For example you need to get rid of the “A” letter in Activity ID.

First you go to Tool ->  Global Change

Click on “New” button.

In “Then” section, In Parameter select “Activity ID”, In Parameter/Value select “RightString(Parameter,#)”

Then click on that field to adjust “Parameter” value to “Activity ID” and “#” value to “4”.

Click on “Change” button.

P6 will show you a preview of the change. Click on “Commit Changes” button.

Now you can see there is no “A” letter in your Activity ID.

This tool also can be applied to Activity Name and some other text field.

This paper attempts to identify the causes of delay on a construction project. The concept of schedule controls is discussed with a focus on the critical path method of network analysis technique. Various types of delays are detailed for compensation applicable against each of them, with a focus on documentation required in support of the delay analysis.

Various approaches for delay analysis are discussed further, followed by a case study. The case study represents a schedule delay analysis using the Window Analysis method, which was encountered by the author on a construction project. This case study highlights the underlying concepts of schedule delay analysis and visual effectiveness of the window analysis method.

IMPORTANCE OF SCHEDULE DELAY ANALYSIS ON

CONSTRUCTION PROJECTS – A CONTRACTOR’S PERSPECTIVE

1.    INTRODUCTION

Construction industry has been a busy industry in the 20th century. Vast multitudes of projects have sprung up, especially since the Second World War. With the growth rate going up constantly, a fierce competition has been set up among the builders. A construction project is typically a series of activities that have a specific objective to be completed within certain specifications and the start/ end dates are well defined. The construction projects are usually capital intensive with a lot of debt and interest components and everybody wants to earn profit on the investment, as soon as possible. This has prompted the surge of fast track projects worldwide.

Construction project schedules are typically a compressed one on fast track projects. To keep up with the competitive pressures, it becomes quite essential for companies to control projects, using all tools for tracking and monitoring. In addition with low profit margins and involvement of many parties at a time, these projects have inherent risk of schedule slippages and subsequent monetary losses. Therefore it is very important that the potential delays are looked into well ahead of time and mitigated implementing suitable workarounds. Even then the schedule may slip and it is of utmost importance to keep a tab on delays arising out of various reasons, especially those from the other parties i. e. the owner, fellow contractor or the subcontractor, right from the design phase through the commissioning of the project. The documents form the basis for delay claim analysis at a later date so as to save one party from the losses made on account of the failure of the other.

The purpose of this paper is to discuss practically all aspects related to delay analysis on a construction project, followed by a case study. Though the paper details practically every aspect related with the delay analysis, focus will be on the Lump Sum Contract from the viewpoint of a contractor, as it carries the maximum risk for a contractor.

As it is the contract document which details the policies in case of delay claims, the following section will discuss various types of contracts and factors for deciding the type of contract before formally accepting it.

2.     CONTRACT TYPES AND DELAY IMPACTS

A Contract is a legal agreement between the owner and the contractor for successful completion of the project and it details comprehensive guidelines including that for delay and disruption of work for various reasons. The Owner specifies and pays for the work whereas the Contractor executes the job for getting profits. The parties involved should Read The Full Contract before formally entering it.

Various types of contracts are prevalent in the construction industry depending on the priorities of the owner and mutual agreement between the owner and the contractor. The most popular types of contract being used in construction industry are detailed below:

2.1  Lump Sum/ Fixed Price Contract

In Lump Sum Contract, the contractor agrees to perform the specified work for a fixed price. If the owner needs some extra work to be done, a variation in contract is to be finalized with mutual agreement, which may affect either schedule or cost or both. It is the sole responsibility of the contractor to complete the job and remain on budget. The price has to be the minimum possible to remain competitive while bidding as well as it should not be impractical to run into losses. Since the optimum balance is sought while bidding the amount, this type of contract is normally used where traditional method of construction is being used and there are minimum chances of significant deviations. In this contract, the contractor owns total risk but has the maximum incentive also for early completion. For owner, the advantage is competitive bidding.

It is very important for the contractor to continuously monitor schedule & cost progressively and keep the budget on track. Delays can eat away the profit margin of the contractor and/ or cause slapping of liquidated damages from the owner, per conditions of the contract.

2.2  Cost Plus Fee Contract

The Cost Plus Fee Contract normally provide for the contractor to do the work, get reimbursed for the material & labor cost of the job and a fee for profit on top of the reimbursement. This fee is usually a percentage of the final cost of the project or a fixed fee. This method provides little risk for the contractor but small profit as well. Here the owner takes the maximum risk and is exposed to the cost overruns due to poor performance of the contractor. This contract is used where time and quality are of prime importance. A variation to this contract is Guaranteed Maximum Contract where the maximum amount is capped, if the contractor delays inordinately and cost overruns are too high.

2.3  Unit Price Contract

The Unit Price Contract allows the contractor to get estimated quantities of defined items of work and in turn get paid for each unit executed. Total payment is based on the units of work actually done and measured in the field. This type of contract is normally used for relatively small scope of jobs and when definitive estimates can be prepared to calculate the quantities for a fair degree of accuracy. In this contract the risk is equally shared between the owner and the contractor.

In brief, the following factors mostly affect the types of contract to be executed:

¯Extent of the work scope definition

¯Accommodation of fast tracking to complete the job

¯Allocation of risk level between the owner and contractor

¯Expertise of the contractor/ owner in the subject field

¯General market conditions

It is clear that the allocation of risk level is an important factor for finalizing the type of the contract executed. As detailed above, schedule slippage risk is an underlying factor for practically all construction contracts. Therefore it becomes imperative now to discuss fundamentals of schedule control, which helps track the progress on projects and take corrective actions from time to time. 

3.     FUNDAMENTALS OF SCHEDULE CONTROL

Delays can impact a project in numerous ways. The one impact is common that they all cost money. Field and home office overhead costs get escalated. Work that could have been performed in good weather gets pushed out into bad weather. Continuous hindrances on a task can greatly reduce labor productivity and lower morale of the workers. Material and labor cost could escalate due to substantial delays.

Various Hierarchical Schedules are developed on a project to monitor and control effectively and avoid delays. The hierarchy defines the schedule control system and is shown in Figure 3.1 on the following page. The different level schedules are detailed below, which are typically used for construction projects:

¯  Level I: This is Contract Milestone Summary Schedule. Usually one page shows overview. This is used mostly at the Director level of the companies to review the project.

¯  Level II: This is summary level schedule from Level III schedule detailed below. Senior management at jobsite as well as at home office uses this schedule to review the project.

¯  Level III: Level III schedule is usually the controlling engine for all the schedules.  This is an Integrated Schedule for all the functions and used by department managers

      for review.

¯  Level IV: Level IV schedule is detailed work plan and lower level of details compared to Level III schedule. This is typically used for regular progress review at site and is field superintendent level schedule. This basic schedule supports all upper level schedules. The project is controlled using this schedule and is used for delay analyzes as well.   

Among the various methods that are available, the Critical Path Method (CPM) is the most popular schedule analysis method, used for tracking the progress of construction projects. Figure 3.2 on the following page depicts a simple CPM network using Arrow Diagram Method. Project activities are shown by arrows in the arrow diagram method, with a Node or Event at each end. Activities take time and resources to be carried out and serve as the building blocks of the network.

Activities are logically interrelated in the network and each one of them is assigned a reasonable duration. The durations must be estimated with reasonable certainty for this method to be successful. For an activity to commence, all immediate preceding activities must be completed. If an activity starts before its preceding activities are completed, the activity must be subdivided to honor the logic of the network.

Dummy activities are used only to show relationships between activities and have no time duration. They are used as restraints for the succeeding activities to start.

The network in Figure 3.2 shows sequence of activities for erection of an equipment. Activity Erection can not start till base plate is installed on the foundation, equipment is

delivered and the crane is arrived on the jobsite. Dotted line represents a dummy activity. It is a restraint for the activity of erection to start.

After creation of a network and assigning duration to each of the activities, start/ finish time is calculated for individual activity as well as for the whole project. Four limiting times are calculated for each activity on the project, as mentioned below:

¯  Early Start: This is the earliest possible date when an activity can start, allowing for

      the duration required for the preceding activities to be completed.

¯  Early Finish: This is the earliest possible date on which an activity can be completed.

¯  Late Start: Latest possible date, on which an activity can start without delaying the

      completion of the project.

¯  Late Finish: Latest possible date on which the activity can finish without delaying

the completion of the project.

Calculating the dates is a simple method of addition and subtraction, as follows:

¯  Forward Pass: This is the first step in a network to calculate early start & early

      finish dates for each activity. At first, the early start is assigned to the first activity.

      Early finish is equal to the early start of the activity plus its duration. It is assumed

      that the activities start as soon as the immediate preceding activities get finished.

      Hence for other activities, early start is equal to the largest of the early finish times of

      the immediate preceding activities. This forward calculation process continues till

      last activity of the project is reached, which gives early dates for the individual

      activities and the early finish date for the total project as well.

¯  Backward Pass: This is the second step in a network to calculate late start & late

     finish dates. Here a finish date, either the early finish calculated by forward pass or an

     imposed one, is set equal to late finish date for the last activity in the network.  Then

     late start for the activity is equal to late finish minus its duration. Further, Late finish

     of an activity is the smallest of the late start times of the succeeding activities. It is

     assumed that an activity finishes as soon as its all immediate successor relations are

     satisfied. This backward calculation process continues till the first activity of the

     schedule is reached to calculate late dates for all activities.

The difference between the Late Finish and the Early Finish or the Late Start and the

Early Start is called as Total Float. Usually Total Float is termed as Float. The activities with the least amount of float are considered as Critical. Ideally any delay to these activities will delay the completion of the project, if no efforts are taken to recover the delay. The Critical Path is defined as the longest path, timewise, of the interrelated activities throughout the project. Since this chain of activities takes the longest time to complete, it is critical to completion of the project. For example, if one of the activities on critical path is delayed by two days and no corrective actions applied to the schedule or the critical activity, the project completion date will be delayed by those two days. Delay involving activities not on critical path generally has no impact on the eventual completion date of the project unless they become critical due to the delay. However, they may impact resource allocation/ availability. The schedule can be loaded with resources/ costs to perform these analyzes.

Free Float is defined as the amount of time an activity can be delayed without delaying the early start of any succeeding activity. This amount of time may be utilized for the activity to delay without affecting the project completion. After that the activity may become critical, subject to criticality of the immediate succeeding activities.

The schedule is updated regularly for the progress at the jobsite and is revised for any major changes in the construction sequence. It is of paramount importance to keep schedules updated regularly and analyze critical paths on a frequent basis. For large projects it is usually beneficial to analyze loss of total float every month. This gives early warning signs to the troubled activity paths and arms the project to take corrective actions. Once the schedule is updated regularly, the critical path routinely shifts from one sequence of activities to another during the course of a project. Thus this method is the most efficient to track the progress, monitor and control the project.

To achieve timely completion of a project, the plan should be carefully prepared and should be bought of by all parties responsible for execution. All delivery lead times should be sufficient to avoid delay. Design should be released in the sequence of construction priorities at site. All permits from Government Authorities should be planned and applied for in advance. Construction interfaces should also be identified well ahead and requirement of resources should be planned against availability of the same.

Project Controls Group is an integral part of the construction project organization. A full project controls set up needs to be functional at the design office as well as at the jobsite to monitor the progress and take corrective actions. The group interacts with all other groups at jobsite as well as at home office to get information on all aspects of the project. The information is used to analyze and track the progress of the project, identify potential delays and raise a warning flag. If at all delays occur; schedule impacts are calculated, mitigations planned and they are well documented with proper responsibilities for performing delay analyzes.

Even with all careful planning for the project, as detailed above, delays may occur for various reasons. The following section will discuss on various causes of delays to help identify and analyze delays on a project.

4.     CAUSES OF DELAY

Classified by responsibilities, the most common reasons for schedule delays are listed below:

4.1  Owner caused Delays

The responsibility lies on owner for these delays, as enumerated below:

¯Suspensions/ Terminations from owner

¯Owner directed changes in scope, schedule sequence or work methods

¯Owner’s interface for access, permits, design and material

¯Interface on inspection and approval with the owner

4.2  Third Party caused Delays

Depending on the assigned responsibilities per conditions of the contract, these may be accounted to the owner or to the contractor. For example, if it is the owner’s responsibility to obtain Government Approvals, delay will be owner caused. Various reasons are listed below:

¯Jobsite contractor interfaces

¯Approvals from Government/ Regulatory authorities

¯Delay in getting data from vendors for equipment

¯Delayed delivery of material from suppliers

4.3  Circumstances caused Delays

Reasons are listed below, which can be attributed to different parties, depending on the interpretations of the conditions of the contract:

¯Unanticipated subsurface conditions (Differing Site Conditions)

¯Force Majeure (Strike, Earthquake, Flood etc.)

