Resource Control”

- Lay-off/fire any under-performing staff

- Hire staff with needed skills

- Assign staff with specific skills to specific activities

Issues:

-PM may be seen as a “stern disciplinarian”

- PM must avoid heavy handed actions,

- Fix problems without blaming people


ManpowerManpower

MachineryMachinery

MoneyMoney

MaterialsMaterials



Also referred to as ”Physical Asset Control”

- Decommission any under-performing equipment

- Bring in equipment with appropriate capabilities

- Re-assign specific equipment to specific activities


ManpowerManpower

MachineryMachinery

MoneyMoney

MaterialsMaterials



Also referred to as ”Physical Asset Control”

- Decommission any under-performing equipment

- Bring in equipment with appropriate capabilities

- Re-assign specific equipment to specific activities

Issues:

- Equipment decisions may involve some economic

analysis- Equipment-based control easier than manpower-

based control - Some trade-off may exist between manpower and

equipment utilization.


ManpowerManpower

MachineryMachinery

MoneyMoney

MaterialsMaterials

3A. Resource-3A. Resource-relatedrelated


Also referred to as ”Financial Resource Control”

- How much money should be spent?

- How should it be spent?

- PM assisted by:

- Project accountant

- Project Finance Manager


ManpowerManpower

MachineryMachinery

MoneyMoney

MaterialsMaterials



- Discontinue use of sub-standard material

- Seek new sources of superior material


Options:Options:

- Reduce project size? - Reduce project size?

- Reduce project scope?- Reduce project scope?

- Terminate project?- Terminate project?

3B. Project-related3B. Project-related

Part 4Part 4

MechanismsMechanisms

of of


Mechanisms of Project ControlMechanisms of Project Control

Types of Mechanisms:Types of Mechanisms:

- Cybernetic- Cybernetic

- Go/No-go- Go/No-go

- Post-control- Post-control

Types of Control MechanismsTypes of Control Mechanisms

CyberneticCybernetic

- “Cyber” means “Steer” or - “Cyber” means “Steer” or helmsman (Greek language)helmsman (Greek language)

- May be First-, Second-, or - May be First-, Second-, or Third-orderThird-order

Cybernetic control mechanismsCybernetic control mechanisms

Process

Comparator

Standards

Effector and Decision-maker

Outputs

Inputs Mechanism:

- System output monitored by sensor

- Sensor measurements transmitted to Comparator

- Measurements compared with predetermined standards

-- Deviation from standard sent to decision-maker

-If deviation from standard is too large, signal sent to Effector

Monitoring mechanism (e.g. sensor)


Process

Comparator

Standards


Outputs

Inputs Mechanism:

- System output monitored by sensor

- Sensor measurements transmitted to Comparator

- Measurements compared with predetermined standards

-- Deviation from standard sent to decision-maker

-If deviation from standard is too large, signal sent to Effector


This is a First-order cybernetic control system. (Standards are fixed)

Example: Thermostat that keeps room temperature to 70F all year round.


Process

Comparator

Standards


Outputs

Inputs Mechanism:

- Same as described for First-order Cybernetic systems, but:

- Standards are not fixed, but the manner they change is fixed.


This is a Second-order cybernetic control system (standards vary according to a fixed set of rules)

Examples: Thermostat that keeps room temperature to 70F in winter and 65F in summer,Robot installations, Automated inventory systems, Automated record keeping systems

Memory Pre-programmed Responses


Process

Comparator

Standards


Outputs

Inputs Mechanism:

- Same as described for First-order Cybernetic systems, but:

- Standards are not fixed but are variable. Also, the manner they change is variable because there is a consciousness (human element) involved.


This is a Third-order cybernetic control system (standards vary according to a variable set of rules)

Examples: Most Project management systems.

