1. Contractor Management Forum 22 & 23 July 2013, Melbourne, Australia P E D R A M D A N E S H - M A N D R E G I O N A L M A N A G E R P R O J E C T C O N T R O L S

2. Effective Contingency Management Good practice of project contingency assessment Risk driven methodology vs. traditional methodology Integrated Project Controls R E Q U I R E D T I M E / C O S T C O N T I N G E N C Y 2 Joint Confidence Level (JCL) Good practice of project contingency management

3. Effective Risk Management H O W M U C H I S E N O U G H ? 3

4. Agenda Introduction Industry performance worldwide Project Based Business Model 4 Joint Confidence Level (JCL) Bid Estimating, Scheduling, Risk Assessment Case Study

5. Aquenta Consulting A S PA RT O F A M E C G R O U P 5

6. Aquenta Consulting S E RV I C E S 6 BUILDING & FITOUT TRANSPORT UTILITIES INFRA- STRUCTURE OIL & GAS Estimating, Cost Management, Planning & Controls, Facilities Management, Contracts & Dispute Services, Risk Management

7. Project Delivery We have a good project controls in place, dont worry! Trust our very experienced planning team. Everythings fine! No problem, everything is under control! T Y P I C A L M Y T H S 7 All performance indicators are green, dont worry! Please, we dont need anything new! Another new manager, new system, new process, again!

8. Project Delivery S O M E FA C T S Engineering Projects 42% behind schedule Oil and Gas Projects 81% behind schedule 8 Ref: Managing the Risk of Delayed Completion in the 21st Century, Survey by Chartered Institute of Building (CIOB), 2007

9. Project Delivery S O M E FA C T S Power Generation Projects 66% behind schedule High-rise Buildings 67% behind schedule 9 Ref: Managing the Risk of Delayed Completion in the 21st Century, Survey by Chartered Institute of Building (CIOB), 2007

10. Project Delivery REQUIREMENTS: Unclear, lack of agreement, lack of priority, contradictory, ambiguous, imprecise RESOURCES: Lack of resources, resource conflicts, turnover of key resources, poor planning T O P 5 C A U S E S O F FA I L U R E 10 resources, poor planning SCHEDULES: Too tight, unrealistic, overly optimistic PLANNING: Based on insufficient data, missing items, insufficient details, poor estimate RISKS & OPPORTUNITIES: Unidentified or assumed, not managed Ref: Strategies for Project Recovery, A PM Solutions Research Report, pmsolutions survey, 2011

11. Project Based Business Model B I D E X E C U T I O N C O R P O R AT E O B J E C T I V E S Bid Estimating 11 Corporate Objectives Project Execution

12. Joint Confidence Level (JCL) Bid Phase JCL is: - The probability that cost will be equal or less than the targeted cost AND schedule will be equal or less than the 12 targeted schedule date - A process and product that helps inform management the likelihood of a projects programmatic success - A process that combines a projects cost, schedule, and risk into a complete picture. NASA HQ Office of Program Analysis and Evaluation (PA&E) Cost Analysis Division

13. Joint Confidence Level (JCL) Execution Phase JCL is: - The probability that cost will be equal or less than the targeted cost AND schedule will be equal or less than the 13 targeted schedule date - A process and product that helps inform management the likelihood of a projects programmatic success - A process that combines a projects cost, schedule, and risk into a complete picture. NASA HQ Office of Program Analysis and Evaluation (PA&E) Cost Analysis Division

14. Effective Contingency Management How to assess optimum contingency allowance (time and cost) for desired JCL during Bid Phase? How to monitor and maintain the desired JCL during Execution Phase i.e. Contingency Management? C H A L L E N G E S 14 i.e. Contingency Management?