¯Attitude of any one or both the parties

¯Rework of defects

¯Delays for providing adequate safety conditions at site

¯Manpower availability constraints – Qualitative/ Quantitative

¯Labor Productivity losses due to extreme physical conditions (Severe heat/ cold etc.)

Delays usually cause loss of money and time on the project. Depending on the parties responsible for the delays and the impact on schedule, delays are classified into five categories. Next section will discuss different types of delays and compensation applicable in terms of time extension or money or both.

5.     TYPES OF DELAY

This section discusses different types of delays and respective compensation applicable but these are general guidelines only. Actual compensation depends on the conditions of the contract and the contract clauses must be comprehensively referred before proceeding with any delay analysis based on the facts discussed below:

5.1  Excusable/ Compensable Delays

The owner’s actions or inactions cause Excusable/ Compensable Delays. The contractor is entitled to time extension as well as damage compensation for the extra cost associated with the delay. Usually construction contracts have an implied obligation on part of the owner not to unreasonably delay, interfere with or hinder the contractor’s performance. Major factors that lead to the compensable delays are as follows:

5.1.1 Change Orders

The changes in the work scope or changes in the work method, manner or sequence of performance may require changes in the schedule or milestones. The change may have a direct impact on the schedule and hence the contractor has to be compensated for the delay resulting from the change and to be paid for the increased cost caused by the change.

5.1.2 Differing Site Conditions

The most risky latent condition in construction projects is the unknown sub-surface. The sub-surface or the latent physical conditions at the site may differ materially from those shown in the contract or the contractor may encounter unknown or unusual physical condition differing sharply from those usually encountered.

5.1.3 Suspensions

From time to time during the course of the work, it may be necessary or desirable by the owner to suspend all or part of the work. To be compensable, the suspension should in no way be caused by the wrongdoing or fault of the contractor.

Some examples of compensable delays caused by the owner are:

¯  Failure to release drawings necessary to maintain the contractor’s satisfactory performance

¯  Failure to release owner supplied materials to the contractor in time

¯  Not releasing access to the contractor to hold the work

¯  Interfering with the contractor’s schedule and ordering to proceed under conditions

¯  Supplying incorrect information, which misleads and disrupts the contractor in his

      performance

¯  Failure to provide timely inspection of the contractor’s completed work

¯  Requiring the contractor to use any particular method when the contract does not

      specify any particular method

¯  Failure to timely process invoices, change orders or amendments and contractor

      submittals

If the owner directs the contractor to accelerate the work for the delay caused on owner’s part or due to Excusable Delay, the cost of acceleration becomes compensable. Excusable Delays are the delays caused by the Excusable Events that are out of control of the parties concerned and unforeseeable. 

5.2  Excusable/ Non-Compensable Delays

Excusable delays are neither the contractor’s nor the owner’s fault. Both the parties share the risk and the consequences when excusable events occur. Contractor is entitled to time extension, including relief from any contractually imposed liquidated damages for the period of delay, but not to damage compensation.

The general intent here is to free the contractor from liability for the effect of a superior force that can not be anticipated or controlled, usually referred to as Force Majeure. This typically includes:

¯  Acts of God (Flood, Earthquake, Cyclone etc.)

¯  Strikes

¯  Extreme severe weather

¯  Fire

¯  Unusual delays in transportation

The following criteria should be fixed to constitute excusable delay, to avoid limiting the different events:

¯  Beyond the contractor’s control

¯  Without contractor’ fault or negligence

¯  Events unforeseeable

5.3  Non-Excusable/ Non-Compensable Delays

The contractor causes Non-excusable/ Non-Compensable Delays and assumes the risk for these delays. The contractor’s or its subcontractor’s actions or inactions cause these delays. Such delays could have been foreseen and avoided by the contractor with due care. The contractor is not entitled to any time extension or damages for this delay. On the other hand the owner may be entitled to liquidated or any other damages. However there is one gray area, which could turn out to be compensable delay from a non-excusable delay. Usually it is implied responsibility of the contractor and its subcontractors to foresee and plan for site interference with other parties working at site. However an unreasonable delay, even in the case of an event the contractor was advised to anticipate, can change a non-excusable delay to a compensable delay. Examples are:

¯  Failure of owner to provide timely inspection of completed work

¯  Failure of owner to competently coordinate the work of separate contractors

5.4  Concurrent Delays

Concurrent delay can be described as a situation when two or more delays occur at the same time during all or a portion of the delay being considered. The concurrent delay is excusable or compensable, this depends on the terms of the contract, cause of the delays, timing and duration of the delays, parties responsible for the delays and the availability of float.

In a particular scenario, both the owner and the contractor are responsible for two separate delays, which occur simultaneously and have equal duration, being on critical path. In this situation, the net point is that the contractor has not been held up by the delay caused by the owner. Therefore the contractor is not entitled to an extension of time. In the same breath, the contractor may face liquidated damages from the owner for delayed completion, even though the owner was not in a position to allow the contractor to complete earlier. In this case, the contractor will be entitled to time extension if he can prove that he could have accelerated the work but delayed due to advance notice from the owner. But the contractor will require delivering notice to that effect at an early stage.    

In cases where a compensable delay and an excusable delay occur at the same time, the excusable delay will negate the compensable delay.

In case of concurrent delay, the most important action is to distinguish the impact of contractor delays from the impact of owner delays. Rights of the parties are mostly determined by delays on critical path. Hence the analysis should always be made whether the contractor was in fact prepared to proceed according to the schedule but for the owner caused delay or whether the contractor would have been delayed anyway for reasons within its own scope of responsibility.

5.5  Non-Critical Delays

Delays that do not upset project completion are Non-Critical. The delay may be large in duration but not critical if they could run parallel to other activities without being on critical path. But these delays may upset loading pattern for resources. Non-critical delays may deserve monetary compensation for extra cost involvement but there is no effect on completion date, unless they become critical due to the delay caused. This analysis of criticality should be performed for every delay occurrence on a project.

Delays usually create an ugly situation and lots of allegations and counter allegations are there from the parties involved.  The following section discusses the various documents required supporting a delay analysis.

6. DOCUMENTS REQUIRED FOR DELAY ANALYSIS

None of the parties will easily accept the responsibility for the delay, unless there is valid document in support of that. Supporting documents for delay analyzes are very important, as the claim may be void in absence of proper support. Hence all documents and records should be well preserved for the project.

A few documents are listed below, which are of prime importance to perform and support the delay analysis:

¯  Approved Schedule : Approved schedule is a very important document as it is used as the baseline for the delay analysis and all distinct responsibility for the delay could be chalked out using this. The schedule should be reliable, accurate, reasonable and agreed by the parties concerned. Any mistake in schedule can cause the delay analysis to be rejected.

¯  Manpower and Equipment Histograms : The histograms provide basis for comparison for planned versus actual mobilization.

¯  Record of Design/ Material Release : These records form the basis for delay on account of deliverables from either of the parties.

¯  Progress Reports : All progress reports, whether Daily/ Weekly/ Monthly, can tell

      into minute details about the working interfaces/ work put on hold etc. during that

      particular period.

¯  Correspondences : Correspondences are very useful tool to find out the responsibilities at a later date and each of the parties should write letters for any delay or interface from the counterpart.

¯  Change Orders : Change orders detail out the scope of change and the analysis can be made for the delay/ cost escalation, based on the work involved.

¯  Trend Logs : A regular log of trends should be maintained to track all deviations,      reasons for the deviations and schedule & cost impacts.

¯  Quality Non Conformance Reports : These could be used to detail out deficiency in

      the quality of the work and the party responsible for that.

¯  Photographs : Regular jobsite progress photographs could tell the story in details with

      the dates printed on them.

¯  Minutes of Meetings : Minutes of meetings contain formal details of all the discussions, agreements and disagreements during the meeting and hence very useful.

¯  As Built Schedule : This is of paramount importance. This could tell all stories that

      happened during the life span of the project. It tells what event happened, when and

      how did that affect the job performance. Activities should be incorporated into the

      schedule for each individual cause of delay, logically tied with the impacted

      activities.

After taking a look at the documents required analyzing and supporting delays, the following section discusses different methods to perform schedule delay analysis.

7.     DELAY ANALYSIS METHODS

Schedule delay analysis is a complex process mostly and varies with the situation. The analysis of delay becomes more difficult when there are multiple causes of delay with interrelated effects.

As discussed earlier, the project schedule is the most widely used and the comprehensive tool for schedule delay analysis. Since the schedule gets updated regularly, all relevant details can be logged in to display them later.

Using computerized scheduling programs that are available in the market today, allow the project scheduler to keep track of:

¯  Actual start and actual finish dates.

¯  Suspension period for a particular activity, once activity started.

¯  Log records as the project progresses. All historical information can be entered for future use. They can be masked also for in-house reference and not to be visible in the prints.

¯  Activities can be coded as delay activities with individual responsibility for all the parties concerned. They can be filtered out later for analysis.

¯  Target bars can be shown against the current/ actual bars to make a visual comparison of the progress. Similarly a table can also be formed for the target dates and the current/ actual dates.

¯  Leaving aside the original schedule, copies can be made and analysis can be done for various scenarios arising out of the delay or change orders. The analysis can be seen quickly, even for large projects and networks.

¯  Pictures can be inserted in the layouts for effective visual display of some activities/ milestones.

Starting with the following page, this paper discusses few prominently used delay analysis methods.

7.1  Total Time Approach

Total Time Approach is the basic method as shown in Figure 7.1. Here the comparison is made for As Planned bar chart against As Built bar chart. The difference calculated is the delay duration. The obvious difficulty with this method is that it does not show the causes for the delay and thus who is responsible. Also it does not show the effect of the delay. It is a subjective method and difficult to analyze using this method.

7.2  Should-Have-Been Approach

Should-Have-Been condition is implied to the original plan, in this approach, for the various reasons of lesser productivity (See figure 7.2). Then period of acceleration is deducted and delay duration is arrived by comparison against the original plan.

7.3  But-For Approach (Collapsed As-Built)

In But-For Approach, all owner caused delays are deleted from the as built schedule to analyze what would have been But-For the owner caused delays as depicted in figure 7.3. Then the difference between But-For Schedule and As Built Schedule tells the scope of owner caused delay for time as well as for cost. This method does not account for criticality/ non-criticality of the activities for the effect of this realignment.

7.4  Time Impact Analysis

Time Impact Analysis was already discussed earlier in Section 3. Detailed schedules are used and critical path analysis done in this method. It shows effects of each individual delay and the actual progress. Difference can be visible between the two schedules using approved schedule as target schedule. This is a proven and successful method and widely used in the construction industry.

7.5  Window Analysis

Window Analysis is a pictorial presentation and information is taken mainly from updated/ as built schedule with support from the various documents mentioned in section 6. The basis for determination of delay analysis window is the best judgement and the periods of delay. Figure 7.4 shows a sample format for window analysis. Events are identified on the critical path, in the window. The comparison is made for the planed against as built durations for the activities. Here a better account can be taken for the concurrent delay and we can superimpose the delays on a single bar clearly showing the effect of each delay and responsible parties. This is a very accurate approach to analyze complex delay situations and the best advantage is the effective visual presentation.

Since window analysis has the advantages of clarity and effective visual presentation, this is widely used on construction sites for the delay analysis. To explain this method in details, a delay analysis case study will be discussed, for which window analysis method was used. The author while working with a contractor as a planning engineer did the analysis. In this case the contractor was delayed by two owner invoked suspensions on the pre-commissioning activities of the contractor.

8.     CASE STUDY

The subject of discussion is a delay analysis, faced while constructing a Gas Based Combined Cycle Power Project. The contractor was awarded Lump Sum Contract to design, procure, build, commission and hand over the plant to the owner in a time span of 27 months from the date of Notice To Proceed. Per the terms of the contract, the contractor had to pay a Liquidated Damage of US$ 150,000 per day of delay. On the other hand, the contractor would have been eligible for an Early Completion Bonus of US$ 80,000 per day, for completion ahead of the Contractual Completion Date. For discussion in this paper, the contractual completion date will be referred as the Guaranteed Completion Date. For analysis, say, the Guaranteed Completion Date was agreed as 07 Jun 2000.