Consciousness Memory, Selection

Cybernetic control in Project ManagementCybernetic control in Project Management

1.1. PM must clearly define “outputs” in terms of PM must clearly define “outputs” in terms of relevant project characteristicsrelevant project characteristics

2.2. PM must establish standards for each PM must establish standards for each characteristiccharacteristic

3.3. Monitoring mechanisms (sensors) must be Monitoring mechanisms (sensors) must be established to measure the characteristics at established to measure the characteristics at regular intervalsregular intervals

4.4. For each characteristic, the trigger point or For each characteristic, the trigger point or maximum deviation (difference between “attained maximum deviation (difference between “attained level” and “standard level”) should be established.level” and “standard level”) should be established.

5.5. If triggered, appropriate action should be taken to If triggered, appropriate action should be taken to minimize the deviation between Attained Level and minimize the deviation between Attained Level and Standard Level of performance.Standard Level of performance.

““Go/No-go” Mechanisms of Project ControlGo/No-go” Mechanisms of Project Control

Testing to see if some specific precondition has Testing to see if some specific precondition has been achievedbeen achieved

Yes/No (discrete)Yes/No (discrete)

Control in most PM fall into this category Control in most PM fall into this category (Cooper, 1994; Meredith and Mantel, 2006) (Cooper, 1994; Meredith and Mantel, 2006)

Example: Was Activity X completed within 6 Example: Was Activity X completed within 6 months?months?

Did Activity Y cost exceed its budget of $1.5 Did Activity Y cost exceed its budget of $1.5 million?million?

Some engineering judgment is necessary in Some engineering judgment is necessary in exercising these types of controls. exercising these types of controls.

Post-Control Types of Project Post-Control Types of Project ControlControl

Also called: Post-performance control, Post-Also called: Post-performance control, Post-performance reviewperformance review

Is done after the activity or project is over Is done after the activity or project is over

Like a post-mortem or report cardLike a post-mortem or report card

Is it “Locking the barn door after the horse Is it “Locking the barn door after the horse has escaped”?has escaped”?

Or is it “We need to learn from the past to Or is it “We need to learn from the past to avoid future mistakes”?avoid future mistakes”?

Generates lessons from current projects so Generates lessons from current projects so that future projects can be controlled that future projects can be controlled better.better.

Desired characteristics of a project control Desired characteristics of a project control mechanismmechanism

FlexibleFlexible – PC should be able to react to changes – PC should be able to react to changes in system performancein system performance

Cost-effectiveCost-effective – Value of PC should exceed cost – Value of PC should exceed cost of PCof PC

Useful Useful – Must really satisfy the needs of – Must really satisfy the needs of project, not the whims of the PMproject, not the whims of the PM

TimelyTimely – Be able to react quickly before the – Be able to react quickly before the problem overwhelms the projectproblem overwhelms the project

SimpleSimple –Easy to understand and operate –Easy to understand and operate AdjustableAdjustable – Capable of being adjusted to – Capable of being adjusted to

reflect changing prioritiesreflect changing priorities DocumentedDocumented – so that training is possible – so that training is possible

Some Interesting Issues in Project Some Interesting Issues in Project ControlControl

FlexibilityFlexibility Trade-offsTrade-offs Some things to watch out forSome things to watch out for Impediments to Project Impediments to Project

accelerationacceleration Cost-only and time-only actions Cost-only and time-only actions

to control projectsto control projects

Value of Flexibility in Project Value of Flexibility in Project PlanningPlanning

Flexibility is primary defense against riskFlexibility is primary defense against risk

Planning too tightly may highly complicate Planning too tightly may highly complicate control control

Flexibility in Flexibility in constructionconstruction is key during is key during control control

Want adequate float and contingency to Want adequate float and contingency to change plans if neededchange plans if needed

Be careful on Be careful on value engineeringvalue engineering that limits that limits flexibility!flexibility!