15. Bid Phase Traditional Approach E P C C O N T R A C T Estimating Scheduling R&Os 15 PROJECT INFORM AT ION % o f Cos t % o f Sell V AL UE RECOV ERY TENDER NO: TC-3218 T otal m an Hou rs Man Hours PROJECT TITLE: We dd ell Un it 3 Civil 3,364 CONSULTA NT/CLIENT: Po w e r & Wate r Co rpo ratio n, NT Mec h 11,854 POST TENDER NEGOTIA TION DA TE: 16- Jan -12 Elec t 6,164 CONSTRUCTION PROGRA MME DURATION (Weeks ) 34 8 Months M an ning A ver age Peak CONSTRUCTION SITE DURATION (Weeks ) 34 8 Months Civil 10 16 DEFECTS LIABILITY PERIOD ( Weeks ) 104 24 Months Mec h 28 45 REVISION A ND ISSUE REVA0-1 Elec t 17 28 V alue Re co ver y (1-4) T OT AL DIRECT JOB COST S (ite m s 1-4) TOTAL COST DJC ( ite ms 1- 5) 51.17% 44.85% $6,338,802.81 ( 1) PROJECT EL EM ENTS, DIRECT COSTS T otal f or se ctio n (1) 40.79% 35.75% $5,053,352.81 1.1 Civil Works Input from File 07- Jun-11 9.13% 8.00% $1,131,041.30 1.2 Mec hanic al Input from File 30-May -11 18.16% 15.92% $2,249,906.72 1.3 Elec tric al Input from File 01- Jun-11 12.79% 11.21% $1,584,404.79 1.4 Rec ruitment 1.4 Final Negotiation figur e generally for w et w eather incr eas e 0.71% 0.62% $88,000.00 1.5 File ( 2) ENGINEERING ( Re fer SHT- 2) T otal f or se ctio n (2) 8.12% 7.12% $1,005,350.00 2.1 UGL Engineering Engineering 09-May -11 7.62% 6.68% $943,522.00 2.2 Geotec hnical Report & O&M Manuals 09-May -11 0.50% 0.44% $61,828.00 ( 3) Gen er al Sp ecification Re qu ire me nt s (Re fe r SHT -3) T otal f or se ctio n (3) 0.81% 0.71% $100,100.00 3.1 Preliminar y Cos ts UGLi Prelims File 0.81% 0.71% $100,100.00 3.2 Preliminar y Cos ts other File ( 4) COMM ISSIONING (Refe r SHT -4) T otal f or se ctio n (4) 1.45% 1.27% $180,000.00 4.1 Commissioning cos ts UGLi Admin Included in A dmin below 4.2 Commissioning Materials Comis sioning File 1.45% 1.27% $180,000.00 4.3 Commissioning cos ts other File (5-9) T OT AL INDIRECT JOB COST S ( item s 5- 9) TOTAL COST INDIRECT S (ite m s 5-9) 42.79% 37.49% $5,302,192.18 ( 5) ADM INISTRAT ION ( Re fer SHT- 5) T otal f or se ctio n (6) 28.90% 25.33% $3,580,535.30 5.1 Site Admin and Site Superv ision Cos ts Admin 10.92% 9.57% $1,352,868.94 5.2 Site Engineering and Site Support Staff Admin 7.44% 6.52% $921,581.16 5.3 Site Commiss ioning labour Cos ts Admin 7.71% 6.76% $955,220.13 5.4 Head Office Support Admin 2.44% 2.14% $302,654.86 5.5 Other admin costs Rec rui tment Cos ts 0.39% 0.34% $48,210.20 ( 6) M OBIL ISAT ION Plan t & Buildin gs (Refe r SHT -6) T otal f or se ctio n (7) 12.75% 11.16% $1,579,350.00 6.1 ( 7a) MOBILISA TION & DEMOBILSATION Mob & Demob 8.04% 7.05% $996,060.00 6.2 ( 7bi) SITE BUILDINGS 0.69% 0.60% $85,010.00 6.3 ( 7bii) SITE CONNECTIONS 1.00% 0.87% $123,550.00 6.4 ( 7biii) PLA NT A ND TOOLS 2.09% 1.83% $258,880.00 6.5 ( 7biv) VEHICLES 0.23% 0.20% $28,900.00 6.6 ( 7bv) SITE RUNNING COSTS 0.44% 0.38% $54,150.00 6.6 Other - Pr inc ipal's Site Offic e + Utility Pow er & Water Connec tions (PWC Mtg Darw in Addition) 0.26% 0.23% $32,800.00 ( 7) COMM UNIT Y & ENV IRONM ENT (Re fe r SHT -7) Comm & Env T otal f or se ctio n (8) 0.09% 0.08% $11,700.00 ( 8) HEALT H & SAFET Y EQUIPMENT (Refe r SHT -8) Health & Saf ety T otal f or se ctio n (9) 1.05% 0.92% $130,606.88 ( 9) HEDGING (re fe r t o SHT -9) BG & Hedge T otal f or se ctio n (10) Hedg in g No t Con sid er ed (10-13) T OT AL ALL OWANCES (ite m s 10- 13) TOTAL COST AL LOWANCES (item s 10-13) 4.33% 3.79% $535,918.23 (10) ESCAL AT ION ( re fer to SHT- 10) Esc alation T otal f or se ctio n (11) 0.76% 0.66% $93,861.25 10.1 Esc allation for Project Management and Supervis ion 0.57% 0.50% $70,900.00 10.2 Esc allation for Engineering 0.19% 0.16% $22,961.25 10.3 Esc allation for Labour (Not req'd - Mid Point calc) 10.4 Esc allation for Materials (Not req'd) (11) Con tin ge ncy R&O T otal f or se ctio n (12) 3.07% 2.69% $379,643.29 (12) We t Weathe r Allo w an ce (Re fe r t o SHT -12) Wet Weather T otal f or se ctio n (13) 0.50% 0.44% $62,413.69 12.1 CIV IL WET WEA THER ALLOWA NCE 0.20% 0.18% $25,358.59 12.2 ELECTRICAL WET WEATHER A LLOWA NCE 0.08% 0.07% $10,323.82 12.3 MECHA NICA L WET WEA THER ALLOWA NCE 0.15% 0.13% $18,006.91 12.4 SUPERVISION WET WEA THER ALLOWA NCE 0.07% 0.06% $8,724.38 12.5 OTHER WET WEATHER A LLOWA NCE (13) PROV ISIONAL SUMS T otal f or se ctio n (14) (14) M ISC COST S ( LSL, BONDS, INSURANCES ETC) TOTAL COST MISC ITEM (14) 1.69% 1.49% $209,427.60 14.1 A 0.57% 0.50% $70,160.00 14.2 14.3 Long Serv ice Levy (LSL) .35 % on contr act value (inc GST) 0.50% 0.62% 0.55% $77,176.00 14.4 Sec urities Bonds Ins ert Final Total Selling Pric e $14,032,000 0.22% 0.19% $27,011.60 14.5 Warranty Provis ion .25 % on contr act value (inc GST) 0.25% 0.28% 0.25% $35,080.00 14.6 14.7 Other cos ts T OT AL COST (ite m s 1-14) PROJECT T OT AL COST IT EM S 1 T O 14 100% 87.62% $12,386,340.82 (15) OV ER- HEADS & M ar gin (it em 15) 12.00% TOTAL O-H an d M argin ITEM ( 15) 12.35% $1,745,046.48 15.1 UGLi Overheads 54.17% 6.50% of Se llin g Mark up 7.39% 6.47% $914,900.17 $914,900.17 15.2 UGLi Prof it 45.83% 5.50% of Se llin g Mark up 6.25% 5.48% $774,146.30 $774,146.30 15.3 A dditional Recover y FX Rate 0.45% 0.40% $56,000.00 $56,000.00 15.4 Mark up 15.5 Par tner 3 Profit & O/H Mark up (16) T OT AL SEL LING (ite m s 1-15) (16) T OT AL SELL ING PRICE EXCL UDING GST 100% $14,131,387.30 $1,745,046.48 GST V alu e $1,413,138.73 PRICE APPROV ED BY : DA TE : 16-Jan-12 RECOVERY TO COST : 14.09% Tender No : TC-3218 Estimator :GRG / RS RECOVERY TO SELLING : 12.35% Insurances exc luding construc tion risk / cons truction w orks "A" .45% of CV, Inc luding cons truction r isk / c onstr uction w orks "B" .9% of CV ( Worn by Busines s) Mo nd ay, 16 Janu ar y 2012 Liability Char ges "U" unc apped Liability (1%), "A" Contract s um Liability (.5%) "B".5 of c ontract s um liability ( .25%)