The project comprised of the following:

¯  Two Combustion Turbines & Generators (CTs & CTGs), named CT 2A/ 2B &

       CTG 2A/ 2B.

¯  Two Heat Recovery Steam Generators (HRSGs), named HRSG 2A/ 2B.

¯  One Steam Turbine & Generator (ST & STG).

An internal target was set by the contractor to complete the job in 25 months i. e. 60 days ahead of the guaranteed completion date, referred to as Target Completion Date. On completion per target completion date, the contractor would have been eligible for an early completion bonus of 60 days, per conditions of the contract. A detailed schedule was prepared to achieve the target completion date in consultation with all responsible parties associated with the project. The schedule was delivered to the owner with the internal target milestone dates and the owner agreed to support with all the deliverables on their account to support the schedule to help the contractor achieve the target.

The contractor started the work per schedule and the schedule was continually reviewed on a weekly basis to status for progress. Supporting critical path reviews were also carried out.  The contractor used to send the updated schedule regularly to the owner, to appraise of the latest developments and to make aware of the expectations from the owner to support the schedule.

Construction of the project progressed well and after achieving all milestones of construction, entered into pre-commissioning phase. During construction phase, the schedule slipped against the target one for various reasons, and that is out of the subject of this discussion.

Before proceeding further, it is imperative to discuss the sequence of pre-commissioning activities falling on critical path, leading to handing over of the project. The First Fire of the combustion turbines is referred to as the milestone activity when the CTs are test run for the first time with fuel on a project. This activity of First Fire triggers the sequence of following activities, typically on a power project of the same configuration as mentioned above:

¯  Synchronization: Testing of the CTs at full speed and running on full capacity after synchronization of the CTGs with the electricity distribution grid.

¯  Steam Blows: Steam is blown through the HRSGs and associated piping using temporary pipes, to clean the system to a certain specification.

¯  Restoration: Once steams blows are completed, temporary pipes are all removed. All permanent pipes, fittings and valves are installed and control system tubes are flushed to required specification.

¯  Function Checks: All control systems are checked in a comprehensive manner. On completion of this activity, the CTs can be refired with fuel.

For ease of discussion here, the above set of activities is referred to as Activities Leading to Refire of CTs. In this case, this set of activities was totally under control of the contractor and was not affected by any direction of the owner.

The Refire of CTs is another important milestone activity which refers to the rerun of both the CTs with fuel, to perform further testing & commissioning, leading to Handing- Over of the project. Typical sequence of activities to follow after Refire of CTs listed below:

¯  Set Safety Valves on HRSGs: The safety valves are first tested and set per operational specification.

¯  ST Roll: Steam Turbine is rolled for the first time, feeding steam into the turbine. After this activity, various checks are done on the turbine & generator and it is synchronized with the electricity distribution grid.

¯  STG Loading: Steam Turbine & Generator is loaded @ incremental load of 25%, 50% and 100%.

¯  Plant Tuning: Fine-tuning is done for the plant to achieve maximum efficiency. After that the plant is shutdown for removal of the screen from the valves, installed to check impurities going into steam turbine. This shutdown period is also utilized for water wash of the CTs.

¯  Plant Operation/ Test & Hand-over: Finally the plant is continuously run and a battery of test needs to be carried out in the presence of the parties involved, per specifications. On satisfactory completion of the tests, the plant is handed over to the owner. 

Coming back to the case, the contractor was in the process of completing the Activities Leading to Refire of CTs when a suspension (Suspension#1) was invoked by the owner on Refire of CTs.  Shortly after that, the second suspension (Suspension#2) was invoked when the contractor was about to Refire the CTs. To analyze the delay due to the suspensions, four schedule snapshots were taken:

¯  On 17 Mar 00, Status prior to suspension#1 in place

¯  On 06 Apr 00, Status after suspension#1 lifted

¯  On 10 Apr 00, Status prior to suspension#2 in place

¯  On 13 Apr 00, Status after suspension#2 lifted

The schedule on the project was developed using Primavera Project Planner software. As a back up to window analysis, the activities falling on the most critical path are shown in the figures 8.2, 8.3, 8.4 and 8.5 for reference. Each one is a schedule, statused on different dates as mentioned above.

Identification number, description, duration, early start, early finish and total float is shown for each activity on the schedules. Bar area shows timescale on top and activity descriptions are marked on bars also for clarity. Activity interrelationship lines are visible in the bar area.

Since the owner directed to put a hold on Refire of CTs during suspensions, window of the delay analysis was selected from Refire of CTs to Handing Over the Project to the Owner. There is a focus on Activities Leading to Refire of CTs too, as the project got delayed due to that activity. Figure 8.1 on page no. 34 depicts the window analysis. Microsoft Excel software was used for the analysis as different types of shapes could be used easily to make an effective pictorial presentation.

The window analysis shows summary of one schedule snapshots on each bar, presented graphically. Each bar is divided into two parts. One is Steam Blows to Refire of CTs and the other is Refire of CTs to Handing Over. Flags are used to display refire and hand over. Each bar shows successive slippages against timescale for the period ending, mentioned on top.

The composite bar at the bottom of the window analysis identifies delay types and responsibilities for the date marked on it. A table shows the delays with accountability and total of the delays.

The float, stated in the discussion at all places, is against the Guaranteed Completion Date of the project. As mentioned earlier, this date was the key for calculation of early completion bonus or liquidated damages. All the four schedule snapshots and the delay impacts are analyzed below, one by one:

8.1  Status Prior to Suspension#1 in Place

On 17 Mar 00, Suspension#1 was slapped on the contractor as the owner failed to get some statutory approvals from Government Authorities, which was solely on their account.

First schedule snapshot was taken just prior to suspension#1 in place, as shown in figure 8.2 on page no. 35. Refire of CTs was scheduled for 27 Mar 00 on this date. With this forecast date for refiring of the CTs, the date for Handing Over was forecast to take place on 24 May 00. There was a float of 14 days to achieve early completion bonus.

8.2  Status After Suspension#1 Lifted

The owner lifted Suspension#1 on 06 Apr 00 as they got some interim approval from the Government Authorities. The schedule status is shown in figure 8.3 on page no. 36.

In the mean time the contractor slipped by 4 days in completing the Activities Leading to Refire of CTs and could be ready to Refire the CTs only on 31 Mar 00.

The suspension#1 stayed for a total period of 20 days and even though the contractor was ready to refire the CTs on 31 Mar 00, they could not do that as the suspension#1 was still in place then. Hence the period of 20 days (17 Mar 00 to 05 Apr 00) could be divided into two parts:

¯  17 Mar 00 to 30 Mar 00 (14 days) was a window of concurrent delay, as the contractor could not be ready to refire the CTs.

¯  31 May 00 to 05 Apr 00 (6 days) was a window of excusable/ compensable delay as the contractor was ready to refire the CTs but could not do, per direction of the owner.

After suspension#1 lifted, the refire of CTs was scheduled to be on 06 Apr 00 and the date for handing over of the project slipped straight to 03 Jun 00. Float reduced to 4 days from 14 days.

8.3  Status Prior to Suspension#2 in Place

Another schedule snapshot was taken just prior to suspension#2 in place on 10 Apr 00, as shown in figure 8.4 on page no. 37. At that point of time, the contractor was just ready to Refire the CTs. Delay for 4 days on the contractor’s part is detailed below.

As the contractor got the Suspension#1 lifted and went ahead to refire the CTs on 06 Apr 00, a snag got developed in the Combustion Turbine Air Inlet Filter. Air Inlet Filter is an important component for firing of a CT, as it filters the air before it comes to CT to get mixed up with fuel for combustion. All efforts were made by the contractor at this late stage to rectify the problems. This took 4 days on the critical path to correct and was totally on account of the contractor and thus non-excusable delay. This non-excusable delay caused to push the refire of CTs on 10 Apr 00 and the handing over date to the same 07 Jun 00 as the guaranteed completion date. The float reduced to zero.

The problem was fixed on air inlet filter and the contractor was about to Refire the CTs. At this juncture, the owner invoked Suspension #2. The suspension directed again to stop refire of CTs and it was again for the owner’s failure to get through with the Government Authorities. 

8.4  Status After Suspension#2 Lifted

On 13 Jun 00, the Suspension#2 was lifted by the owner and the same day the CTs were refired. The schedule impact of suspension#2 is shown in figure 8.5 on page no. 38. This delay of 3 days due to suspension#2 was a compensable one. The delay caused the project handing over date to push out of the guaranteed completion date of 07 Jun 00 and that went over to 10 Jun 00. Thus the float was negative three days on the project.

On analyzing, it was found that the contractor had lost ground for 14 days of concurrent delay. The contractor issued the notice of delay to the owner in time, against the notice of suspension#1 invoked by the owner, but failed to be ready to refire the CTs early and hence no time extension claim was possible for the Concurrent Delay of 14 days.

But-for the contractor’s delays, clear Compensable Delays from the owner was on two occasions:

¯  Suspension#1: 31 Mar 00 to 05 Apr 00 (6 days)

¯  Suspension#2: 10 Apr 00 to 12 Apr 00 (3 days)

For compensable delays, the contractor was entitled for a total of 9 days of Time Extension against the Contractual Completion Date. In addition to that the contractor was entitled for the Reimbursement of Cost Overruns for this period. As the contractual completion date was getting extended, there was no effect on the entitlement of the contractor’s early completion bonus.

·         Be between 50 and 200 activities (the smaller the better).

·         Have only finish to start relationships. If not possible then start-to-start or

finish-to-finish should be kept to the very minimum but never on the critical or

near/sub critical paths.

·         The plan must have no constraints e.g. Must Start On Date, Cannot Finish Later

Than Date etc. The only acceptable constraint is the start date for the first activity.

However, if there is some doubt about when the project will start then it is

recommended that an activity prior to start is put into the plan, this can be

constrained to say current date. Another activity called something like duration to

start of project then follows and the actual start of the project links to this. This will

allow a variation in the actual start of the project to be considered in the analysis.

·         The plan should only contain future and current (remaining scope) activities.

Completed activities are not required. No progress should be shown against an

activity only the remaining work for that task.

·         Lags and leads should also be avoided. If you want to start an activity say three

weeks after ‘Design’ starts then it is better to split the Design activity into two calling

the first part something like Design to requisition stage, this would then become the

finish to start to the activity that you wanted to delay.

·         Ideally the plan should have one start and one finish. However, if the plan has

more than one end then multiple ends are possible. If this is the case then thought

must be given to structuring the plan so that activities can be deleted to review each

end separately, if required. This may be needed as the analysis will show the critical

path for the last/longest activity/path and therefore, shorter paths (to the other

ends) will not show up as critical. To show these as critical the other ends and their

associated activities can be deleted and separate runs carried out.

·         Titles should be self-explanatory and not reliant on summary level descriptions

e.g. the plan may have various sections the first called Design. The activities within

Design relying on the reader to see the Design section heading. This is required as

the risk analysis will likely sort the activities in a different order and therefore, the

descriptions must stand alone. Summary level titles should be avoided.

·         Ideally the plan should be developed using a single calendar. Weather

modelling and non-productive time will be modelled within Primavera Risk Analysis

(PRA).

Modifications to an existing plant, for its expansion, debottlenecking etc., entail a set of specific engineering tasks and documents which are not found in a "Green Field" (new built) development.

As the modifications of the existing plant will lead to a change of operating conditions for its process equipment, their duty must be checked for the new conditions. This will entail, among others, the verification of the capacity of roating equipment, thermal duty of heat exchangers. Etc. Some of these verifications will need to be done by the equipment supplier itself, such as verification of compressors for new gas composition, distillation column trays for new gas/liquide traffic etc.

 Additionally, suitability of the equipment and piping for the new pressure and temperature conditions must be checked. Hydraulic calculations of pipework given the new flow conditions must be performed etc.

 Instruments, such as control valves and pressure saftey relief valves must also be checked so that they have adequate capacity to cover the new operating requirements.

In the case of new unit(s) being added to an existing facilities, it is more than likely that the new unit(s) will use some of the existing facility utilities. This could include fuel gas, electrical power, cooling medium, instrument air etc. Care must be taken while evaluating if the existing utilities have enough capacity: The current consumption need to be precisely assessed, taken into account the conditions of maximum consumption. Note that the spare capacity of the existing units might be less than that indicated in their original design documents due to modifications made to the plant since then!