Trade-offs between Performance Trade-offs between Performance Measures during Project ControlMeasures during Project Control

Can sometimes only correct for Can sometimes only correct for oneone performance measure at a time performance measure at a time – TimeTime– CostCost– QualityQuality

Need to understand Need to understand tradeoffstradeoffs and and triagetriage– Pick where to make tradeoffs (e.g. Pick where to make tradeoffs (e.g.

non-critical activities)non-critical activities)


TradeoffsTradeoffs

Time Quality

$Acceleration $ (Overtime, shift work, Rework, higher-end equipment, better crews etc.)

Less $ Low progress Resource reduction Selection of poor quality workers Default of contractor/subs

Quality problems result from overtime, shift work, new hires

Quality level impacts speed of work, Level of rework

Need for rework imposes high expensesHigh quality needs can lead to costly miscalculations on labor time

Trying to save $Can lead to substitution, lower quality workmanship

Slow progress $ Delayed occupation, Higher interest on const. loan Loss of tenants Opportunity cost


Trade-offs: The Time-Quality-Money Trade-offs: The Time-Quality-Money Triage Triage

In many cases, the best we can do In many cases, the best we can do is to pick the areas where is to pick the areas where tradeoffs do the least harm tradeoffs do the least harm e.g.e.g.– Move resources from non-critical Move resources from non-critical

activitiesactivities– Accelerate only critical activitiesAccelerate only critical activities– Sacrifice quality on non-critical items Sacrifice quality on non-critical items

that can be remedied after that can be remedied after substantial completionsubstantial completion


Some things to watch out for: Some things to watch out for: Overreacting/Improvisation, etc.)Overreacting/Improvisation, etc.)

When trying to correct, often bump up against When trying to correct, often bump up against other limiting factorsother limiting factors– Space constraints/Hiring Space constraints/Hiring

time/Morale/Coordination difficultiestime/Morale/Coordination difficulties Improvisation dangerous (working w/o planning)Improvisation dangerous (working w/o planning)

– Often can lead to “Snowballing” (Often can lead to “Snowballing” (increased increased problems at a rapidly accelerating rate)problems at a rapidly accelerating rate)

– Confusion, discoordination, cascading Confusion, discoordination, cascading unanticipated effects, suboptimal work unanticipated effects, suboptimal work efficiency, lack of moraleefficiency, lack of morale

– Breaking “Job rhythm” and learning curves can Breaking “Job rhythm” and learning curves can really inhibit productivity!really inhibit productivity!


Controlling the Time Schedule – Project Controlling the Time Schedule – Project CrashingCrashing

– Adding new project resourcesAdding new project resources– Changing the “production function” Changing the “production function”

(Change the technology)(Change the technology)– Change operation conditions by altering Change operation conditions by altering

the precedence, sequence, or timing of the precedence, sequence, or timing of workwork

Fast-track, activity overlappingFast-track, activity overlapping OvertimeOvertime Shift workShift work

– Changes in the tools, methods, operating Changes in the tools, methods, operating conditionsconditions

– Work in more sheltered locationWork in more sheltered location


Impediments to Project Impediments to Project AccelerationAcceleration Human resourcesHuman resources

– Multiple-shift workMultiple-shift workEnvironmental/safety issues, High cost, Neighborhood Environmental/safety issues, High cost, Neighborhood

objectionsobjections– Overtime/extended workdaysOvertime/extended workdays

Fatigue, Lower morale, ReworkFatigue, Lower morale, Rework– Increasing # of workersIncreasing # of workers

Training (takes time of most experienced!), Space constraints, Training (takes time of most experienced!), Space constraints, Hiring timeHiring time

TechnologyTechnology– Using more, larger or more efficient equipmentUsing more, larger or more efficient equipment

Training/learning curve, Procurement time, Space constraintsTraining/learning curve, Procurement time, Space constraints– Using faster-installing materialsUsing faster-installing materials

Procurement, Submittals for owner approvalProcurement, Submittals for owner approval– Alternate construction methodsAlternate construction methods

Skill set, Learning curve, Unknown side-effectsSkill set, Learning curve, Unknown side-effects


1.040/1.401/ESD.018 Project Management, Spring 2007 Lecture 15 Project Control Samuel Labi and Fred...

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