16. Risk Driven Approach QUALITY 16 QUALITY TIME SCOPE COST

17. COST

18. Cost Management Cost Estimating developing an approximation of the costs of the resources needed to complete project activities. Cost Budgeting aggregating the estimated costs of individual activities or work packages to establish a cost baseline. P R O C E S S 18 or work packages to establish a cost baseline. Cost Control influencing the factors that create cost variances and controlling changes to the project budget.

19. Cost Management Available organisational process assets Available quantities, resources and productivity rates I N P U T S All these assumptions add UNCERTAINTIES which reduce the cost confidence 19 and productivity rates Available work/scope statements Work Breakdown Structure (WBS), and Other assumptions/documents e.g. PMP, etc. cost confidence level. What about other R&Os and events?

20. Cost Management (Deterministic) Activity Cost Estimate (Deterministic) Total Project Cost O U T P U T S What is your CONFIDENCE LEVEL in such a deterministic cost estimate? 20 (Deterministic) Cost Model Data (Deterministic) Cost Baseline (Deterministic) Resource Requirements estimate?

21. TIME

22. Time Management S C H E D U L I N G 22

23. Time Management Logic-based Scheduling Methods (LSM) Deterministic Techniques e.g. CPM, Critical Chain, etc. S C H E D U L E D E V E L O P M E N T M E T H O D S Which method and tool will suit your project requirements the most 23 Stochastic Techniques e.g. PERT, PNET, Monte Carlo Simulation, etc. Repetitive Scheduling Methods (RSM) Line of Balance (LOB) Flowline Method most

24. Scheduling Available templates Available quantities, resources and productivity rates I N P U T S All these assumptions add UNCERTAINTIES which reduce the schedule 24 Available work/scope statements Available construction logic, and Other assumptions e.g. calendars, PMP, etc. schedule confidence level. What about other R&Os and events?