 The additional load must also be estimated with sufficient accuracy as well. This will avoid a situation where the existing utilities fall short as the new design develops.

 On a physical stand point, addition to an existing plants will make use of the provision for "future" that was made in the original design. A new built facility indeed includes a certain level of pre-investment, such as 20% free space on pipe-racks, 20% free spare terminals in instrument junction boxes and multi-cables etc.

 Such space, if it has not been used up already, will be used for the extansion. Retrieval of the engineering drawings of the existing plant allowing identification of such free space is only the first step. As these drawings may not reflect the as-built condition of the plant and may not have been up-dated with later modifications, a physical check of the available free space is required. This requires to perform surveys.

 For above ground facilities, surveys range from simple visual or "measuring tape" type, to more extensive co-ordinates and elevations, up to the full 3D survey of an area.

 The 3D survey is performed by shooting numerous 2D pictures of an area of the plant from different view points. The pictures are then superimposed, yielding a 3D image. The later can be looked at and navigated in from the engineering office. The 3D picture is coordinated to the local plant coordinate system and scaled, which allows measurements.

 The point cloud 3D image of the existing plant can also be superimposed to new design in the 3D model, as shown on the picture here, to identify interferences.

 A 3D survey involves significant field and processing time besides expensive equipment. It is justified in the case of extensive modifications to a congested existing area. It will indeed allow to identify interferences, specially with small items such as small bore pipes, small E/I trays, supports etc. which do not appear on the existing drawings. In this case, it avoids numerous visits to the job site.

 It can also be useful to mitigate unavailability/unacurracy of existing drawings, provide measurements in unaccessbile areas, produce scaled drawings of the existing etc.

 Underground survey is done by means of excavations. The plot of land where a new unit is to be built, for instance, must be free of underground networks, such as pipes, cables etc. or their positions precisely known As available drawings may not depict all constructions having taken place over a number of years, an exploratory trench is commonly dug all around the area, up to the lowest level of expected networks, to identify any pipes, cable etc.

 Local excavation, of cable trenches, will allow to confirm that the free space that appear on existing drawings is still available for cables foreseen to be added in the trench.

 Although surveys might mitigate the unavailability of existing drawings, some existing documents are necessary. The addition of new lines on a pipe-rack for instance, will not only require the drawings of the existing steel work (which could be redrawn following survey if not available) but also its calculation note. The latter will indeed contain the information about its existing loading. Although the revamping engineer could estimate the pipe weights, loads sustained by the steel work to ensure pipe flexibility requirements, such as loads at fixed "anchor" points, cannot be guessed. They are found in the steel structure calculation note, as input data resulting from detailed piping stress calculations.

Once free spaces have been identified for the plant expansion, it needs to be booked. Physical markers are best, such as signs at tie-in locations, warning tape etc. Experience proves that co-ordination between a large plant various expansion projects is not often effective, especially between small projects under the Plant Engineering department and larger ones under dedicated project teams.

Knowledge of concurrent projects is essential for coordination to avoid conflict (both projects use the same plot space for instance).

The connections of the new facilities to the existing plant are called "tie-in’s". They consist of connections to the existing facilities pipe-work, electrical power distribution, instrumentation and telecom systems etc.

Doing some such connections will require the existing facility to be shut in, while others can be done while the plant is in operation. The Engineer will be able to minimize the former by discussing with the plant operator and find that, for instance, a piping tie-in can be relocated onto a line that can be temporarily put out of service etc. The existing design may also allow for tie-in’s during operation, such as that to a control system with redundant A/B circuits (operating with B while working on A then reversely), that to an electrical switchboard a section of which can be isolated etc. Detailed review and optimization ot tie-in’s will allow to reduce the number of tie-in’s requiring plant shutdown hence reduce downtime.

Tie-in schedules are issued by the concerned disciplines (Piping, Electrical, Instrumentation, Telecom).

Process discipline defines the required connections to the existing process and utility lines and initiates the Piping tie-in’s list. Verification is made of the adequacy of the existing lines design pressure and temperature with that of the new connecting lines.

Piping tie-in’s will entail the usual "tee" addition, where a branch is added on an existing line by "cut and weld" requiring the line to be shut in.

Addition of a branch connection during the operation of a line is also feasible by performing a "hot tap". In such case, a slightly larger and purposely made "tee", split in two halves, is welded to the live line. The tee is then fitted with a flange and an isolation valve. The hot tapping machine drills through the open valve while containing the fluid coming through the opening. A special device allows retention of the coupon. Once the drill is completed, the drilling equipment is retracted, the valve closed and the hot tap machine dismounted.

Controlled heat input during the welding operation of the hot tap tee to the live line is required. The pipe effective wall thickness will be indeed be reduced during welding due to the fusion of its outer surface (typical penetration is 2-3mm). The remaining wall thickness must be sufficient to hold the fluid pressure, or the latter shall be decreased.

 System modifications will entail that of:

   • Old systems, which are hard wired or have a hard logic, such as that contain in a ROM chip etc. Changes to these systems require their shutdown, for rewiring, replacement of the old chip with a new one etc.

   • New systems, which have a soft (configured) logic and distributed architecture: additional controllers can be added on-line while modifications on operators’ consoles (addition of mimics etc.) can be done on each console at a time, without impact on the other consoles. Even the controls (control loops) can be modified on the LIVE system, as controllers are usually duplicated A/B so that modifications can be done on A with B controlling, and then on B with A controlling.

 In both cases, the modifications of the system must be performed by the existing system supplier, which can be a constraint in terms of cost as there is no alternative. The Engineer merely provided the functional requirements, which the supplier implements.

 One may also find old systems which are obsolete and cannot be extended. I/O cards may for instance no longer been manufactured. Such systems must then be upgraded, i.e., replaced by new version.

Tie-in dossier will be submitted to the plant owner for review. They will include ad-hoc drawings, such as dismantling drawings showing what part of the existing plant has to be removed, e.g., a piece of pipe for incorporation of the branch "tee" connection etc.

Up-dating of plant documentation by its owner is rarely done properly. A project often develops new drawings instead of up-dating the existing drawings. The owner ends up with two drawings instead of one, one showing the existing plant and another one showing what has been added by a given project. Consolidation has to be done later on to a single drawing.

One issue faced is that several projects might be making concurrent modifications to the same part of the plant hence the same drawing. Having each of them up-date the same existing drawing in parallel is not acceptable and a drawing check out/check in system must be put in place: Project B, which "checked out" a certain drawing, must return, i.e. "check in", such drawing before it is provided ("checked out") to Project A.

Click on Setup

Select “Typical” and click OK

Click Install

After installation complete, click OK.

In Driver type drop-down list, select “P6 Pro Stand-alone (SQLite)”, then click Next

Select “Add a new standalone database and connection”. Click Next

Enter new password. For example “admin”. Click Next

You can change destination of database file, otherwise it will be stored in My Document folder.

Check on “Load Sample Data” if you want some sample project appear in your database. Uncheck it if you want your database is blank. To create database for working, we usually uncheck it.

Click Next

Click Finish

You have finished the installation.

Now we open the application.

In Start menu click on P6 Professional R16.1

Enter password. For example “admin”. Click OK

Click OK again. We will turn that notification off when we’re inside program.

Go to Admin -> Admin Preferences

Go to Industry tab and select your industry. For example “Engineering and Construction”. Then click on Close.

Congratulation. Now you can plan with Primavera P6.

Happy Planning

Sometimes you need to make an activity table report which also show predecessors and successors of each activity.

Here are the step how to do it.

Go to Report window and click “+” button to create a new report.

At “Select Subject Area” dialog, Select Activities.

At “Select Additional Subject Areas” dialog, Select Predecessors and Successors

Select Predecessors, Click Column

Select column you want to show. For example : Activity ID and Name. Then you should click Edit column to change the title.

You will do the same with the Successors.

Now you can print the report like this:

It show Predecessors and Successors for each activity.

Sometime you need to make a report which focus on some WBS only. Like in this picture:

However, the Gantt chart show all other bar and make you distracted.

How about we can make it like this:

Well, much more cleaner. All unnecessary bars is hidden.

I will show you how.

Right click on Gantt chart area. Click on Bar:

You select the Bar which is showed in Gantt chart. By default the “Show bar when collapsed” option is checked. Now you uncheck them:

You will do this for each bar.

Then you will have a very clean Gantt chart.

The carat (^) is displayed when the resource does not have a price/unit assigned.

If resource does not have price/unit, Primavera will use the Project level price/unit which is defined in Project window -> Calculation tab

Now if you define price/unit for the resource like this:

Primavera will now use the price/unit from resource.

However you have to run “Tool -> Recalculate Assignment Costs” to refresh the data.

Click on Recalculate

Now you can see there is no carat (^) symbol in the price/unit and that price is taken from Resource.

Incorporating Risk Assessment into Project Forecasting

Author: Dione Palomino Conde Laratta, PMP

Company: ICF International - USA

Phone: +1 (858) 444-3969

Dione.laratta@icfi.com

Subject Category: Project Risk Management and Cost Estimating

Brief author profile

Dione Laratta (MBA, PMP) has 16 years of experience in the energy industry with the last 8 years focused on project management.

She currently serves as a Project Controller with ICF International on a $200 million environmental project involving mitigation for construction of a transmission line (TRTP).  She is responsible for overseeing budget forecasts, risk assessment, schedule controls, and subcontractor management using sophisticated budget managements tools that are integrated throughout the project.

Her additional project management experience includes five years as the Planning and Control Manager for a $30 billion refinery program for the third largest Oil and Gas Company in the world.

Acknowledgements

This paper presents the results of a risk assessment approach applied to an environmental project. The author wishes to express her gratitude to all who participated in the risk workshops conducted as part of this paper. The author also wishes to express my gratitude to the reviewers of this paper for their comments and suggestions.

Abstract

The science of project management was founded, in large part, to manage risk and prevent it from negatively affecting project objectives, schedules, and budgets.

Risk in any project is unavoidable. Fortunately, there are proven methods to identify and analyze potential threats so that appropriate risk responses are developed and the project's level of exposure is controlled.

Risk analysis has become an important discipline within the field of project management. It involves prioritizing risks and assessing each identified risk's probability of occurrence and potential impact, whether positive or negative.

This paper explores both qualitative and quantitative risk analysis techniques applied to the environmental industry. It explains how to incorporate risk assessment into forecasting and shows how a project was able to increase forecast accuracy from 50% to 95% by using the described approach.

Introduction

In a business world that can transform in the blink of an eye, complexity is the new norm. On top of that, add forces of nature and you are entering the environmental industry.

Forecasting for a project that can be impacted by rain, snow, drought and wild fires can be very challenging since there is always “something in the air.” To get an accurate gauge of these risks – and opportunities – across the project, project executives are appealing to risk management and incorporating its results into the forecast process.

The Risk Management Process

Risk is inherent in projects. One can never overcome all potential risks in a project, but preparation, planning and execution can mitigate much of the risk.

Successful management of a project’s risks gives you better control over the future and can significantly improve the chances of you reaching your project objectives, including scheduling and budget objectives.

Figure 1 shows a summary of the risk management process and its connection with the forecast.

Figure 1 – Risk Assessment Process/Forecasting Process

Phase 1 – Identify Risks

The first step is to identify all risks that could realistically affect the project. This activity is best performed by the project team rather than by one individual. Depending on circumstances, it can be useful to obtain input from your customers, subcontractors, vendors, and other stakeholders involved in the project. Engaging them in the process can help your stakeholders become more committed to the project.

The approach used to identify the risks for our example was a brainstorming session.

In a brainstorm session a team works together with the help of a facilitator. The facilitator encourages everyone to participate in a free-flowing conversation amongst a group of knowledgeable people without criticizing or rewarding ideas. S/He provides guidance throughout the meeting by using structured questions and templates to foster the discussion.

Ideally, all stakeholders should eventually participate in the brainstorming sessions, but the initial Risk Identification Workshop should be restricted to a small number. Choose those who will be full-time members of the project team, have key responsibilities, and cover critical technologies and processes. As the project moves along, new workshops should be performed to incorporate more stakeholders and update risks already mapped.

Prior to the Risk Identification Workshop, participants should receive support documentation such as the statement of work (SOW), the baseline budget and current forecast as well as the Risk Breakdown Structure (RBS) and Work Breakdown Structure (WBS).

The dynamic of the brainstorming session should be discussed between the project manager and facilitator. For example, deciding if discussions will be conducted according to the WBS or RBS, identifying the participants, and defining the number of participants per knowledge area.

During the session, all potential risks are captured by the facilitator and then condensed and refined in order to be validated and classified.

The template used to identify each risk has the following fields:

• Risk Description
• General Information
• Causes
• Potential Impact (Time-Days)
• Potential Impact (Cost- $)
• Period of Occurrence
• Risk Status (Active, New, Completed, Canceled)
• Category (RBS classification)
• Risk Classification as Opportunity (+) or Risk(-)

Phase 2 – Qualitative Analysis

The Qualitative Analysis consists of the methods used to prioritize the risks identified.

Each risk is classified on three variables: impact on cost and schedule, probability, and importance to the project. To simplify the analysis, the importance to the project was indicated by the multiplication of probability times impact.

Tables 1, 2 and 3 show the range used to estimate the severity of the impact and the probability of the risk occurring.

Table 1 – Schedule Impact

Table 2 – Cost Impact

Table 3 - Probability

Based on the complexity and size of the project, a risk tolerance with a lower limit of 4% and an  upper limit of  14% was used, which means that risks with a probability and impact higher than 15% are considered severe and therefore must have a risk response.

Phase 3 – Quantitative Analysis

The Quantitative Analysis consists of evaluating the magnitude of the risks previously classified. It incorporates cost and schedule impacts and evaluates pessimistic and optimistic scenarios.

Based on the forecast and the baseline budget, it was possible in our example to identify potential impacts on schedule and cost.

An expected monetary value (EMV) was calculated for the list of prioritized risks by multiplying the probability (P) times the potential impact (I) in cost.

EMV = P x I

Figure 2 – Matrix Probability vs Impact

Phase 4 - Risk Response

Risk response determines actions and responsibilities to keep track of each risk identified and prioritized.

The response should be aligned with one of the following risk strategies:

• Avoid: Change the project or some assumption to protect the project against the impacts.
• Transfer: Transfer the consequences of a risk to a third party.
• Mitigation: Aims to reduce the consequences or probability of happening.
• Acceptance: Incapability of pursuing another risk strategy or consciously assume the risk.
• Exploit:  Aims to foster the probability of an opportunity happening.
• Share: Used when a partner has a higher potential to capture the opportunity.

Phase 5 - Risk Monitor and Control

Risk monitor and control consists of identifying, evaluating and planning the risks and responses.

New risks can be identified during the project and should be included and tracked with a list of risks at the management team meetings.  Severe risks and their impacts, probability, EMV and responses should be reviewed monthly.

Phase 6 - Integrating Risk with Forecast

After quantifying the risks, the forecast will be split into 3 different scenarios: optimistic, most probable and pessimistic.

The pessimistic scenario incorporates the EMV of risks and the optimistic scenario incorporates the EMV of opportunities identified. The most probable uses the forecast as is.

Graph 1 shows the forecast scenarios distributed through the year.

Graph 1 – Forecast Scenarios

Graph 2 – Risk and Opportunities – Expected Monetary Values (EMV)

Graph 2 shows the distribution through the year of the expected monetary values for risks and opportunities quantified. These numbers were incorporated into the revenue forecast and can be detailed as shown in the table below.

Table 4 – Details on EMV

By using the results from the qualitative and quantitative analysis one can improve the accuracy of the forecast and also support the understanding of the nature of the work being executed. It demystifies the work and its associated risks to top executives and the project management team.

Before introducing the risk assessment into the forecast process, executives in our example project had a hard time understanding why there was often a large difference between the forecast and the actuals, as some months would vary by almost 50%.

Graph 3 shows how volatile and hard to control the environmental industry is, breaking down the risks according to its source.

Graph 3 – Risk Sources

Observing Graph 3 it can be seen that almost 10% of the risks were unforeseeable.  They were related to forces of nature such as rain, snow, wildfires, or accidents. Another 75% were related to external sources such as permits, taxes, regulations, other contractors participating in the project, clients, unions, competition, environmental conditions, the economy and market forces.

Being able to anticipate when most of these risks will happen, and to quantify and incorporate them into a regular forecast process, enables the project team to be more accurate and aware of potential risks and opportunities. Forecasts should be revised on a regular basis, and risk should be one of the topics discussed and updated.

Conclusion

It is widely accepted that risk management is a key contributor to project success, but integrating it into the forecast process can add even more value to the project.

There is no magic bullet to implement a process like the one presented in this paper, but there are some key guidelines you can follow. With that in mind, the following simple steps may help guide you as you begin planning your process to evaluate risk and improve your forecasts.

• Define what values your project and organization will gain from this approach. Examples: reduce volatility to enable a more efficient use of capital. Increase customer satisfaction and transparency. Obtain the project and company goals – a project on budget and on schedule and a more accurate company’s forecast for the market.
• Seek support and help. Get the involvement of your team and an executive sponsor. Explain the value of the process to the project and the organization.
• Use templates to keep the process simple and straight forward.
• Start in a small group with the core management team. Extend to other stakeholders once the process is more refined and established.
• Keep the ball rolling. Define regular meetings with the project team to revise the forecast and risk analysis. Look for unanticipated risks as you already mapped and decided how to deal with the expected ones. Explore the different scenarios.
• Support  the development of an organizational knowledge base. Create a database for the risks mapped and share with your team and organization.
• Develop a monthly report with the three scenarios forecasted and highlight the most relevant risks and upcoming opportunities.

Appendix  - Glossary

• Risk is an uncertain event that may result in a positive or negative impact on project objectives.
• Qualitative Risk Analysis is the process for prioritizing risks for subsequent further analysis or action by assessing and combining their probability of occurrence and impact.
• Risk probability and impact assessment is a method for "investigating the likelihood that each specific risk will occur" and a method for explicating their "potential effects" on the project which can be positive (risk is an "opportunity") or negative (risk is a "threat")
• Risk Severity is a risk classification in terms of impact and probability of occurring. The tolerance to risk will define the thresholds.
• Brainstorming is an information gathering technique used to collect requirements for the project. Uses the project team or experts to creatively identify risks, ideas or solutions.
• RBS: Risk Breakdown Structure
• WBS: Work Breakdown Structure
• Risk categorization is the act of linking identified and evaluated risks into the RBS or WBS.
• Quantitative Risk Analysis is the process for numerically analyzing the effect on overall project objectivities of identified risks. Based on the results of the Qualitative Risk Analysis the Quantitative Risk Analysis is performed on risks that have been prioritized.
• Expected Monetary Value Analysis (EMV) determines an overall ranking of risks multiplying the probability times the impact of the risk, creating different scenarios that may or may not occur.

References

-          Real-world Risk Management. White Paper. PMI. http://www.pmi.org/Business-Solutions/~/media/PDF/Business-Solutions/Risk%20Management_FINAL.ashx

-          Project Management Institute. (2015). A guide to the project management body of knowledge (PMBOK® guide) – Fifth edition. Newtown Square, PA: Author.

Primavera allows for top level planning as well as being ideal for managing the intricate details. This enables project managers, planners, planning controllers and other associated professionals to have instant access to all the project information they require at the touch of a button. It also means that all parties can be kept updated within one system, reducing duplicate information and keeping everyone in the loop.

There are number of other P6 features which makes it unique and recommended tool for planning and will make a planner or a project manager life easier by providing structure, access to information, monitoring progress and reporting mechanisms capability:-

Perfect for Project-focused Business functions - Primavera project portfolio management solutions are also suited for any company with project-focused business functions such as Construction program management, Capital asset maintenance,  Software system development and deployment, Enterprise investment portfolio management, Resource productivity and capacity planning, Product design, manufacturing, and implementation program management etc.

High performance project management - The recognised standard for high performance project management Primavera handles large-scale, highly sophisticated and multifaceted projects. Organise projects of up to 100,000 activities with unlimited resources and an unlimited number of target plans. Enhanced fiscal accountability to customers to identify common scheduling pitfalls and quickly remedy them. Track costs and gain insight into change orders and forecasts. P6 allows top level planning as well as being ideal for managing the intricate details. All the parties can be kept updated within one system, reducing duplicate information and keeping everyone in the loop. Primavera P6 Implement sound risk management principles, reducing the risks associated with projects such as delays in delivery and resource shortages. It reduces risks of schedule inconstancies, errors, or overrun issues. P6 helps identify and mitigate risks in the course of planning and controlling projects. 

Optimized Resources – It helps to carefully monitor resource availability and adjust scare resources to meet project demand. Furthermore, the software can help identify areas where resource cost may be reduced by analysing trends and costs. Primavera has resource levelling option which is very handy in optimizing resources.

Enhanced visibility – Everything is included in the programme so you can easily see what’s going on with a project at any time.  It allows all data to be entered, tracked and analyzed in one location. An unified project view for all participants and stakeholders.

Improved Forecasting – Having up to date information means that you are able to clearly see where there is likely to be overbooked or underutilized resources and can plan accordingly. As the project progresses, the project may require additional resources/activities to meet stakeholder demand. Within P6 schedulers can create forecasts for resources, activities and other project needs.

Instant and Quicker access – Keeping track of progress with time and resources and getting information whenever and wherever needed. Usage of only one system which gives you all the information needed which saves time and cost by not having to refer different tools.

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Gives Employees user access in schedule creation/update- Site Engineers can create schedule, turn in timesheets and update progress.

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Engineering progress is commonly measured by assigning a weight, usually the required number of required manhours, to each task/deliverable. Once the task is performed/ the deliverable is issued, the corresponding manhours are earned.

The earned progress divided by the total number of manhours gives the % progress.

As each engineering task/deliverable is scheduled at certain dates, it is possible to anticipate the progress that should be earned at a given date. It is the planned progress.

At regular period, usually on a monthly basis, the actual progress of each activity/deliverable is measured against the planned progress. An actual progress less than the planned progress might show a lack of resources and a need for increased mobilization to get back on plan, following a (re-)forecast progress curve.

Although such progress measure is commonly used, it could be deceiving. It indeed reflects rather well the progress of engineering on its own but not how well is engineering supporting the Project schedule.

Let’s consider that engineering must issue 2 material requisitions, an urgent one for a Long Lead Item and another one which is required later on. Engineering will earn progress whatever requisition it issues, even if putting the Project in delay by issuing the non urgent requisition first.

One sees that the above measure of progress alone is insufficient. It must be complemented by monitoring that important Milestones are met.

These Milestones are first of all, the ones associated with the issue of the Requisition for the equipment. Long lead items have naturally to be purchased early. All equipment and packages also need to be purchased as early as their technical definition allows. Indeed, engineering development is highly dependent on information from vendors. The sooner the purchase orders are placed the sooner the vendor information will be available.

Next come the Milestones associated with Bulk Material Procurement to support construction, such as the Piping MTO and the Structural Steel MTO (for an off-shore Project).

Then come the Milestones associated with Construction. These are the IFC Plot Plan, a pre-requisite to start any site work, and the IFC P&IDs, a pre-requisite to the issue of Piping isometrics. The 50% IFC Piping isometric milestone comes next, which typically falls half way through the Project, as ensuing works, such as pre-fab and erection have a rather incompressible duration, due to site constraints (capacity of pre-fab shop, space constraints for erection limiting the progress).

Even if engineering deliveries are in sequence, the above engineering progress measure might still be deceiving, as it will only reflect the amount of engineering work completed and not the workfront made available to construction.

Let’s consider for instance that two foundations are to be cast. The first one is a very large foundation and the second one a small one. Issuing the drawing of either the large or small foundation will earn engineering the same progress, although it will open quite a different workfront to Construction.

One sees the necessity to measure the issued Workfront.

In the case of foundations, for instance, this will be done by monitoring the cumulative quantity of concrete (m3) of all issued IFC foundation drawings.

Producing an S curve, such as the one shown here, showing both planned and actually issued quantities will give a true picture of how well engineering is supporting civil works.

One will similarly monitor, for an On-Shore project, the cumulative quantity of steel (tons) of issued IFC Structural drawings.

The cumulative tons (or dia inch) of IFC issued Piping isometrics will show the available piping workfront.

Such progress curves, showing the actual versus planned available workfronts are instrumental to monitor engineering progress, identify shortage and take corrective actions (increase mobilisation).