25. Scheduling (Deterministic) Project Schedule (Deterministic) Schedule Model Data O U T P U T S What is your CONFIDENCE LEVEL in such a deterministic schedule? 25 (Deterministic) Schedule Baseline (Deterministic) Resource Requirements schedule?

26. Integrated Time/Cost Risk Management JCL is: - The probability that cost will be equal or less than the targeted cost AND schedule will be equal or less than the TIME COST 26 targeted schedule date - A process and product that helps inform management the likelihood of a projects programmatic success - A process that combines a projects cost, schedule, and risk into a complete picture. NASA HQ Office of Program Analysis and Evaluation (PA&E) Cost Analysis Division Joint Confidence Level (JCL) RISK

27. Joint Confidence Level (JCL) Step 1 Identify goals of JCL for specific project Step 2 Review built schedule (i.e. Schedule Health Check) Step 3 Cost loaded schedule (both Time Dependent / Independent) P R O C E S S 27 Step 3 Cost loaded schedule (both Time Dependent / Independent) Step 4 Implement Risk Register (through R&Os Workshop) Step 5 Conduct uncertainty analysis Step 6 View results Step 7 Analyse results

28. Validation and Health Check Validation of Quantities (most likely) Productivity Rates (most likely) C O S T A N D S C H E D U L E 28 Durations (most likely) Resource Cost Rates (most likely) Constraints (Contractual or Management) Logic network and Work Statements, and Reasonable Critical Path

29. Risk Register The identified risks & opportunities Likelihood of the identified risks and opportunities Impacted activities and/or cost elements K E Y E L E M E N T S 29 Uncertainties Existing controls and residual risks Schedule and/or Cost Consequences and required Contingency Correlation of risks and opportunities to one another

30. Case Study 1 Bid Phase Scope: Project Management Engineering & Design Procurement & Delivery $ 1 0 0 M P O W E R P L A N T E P C C O N T R A C T 30 Procurement & Delivery Installation Earthwork & Civil Mech, Elec, & Control Systems Two Gas Turbine Generator Units Balance of Plant (BOP) Testing & Commissioning

31. Effective Contingency Management How to assess optimum contingency allowance (time and cost) for desired JCL during Bid Phase? How to monitor and maintain the desired JCL during Execution Phase i.e. Contingency Management? C H A L L E N G E S 31 i.e. Contingency Management?

32. Case Study 1 Bid Phase S C H E D U L E H E A LT H C H E C K Confidential 32

33. Case Study 1 Bid Phase R I S K C R I T E R I A & R I S K M AT R I X 33 Consequence Table Likelihood Table Escalation Table Risk Matrix

34. Case Study 1 Bid Phase R I S K R E G I S T E R 34 Risk Identification Controls Assess w/Controls Treatment Assess w/Treatment Cost Impact Schedule Impact

35. Case Study 1 Bid Phase S C H E D U L E C O S T R I S K A N A LY S I S Confidential 35 Confidential

36. Case Study 1 Bid Phase S C H E D U L E C O S T R I S K A N A LY S I S 36

37. Case Study 1 Bid Phase C O N T I N G E N C Y A S S E S S M E N T 37

38. Case Study 1 Bid Phase Scope: Project Management Engineering & Design Procurement & Delivery $ 1 0 0 M P O W E R P L A N T E P C C O N T R A C T 38 Procurement & Delivery Installation Earthwork & Civil Mech, Elec, & Control Systems Two Gas Turbine Generator Units Balance of Plant (BOP) Testing & Commissioning

39. Effective Contingency Management How to assess optimum contingency allowance (time and cost) for desired JCL during Bid Phase? How to monitor and maintain the desired JCL during Execution Phase i.e. Contingency Management? C H A L L E N G E S 39 i.e. Contingency Management?

40. Case Study 2 Execution Phase C O N T I N G E N C Y M A N A G E M E N T 40 CONFIDENTIAL

41. Case Study 2 Execution Phase Updated Project Execution Plan Effective Change Management Consistent WBS between cost control & scheduling K E Y L E S S O N S L E A R N E D 41 Independent Schedule Health Check R&O Workshop every month for both Events and Uncertainties Desired time/cost Contingency vs. Available time/cost Contingency Early warning (early bad news is actually a good news!)

42. Proactive Risk Management What about your projects? Dont they need a proactive risk management platform in place? THINK again. W H AT I S N E X T F O R Y O U ? 42 Good luck and enjoy your risk management challenges.

43. Pedram.DaneshMand@aquenta.com.au +61 432 041 560