It is not perfect however and can still be deceiving, in case of out-of-sequence issues: engineering may have issued drawings representing significant quantities, but that does not generate construction workfront as such works can not be performed at this time (due to lack of access or pre-requisite for another work to be completed before, for instance).

Such integrated model existed, up to the eighties, but has disappeared, Engineering companies having first cut their construction labour and equipment then their construction supervision.

The EPC Contractor one will find today is typically an association of two companies, one doing Engineering and Procurement (E&P) and the other one the Construction (C).

There are 3 types of associations between these two companies: a JV, a consortium or a sub-contract. The most frequent is the last one, the Construction contractor being sub-contractor to the Engineering Company, to which is awarded the EPC Contract.

Let’s look at the pro’s and con’s of each type of association to understand the paradigm leading to systemic delays in EPC contracts execution:

The Joint Venture seems the ideal: both parties share a common profit or loss. There is no conflict of interests.

The issue lies with how one party controls the costs charged by the other party. It is very difficult for an Engineering Company to control the manhours of manpower and equipment charged by a Construction contractor. The Construction contractor is likely to inflate the latter to make its own profit on these charges, regardless of the profit it could get from the JV.

The consortium has each party responsible for its scope, expenses and profit. This provides an incentive for each party to minimize its costs. There is a non recourse clause in the consortium agreement that prevents one party to claim to the other.

The issue lies with the impact that could be suffered by the Construction partner due to the delays in drawings and materials deliveries from the Engineering company. These delays will typically result in idle manpower and equipment. The Construction contractor will not be able to claim the resulting extra cost from the Engineering company. Knowing this, it will include such costs in its bid which will affect the price competitiveness of the consortium bid. This type of scheme is therefore not often seen…

Finally, the most commonly found type of association is the sub-contract. The Engineering company sub-contracts construction activities to a construction sub-contractor.

The construction contractor is commonly paid applying unit rates to installed quantities, e.g. so much for a cubic meter of concrete cast, so much for a ton of pipe erected  etc. This means that the construction contractor will be paid a fixed amount for a given amount of work done whatever its actual consumption of resources (manpower, equipment) is. In other words, the construction contractor bears its productivity risks.

The productivity of the sub-contractor is however highly dependent on timely deliveries of drawings and materials by the Engineering company. In case drawings and material deliveries are delayed, idle time of manpower and equipment will be suffered by sub-contractor, as sub-contractor will still be paid the same amount for each erected ton of steel and the manpower and equipment will require to be mobilized over a longer period.

In theory the sub-contractor could claim for such extension of time and related costs. Such claims are indeed made possible by the sub-contract type of association, contrary to the consortium.

In practice, the sub-contract usually contains difficult to match conditions to such claims. The claim might, for instance, be eligible only of there is a proven overall – not local – lack of workfront. The sub-contractor might also be required to prove that the delay impacts the schedule critical path etc.

As engineering and material deliveries are always subject to out-of-sequence and delayed deliveries, and the above claims are difficult to make, the sub-contractor will be careful not to mobilize too early. The sub-contractor will rather aim to always be a little under mobilized to achieve the best productivity.

On the other hand, the EPC contractor will not be fully transparent with expected engineering and material delivery slippage as its interest is construction progress rather than productivity.

Here, I believe, lies the systemic factor that leads to delays of EPC Projects organized under such contractual schemes.

As such scheme is the norm, one deducts that the owner is more concerned with price than schedule and has accounted float in its overall schedule for delay in the execution of the EPC Contract.

The scheme still entices the EPC contractor to complete as early as possible to avoid both Liquidated Damages and extra costs of prolonged presence at Site.

Introduction

Take your schedule, drop it into a Monte Carlo engine, apply some risks, press the button and in a couple of turns of the egg timer you have a set of confidence dates, some distribution curves and even a tornado chart or two. If you don’t get quite the answer you were looking for you can alter a maximum duration here, a risk likelihood percentage there and press the button again. Eventually you’ll get a result that supports your business case and doesn’t attract too many difficult questions. That’s the aim of SRA right? It’s a means to an end. 

It’s pretty obvious that the previous paragraph was designed to provoke the response “No! Of course that’s not right”. But be honest, how often is schedule risk analysis (SRA) completely unconstrained and unbiased, based on credible and technically accurate inputs and analysed by an experienced risk practitioner? Moreover when have you used the results to inform decisions on budgets, resource allocations and even the viability of the project?  

Regardless of the reason for undertaking SRA, every project manager must consider whether they and their project are ready to go through the unbiased process required to produce a beneficial SRA output and to accept the results. 

This paper doesn’t intend to discuss the benefits and process involved in undertaking an SRA, as these are already well documented. Instead the paper seeks to ask the question ‘are you REALLY ready for SRA?’ by examining the true components of a robust analysis and the potential impact of compromising any one of them. 

However, before you read on it must be stressed that this paper isn’t designed to turn you away from the idea of utilising SRA, as it’s a useful part of a project manager’s arsenal. The paper aims to give you a greater appreciation of how to plan for and conduct a quality SRA in order to gain the most benefit from it.

Components of SRA

It’s a common misconception that if you have a schedule and you have a risk register then you have all the components required to undertake an SRA. The fact of the matter is that there are a number other components that must be in place before an SRA will be close to meaningful. These components can be broadly grouped into three perspectives; 

It is the sum of all of these components that make up the SRA. The analogy of a house of cards is quite apt, if any one of these components is absent or has been compromised then the hard work involved in putting the individual cards together will be in vain. You will be left with a pile of cards with nothing meaningful to show for all your effort, or even worse, your house of cards will just about stand up, but on extremely weak foundations that may lead to key decisions being taken based on misleading analysis.

The following sections explore each of the perspectives above and provide the real questions you should be asking yourself to ensure you are ready to run an SRA. 

 Inputs

The inputs to an SRA are its foundations, if these aren’t solid then the outputs, analysis and decisions that come from the SRA will be baseless. I’m sure you’ve all heard of the phrase “Rubbish in; Rubbish Out”, or more specifically in the case of SRA, it will probably be “Bias in; Bias out”.

Before considering whether to undertake an SRA you as the project manager not only need to be assured that the inputs are well founded, but also, that you understand what it is you want to achieve by undertaking an SRA. 

The following four questions hope to prompt that thought process.  

1. 1) Do you fully understand the purpose of running this SRA?  

Reasons such as; “to get the senior management off my back”, “because we have to convince the scrutiny department or client that we know what we’re doing” or “we need to show that we are going to meet out deadline” are not good reasons for undertaking an SRA and indicate that the benefits of SRA are perhaps not fully understood. 

Understanding the context, stakeholder expectations and having a clear understanding of the decisions your SRA is intended to support, will make it easier to gather the necessary inputs and “sell” the results to the stakeholders. There is no point going through the SRA process only to provide an analysis that fails to answer the questions you and your stakeholders wanting answers for. 

Understanding the purpose also allows you to focus the SRA on particular areas of the project that are of interest. For instance, if the project is 20 years in duration, but stakeholders are only interested in the likelihood of achieving the first deliverable after two years there is no point in developing a risk network for the entire project. 

If you can’t answer the question “what is the purpose of running this SRA?” with a valid, focused and unambiguous reason, such as; “we are trying to identify the phase in our project that is most likely to affect the likelihood of meeting our contract deadline” or “the penalty clauses in our contract mean that missing our deadlines could prove very costly – how much money should we be spending up front to mitigate risk and protect our profit”, then there is no foundation to run an SRA. 

1. 2) Do you have estimates free of bias, obtained from multiple sources and which are considered credible?

The answer to the questions; “how do you know whether your estimates are free from bias and are credible” is that you can’t, but you can take action to reduce bias and increase the credibility of your estimates.  

Only if you have consulted as many people as is practical, with the expertise and experience required, on an individual basis (to avoid ‘groupthink’), can you say for certain that your estimates are as free of bias as possible and therefore, as credible as possible. 

As tempting as it is to believe, putting poor estimates through a modelling tool does not make them any more accurate and certainly does not validate them. Referring back to the ‘House of Cards’ analogy, if the foundations are weak, you cannot be sure that the structure they are supporting will not collapse under even the lightest challenge.

1. 3) Does your risk network contain sound and tested logic?

If the risk network is constructed using any scheduling technique other than left to right with complete and free flowing logic, the answer to the above question is ‘no’ and the SRA will fail to accurately portray the impacts of estimating uncertainty and event risk. 

The risk network forms the backbone of the SRA. Regardless of the level of the risk network and the tasks it includes, it must allow delays to honestly and fully propagate through without interference (i.e. constraints, lags) to provide a meaningful output. 

1. 4) Have all assumptions upon which the risk model is based been clearly articulated and documented?

 Any analysis is only as good as the assumptions with which it is presented. It’s highly likely that some information needed to undertake an accurate SRA is either not available or is unstable at the time required. In these cases planning assumptions should be made in order to complete the SRA. 

These need to be documented to allow you to understand the results of the SRA when revisiting it at a future date. If the answer to the above question is “no” then revisit it to understand what factors may invalidate the SRA if they were to change in the future. 

Remember that an SRA will never provide ‘the answer’. Even the best quality SRA will never end with a statement saying, “the answer is X”.  Project management, as with life, is never that cut and dry; and it is part of the responsibility of the analyst to ensure that the results they present are not divorced from the assumptions and context with which the analysis was carried out.

It is clear that to ensure the results of the SRA are credible and provide value, time must be taken upfront to ensure that the inputs are meaningful and well thought out. Without credible inputs to the SRA, the results should not be trusted. 

 Enablers

Enablers are the things that allow a successful SRA to take place, free of interference, at the appropriate level and with the right analysis to answer the required questions. 

This paper is focusing on organisational enablers such as; knowledge, availability of resources, appropriate governance and organisational maturity. 

The following questions are intended to challenge whether you are in the position to make the most of the SRA and its outcomes. If you’re not, you must ask “why am I doing it?”

1. 1) Do you have the right level of knowledge, experience and impartiality within the organisation to properly analyse the SRA results?  

It’s not too difficult to throw a few risks together with a high level schedule and click a button. Similarly it’s not hard to read results from a graph. However, would you or any of your team be comfortable explaining to senior management the detailed results of an SRA, the context and assumptions that underpin them, how they were achieved and what they do (and importantly, don’t) tell you about the project? 

If you want to get valid and impartial results that provide a meaningful insight to the project then you need people with specialist competence, training and experience. If you expect to run a meaningful SRA without the specialist skills, you run the risk of making decisions about your project based on un-informed analysis.  

1. 2) Have you allowed enough time to fully engage with the SRA process, analyse the results and put actions in place?

Running an SRA is not a simple process; from experience an SRA invariably takes longer than you initially expect. Rushing it can result in poor quality analysis and can invalidate the whole outcome. 

An important point to remember is that SRA needs to be done to an appropriate level of granularity and should be iterative. SRA takes time and depending on the reasons for undertaking an SRA it may not be necessary to undertake it on the entire project. Consider what is appropriate to you and weigh the costs, time and effort against the potential benefits. 

1. 3) Are you opened minded about the outcome and unconstrained by pre-conception? 

This question speaks for itself; if you already know the answer you want the SRA to provide, aren’t open to alternatives and are willing to manipulate the model to get the answer you want, then it’s a fairly futile exercise. SRA is not flawless; referring back to the second sentence of the paper; 

“If you don’t get quite the answer you were looking for you can alter a maximum duration here, a risk likelihood percentage there and press the button again”

Doing this defeats the object of the SRA and invalidates the process, analysis and any decisions made based on the outputs. 

It’s strongly recommended that an impartial third party is utilised to assure that the process is undertaken correctly, regardless of the result. If you are the project manager or senior stakeholder commissioning an SRA then it is your responsibility to ensure that the analyst is not unduly influenced by yourself or other stakeholders. If you think you know what you want the ‘answer’ to be, then don’t tell your analyst!

It is clear that enablers are a key aspect of running an SRA. Without aspects such as the knowledge, time and right intention of running an SRA, results of worth and value are impossible. 

Outputs

Outputs in the context of this paper are not referring to the technical analysis or various graphs that an SRA produces, these are produced regardless of whether the SRA is based on solid foundations or not. Instead, this paper is looking at the actions of the organisation and project team as a result of the SRA outputs.  

The three simple questions that you should ask yourself with regard to outputs may be difficult to answer. However, they need to be considered. 

1. 1) Is your SRA analyst independent and free of un-due influence from the project team or senior management? 

If the answer is no, how can you trust the results and base decisions on them?

To ensure credible, valid and impartial outputs the operator needs to be independent of the project team or senior management. Without this you cannot assure yourself or your stakeholders that the outputs have been free of any influence that could have altered the results. 

1. 2) Is the governance and culture in your organisation prepared to understand and act upon the outcomes of the SRA? 

“Prepared to understand”, what does this mean? Fundamentally, will you or your senior management accept the results of the SRA and try not to influence them to make a political point, or to ensure the continuation of the project. What other information will you be taking into account when considering the results?

As for “acting”; is the organisation ready to make the decisions that a SRA may highlight? For instance; “where shall we spend the £100K budget for risk mitigation?” or more contentiously, “should we cancel this project?” 

It’s also important to remember that SRA is just one of many tools used to inform decisions. There is nothing inherently wrong with basing decisions on the project manager’s experience, or ‘gut instinct’, but SRA can provide the evidence based analysis and perspective to support your gut instinct or indeed challenge it. SRA is another tool for the armoury, and should be used as such – not the magic bullet, but extra ammunition!

If the organisation is not mature enough to accept an outcome or ready to take action then ask why are you doing an SRA, what is the benefit to the organisation and the project?

1. 3) Do you have the time and resources to act on the outputs of the SRA? 

This question goes hand in hand with its predecessor. Whilst you may have the intention to act, depending on what may be required, do you have the time or resource to actually do it. 

Identifying the reasons for undertaking the SRA, and conducting the analysis at an appropriate level, is key. If resources are not available, expectations must be managed at the outset of the SRA process so that the reasons for undertaking the SRA are not undermined.  

The actions of an organisation following the SRA are fundamental to success. If no action will be taken following the SRA, what value has it added? The effort put into the SRA must be matched by the effort put into the results to ensure that the right direction is taken by the organisation or project following the results.

Finally

Looking back at the question the paper is trying to answer, ‘are you REALLY ready for SRA?’, put simply; if you can’t answer ‘yes’ to all of the questions asked through the paper, and compiled in table 1, then realistically you’re not ready to get the best from an SRA. 

However, before you think, “well I just won’t bother then, as it all seems a bit too hard to do properly”, everything discussed can be overcome or managed. The key is to understand the weaknesses of the SRA to ensure you get the most benefit, or tailor the process to an appropriate level. 

The key points to remember are that in order to get the best from SRA you must: 

• Understand the reasons for undertaking an SRA
• Assure yourself that the process is impartial and unbiased
• Apply it an appropriate level 
• Be confident that the outcomes can be used to take decisive action for the good of the organisation. 

SRA is an extremely powerful tool that can provide huge benefit to projects and organisations when ‘done right’. So now, ask yourself, are you REALLY ready for SRA?

Table 1: “The Complete SRA Readiness Quiz”

Acknowledgements

The author would like to thank the following individuals for their assistance in developing this paper;

 Laura Smith – BMT Hi-Q Sigma

Russell Tarver – BMT Hi-Q Sigma

Jo Langley – BMT Hi-Q Sigma

Michelle Glasgow – BMT Hi-Q Sigma

Georgina Jones – BMT Hi-Q Sigma

Author:

Tom Olden
T: +44 (0) 1225 820 980 
E: tom.olden@bmt-hqs.com

Disclaimer

 

I hereby declare that the content of this paper does not infringe any copyrights and is owned by the author. 

 

 

Signed:  …………………………………………

 

                                              T. Olden

Key Words

Progress. Position. Forecast. Earned value. Change. Linear regression. S-curve. Schedule.

Abstract

Current methods for assessing activity progress, calculating project position and forecasting project completion (including the use of earned value analysis) are examined in this paper. The disadvantages of current forecasting methods are discussed with special reference to single data point extrapolation and the difficulty for non-specialists in analysing s-curves. A different method of forecasting project completion using simple linear regression and time series analysis is proposed which has real practical applications for project managers and allows them to easily and rapidly produce position and forecast data in a format that is understood by layman and specialist.

Introduction

The UK Construction Industry does not have a good record for completing projects on time. Constructing Excellence’s data from its 2012 report (the latest available) shows that the actual out-turn time taken for the construction phase of projects compared with the length of time agreed at the start of that phase dropped sharply in 2012, with only 42% of projects delivered on time or better, compared with 60% the year before.  Whilst this is the first time since 2000 that the KPI was below 50% the data shows that, on average, less than 40% of projects finish on time, Figure 1. 

Figure 1.  Predictability Time - Construction

The production of a project schedule is the first step in project control.  In some cases, particularly on undemanding and straightforward projects, this initial planning and programming is sufficient and the project manager will be able to determine the status of the project without rigorous examination.  More often schedules are required to assist with the active management of time by regular monitoring, examination and modification.  Active management of time comprises three steps; Progress, Position, and Prediction, these are all relative to a point in time when the measurements or calculation are made; ‘time now’.  Without accurate measurement of progress it is not possible to establish the position of the project and without knowing the current status of the project, predictions about the completion of the project are likely to be little more than guesswork.  Without knowing when the project is likely to be complete it is impossible to determine what action must be taken to bring in the project on time.

Current Techniques

Progress – how much has been done

This is reasonably straightforward and usually involves assessment or calculation of the percentage of work completed on individual schedule activities.  Progress can also be attributed to the project as a whole but unless the project is relatively simple a single measure of how much of the project is complete is somewhat superficial.

Position – what is the current status

Position is usually stated as time ahead, on schedule or time behind and relates to an individual activity or the project as a whole is a comparison of where the activity, or project, is compared to where it was planned to be.  

For a single activity, assessment or calculation of position is also relatively straightforward. To calculate activity position:

if S  TN  F, then  if (% < 100, P = S + (D x %) – TN, else P = 0), else

if S  TN  F, then P = S + (D x %) – TN, else

if S  TN, then  if (% > 0, P = S + (D x %) – TN, else P = 0)

Where: P is the activity position,

S is the planned start of the activity,

F is the planned finish of the activity,

TN is time now,

D is the planned duration of the activity, and

% is the percentage complete of the activity at time now.

However, for a single activity, position is more readily demonstrated graphically using the bar chart ‘drop line’ method (see figure 2).

Figure 2.  Drop line activity progress and position

Determining the project position (or project status) accurately is more difficult.  Many project managers will use their skill, judgement and experience to assess the project position.  However, such visceral and subjective techniques are open to suggestion of bias and manipulation for commercial or other ends.

A number of objective techniques have been developed:

• Averaging. This method averages the position of all the activities that are ahead or behind schedule.  Although simple and apparently reasonable this method is mathematically unsound.
• Planned Progress Monitoring (PPM). This method compares the planned work content (based on activity duration) with that achieved.  This method does not depend on the schedule being a critical path network and is predominately the underlying method adopted to ‘roll up’ progress in summary and expanded type bars of project management software. 
• Critical Path Methods. When the progressed project is rescheduled with the variance in the end date of the project can be interpreted as the project position.  This method depends on a fully linked and logical network.
• Earned Value Analysis (EVA).  The parameter SV (scheduled variance) is a measure of the current status of the project.  This is similar to standard cash flow analysis; income -v- expenditure or cash weighted PPM.

Prediction – when will the project end

Predicting is the estimation or forecasting of some future event or condition of the project as a result of the study and analysis of available data on the basis of observation, experience or scientific reason.  Generally this will relate to a project milestone and particularly a forecast of when the project will be complete.

By its nature the prediction of future events with any degree of accuracy is difficult.  Project managers tend to rely on their experience and analysis based upon the current position of the project and with the assistance of the project schedule will envisage, or more formally reassess, the schedule for the remaining work.  If the reason for delay in the schedule was merely unrealistic durations and sequences then updating and amending the schedule to predict the completion date may be viable.  Unfortunately the time taken to complete activities generally conforms to Parkinson’s Law and the Student Syndrome so, unless the underlying causes of delay are confronted, there is inherent risk of overrun of the reassessed schedule too.

The result of analysing a critical path network taking into account current progress is often erroneously referred to as a forecast of completion.  For instance, where the project is in delay the rescheduled end date of the project would be delayed, this will only be a forecast of the completion date if the uncompleted remaining work were to be carried out in accordance with the schedule.  It is more likely that if past work was not carried out in accordance with the schedule then, unless something changes, nor would future work.  As stated previously the result of rescheduling a network taking account of current progress is a measure of the project position.

EVA attempts to formalise the forecasting of completion of projects using the parameter EAC (Estimate at Completion).  The unnecessarily complex acronyms render the technique virtually unusable for all but the ardent enthusiast.  In relation to time alone the technique can be simplified using the rate of progress to date and the time outstanding on the original schedule; for example, see Figure 3.

Planned completion date = 22.0 (BAC_t)

Time now = 12.0 (BCWS_t)

Current position = 10.0 (BCWP_t)

Rate of Progress = 10.0 / 12.0 = 0.83 (SPI)

Time not yet completed=22.0 – 10.00=12.0

Forecast time to complete = 12.0 / 0.83 = 14.5 (ETC_t)

Forecast completion date = 12.0 + 14.5 = 26.5 (EAC_t)

Figure 3.  Forecast completion using Earned Value Analysis

Whilst the estimated completion date can be calculated, plotting of the remaining forecast to completion curve is problematic, but without it, it is difficult to envisage the remaining progress of the project and to determine if future work is proceeding to the forecast plan.  In his booklet ‘EVA in the UK’, Steve Wake says:

The estimates to complete can be plotted (or hand-drawn by “experienced professionals”). …

The prediction of potential EACs (Estimates at Completion) has become increasingly accurate by using performance statistics from similar projects.  These statistics become templates that are overlaid onto the existing cost curves of a project and provide an independent and objective estimate of the final cost and completion date.  Something that everyone is interested in.

Blythe and Kaka take a different view and appear to suggest that advanced mathematical modelling is required (or at least beyond the capabilities of most project managers) and that the accuracy of the models is questionable:

There have been many attempts in the past to develop cash flow forecasting models.  They were mainly part of more comprehensive models aimed at assisting contractors or clients forecast their cash flow on an individual project level or on a company level.  The majority of these models were based on the idea of developing standard S-curves to represent the running value or cost of different types of construction projects.  Typically this was achieved by collecting data relating to the monthly valuations and the projects’ general characteristics.  These projects would then be classified and distributed into groups and average S-curves would then be fitted on the individual groups.  Several mathematical models were used to fit the S-curves (e.g. alpha-beta cubic equation, Weibull function, DHSS model etc.).  These models could be used, given that the total value and duration of the projects to be constructed are known, to forecast the cumulative monthly (or at any other time interval), value/cost of that project.  The accuracy of these previous models is in question.

Using PPM similar shaped graphs to EVA’s BCWS and ACWP for planned progress and actual/as-built progress are generated.  Whilst PPM is a useful method for determining the position of a project the s-curves that are typically produced are not easy for most practitioners to assimilate and to use for forecasting, see Figure 4.

Extrapolating the rate of progress, planned compared to actual at ‘time now’ can be used to predict the project completion date without the need for considering EVA or PPM. The only data require is the original project duration (D), the project position (P) and the ‘time now’ date (TN).  The forecast completion date is:

Completion = D x TN / P

Using the previous example:

= 22 x 12 / 10 = 26.4

Figure 4.  PPM - planned, actual and forecast curves

The Proposed Method – Simple Linear Regression

Statistical analysis of project data has, up to recently, been the preserve of the financial analysts, be they corporate accountants or project accountants.  The data produced, when graphed, tends to resemble an s-curve.  As described previously, in connection to EVA, it is not easy to estimate the path of a partially completed curve.  It is possible, theoretically at least, to assign a mathematical formula to most curves but these can be extremely complicated (at least for the layman) and there is no certainty as to the shape, and hence formula, of that a predicted curve will, or should take.

The data for the graph at Figure 3 was based on SPI of 0.8 and further randomized on a monthly basis between 80% and 120% to model variances in progress.  The graph at Figure 5 illustrates the difference between the forecast data (from Figure 3) and the modelled ‘actual’ data.  The forecast completion is 27.6 months which is very close to 27.5 months that would be expected for a 22 month project (22/0.8).  Whilst this apparent accuracy is as much to do with the coincidence randomness of the data it illustrates the primary flaw in SPI type forecasts that they use a single data point as the basis for extrapolation rather than a longer term trend.

Figure 5.  EVA - forecast and actual

To overcome this weakness and the limitations of projecting unsystematic curves the method described below is based upon simple linear regression and time series analysis.  Whilst the components of the method are not novel the author is not aware of it being used to forecast project completion, particularly at least in the UK construction and engineering industry.

The planned model

The position of a project is usually stated as being ahead, on schedule or behind but it can also be stated as the number of schedule weeks achieved.  For instance, a project at week 20 which is 2.5 weeks behind schedule can be said to have achieved week 17.5, similarly a project at week 20 that is 2.5 weeks ahead of schedule can be said to have achieved week 22.5. The importance of the proposed method is recognising that for all projects there is a simple straight-line relationship between the planned position of a project and project time such that, for instance, at week 20 the project is planned to have achieved week 20.  The planned position line for all projects will be a ’45 degree’ line which straightens at the project completion date; see Figure 6.  In terms of EVA the planned line is similar to the BCWS curve.

Figure 6. The actual/as-built model

The data for the actual/as-built model (BCWP in EVA parlance) is generated by calculating the project position by whatever method is appropriate as outlined above.  It is not recommended that different methods of determining the project position are used for each period but it may be good practice to generate multiple datasets based on different methods of calculation which then may give a range of estimates of project position.

The actual/as-built position data can then be plotted against the planned data; see Figure 7.  As the planned model is based on a straight line it is easier to appreciate the deviation of the actual position compared to the planned position.

Figure 7. The actual/as-built model

The forecast model

The forecast of completion is made on the premise that, if nothing changes, if progress carries on in the future as it has in the past, the project completion date will be thus.  Previous forecast models have used a single data point; the last measured project position.  However trends are not absolute and there is likely to be some waxing and waning, positive and negative deviations from the general trend.  Using the last measured progress position may exaggerate or understate the general trend.

As the planned position is based on a linear model it is acceptable to consider that the actual model, unless it is subject to wild fluctuations due to specific delaying events, will also follow a linear trend and hence forecast can be made using simple linear regression which will take account of all the past progress not just the last project position.

Figure 8 shows the simple linear regression line plotted for the actual project positions.  The linear equation enables the trend line to be extended to the completion position (month 22) and for the date to be calculated, in this case 26.62 months.

Figure 8.  The forecast model

The position trends are easier to assimilate as straight lines and progress and trends, should future performance match past performance, can be readily seen as can  changes in progress required if the project is to not lose any further time or to be completed on time, see Figure 9.  It is submitted that such trends are not readily accessible using s-curves.
 

Figure 9.  Change required

Most emphasis in this paper has been on projects that are behind schedule. Figure 10 shows typical regression plots for projects that are on schedule and for projects that are ahead of schedule.

Figure 10.  Ahead and on schedule

Conclusion

Forecasts of completion dates are almost always wrong.  Forecasting completion of projects is not about estimating when a project will be complete but more about when it will be complete if progress continues in the future at the same rate that was achieved in the past.  Only by knowing what the potential overrun (usually) will be if nothing changes can the project manager determine what needs to be done to bring the project back on schedule.  The reason forecasts are wrong is that, hopefully, project managers will have taken steps, with the knowledge of the effects of doing nothing, and have pulled the project around.

Current methods of forecasting completion mostly depend on extrapolating the last known project position to forecast project completion.  Earned Value methods also use a single position measure but depend on s-curves to illustrate the work flow. S-curves are difficult to assimilate and difficult to mathematically predict.

The proposed method depends on simple linear regression taking account of all the position data and presenting it in simple straight-line graphs that are more readily understood by non-specialists.  Trends are easier to understand and the amount of action to bring the project back on schedule is straightforward to see.

Like all current methods of forecasting, including earned value methods, specific and exceptional delaying events can skew the forecast.  Progress trends tend to be influenced by leadership, management, resources, experience and strategy decisions.

Acknowledgements

Anneka Wilson, Driver Group’s Group Marketing Executive has been constant with her help and encouragement even though, like most planners, I have always been behind schedule.

My colleagues at Driver Group; Stephen Lowsley, Keith Strutt, David Wileman, Philip Allington and Janus Botha have provided technical critique of my paper – any errors, however, remain mine.

Dr Chris Chatfield of the Department of Mathematical Sciences at the University of Bath and author of ‘The Analysis of Time Series: An Introduction, Sixth Edition’, kindly took time to reply to my emails and responded to my very basic time series questions.

Whilst every effort has been made to ensure the accuracy of the information supplied herein, Driver Group plc, its subsidiaries and the author cannot be held responsible for any errors or omissions. Unless otherwise indicated, opinions expressed herein are those of the author and do not necessarily represent the views of Driver Group plc and/or its subsidiaries.

The author warrants that he is the copyright owner and that all sources are acknowledged and referenced and that as far as it is possible to ascertain this work does not infringe any existing copyrights.

All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission the author or Driver Group plc.

A recurring question asked about the Engineering process is the frontier between BASIC and DETAIL Engineering. Engineering design is indeed a continuum and one may wonder to what level of details corresponds the BASIC Engineering.

This question finds its answer while considering the purpose of BASIC Engineering, which is define the facility to high enough a level of details so that

1)      contractors can estimate the costs for the EPC execution of the facility with enough accuracy to submit a lump sum bid,

2)      the documents define the facility in enough details to secure a certain standard of quality in design, materials and workmanship for the Owner

It is in both the owner and the contractor’s interest that the plant is as well defined as possible at BASIC Engineering stage.

This is rather obvious for the EPC bidder, in order for him to properly assess its costs and the required resources. An insufficiently developed BASIC engineering is likely to show quantities significantly inferior to the actual ones. This may lead to an underestimated cost and resources allocation by the EPC Contractor. This will create a strain in the project execution, as contractor will exceed its budget or will not have planned and mobilized sufficient resources.

An ill defined BASIC engineering will also lead to a large number of changes in EPC phase, which will generate delays in Engineering, extra costs etc.

The owner will also benefit from a well defined BASIC Engineering, as its requirements will be precisely defined, ensuring compliance by contractor.

One could think, however, that a too high level of details in the Engineering basis of a lump sum EPC contract could be detrimental to the owner. A precise definition at an early stage is very likely to require numerous changes as design develops later on. The EPC Contractor could then claim extra costs for such changes to what he bid for.

Let’s consider a facility whose BASIC Engineering package included drawings of its equipment supporting structures. As the piping routing and location of manifolds, instruments, filters etc. will not have been developed as this stage, the structure will most probably lack floors to accommodate these equipment while providing access to the operator. Should drawings of these structures be issued at BASIC engineering stage, these floors will be missing. As these floors will prove necessary as design progresses, the EPC contractor may very well consider them as additions that were not quoted for. The EPC contractor could compare the final design (with operating floors) and that of the BASIC design and claim for the incremental cost.

To protect the owner against such risk, the EPC Contract includes a clause that specifies that the EPC contractor endorses the BASIC Engineering. This means that the EPC contractor takes responsibility for the content of the BASIC Engineering and forfeits its rights to claim for any change, including changes required due to design development, such as that the additional floors discussed above.

Although the higher BASIC Engineering is defined, the better it is for both parties, the Owner will want to limit its duration to launch the EPC as soon as possible. BASIC Engineering will therefore focus on a limited number of activities and deliverables.

First of all, a BASIC design package, that will form the Engineering basis of the EPC Contract, will contain generic documents, not specific to the particular facility being projected, but aimed at defining certain standards to the EPC Contractor for the design, materials and workmanship. These are the General specifications, usually that of the owner.

The general specifications will include specifications for the various types of materials and works.

The specific document describing the facility will come next, starting with the 3 most important ones, that almost by themselves nail down the price of the facility: the P&IDs, heat and material balance and General Plot Plan, to which could be added the Electrical One Line Diagram.

The Process and Utilities P&IDs along with the Heat & Material balance will set the duty of all process equipment.

The Plot Plan will set the overall dimensions of the facility and the distance between equipment, which will determine the length of all networks (piping, cables, roads, sewage etc.) directly impacting their supply and installation costs.

Once these are defined, BASIC Engineering, whose aim is to allow an accurate estimate of the cost of the facility, will focus on the definition of the most expensive pieces of equipment, whose data sheet and specification will be prepared in order to issue inquiry to vendors.

Installation costs will be estimated from Engineering list and MTO: The Project equipment list for equipment erection, the civil BOQ for earthworks, foundations, concrete and steel structures, underground networks and buildings, and the Piping MTO. Ratios, rather than precise MTO, will mainly be used by the estimator to evaluate the cost of E&I works.

Safety discipline will conduct the first HAZOP. Safety will issue its philosophies, including Fire Fighting & Protection, Fire & Gas detection, Human Factors etc. Safety will issue Fire Water P&IDs and data sheets of main Fire Fighting equipment. Hazardous area classification drawings will be issued. An ENVID (Environmental Identification) study will register all environmental aspects. No Quantitative Risk Assessment will be carried out at this stage, as required detailed data is missing.

Process will first of all develop the P&IDs from the PFDs and produce/update the Heat & Material balance. For inquiry purpose, Process will be required to issue Process data sheets of all main equipment and functional specifications of all main packages. All Process “philosophy” documents will be issued, such as the Process description and Operation philosophy, Emergency shutdown and depressurization philosophy. Cause & Effects diagrams will not be developed at this stage. Process will participate in the HAZOP of the BASIC design P&IDs. The Flare study will be limited to the identification of the largest relief case.

Specialist engineers in the various equipment disciplines (Rotating, Packages, Fires Equipment, Pressure vessels, Heat Exchangers) will issue the Mechanical Data Sheets, Inquiry Requisition and Technical Bid Tabulations after receipt of vendor bids.

Clarifications with vendors might take place for the vendors of major equipment however placing of Purchase Orders and vendor follow-up (review of vendor drawings etc.) will not take place at BASIC design stage.

Piping installation discipline will develop the General Piping Layout for main pipes, e.g. above 4”. The first Piping MTO will be issued, based on the later for length and P&IDs for item count. Construction drawings (Piping General Arrangement drawings and isometric drawings) will not be not developed at this stage.

Piping Material will issue the Piping Material Classes specifications as well as General specifications for the various types of Piping Materials (fittings, valves etc.).

Piping Stress will simply issue the criteria for the Piping stress calculations. No calculations or support studies will be done at BASIC stage.

The instrument engineer will specify the various systems to be provided. This will include the usual PCS, ESD, and F&G systems, for which specification, including I/O count, and architectural drawings, will be issued.

Other systems, such as a security system, advanced process control systems, telecom systems etc. will also be defined, by means of a specification, an architectural drawing and, for systems expanding throughout the field (e.g. security system), a General Layout drawing.

The data sheet of motorized valves will be produced, due to their cost. No other instrument data sheet will be produced.

No Material Requisition will be issued by the Instrument Engineer at BASIC Engineering stage. Cost will be estimated by the EPC contractor from data base and ratio, e.g. so much for each instrument, I/O etc.

Typical installation drawings will be issued. Although no cable routing will be issued at this stage, width of the main cable routed will be advised to the Piping Layout discipline for incorporation in the Plot Plan. Equipment arrangement drawings for instrumentation and control room will be issued as input data for civil discipline’s architectural drawings.

The Civil Engineer will issue the initial soil investigation specification, aimed at identifying the soil geotechnical parameters and any geo hazard. The specifications for the various types of civil works will be issued, together with the bill of concerned quantities. No drawings will be issued, neither calculations done, for any foundation or structure at this stage. Standards design drawings only will be issued. Building architectural drawings will also be produced..

The Electrical Engineer will not go beyond the General One Line Diagram. The One Line Diagram of switchboards will not be developed at this stage. The Electrical Consumers list will be produced, from which the Power requirement and the size of the power generators will be derived.

The Electrical Engineer will issue the specification, data sheet and inquiry requisition for the High and Medium Voltage equipment – the most expensive - only. Cable routing drawings will be limited to the Main routings only, allowing to allocate required space on the Plot Plan and to define cable lengths and issue the cable MTO. Standard drawings related to design, i.e. equipment, only will be produced at this stage. Installation standard drawings will be developed at DETAIL stage. Equipment arrangement drawings will be issued for electrical sub-stations as input data to Civil’s architectural drawings.

Painting, Coating etc. specifications may also be issued, especially where onerous requirements apply, e.g., coating of underground pipes etc.